Ray Dalio: Money, Power, and the Collapse of Empires

00:00:00.000 | The following is a conversation with Ray Dalio,

00:00:02.600 | his second time on the podcast.

00:00:04.600 | He is a legendary investor,

00:00:06.920 | founder of Bridgewater Associates,

00:00:09.120 | author of a book I highly recommend called "Principles,"

00:00:12.480 | and also a new book called "Principles for Dealing

00:00:15.960 | "with a Changing World Order,"

00:00:17.840 | that looks at the geopolitics of today,

00:00:20.480 | especially US and China, through the lens of history,

00:00:24.580 | providing a fascinating model

00:00:26.120 | for the rise and fall of empires

00:00:28.200 | that can be applied to the analysis of our world today.

00:00:31.300 | This is the Lex Friedman Podcast.

00:00:34.320 | To support it, please check out our sponsors

00:00:36.360 | in the description.

00:00:37.520 | And now, here's my conversation with Ray Dalio.

00:00:42.040 | When you look at the history of the world,

00:00:44.200 | as you have done in your new book,

00:00:45.880 | "Principles of Dealing with a Changing World Order,"

00:00:49.760 | what is more important, more impactful, money or power?

00:00:53.300 | - They go hand in hand.

00:00:56.480 | They support each other and they compete with each other.

00:01:01.120 | Those who have money have power, a certain type of power.

00:01:05.380 | That power has to do with all that they can buy,

00:01:09.600 | but it also has the ability to influence

00:01:13.520 | those with political power.

00:01:15.400 | And so you see this throughout history,

00:01:20.260 | this symbiotic relationship, you know,

00:01:24.340 | for example, between the royal families,

00:01:29.340 | and the nobility, and the church.

00:01:33.400 | So you see that group of people

00:01:36.160 | supporting each other in various ways,

00:01:39.080 | and then wrestling around with each other

00:01:42.480 | for the money and power among that group.

00:01:45.880 | So the dynamic that's quite classic

00:01:48.640 | is you could look at the parties in power,

00:01:52.840 | back in, you know, the 16th, 17th centuries,

00:01:57.760 | you would look at royal families, nobles,

00:02:01.640 | and the church, if you're in Europe,

00:02:05.560 | and then you would look at agricultural land,

00:02:10.040 | and there was a certain dynamic.

00:02:12.240 | And that varies over time, it changes,

00:02:15.100 | as those people get thrown out, and technology changes.

00:02:20.440 | So when we evolved, when the society evolved,

00:02:24.120 | so that it would produce goods and services,

00:02:28.040 | and you have something like the Industrial Revolution,

00:02:31.960 | the first Industrial Revolution,

00:02:33.560 | they have machines, and you have the talent of people

00:02:37.280 | that are off the farms,

00:02:39.000 | and then you have a struggling for power,

00:02:43.440 | you see that power mix change.

00:02:47.520 | And so we don't see that same power mix anymore,

00:02:50.920 | but you still see the same dynamic.

00:02:53.920 | You see those with money dealing with those

00:02:57.680 | who have political power around those assets

00:03:02.600 | that are considered most valuable

00:03:04.680 | to particularly the productive assets that produce money.

00:03:09.360 | - And political power is usually centered

00:03:11.820 | around nation state, so the major locus

00:03:15.560 | is if power is the nations?

00:03:17.880 | - Yes, in 1668, after 30 years of war,

00:03:22.880 | there was the development of nation states.

00:03:29.920 | Before then, we had, it was really the development

00:03:33.680 | of countries as we know it, that there were borders,

00:03:37.520 | and that within those borders,

00:03:40.440 | those who had control got to control it,

00:03:43.960 | and there were not to be intrusions in those borders,

00:03:48.080 | and that's how we established the nation state.

00:03:51.540 | And then of course, within each country, there is levels.

00:03:56.440 | There is a central level, and then there is a,

00:04:01.360 | typically a province or state level down below,

00:04:05.360 | and then there's a municipal level,

00:04:06.980 | so they each have different levels of power,

00:04:10.680 | and it's the coordination of those

00:04:14.440 | that determines how the country is run.

00:04:17.920 | - You write that the quote, "archetypal big cycle

00:04:23.280 | "governs the rising and declining empires

00:04:25.800 | "and influences everything about them,

00:04:27.840 | "including their currencies and markets.

00:04:30.280 | "The most important three cycles

00:04:31.720 | "are the ones you mentioned in the introduction,

00:04:35.020 | "the long-term debt and capital market cycle,

00:04:38.140 | "the internal order and disorder cycle,

00:04:40.460 | "and the external order and disorder cycle."

00:04:44.640 | Can you describe this big cycle?

00:04:47.400 | - There are two orders.

00:04:49.660 | There is an order by a, order, I mean a system,

00:04:55.320 | how the system works.

00:04:56.880 | So there's an internal order,

00:05:01.600 | that is the internal governance system,

00:05:04.100 | and it's usually set out in a constitution

00:05:06.720 | or some agreements, and then there's the world order,

00:05:11.400 | how the world system.

00:05:12.700 | So for example, in 1945, at the end of a war,

00:05:17.700 | which is basically a fight for determining the world order,

00:05:22.280 | the winners of the fight got together

00:05:27.600 | and created the world system as we now know it.

00:05:32.440 | '44, they created the Brenton Woods monetary system

00:05:35.920 | that determined the money, pretty much,

00:05:38.640 | and because the United States won

00:05:41.440 | and had 80% of the world's money,

00:05:44.120 | gold was money then, and it had 80% of the world's gold,

00:05:47.200 | and it was half the world's economy,

00:05:48.800 | and it was the great military power,

00:05:51.500 | the order was built around an American world order,

00:05:55.280 | so that the United Nations was in New York,

00:05:58.480 | the World Bank and the IMF were in Washington,

00:06:00.960 | and they built that new order.

00:06:02.740 | So classically, you have a war to determine

00:06:06.720 | whose rules we're following,

00:06:08.640 | and then you have the new order being constructed.

00:06:13.380 | After that, there is usually period

00:06:16.200 | of extended peace and prosperity.

00:06:19.920 | Peace suits prosperity, and so there's not,

00:06:25.260 | and the reason you have the peace

00:06:27.000 | is because no one wants to fight with the dominant power,

00:06:31.800 | you know you're gonna lose, you've surrendered,

00:06:34.080 | there's been the surrendering.

00:06:35.320 | They carve up the world, they say what it's gonna look like,

00:06:38.480 | who's gonna control what,

00:06:40.160 | and then you come into that period of peace,

00:06:44.680 | and then prosperity, where then there's a working together.

00:06:49.680 | Usually, at that point, you've wiped out a lot of the debt,

00:06:55.840 | you've wiped out a lot of the issues,

00:07:00.660 | the class warfare and so on,

00:07:02.960 | and then there's good working together.

00:07:04.820 | So those great periods, such as the Industrial Revolution

00:07:09.820 | in the late 1800s, or what we've experienced

00:07:15.300 | in the post-World War II period,

00:07:16.960 | are peaceful and prosperous periods,

00:07:20.280 | led largely by the dominant world power.

00:07:23.560 | Over a period of time, since really 1500,

00:07:28.200 | and maybe before, but really 1500,

00:07:31.780 | when the Dutch invented capitalism,

00:07:35.860 | and what I mean by that,

00:07:37.040 | they invented the first capital markets,

00:07:39.640 | the first stocks and the first stock market,

00:07:42.580 | that since then, capitalism has been an effective tool

00:07:47.440 | for building wealth, because it got resources

00:07:50.820 | into the hands of inventive people.

00:07:54.020 | That's when we move from agriculture

00:07:56.540 | to the importance of inventiveness of people,

00:07:58.840 | they got resources, and then they built that prosperity.

00:08:03.500 | In that process of doing that,

00:08:06.020 | they create wealth gaps, naturally.

00:08:09.060 | Those who make a lot of money make a lot more

00:08:13.180 | than those that don't,

00:08:15.000 | and it also produces opportunity gaps,

00:08:20.220 | because, for example, those who earn a lot of money

00:08:25.020 | have that wealth, they have the power

00:08:27.580 | to educate their children in a way that others don't,

00:08:30.940 | and the gaps grow, and also the debts grow at that time.

00:08:36.980 | When they go around the world with their competitiveness,

00:08:43.540 | they earn a lot of money.

00:08:46.060 | So, for example, the Dutch, the Dutch Empire,

00:08:49.020 | learned how to build ships that would go around the world.

00:08:54.180 | A key ingredient of this improvement in this cycle

00:08:57.980 | is the improvement of education,

00:09:00.580 | and by education, I mean the skills that come from education

00:09:04.260 | but also civility, the ability to deal well together.

00:09:08.680 | So the Dutch invented ships that could go around the world,

00:09:12.380 | and they had military power,

00:09:13.720 | but they were also a very inventive society.

00:09:16.420 | 25% of the world's new inventions came from the Dutch.

00:09:21.420 | And so as they went around the world,

00:09:23.740 | they also brought their currency,

00:09:26.300 | and they brought their military.

00:09:28.260 | They needed the currency, they paid for things,

00:09:31.660 | and that currency, and then the more that happens,

00:09:34.660 | the more that becomes a reserve currency.

00:09:38.020 | And then they have their military,

00:09:40.180 | so they need their military strength,

00:09:42.060 | and so you see it evolve in all of those ways.

00:09:45.960 | But over a period of time,

00:09:48.060 | as they become more successful and more expensive,

00:09:53.020 | they become more expensive.

00:09:55.220 | And newer countries come along, like the UK,

00:10:01.820 | then learn to build ships from a lot the Dutch,

00:10:07.800 | and could do that less expensively.

00:10:10.500 | And also when they become more expensive,

00:10:14.420 | so less competitive,

00:10:16.100 | and also the work ethic begins to change.

00:10:19.060 | They believe that since they're richer,

00:10:20.660 | they can enjoy life more.

00:10:22.660 | They don't have to work quite as hard.

00:10:25.260 | And so you start to see the tilt.

00:10:28.060 | Now you start to see the development of the top.

00:10:31.160 | And when you have a world reserve currency,

00:10:34.380 | that allows you to borrow a lot of money,

00:10:37.000 | because those who want to save,

00:10:40.340 | wanna hold your money,

00:10:41.940 | and that means that they'll lend you money,

00:10:44.060 | and so those countries get deeper into debt.

00:10:47.140 | So you see that they gradually lose their competitiveness,

00:10:51.380 | and they get themselves into financial circumstances,

00:10:56.300 | which are not good,

00:10:58.700 | and they have large wealth gaps,

00:11:01.460 | which set the stage for downturns.

00:11:04.660 | And when they have downturns,

00:11:06.700 | the first question is, do they have enough money?

00:11:10.140 | And traditionally, money is resources.

00:11:15.660 | So you classically see that the coffers are bare,

00:11:20.000 | that they're spending more money than they are earning,

00:11:25.000 | and they run out of money in the coffers.

00:11:28.920 | And their granaries are empty,

00:11:31.620 | rather than stocked,

00:11:33.180 | so that they give them the buffer.

00:11:35.340 | And as that deteriorates, that worsens conditions.

00:11:40.340 | And if they have a rival power,

00:11:42.580 | that's also challenging them,

00:11:44.500 | they see greater internal conflict over wealth,

00:11:48.820 | and then they have the problems internally,

00:11:52.420 | and the problems externally,

00:11:54.100 | which usually results in an internal war,

00:11:57.660 | or an external war,

00:11:59.480 | that leads to the change in the,

00:12:01.740 | to the new world order.

00:12:03.000 | - And to you, the Dutch Empire is a good example of that.

00:12:07.760 | The British, what are some of the key examples

00:12:11.180 | that you think about in the book,

00:12:13.200 | of this process that followed the big cycle?

00:12:16.320 | - Well, the leading reserve currency empires,

00:12:19.200 | but it applies to all the empires,

00:12:21.460 | were the Dutch, the British, the American, and the Chinese.

00:12:27.820 | But you could follow the same pattern.

00:12:32.660 | In the book, it was very important for me

00:12:35.420 | to not just use words and concepts,

00:12:39.020 | because that's subjective.

00:12:41.380 | It was very important for me to use actual measurements.

00:12:45.800 | So as you see in the book, you can see every level of this.

00:12:49.480 | You can see where's the education level,

00:12:52.060 | what is the military power, each one of those,

00:12:55.560 | and you can see them back going over the 500 years.

00:12:59.320 | And so you can see the arcs and the composition

00:13:03.400 | of those arcs, and what you see is really,

00:13:07.280 | in most countries and most dynasties, you can see that.

00:13:10.800 | But you also can see through those numbers,

00:13:13.520 | the health of those countries.

00:13:16.000 | Today, there are statistics that are in the book,

00:13:21.000 | that show what is the level of education,

00:13:25.160 | what is the level of economic output,

00:13:28.280 | what is the level of military strength,

00:13:32.140 | what is the level of a number of different

00:13:34.200 | measures of strength, so that you can then compare that.

00:13:38.000 | And I think that because there are objective

00:13:40.020 | measures of strength that you could see change,

00:13:43.320 | that shows the picture of where we are today.

00:13:48.160 | And I think one of the most important things

00:13:50.200 | about the book is that it allows people to monitor

00:13:54.360 | how those things are transpiring.

00:13:56.680 | I think for policy makers,

00:13:58.780 | are your policy makers doing a good job?

00:14:03.200 | And there's so much subjectivity in that.

00:14:06.320 | But I think it's very simple.

00:14:08.320 | If those lines on the chart are improving,

00:14:10.920 | if your health index is improving,

00:14:13.360 | then you're moving toward a better life.

00:14:17.660 | So that's what the book works like.

00:14:19.340 | Also, it was used to create a model for the future.

00:14:24.100 | In other words, there are cause-effect relationships.

00:14:28.200 | Everything that happens has reasons,

00:14:31.040 | causes that preceded it, that made it happen.

00:14:34.860 | And so by having all those in numbers,

00:14:38.020 | one can see the probabilities of certain things happening.

00:14:42.440 | So that's what you see in the book.

00:14:46.780 | It's not just Ray's interpretation.

00:14:49.940 | I didn't wanna make it Ray's interpretation

00:14:51.920 | 'cause I don't know if I'm right.

00:14:53.860 | - Yeah, so one of the fascinating things in the book,

00:14:56.220 | so you have to list these 18 measures.

00:14:58.800 | And there's like a little scorecard

00:15:01.460 | for the countries of the world today.

00:15:04.360 | So let's say US, China, and Europe.

00:15:07.780 | And what it was 20 years ago,

00:15:09.940 | and looking at the change from 20 years ago,

00:15:11.940 | and that's another indicator,

00:15:13.560 | the change itself to see where things are headed.

00:15:17.220 | Maybe can you comment on, from a score perspective,

00:15:21.500 | how is US and China doing?

00:15:24.100 | And in the 18 measures, what are some measures

00:15:26.700 | that stand out to you as particularly important

00:15:29.460 | to think about today for the United States, for China?

00:15:32.500 | - Well, there are a number.

00:15:35.760 | Financially, what you see in the United States

00:15:40.760 | is that we're borrowing a lot more money,

00:15:44.840 | creating a lot of debt, and we're printing a lot of money.

00:15:49.840 | And our capacity to do that is very much,

00:15:54.440 | is limited, first of all,

00:15:55.800 | because when there's a sale of a bond,

00:15:59.860 | when the government borrows more than it borrows money

00:16:04.460 | because it spends more than it takes in,

00:16:07.400 | you have to sell a bond.

00:16:10.320 | And the world right now has a lot of US dollar

00:16:13.660 | denominated bonds because as the world's reserve currency,

00:16:17.260 | they sell, sold on them.

00:16:18.940 | And they have very bad returns, negative real returns,

00:16:23.940 | negative real returns significantly, and so on.

00:16:27.760 | So that means that more bonds has to be sold

00:16:32.640 | than are bought.

00:16:36.700 | And that means that the Federal Reserve

00:16:40.040 | is faced with the choice of having to raise

00:16:43.680 | the interest rate to curtail borrowing,

00:16:47.140 | which slows the economy and hurts the markets,

00:16:50.000 | or by filling that difference and producing money,

00:16:55.000 | the debt monetization, which produces an inflation

00:16:59.760 | in goods, services, and financial assets.

00:17:03.480 | So in that regard, that's the United States' position.

00:17:08.480 | In China's case, its balance of payments is better.

00:17:13.920 | China has displaced the United States

00:17:18.580 | as the world's largest trading country.

00:17:21.740 | In other words, more exports to other countries.

00:17:24.420 | And as a result, it's economically competitive,

00:17:29.760 | but it doesn't have the world's reserve currency.

00:17:32.360 | It's a real blessing.

00:17:33.760 | So the United States has the world's reserve currency,

00:17:37.540 | but it is risking it because of this imbalance.

00:17:41.020 | So if you look at history, you see that those go slowly,

00:17:45.380 | but when they go eventually, they go quickly.

00:17:49.000 | So there's a risk of that financially.

00:17:54.820 | Then there's the issue of internal order.

00:17:58.480 | So I'm just giving you the major ones,

00:18:00.260 | but I'll get into some of the other ones too.

00:18:02.720 | Right now, there's a lot of internal conflict

00:18:06.920 | in the United States, which affects how well it works.

00:18:11.920 | In China, there's less internal conflict

00:18:17.660 | because it's a more autocratic state,

00:18:20.740 | but also they've created this bifurcation

00:18:24.440 | of what is political and what is economic

00:18:29.440 | in terms of producing that prosperity.

00:18:32.040 | So if you stay out of the politics, pretty much,

00:18:34.700 | and then you're seeing entrepreneurship,

00:18:39.640 | you're seeing the finances of new businesses and so on.

00:18:44.360 | And so that internal working,

00:18:46.860 | that's subject to different people's interpretations,

00:18:51.320 | whether they like it or not,

00:18:52.560 | but the internal conflict in terms

00:18:55.040 | of those kinds of measures is less.

00:18:57.960 | - Sorry to pause on that for a second.

00:19:00.160 | So these measures, I guess you don't want to sort of

00:19:03.360 | romanticize any one measure or something like that,

00:19:07.800 | over-interpret any one measure,

00:19:09.980 | but is internal conflict always a bad thing?

00:19:14.040 | Is it a complicated calculation?

00:19:18.280 | Or do you kind of, the way we think about these measures

00:19:20.560 | that you've presented, we should be thinking like

00:19:23.160 | the higher, the better, the lower, the worse?

00:19:26.320 | I mean, of course, depending on the--

00:19:27.520 | - Well, in many cases, the conflict

00:19:31.240 | that produces the revolution produces revolutionary changes

00:19:36.240 | that lead to resolutions and lead to new starts.

00:19:42.020 | And so their short-term, a short-term civil war

00:19:50.360 | is a hellacious experience.

00:19:52.920 | And at the same time, it can be the transition

00:19:57.680 | to a new beginning.

00:19:58.960 | Also, there are different types of conflict.

00:20:02.740 | Competition, which makes things, makes everything better,

00:20:08.760 | is a productive conflict, whereas destructive conflicts

00:20:16.000 | are not good over the short time.

00:20:20.960 | So that's how those go.

00:20:23.600 | - So within each measure, the story is complicated.

00:20:28.600 | - Yeah, but my measures are sort of clear,

00:20:32.280 | meaning how much political conflict,

00:20:35.180 | how much social conflict.

00:20:38.800 | In other words, you can measure conflict,

00:20:40.620 | you can measure fighting, you can measure crime rates,

00:20:44.220 | you can measure lots of different ways of conflict.

00:20:49.220 | So the measures are a composite of different types

00:20:53.400 | of internal conflict.

00:20:55.600 | - What are some other interesting measures,

00:20:57.840 | maybe if you can also mention that for me in particular,

00:21:00.880 | interest is education and innovation.

00:21:03.280 | - Yes, the classic cycle, the most important

00:21:06.840 | leading indicator, is the quality of education.

00:21:11.160 | Most importantly, broad-based education

00:21:16.020 | drawn from the largest population,

00:21:18.820 | because you can never tell who the talent is going to be,

00:21:23.540 | where they're gonna come from.

00:21:25.040 | So for example, if you look at the Chinese dynasties,

00:21:28.140 | the great Chinese dynasties, and the Confucian approach,

00:21:33.140 | it was meritocratic of, everybody could sit for exams

00:21:38.540 | and so on, broad base of drawing in the populations.

00:21:41.560 | And you see that if you go across societies,

00:21:44.260 | because that draws on the largest number of population

00:21:49.040 | to get education, and it also, that creates

00:21:54.040 | a reality and a perception that the system is fairer,

00:22:00.000 | equal opportunity, not just one of privilege,

00:22:03.000 | and that helps to create social stability.

00:22:06.320 | But education is not just education in understanding

00:22:11.320 | facts and so on, it is education in civility,

00:22:17.780 | of how to behave together.

00:22:19.260 | And so if they're smart, they understand

00:22:22.060 | how to be productive, because they work well together

00:22:25.620 | and they're productive.

00:22:27.380 | And then that leads to the next stage.

00:22:30.060 | You can see in the lines in the charts, I plotted these,

00:22:35.140 | so that you could see in a typical cycle,

00:22:37.720 | you could see that education is the long leading indicator.

00:22:42.600 | And then you could see, as you mentioned,

00:22:45.420 | that what you see is inventiveness and technology measures

00:22:49.740 | then follow, and you see then also competitiveness

00:22:54.200 | and world markets follows.

00:22:55.960 | For example, in the early stages of a cycle,

00:22:59.180 | the industries that they go into tend to be

00:23:03.360 | very basic industry, 'cause they have cheap labor,

00:23:06.260 | something like textiles and simple manufactured goods

00:23:10.500 | and so on.

00:23:11.380 | But as the education rises, then they move up

00:23:14.560 | the value chain to greater technologies and so on,

00:23:19.560 | which raises incomes and raises productivity.

00:23:23.200 | So yes, those, and as you say, there are 18 different

00:23:27.180 | measures like that, but education and then civility

00:23:31.580 | and the inventiveness.

00:23:32.780 | So you see it reflected in who's inventing what.

00:23:37.080 | And that corresponds then who's trading with,

00:23:41.780 | who's a big trading country, and where's the value

00:23:44.940 | of economic output and what are per capita incomes.

00:23:47.780 | They all follow those arcs.

00:23:49.740 | - Yeah, like you said, the fascinating thing

00:23:52.980 | about your book, so there's philosophy, there's wisdom,

00:23:56.580 | but there's plots.

00:23:58.660 | - Yeah, you can see it.

00:24:00.140 | - So it's not just your opinion,

00:24:02.380 | it's kind of like you can interpret it any way you like,

00:24:06.300 | but you're just giving a lot of your own insights

00:24:09.580 | along with the numbers.

00:24:10.740 | If you were to look at the American nation,

00:24:15.580 | the American empire, and the trajectories looking

00:24:18.740 | into the future, given these measures,

00:24:21.440 | what is the trajectory that leads to the collapse

00:24:25.940 | of the American empire based on these measures?

00:24:28.820 | What are the concerning indicators?

00:24:30.540 | And if those break down further, what does that look like?

00:24:34.480 | - Well, all of those indicators are concerning.

00:24:40.500 | Maybe except for one, which is technology,

00:24:47.460 | the technology niche, although even in that area,

00:24:52.100 | the United States is improving at a slower rate

00:24:57.240 | than is China for various advantages that they have there.

00:25:01.720 | They put out about eight times as many computer engineers,

00:25:05.240 | they have free data, and so on.

00:25:07.720 | But if you look at them, so the financial is a concern,

00:25:12.720 | the internal order, disorder, is a concern.

00:25:18.300 | Then if you look at education levels,

00:25:21.400 | the United States is in many ways,

00:25:24.940 | is losing its educational advantage.

00:25:28.120 | If you were to look at, compare it with China,

00:25:31.120 | if you take general public education in the United States,

00:25:36.960 | it's deteriorated tremendously,

00:25:39.880 | even in comparison to developed countries.

00:25:42.780 | There are scores, PISA scores, and so on,

00:25:44.860 | and it's something like 38th in the world or something,

00:25:47.900 | and that was a big plunge, average public education.

00:25:51.440 | If you look at the best universities in the world,

00:25:54.880 | the United States is unique

00:25:56.580 | in having the best universities in the world,

00:25:58.880 | so there are these privileged spots

00:26:02.380 | that are excellent, uniquely excellent.

00:26:06.420 | So when you look at the comparison,

00:26:09.220 | education in China is improving rapidly,

00:26:13.700 | and the quantity is, a quantity of educated people

00:26:18.700 | in the areas that they're moving in is greater,

00:26:23.540 | and the resources that they're putting behind it is greater,

00:26:27.200 | and so you see the results are greater,

00:26:29.500 | but it's sort of along the lines that I'm dealing with.

00:26:34.440 | If you were to follow through in terms of

00:26:37.880 | actual productions, I think you know,

00:26:42.080 | in terms of technologies,

00:26:45.000 | there are some areas that the United States

00:26:47.480 | is in a lead at the moment.

00:26:49.640 | There's some areas that China's in a lead,

00:26:51.880 | but China's gaining very quickly.

00:26:54.960 | When I first went to China, 1984,

00:26:58.140 | I would bring $10 calculators,

00:27:01.140 | and I gave them away as gifts to high-ranking people,

00:27:05.020 | and they thought they were miracle devices.

00:27:07.340 | Right now, in terms of areas like quantum computing

00:27:13.260 | and AI and, you know, many areas,

00:27:18.220 | you have a race going on,

00:27:20.440 | and so if you take the trajectory of the competitiveness,

00:27:24.820 | not just look at the current level,

00:27:26.920 | you have a situation where they're improving

00:27:29.340 | at a much faster rate.

00:27:31.220 | This is all good for the world if the world can get along,

00:27:34.980 | and the main thing I think is,

00:27:38.640 | in just, how do you have a healthy world,

00:27:44.380 | and how do you have a strong economy,

00:27:45.940 | and how do you have a strong situation, is be strong.

00:27:49.920 | The United States' war is with itself.

00:27:53.580 | That's the main war.

00:27:55.380 | You know, it's very simple in history.

00:27:57.460 | Be financially sound, earn more than you spend,

00:28:03.100 | and be strong in these ways,

00:28:08.180 | and pretty much everything will take care of itself.

00:28:10.780 | - But you make it sound simple, of course,

00:28:15.180 | 'cause there's a momentum when things degrade,

00:28:17.980 | when the education system degrades,

00:28:19.660 | when you start borrowing,

00:28:21.460 | I mean, all of these indicators,

00:28:24.140 | once they start going down,

00:28:26.020 | there's a momentum to it, right?

00:28:28.420 | So it's hard to reverse it.

00:28:30.180 | - Right, and there are circumstances that you're then in.

00:28:33.660 | For example, indebtedness.

00:28:36.180 | It's politically desirable for those

00:28:42.420 | to borrow money and spend,

00:28:44.740 | because their constituencies only look at what they get,

00:28:49.300 | and when they get a lot,

00:28:50.820 | they don't pay attention to the balance sheet

00:28:53.140 | and how much debt is on the books.

00:28:55.180 | So it's always better to borrow, spend,

00:28:58.660 | and then leave the cleanup to the next guy.

00:29:01.860 | And so you inherit a lot.

00:29:04.820 | You inherited, as a new president enters in,

00:29:09.440 | or new legislators, they have a lot of debt,

00:29:13.380 | they have a broken-down infrastructure,

00:29:17.460 | they don't have enough money to fix that,

00:29:20.820 | and so that's the lay of the land

00:29:23.380 | that the prior generations put you in,

00:29:27.660 | and there you are.

00:29:29.180 | And so that's right.

00:29:30.640 | It's difficult, because when you start to think,

00:29:33.900 | okay, what's healthy?

00:29:35.380 | Well, earn more than you spend.

00:29:37.960 | Well, that's not so easy,

00:29:39.660 | because what does that mean?

00:29:42.020 | Go earn more?

00:29:43.460 | I mean, okay, that's not so easy.

00:29:45.860 | Spend less?

00:29:47.300 | That isn't gonna work.

00:29:49.100 | So now what do you do?

00:29:50.680 | Okay, you have this debt that you then monetize,

00:29:54.260 | and that's why it's classic.

00:29:55.720 | So yes, that's why these cycles occur,

00:29:57.820 | because what has created before,

00:30:00.780 | what happened before created the lay of the land

00:30:03.460 | that is then increasingly difficult to deal with.

00:30:06.460 | - So what can great leaders do in this moment?

00:30:08.780 | I mean, maybe, my sense is leadership is crucial here.

00:30:13.580 | So for example, to do very large projects

00:30:16.260 | that invest in the education system,

00:30:18.300 | that sort of try to fix the fundamentals,

00:30:21.980 | or maybe invest more and more into the innovation

00:30:25.980 | and the development of new technologies and so on.

00:30:28.540 | It feels like that just doesn't happen organically.

00:30:32.940 | So you have to have strong leaders

00:30:37.740 | that convince the populace of the importance of these ideas.

00:30:43.720 | - Well, I completely agree with your list.

00:30:46.680 | What we have is a situation where everybody

00:30:50.440 | has their opinions, and they have to sort of

00:30:53.260 | get them exactly right, and they all fight with each other

00:30:56.740 | about whether their opinions.

00:30:58.360 | So the most important thing is that we become bipartisan

00:31:03.360 | so that we don't, and we get over our differences.

00:31:07.080 | I would have a bipartisan cabinet.

00:31:10.320 | I would draw upon members of both parties,

00:31:15.320 | the moderates, who are going to be able to work together.

00:31:19.540 | So as then we have one country,

00:31:24.360 | and then we deal with those in a means

00:31:27.840 | that works for the majority of the people

00:31:30.200 | in the middle rather than the polarity.

00:31:32.480 | I think our greatest risk is in not being able to do that.

00:31:38.040 | So I would say that's of paramount importance

00:31:42.280 | because we have the resources.

00:31:44.580 | Wealth, real wealth, and science and everything

00:31:50.040 | has never been better than it is.

00:31:52.480 | But the notion is that it has to work

00:31:54.660 | for the majority of people,

00:31:56.760 | and we have to keep it being productive.

00:32:00.360 | So that group has got to calmly and knowledgeably

00:32:05.360 | work together so that they increase the size of the pie

00:32:09.800 | and they create broad-based prosperity.

00:32:12.680 | So that is of paramount importance.

00:32:15.680 | Whatever they do, if they do it that way,

00:32:18.920 | I can say I'm happy about because that other alternative

00:32:23.320 | is the really scary alternative.

00:32:25.820 | - The scary alternative,

00:32:32.560 | the different ways it has evolved throughout history,

00:32:35.880 | some of it has led to wars.

00:32:38.000 | What are the future trajectories

00:32:41.760 | that lead to a potential war with China?

00:32:44.440 | Cold War or Hot War?

00:32:46.960 | Is this something you think about?

00:32:48.280 | Is this something you're worried about?

00:32:50.280 | - Yeah, I'd like to talk about both wars.

00:32:52.360 | So the war with China,

00:32:54.480 | as I say, there are five kinds of wars.

00:32:56.860 | There's a trade war, technology war,

00:33:01.000 | geopolitical influence war, capital war,

00:33:05.600 | and military war.

00:33:07.320 | As far as military war goes,

00:33:10.760 | I think it's only a Taiwan issue,

00:33:13.940 | but that's a big issue.

00:33:16.520 | And we could talk about that for a minute.

00:33:18.800 | But those others, they'll be rough competitions,

00:33:23.060 | and we'll have that type of evolution over a period of time.

00:33:27.640 | That's what that war looks like.

00:33:30.440 | Taiwan has been, for a long time,

00:33:34.180 | a sovereignty issue to China.

00:33:38.500 | And it has its roots in what's called

00:33:44.280 | the 100 Years of Humiliation.

00:33:46.140 | From the 1840s to 1949,

00:33:50.720 | foreign powers came in, took advantage of China.

00:33:54.840 | They had the Opium Wars and such times.

00:33:59.200 | And that represented the 100 Years of Humiliation.

00:34:03.040 | And Taiwan represents, is their sovereignty

00:34:08.040 | and their important thing.

00:34:11.040 | And 50 years ago, starting 50 years ago,

00:34:14.640 | there was an agreement that there is one China,

00:34:18.420 | and Taiwan is part of China,

00:34:21.580 | and that there would be peaceful reunification.

00:34:27.000 | The peaceful reunification hasn't happened.

00:34:31.480 | And in their view, that's a very big issue.

00:34:34.960 | And so it's a big contentious issue.

00:34:37.520 | And that could produce a military war,

00:34:41.820 | could produce a military accident.

00:34:44.440 | It's a very tense situation.

00:34:46.000 | And if we had a military war, God help us,

00:34:49.840 | because of the capacity in all different new ways

00:34:53.680 | to inflict harm on each other.

00:34:56.440 | But anyway, that's that.

00:34:58.720 | If you don't have that military war,

00:35:01.720 | you'll have the competition between

00:35:04.520 | those other kinds of wars,

00:35:06.360 | and whoever is strongest in those areas will win.

00:35:11.360 | - Where do you put cyber war within the five?

00:35:14.720 | - Well, cyber war is a military war.

00:35:17.440 | I'm assuming the type of cyber war that you're referring to

00:35:22.040 | is that which is used to inflict pain

00:35:24.600 | on the other party through cyber.

00:35:26.800 | So cyber wars, you'll see cyber war.

00:35:29.740 | You could see space war.

00:35:31.920 | You can see drone warfare.

00:35:34.420 | New types of warfare, not just the traditional

00:35:40.240 | and nuclear type of warfare.

00:35:42.720 | But you could see any of the above.

00:35:44.480 | - What are the defining characteristics?

00:35:48.880 | What are the interesting things about Xi Jinping,

00:35:51.720 | the president of China, as a leader on the world stage?

00:35:55.920 | - His father was a early leader.

00:36:00.280 | He was himself, in the Cultural Revolution at times,

00:36:06.720 | treated brutally.

00:36:12.300 | And during that period of time, it was very, very difficult.

00:36:17.800 | And he came up through the ranks,

00:36:21.480 | and is a very intelligent man.

00:36:25.260 | When he first came to power, as you know,

00:36:29.800 | they have two five-year terms,

00:36:32.160 | and we're now coming to the end of the second

00:36:35.200 | of those five-year terms.

00:36:36.760 | When he first came to power,

00:36:39.000 | he felt that there should be a lot of reform,

00:36:42.880 | and reform meant moving to much more of a market,

00:36:47.620 | an open economy.

00:36:49.380 | When that happened, him coming in,

00:36:53.120 | I had some contact with economic policy makers,

00:36:56.960 | but in the circumstances then,

00:36:59.320 | were that five major banks lent to state-owned enterprises

00:37:03.840 | and local governments with implied government guarantees.

00:37:07.800 | And so there was not control of that,

00:37:10.080 | and the movement to a more of a market economy.

00:37:14.080 | And the development of markets was a primary.

00:37:17.760 | And also, the dealing with the corruption issue.

00:37:20.900 | There was a lot of corruption prior to that,

00:37:24.120 | and that was viewed as an existential threat to the system.

00:37:28.480 | So that became the primary objective.

00:37:31.600 | And then as time progressed over those 10 years,

00:37:36.600 | there was a lot of changing in the world,

00:37:41.600 | their financial circumstances,

00:37:43.820 | opening many, many other markets.

00:37:46.920 | And they particularly getting money

00:37:48.460 | to small and medium-sized enterprises,

00:37:51.200 | and developing a lending system,

00:37:52.960 | and then establishing controls on it.

00:37:55.340 | So right now, there's a vibrant capital markets.

00:38:00.340 | You can raise capital, you can be an entrepreneur,

00:38:07.880 | you can become a billionaire in the capital markets.

00:38:12.280 | And they developed the markets

00:38:13.680 | to be the second largest capital markets.

00:38:16.400 | At the same time, they had to deal

00:38:20.280 | with their rising debt issue,

00:38:23.720 | which they began to deal with really about four years ago,

00:38:28.680 | when the second term began.

00:38:33.120 | And then Liu He became the vice premier,

00:38:40.560 | responsible for that, and to deal with those issues.

00:38:46.360 | So you see right now that what's happening

00:38:49.920 | is the dealing with the real estate bubble.

00:38:53.180 | There was a development in real estate, a bubble,

00:38:56.000 | which produced a lot of unproductive lending.

00:39:00.040 | And Xi Jinping said, "Houses are meant to live in,

00:39:05.040 | "not to speculate on."

00:39:08.280 | And so that was wasteful.

00:39:09.880 | So they established what they call three red lines,

00:39:12.960 | which are financial ratios,

00:39:14.940 | that the property developers had to live within.

00:39:18.400 | And that is then causing the adjustments

00:39:21.880 | that are going on now, which in my view are very healthy,

00:39:25.280 | because whenever there's bankruptcies and so on,

00:39:29.680 | most in the public think, okay, that's a problem.

00:39:33.160 | It's in many cases really a cleaning up of bad debts

00:39:36.320 | and bad practices.

00:39:37.460 | And so that's what's going on.

00:39:40.120 | So that's, let's say, economically.

00:39:42.640 | At the same time, there is the changing relationships,

00:39:47.640 | the changing world order, the changing relationships

00:39:51.540 | with the United States and other countries,

00:39:54.180 | which is becoming much less cooperative

00:39:57.980 | and much more warlike, much more confrontational.

00:40:01.640 | Those two things, the domestic debt problem

00:40:06.820 | and the investing, has led to what's called core,

00:40:11.200 | what they call core leadership,

00:40:13.180 | which means a leadership more around him

00:40:17.220 | that is less challenging,

00:40:21.220 | because they believe in history

00:40:23.440 | that during very difficult times,

00:40:26.380 | a more centrally controlled decision-making process

00:40:29.880 | lends itself better than to a more fragmented

00:40:32.780 | political contentious project.

00:40:35.060 | And that's basically what's going on now.

00:40:39.900 | - You said it very eloquently,

00:40:42.080 | but you mean the leadership is surrounded by yes men

00:40:46.620 | and there's a lot of centralized control.

00:40:50.120 | - That characterization is much more black and white

00:40:55.120 | than it really is.

00:40:56.640 | - But it leans towards that direction.

00:41:00.380 | - Like, for example, of the standing members

00:41:02.320 | of the Politburo, four are more allied to him,

00:41:06.180 | three are less so.

00:41:09.500 | You have to understand that it's kind of

00:41:11.600 | a collective leadership at the top.

00:41:14.680 | And then, of course, there's just jockeying for power

00:41:18.640 | in a highly political sense at the top.

00:41:22.640 | But no one leader can be successful

00:41:26.000 | against all those powers at the top.

00:41:30.240 | So it's very politically negotiating.

00:41:32.920 | It's very much more like if you put in the United States

00:41:37.600 | the Democrats and the Republicans

00:41:39.540 | and they had to be in the same government

00:41:41.380 | and they work it out, it's kind of something like that.

00:41:45.180 | And so that's that struggle, but it's an internal struggle.

00:41:49.760 | - Where do you put the importance of some of these ideas

00:41:53.060 | at the founding of the United States?

00:41:55.300 | When then, now we're talking about it at the context

00:41:58.340 | of China, the freedom of speech, freedoms.

00:42:02.500 | What China is doing with the central management

00:42:04.620 | of a lot of things, it's enabling a lot of growth,

00:42:08.520 | but it's also limiting people on the very basic level

00:42:12.880 | in terms of freedom, the kind of freedom

00:42:14.760 | that I think can lead to entrepreneurship,

00:42:18.400 | to starting new businesses, to having big dreams

00:42:20.880 | and chasing those dreams and then creating

00:42:22.880 | totally new things in whatever the space,

00:42:25.080 | maybe in technology, in business, in whatever.

00:42:29.040 | How important is that as a metric for society?

00:42:33.440 | - Well, they have a view which is the idea of a dialectic,

00:42:38.120 | which means that two things are at,

00:42:41.400 | that everything comes with pros and cons

00:42:43.520 | and two opposites exist.

00:42:46.580 | And you want the benefits of those two opposites

00:42:50.140 | and how do you deal with the benefits

00:42:51.960 | of those two opposites?

00:42:54.040 | So let's say you want the capital markets

00:42:57.420 | because it gets money into the hands of the entrepreneurs

00:43:02.060 | who are motivated, they build fortunes

00:43:04.300 | and that drives an economy to do very well.

00:43:07.860 | And at the same time, it produces the other problems,

00:43:12.780 | the wealth gaps, the other problems,

00:43:14.940 | then the debt cycle that we're talking about and so on.

00:43:18.460 | And Deng Xiaoping, how do you reconcile communism

00:43:23.340 | and the market economy and the capital markets?

00:43:27.580 | And he famously said, "It doesn't matter if it's a white cat

00:43:32.580 | "or a black cat, just as long as it catches mice."

00:43:36.380 | In other words, if it works in making the country richer,

00:43:40.660 | then that becomes the objective

00:43:42.300 | and then they move that along.

00:43:43.660 | So there are these conflicts.

00:43:45.520 | And one of the leaders described it to me as follows

00:43:51.440 | because it's confusion and it goes back

00:43:53.960 | over a period of time.

00:43:55.720 | There's a hierarchy and it's an extension

00:43:58.780 | of the family, he described it.

00:44:01.320 | And he said, "The United States is a country of individuals

00:44:06.320 | "and individualism."

00:44:08.380 | And that is its vibrancy that we see.

00:44:14.700 | The individual rights to speak up,

00:44:17.660 | the individual protection of the individual,

00:44:22.460 | individual property rights and all of those things

00:44:25.580 | is of paramount importance.

00:44:28.300 | And we build our organization,

00:44:29.940 | that's why democracy is from the bottom up

00:44:32.140 | or even a company will get together

00:44:34.300 | and will be partners to prosper together.

00:44:37.540 | That is the American approach.

00:44:39.500 | He was describing that in China,

00:44:43.420 | it's an extension of the Confucian family, essentially.

00:44:47.900 | And so it's almost like there's a hierarchy.

00:44:52.400 | And so what they think about is the common good,

00:44:57.080 | not the individualism.

00:44:59.440 | So for example, if they want a high-speed rail

00:45:02.120 | to go from one place to another,

00:45:04.160 | and that's best in the common good,

00:45:06.760 | then the individual protections that would stand

00:45:09.720 | in the way of doing that would be of secondary concern.

00:45:13.700 | So that notion of controlling.

00:45:17.240 | So for example, what they're doing with video games,

00:45:23.240 | they control what type of video games

00:45:28.240 | and how many hours a day kids can be on video games

00:45:32.760 | operating in that way,

00:45:35.720 | because they believe that that's good for the society

00:45:39.000 | and that's very controlling.

00:45:40.800 | In the United States, I think probably most parents

00:45:43.880 | would say, leave it to me,

00:45:45.160 | and it's a matter between me and my kids.

00:45:48.360 | The same thing has to do with data.

00:45:50.680 | In other words, in the United States, who controls the data?

00:45:54.360 | Does the company control the data?

00:45:57.380 | Do you individually control the data?

00:46:00.040 | And so the inclination would be to figure that out,

00:46:03.640 | but nobody would say that the government

00:46:05.680 | is going to control the data

00:46:07.480 | because of our inclination of really anti-government control.

00:46:11.820 | In China, it would be that the government

00:46:14.240 | will control the data

00:46:15.920 | because that's going to be best for the society,

00:46:18.960 | and it depends who you trust,

00:46:20.380 | but that's, so that difference in philosophy

00:46:24.740 | is very much at the heart of that.

00:46:28.680 | As far as your question in terms of effectiveness,

00:46:33.160 | it really is, in China's case,

00:46:35.960 | it's how you balance the things, right?

00:46:38.160 | So what they're attempting to do

00:46:40.040 | is to create a lot of freedom and creativity

00:46:43.720 | in areas that are not political, let's say,

00:46:49.000 | and so you see a lot of entrepreneurship,

00:46:53.880 | you see a lot of product development,

00:46:55.980 | you see a lot of creativity happening in that way.

00:47:00.660 | So the stereotype that you don't see creativity happening

00:47:04.940 | is an old stereotype,

00:47:06.740 | but where there's a lot of creativity certainly happening,

00:47:09.260 | and the system can work well

00:47:10.940 | if they can achieve that kind of balance.

00:47:13.300 | It's proven to have worked well.

00:47:15.100 | Since I started going there in 1984,

00:47:18.340 | per capita income, real per capita income,

00:47:21.140 | has increased by 26 times.

00:47:24.200 | The longevity rate has increased by 10 years.

00:47:28.960 | The poverty rate has fallen from 88% to less than 1%

00:47:33.260 | in terms of basics like starvation and things.

00:47:37.420 | And if you read history, Plato's Republic,

00:47:41.740 | he talks about the cycles, democracy and autocratic

00:47:46.400 | and the benevolent despot and all of that.

00:47:49.240 | Each has their own vulnerability.

00:47:53.360 | The vulnerability of democracy,

00:47:55.700 | which has been a remarkable, remarkable system,

00:47:58.820 | and I don't have to extol the benefits of it,

00:48:02.040 | but the vulnerability of it has always been

00:48:07.980 | the internal conflict that produces itself as anarchy.

00:48:13.900 | In World War II, four democracies

00:48:18.640 | chose to be autocracies

00:48:21.960 | because there was internal disorder,

00:48:25.960 | and there was the belief,

00:48:27.920 | will somebody bring about order

00:48:30.200 | and get control of the situation?

00:48:32.640 | That was in Germany, Italy, Japan, and Spain.

00:48:37.640 | There were parliamentary systems

00:48:41.160 | that turned themselves over to that.

00:48:43.840 | So both systems have vulnerabilities.

00:48:48.840 | I think the main thing that we need to think about

00:48:53.300 | is those vulnerabilities.

00:48:54.800 | Democracy is an amazing system

00:48:58.340 | because the adherence to the rules and the system

00:49:03.340 | and the checks and balances is quite amazing,

00:49:06.660 | and it gives it a flexibility to change without civil wars.

00:49:12.460 | But there has to be the respect of the rules.

00:49:15.060 | And when you see something like

00:49:18.060 | they will not accept elections

00:49:22.500 | or they will not accept rules,

00:49:24.640 | history has shown when the causes that people are behind

00:49:29.700 | are more important to them than the system,

00:49:32.380 | the system is in jeopardy.

00:49:34.440 | So we have a situation that's very much like that

00:49:38.300 | in terms of, let's say, the 2024 elections.

00:49:42.540 | I believe that there's a very high chance

00:49:46.780 | that neither side will accept losing, for example.

00:49:51.780 | And so we have that kind of a situation.

00:49:56.300 | So one would hope that one could rise above the disagreements

00:50:01.300 | and rely on the system for resolving disagreements

00:50:06.940 | because if that doesn't happen, then we have our own chaos.

00:50:11.740 | - So the kind of the trend that started in 2020,

00:50:16.820 | or I mean, I suppose it's been there, it's been growing.

00:50:21.820 | One representation of this internal disorder

00:50:24.300 | has been the growing trend of being skeptical

00:50:27.460 | about the results of the election.

00:50:29.700 | - Well, it started before that.

00:50:31.700 | There was the emergence of populism

00:50:35.140 | before President Trump was elected.

00:50:39.200 | He was basically elected as a populist

00:50:43.340 | because there was a large percentage of the population

00:50:46.840 | that felt that the system didn't work for them.

00:50:50.700 | And he tapped into that, and he was largely elected

00:50:54.300 | as a populist leader, first populist leader

00:50:57.700 | in a developed country.

00:50:59.460 | And so populism began then.

00:51:04.240 | And that was a battle of one group against the other group.

00:51:08.460 | And so since then, it's been like that,

00:51:11.700 | and it continued to grow.

00:51:13.640 | - You've mentioned the vulnerability of democracy,

00:51:22.980 | the internal disorder is the vulnerability of democracy.

00:51:26.660 | What's the vulnerability of a system like China?

00:51:29.500 | Maybe one way to say is put China aside

00:51:32.500 | and look at history, look at Soviet Union.

00:51:35.000 | What's the vulnerability of a communist-type system?

00:51:39.920 | - Well, I'll call it both communist and autocratic,

00:51:44.920 | depending on how much autocracy.

00:51:49.000 | Is that it lacks flexibility.

00:51:52.560 | It lacks the ability,

00:51:56.120 | but I should deal with them differently.

00:51:59.600 | In other words, there's the economic system.

00:52:02.200 | The economic system threatens motivation and productivity.

00:52:07.200 | So communism or socialism has to be done in a way

00:52:12.300 | where you can threaten productivity.

00:52:17.080 | Capitalism has, and what I mean by that,

00:52:20.560 | I mean free markets and capital markets

00:52:24.760 | have been an effective way of allocating resources

00:52:28.520 | and also creating the incentives and the resources,

00:52:33.520 | providing the resources for the inventiveness of new ideas.

00:52:37.640 | And so if I compare that, what the Chinese have done

00:52:42.480 | to a large extent is to recognize that,

00:52:45.560 | and have made a move, that's why the seeming dialectic

00:52:49.980 | or the conflict between those two things exist.

00:52:53.740 | But anyway, that's it.

00:52:55.560 | As far as an autocratic system,

00:52:58.820 | rather than one man, one vote from the population up,

00:53:03.820 | the risks of the autocratic system

00:53:07.340 | is that there's enough discontent that arises,

00:53:11.380 | that the system doesn't have the flexibility,

00:53:16.620 | and that rather than bending, it breaks.

00:53:20.560 | That's the big risk.

00:53:24.180 | The notion of trying to control a population

00:53:27.460 | if there's that, rather than giving it the flexibility.

00:53:31.460 | So that would be the big risk of the autocratic system.

00:53:36.220 | - What's the human, 'cause you mentioned

00:53:39.420 | the top gets bigger with empires,

00:53:42.500 | and you start taking things for granted.

00:53:44.820 | Is some of this just human nature?

00:53:48.360 | So the concern with China, with autocratic nations,

00:53:53.420 | the concern with the Third Reich, the Soviet Union,

00:53:58.420 | was that fundamentally at the individual level,

00:54:03.620 | the humans involved at the top,

00:54:06.500 | they start becoming, they're starting to lose touch

00:54:09.640 | with the reality in a way that no longer makes them,

00:54:13.480 | I guess that's the representation,

00:54:14.940 | the flexibility that you're referring to.

00:54:17.020 | - Well, I mean, in a democracy, you could change.

00:54:21.220 | You can go as far left or as far right.

00:54:23.620 | You can change the leaders easily.

00:54:25.820 | And so the people don't become,

00:54:27.740 | they pretty much only have themselves to blame.

00:54:31.300 | And one of the problems of that

00:54:35.720 | is they may not choose the best leaders,

00:54:38.020 | but they have that flexibility.

00:54:42.380 | So vote, and you get what you wanted.

00:54:46.220 | In the case of the autocratic, let's say, leaders,

00:54:49.060 | and then the movement from democracies to autocracies,

00:54:53.080 | what you see, normally that movement,

00:54:57.460 | is that one of the systems is not working.

00:55:00.580 | Let's say the democracy is not effectively,

00:55:02.980 | everybody's arguing with each other

00:55:04.520 | and nobody's getting anything done.

00:55:05.940 | And like Mussolini, the trains are not running on time.

00:55:10.340 | And that would be the example.

00:55:12.280 | Geez, this place has gotten chaotic.

00:55:14.580 | Will somebody get to control?

00:55:16.700 | And then you get the autocratic,

00:55:20.500 | and then he's autocratic enough to boss people around.

00:55:24.540 | And then you follow those kinds of orders.

00:55:29.020 | And it's like maybe a CEO in a powerful company

00:55:32.660 | ordering around, and that could work well

00:55:34.580 | or it could work badly.

00:55:36.380 | Most companies are run as,

00:55:40.820 | like autocracies, in a sense.

00:55:44.140 | There's the hierarchy and the command economy

00:55:47.020 | and that kind of thing.

00:55:48.640 | And that can work well or not,

00:55:53.700 | but then quite often when you get the populist autocratic,

00:55:58.700 | their personality is something that they wanna fight,

00:56:02.380 | and they become more nationalistic,

00:56:05.920 | and they tend to become more militaristic.

00:56:09.880 | And human nature, at that stage,

00:56:13.840 | lends itself to fighting.

00:56:15.200 | There's an arc here that when we think of a country

00:56:20.200 | and we say we, and we think of a country,

00:56:23.760 | it's not true, it's not like that.

00:56:26.720 | There are individuals who change.

00:56:29.040 | One generation dies and another generation comes along.

00:56:33.040 | And one of those arcs is that

00:56:35.980 | the ones who have been through war

00:56:39.860 | don't wanna go to war

00:56:41.640 | and are more happily willing to abide

00:56:45.840 | by whatever the rules are.

00:56:47.980 | As you get farther along into that cycle

00:56:50.920 | and you get a new generation

00:56:52.440 | and they forget about wars and the horrors of wars,

00:56:55.440 | then they want to fight.

00:56:59.600 | And so you're seeing right now

00:57:01.840 | the emergent of fight for right.

00:57:04.840 | And what that means is you see it internally.

00:57:08.960 | Fight, where are you, and fight for that thing.

00:57:13.220 | And they mean fight.

00:57:14.880 | And then into externally, fight.

00:57:17.600 | Are you going to be the strong one who will fight and win?

00:57:21.840 | And that develops on both sides, this fight and win.

00:57:26.040 | And each side is cheering each other on into a war.

00:57:30.280 | But that comes by those who really have not experienced war

00:57:34.720 | because it comes in their part of their lifetime.

00:57:38.720 | - Humans are fascinating.

00:57:40.640 | - Humans are fascinating.

00:57:41.960 | And by the way, human nature has not changed

00:57:45.720 | over the thousands of years.

00:57:48.240 | So it's so interesting 'cause like in doing this study,

00:57:52.000 | and it comes across in the study,

00:57:54.080 | it's like watching the same movie over and over again.

00:57:56.780 | You see the arc and you see it happen over and over again.

00:58:02.600 | The only things that seem to change

00:58:04.720 | are the clothes people wear and the technologies they use.

00:58:07.640 | (laughing)

00:58:09.880 | - Yeah, and then somebody probably will disagree

00:58:12.920 | with you about the clothes.

00:58:13.760 | Maybe there's also cycles within fashions.

00:58:16.320 | Maybe we're not even creative there.

00:58:18.120 | What do you make of Russia and Vladimir Putin?

00:58:23.960 | What do you think about Putin as a leader,

00:58:26.400 | as a human being on this world stage

00:58:28.560 | within the context of the cycles of empires

00:58:32.400 | that you think about?

00:58:33.920 | - Well, Putin came to power

00:58:36.640 | at the failure of Russia's last order.

00:58:41.240 | So there was the end of communism,

00:58:43.620 | and there was the development of the market economy,

00:58:48.000 | the collapse of the Soviet Union.

00:58:50.180 | And at that time, he was appointed by Yeltsin,

00:58:56.880 | who was an alcoholic and had problems managing,

00:59:03.240 | and was put into power.

00:59:05.280 | And the conditions in the Russia were,

00:59:08.720 | there was anarchy, there was no money.

00:59:12.560 | It had the classic end of cycle ingredients.

00:59:15.560 | It was broke, it was people were fighting with each other,

00:59:18.680 | it was in the anarchy, and that's when he came to power.

00:59:23.200 | And there were not institutions.

00:59:27.600 | The whole thing had collapsed.

00:59:29.160 | And it was not effective ministry of education,

00:59:32.000 | ministry of anything.

00:59:33.100 | And so the idea was that they needed 25 years of stability,

00:59:39.200 | and they needed a democracy,

00:59:43.760 | and they needed the improvement of capital markets.

00:59:47.600 | So he's been in that position as a,

00:59:52.160 | I guess I would call him a semi-autocratic leader,

00:59:59.480 | in that from all indications,

01:00:03.400 | he would respect the democracy,

01:00:05.780 | and he's very popular.

01:00:08.520 | He's won democratic elections

01:00:10.840 | because he's been a strong leader,

01:00:12.600 | and he's brought peace and stability to the Soviet,

01:00:17.600 | to Russia after the breakup of the Soviet Union.

01:00:22.320 | And he's a strong leader in pursuit of the,

01:00:29.400 | the country's interests in a way where Russia

01:00:34.400 | is not a significant economic power,

01:00:40.120 | but it is a significant military power.

01:00:44.340 | So the issues, and then there's a strong alliance

01:00:49.880 | between Russia and China now.

01:00:51.720 | So that's kind of the lay of the land.

01:00:55.900 | And then there are sensitivities.

01:00:59.380 | The Ukraine issue is a sensitivity

01:01:04.000 | because of there are a lot of Russians

01:01:07.200 | who live in the Ukraine,

01:01:08.980 | and there's also the issue of NATO on their border.

01:01:12.820 | So there are those kinds of things,

01:01:15.600 | and he has military power,

01:01:17.000 | and he has a strong alliance with China.

01:01:19.700 | And I guess that's my best summary

01:01:23.640 | of what his position is.

01:01:27.200 | Strong leader, popular.

01:01:30.220 | These are not subjective interpretations.

01:01:35.380 | These are objective interpretations.

01:01:37.820 | - Yeah, it's interesting, just in this conversation,

01:01:40.980 | you're not sort of doing the usual criticism

01:01:45.940 | of any one particular system.

01:01:47.460 | You're looking at these systems

01:01:48.740 | from the perspective of history.

01:01:50.660 | You're just describing how they work.

01:01:52.960 | It's oftentimes when you talk about what Russia is today

01:01:56.460 | or what the Soviet Union was or what China is today

01:01:59.380 | is you start to criticize,

01:02:00.780 | well, they do this kind of censorship

01:02:03.260 | or they do this kind of,

01:02:04.540 | they limit freedoms in this kind of way.

01:02:07.200 | But you're just kind of describing this as a nation

01:02:10.740 | with ideas what they think is right.

01:02:13.320 | This is how they hope to get it to work.

01:02:15.320 | This is why it's working.

01:02:16.540 | This is what's not working.

01:02:18.260 | Here's metrics that show that it's not working.

01:02:21.380 | I think that's a refreshing way to think about it.

01:02:23.780 | It's easy, though.

01:02:24.700 | I mean, you got some criticism saying

01:02:27.980 | that I think China's a strict parent.

01:02:30.080 | Some people criticize these countries for doing,

01:02:35.220 | so for violating human rights.

01:02:39.020 | I suppose there's some people that criticize

01:02:41.980 | the United States for violating human rights.

01:02:44.100 | But what are your thoughts on the world stage today

01:02:51.100 | about some of the behaviors it has governed

01:02:54.780 | in terms of respecting the rights,

01:02:56.340 | the basic rights of human beings?

01:02:58.380 | - You described accurately how I just try to look at things

01:03:03.380 | in a non, I don't want to impute my values on anybody.

01:03:08.460 | I mean, there are intolerable things,

01:03:14.020 | so I'm not saying there aren't intolerable things.

01:03:16.780 | But one of the great things of being an American here

01:03:20.340 | is that I grew up with all different nationalities

01:03:23.860 | having all different points of view

01:03:26.060 | and all different religions

01:03:27.700 | and all different ways of operating.

01:03:30.500 | And I've come to treasure the fact that that is,

01:03:35.500 | you know, what's their business is their business.

01:03:38.000 | And then the question is, where do you cross the line

01:03:41.180 | under what circumstances that others

01:03:44.100 | have got to do it my way.

01:03:45.740 | And then when you do it internationally,

01:03:49.920 | the issue of what is a sovereign state,

01:03:52.460 | you know, which, as I say, in the piece of Westphalia,

01:03:56.060 | and you have borders, and then when do you cross the line,

01:04:00.060 | that my way of doing things

01:04:02.740 | has got to be their way of doing things,

01:04:04.500 | or what are the various rights?

01:04:06.180 | And so that's a very delicate question,

01:04:09.540 | or a very difficult question.

01:04:12.020 | And we all have responsibilities to different parties,

01:04:16.260 | and we all have different levels of knowledge

01:04:18.980 | about those particular things.

01:04:21.240 | So for example, as an international investor,

01:04:25.600 | I have a responsibility to my investors.

01:04:28.320 | Those who run companies have a responsibility to theirs

01:04:33.120 | of how did they run that.

01:04:34.580 | So if you're taking Nike or Snickers and so on,

01:04:39.580 | and Americans can decide whether they wanna buy

01:04:43.520 | Chinese products or not buy Chinese products,

01:04:46.280 | we are all faced with those types of choices.

01:04:49.460 | So you have what do you wanna do in your constituency,

01:04:52.420 | and you have your choices.

01:04:53.900 | And then beyond that, in many cases,

01:04:56.340 | the issues are quite complex,

01:04:58.100 | like there are geopolitical questions that enter into it.

01:05:02.340 | So, and then I believe that if you disconnect it,

01:05:07.340 | if all those entities, like myself, the businesses,

01:05:14.640 | doing business with China, disconnected,

01:05:17.860 | I think that that would be disastrous,

01:05:20.460 | economically disastrous, and it would also be,

01:05:24.260 | reduce the understanding that comes from working together,

01:05:29.260 | that helps to reduce wars.

01:05:31.500 | And so these are all complicated.

01:05:33.780 | So what we do is, and who makes it,

01:05:37.840 | my opinion matters the most.

01:05:39.660 | Why should it be my opinion that matters the most

01:05:41.780 | in making that decision?

01:05:43.260 | So I largely look at the government guidance

01:05:46.780 | that I get not only from my own government,

01:05:49.340 | but from the other governments, and I follow the rules.

01:05:52.260 | I'm in 40, we invest in 40 countries,

01:05:55.420 | and we wanna do that in the best way

01:05:57.620 | to provide the diversified portfolio,

01:06:00.020 | and we sort of need that.

01:06:01.820 | Every one of those countries has similar complexities.

01:06:06.420 | There are always one issue or another,

01:06:08.820 | and there's only so much that we really understand

01:06:12.460 | about all of those issues.

01:06:13.700 | So we rely largely on the guidance that we get.

01:06:17.020 | - Yeah, you have to empathize and show respect

01:06:19.460 | to the culture of the place, the way things are done.

01:06:22.460 | You don't necessarily,

01:06:25.020 | the way you heal relationships between nations,

01:06:30.460 | like you said, you work together,

01:06:32.940 | and that requires kind of,

01:06:36.080 | to listen maybe more than you talk,

01:06:40.220 | and I think people in the public sphere

01:06:42.500 | talk a lot about China without really listening,

01:06:46.540 | without understanding much about China, without,

01:06:48.940 | one of the things that makes me really sad

01:06:50.380 | because I know how to speak Russian,

01:06:52.460 | and I know how much is lost in translation,

01:06:56.720 | it makes me sad that I'll never really get to know

01:07:00.220 | the Chinese culture, because,

01:07:02.700 | like I'll never really get to know the language,

01:07:04.740 | the literature, the, just talk to regular people.

01:07:08.020 | It's not just the government or officials or scientists,

01:07:10.620 | just regular folks, get the culture.

01:07:12.820 | I think if you don't understand the culture,

01:07:15.020 | just the basics of the human nature,

01:07:18.700 | what people love about their country, about their family,

01:07:23.060 | what kind of hopes they have,

01:07:25.340 | what kind of values they have,

01:07:26.500 | without that, you're not gonna be able to

01:07:28.620 | fully connect with them,

01:07:34.020 | and you have to do that first,

01:07:35.900 | to have a chance of building a good world.

01:07:37.900 | - I couldn't agree with you more.

01:07:39.100 | I was very lucky because, as I say,

01:07:41.780 | since 1984, so for more than half of my life,

01:07:47.820 | I've been going there, and the common people,

01:07:51.060 | and all sorts of people, and I've got to meet them.

01:07:53.860 | I don't speak the language,

01:07:56.260 | but a combination of through translators

01:07:59.820 | or them speaking English and being in situations,

01:08:02.980 | I had my son go to school, a local school,

01:08:07.420 | and we developed those kinds of understandings.

01:08:10.820 | I think that, but the not wanting

01:08:15.820 | to know the other perspective

01:08:18.860 | is the thing that's most scary.

01:08:22.100 | Like, I'm right now in the middle,

01:08:24.380 | and all I wanna try to do is to help mutual understanding.

01:08:30.700 | You're right, if there were questions probing me,

01:08:34.740 | asking me, what is it?

01:08:36.800 | I'm not on one side or another.

01:08:39.460 | I don't wanna be on one side or another.

01:08:41.900 | I believe that each has their right within there

01:08:44.660 | to approach their different culture in their own way.

01:08:47.020 | So many ways, you gave an example.

01:08:48.940 | If they're not doing harm to others.

01:08:53.700 | But that issue of trying to understand

01:08:59.780 | is so much better.

01:09:03.260 | That doesn't mean agree with.

01:09:05.300 | If you are wanting to out-clever and out-compete somebody,

01:09:11.740 | it still pays to understand what they're thinking.

01:09:17.020 | So to achieve understanding of what they're thinking,

01:09:20.500 | even if you wanna go to war with them,

01:09:22.220 | that understanding is the best thing to have.

01:09:25.300 | What we have now is a situation

01:09:28.140 | in which there's an enemy mentality,

01:09:31.620 | and that means that anything that serves,

01:09:35.500 | seems to be like understanding or conveying understanding

01:09:39.820 | seems to mistakenly create the notion

01:09:42.600 | of I'm on their side in a war.

01:09:45.380 | And that's kind of a dangerous thing

01:09:47.740 | because there's a momentum here to fight.

01:09:50.920 | - Henry Kissinger praises your new book,

01:09:54.660 | and you thank him in it in the dedication.

01:09:57.660 | What's your relationship like with him?

01:09:59.700 | What makes him interesting?

01:10:01.560 | Maybe what makes him controversial?

01:10:03.260 | What makes him such a central figure in history?

01:10:05.780 | - First, most importantly,

01:10:08.060 | he's unique about seeing things through all the other's eyes.

01:10:13.060 | So if you were, it's like there's a chess game.

01:10:18.060 | I mean, I think geopolitics is like a chess game,

01:10:22.920 | but with multiple chess players playing the same game.

01:10:26.660 | So imagine there are six people around

01:10:30.100 | playing the chess game, and he could sit in each seat,

01:10:34.740 | and he could know how they see it, okay,

01:10:38.540 | and see it in a calm way of how they see it.

01:10:42.340 | He's unique in that way.

01:10:43.780 | He's 98 years old, and he's equally able to do that.

01:10:48.100 | And he has a background in which he's a historian,

01:10:52.500 | so he really understands history super terrifically.

01:10:58.860 | He doesn't understand economic history as much,

01:11:02.100 | so that's why, to some extent,

01:11:03.820 | we enjoy having the conversation,

01:11:06.380 | 'cause he's interested in the economic piece

01:11:09.580 | he doesn't know, and I'm so interested

01:11:11.740 | in the geopolitical piece that I don't know as well.

01:11:15.060 | But anyway, he's able to do that,

01:11:16.920 | but not only a historian, but a practitioner.

01:11:21.500 | So when you go from an academic to a practitioner

01:11:27.780 | who has that talent to see things through others' eyes

01:11:31.860 | in an objective way and to be strategic

01:11:35.220 | rather than just tactical, that's a very special person,

01:11:38.940 | and that's why Henry is, to me, a very special person.

01:11:43.040 | - Yeah, he's lived a fascinating life.

01:11:45.360 | Just all of the world events he's been involved in

01:11:49.820 | is fascinating, and like you said,

01:11:51.780 | that's such an interesting skill to have,

01:11:54.460 | to consider what are the concerns, the hope,

01:11:56.700 | the dreams, the fears of all the people at the table.

01:11:59.540 | What are they thinking?

01:12:01.240 | I find that people don't, once again,

01:12:04.260 | don't do that enough when it's the obvious thing

01:12:06.940 | you should be doing, whether it's business deals

01:12:09.060 | or political negotiation or geopolitical negotiation.

01:12:14.060 | I'm often surprised, again, sorry to go to the Russian thing

01:12:18.060 | because I hear Putin talk in Russian,

01:12:23.060 | and you start to infer certain intentions,

01:12:26.260 | like not the trivial stuff, like the human being.

01:12:29.380 | What is that human being hoping for himself,

01:12:32.980 | for his country, for his close inner circle,

01:12:36.060 | for the bigger, and I just see that

01:12:39.420 | that's often just lost in translation.

01:12:41.420 | I just see American leaders talking to Putin,

01:12:45.420 | and it's just not, there's not a connection.

01:12:48.780 | - Absolutely, I know exactly what you're talking about.

01:12:53.540 | It has never failed that in my listening to a conversation,

01:12:58.540 | or even reading a speech, and you see then it reported,

01:13:03.540 | inevitably, the reporter picks some headline characterization

01:13:10.580 | that has very little to do with what was really happening,

01:13:16.380 | but might be a headline grabber

01:13:19.080 | that's at some kind of distortion,

01:13:20.980 | and there's a lack of understanding

01:13:22.860 | of really what's going on.

01:13:25.180 | - If it's okay, let me ask you a couple questions

01:13:27.580 | about cryptocurrency.

01:13:28.820 | You've had a few opinions about Bitcoin over the years.

01:13:32.700 | What are your thoughts about Bitcoin today,

01:13:34.900 | its role in the global financial system,

01:13:38.380 | and just in human society in general?

01:13:41.420 | - Well, the evolution of Bitcoin over the years

01:13:44.340 | is one of the things that has influenced changes,

01:13:49.340 | in my view.

01:13:51.660 | It has proven itself something like 10, 11 years ago.

01:13:56.660 | Imagine the programming of this,

01:13:59.900 | and here's, you throw it out, and that's the idea.

01:14:02.820 | It has not been hacked.

01:14:04.860 | It has operated, it has built,

01:14:09.700 | it has come an amazing way over that 11 years

01:14:14.420 | to be maybe probably the most excited topic

01:14:19.900 | among a lot of people, and has been used,

01:14:23.420 | and now has obtained the status of having imputed value.

01:14:28.420 | At the same time, it is one of those assets

01:14:35.260 | that is an alternative money.

01:14:37.480 | I think we're entering an era

01:14:40.100 | where there's going to be a competition of monies

01:14:44.300 | because of the printing of fiat money,

01:14:49.860 | and the depreciated value.

01:14:52.900 | There will be a competition of monies,

01:14:55.480 | and Bitcoin is part of that competition,

01:14:59.620 | but there'll be many monies, not just crypto monies,

01:15:02.900 | but there'll be central bank crypto monies,

01:15:05.560 | but there'll be different kinds of monies.

01:15:09.200 | And even monies are things that you buy and sell.

01:15:14.720 | NFTs can become a money, a type of money.

01:15:18.740 | You own it and it's an investment,

01:15:20.460 | and you could say I'd rather own it than own Bitcoin.

01:15:24.500 | - Has Ray Dalio bought any NFTs?

01:15:27.260 | - Not yet. - Okay.

01:15:28.320 | - But only just because,

01:15:32.780 | I definitely want to buy NFTs to just experience them.

01:15:36.940 | Like I think I should produce one, and I should--

01:15:40.740 | - I should have asked that, have you minted an NFT?

01:15:43.860 | You probably should, just to know what it's like.

01:15:45.740 | - Yeah, that's right.

01:15:46.640 | This stuff is happening.

01:15:48.240 | This stuff is real, okay, and how it operates.

01:15:51.980 | But like all new real things,

01:15:55.100 | some are gonna go and some are gonna,

01:15:58.300 | it's like in the internet in the year 2000,

01:16:01.720 | pets.com could have been a great,

01:16:05.340 | but maybe pets.com doesn't make it, and who knows.

01:16:08.340 | That's the beauty of the competitive system,

01:16:11.020 | that it'll evolve and some things will be treasured

01:16:13.300 | and some things will be trashed.

01:16:17.540 | But when I look at it, I think we are in an environment

01:16:21.820 | of what is an alternative money?

01:16:23.880 | A money has two purposes, a medium of exchange

01:16:27.060 | and a storehold of wealth.

01:16:29.200 | And we are looking for, and it's portable.

01:16:33.740 | And it's best if it's recognized in other countries.

01:16:38.080 | So gold is one of those.

01:16:41.880 | So I look at it as an alternative gold,

01:16:46.600 | but I look at a number of things as an alternative gold.

01:16:49.680 | And I think that, and gold is still my favorite

01:16:54.880 | because of certain qualities.

01:16:56.960 | For example, you can't trace it.

01:16:59.560 | In Bitcoin, you can trace who owns it,

01:17:02.420 | where it's going and so on.

01:17:04.100 | Governments can have that ability to trace it and so on.

01:17:07.480 | A gold piece of coin, it's not connected.

01:17:10.820 | I think not connected has benefits,

01:17:13.020 | particularly in a world where maybe connections

01:17:16.300 | can be more risky.

01:17:17.680 | And then also gold has been for many thousands of years

01:17:24.760 | universally recognized as a source of money.

01:17:28.400 | And central banks, it's the third largest source of money

01:17:33.400 | in central bank reserves.

01:17:35.500 | And I don't think Bitcoin is going to serve

01:17:38.360 | those types of purposes and so on.

01:17:40.440 | So for various reasons, I prefer gold to the other.

01:17:44.060 | But it's a little bit part of my mix.

01:17:46.920 | - But then you look at it, it hit, I think,

01:17:49.060 | 69,000 this year is the high Bitcoin hit.

01:17:52.800 | Do you think it's possible, you mentioned gold,

01:17:55.680 | do you think it's possible it reaches very high numbers,

01:17:59.280 | like one million that some people talk about?

01:18:02.400 | - I don't think that's possible

01:18:04.400 | because the way I look at it is

01:18:06.480 | there's a certain amount of

01:18:13.860 | a certain amount of it.

01:18:15.840 | And there's a certain amount of gold.

01:18:18.080 | I'll use gold as a benchmark.

01:18:19.820 | The amount of it is worth about $1 trillion.

01:18:26.360 | Total crypto is about 2.2 trillion.

01:18:29.760 | But let's say Bitcoin, it's $1 trillion.

01:18:32.680 | If you take the amount of money that is in gold

01:18:37.760 | that is not used for jewelry purposes

01:18:42.400 | and not used by central banks,

01:18:45.020 | and I assume Bitcoin won't be used for jewelry purposes

01:18:48.380 | or central bank purposes,

01:18:50.140 | that amount in gold is about $5 trillion.

01:18:54.180 | So right now, if you were to have a portfolio

01:18:59.160 | that has gold and crypto, gold and Bitcoin,

01:19:03.980 | it's worth about 20% of the value of gold.

01:19:07.540 | Do I think it's going to be worth more than gold?

01:19:12.580 | In terms of that mix,

01:19:14.220 | I don't think it'll be worth more than gold.

01:19:16.900 | But let's say it became worth as much as gold.

01:19:21.340 | I don't believe it will be.

01:19:22.740 | I think that 20% sounds kind of about right.

01:19:25.660 | I really don't know what the right answer is.

01:19:28.000 | And then there's the question of

01:19:30.660 | what is all of that pool of money

01:19:33.860 | that let's say gold and gold equivalents

01:19:36.220 | relative to everything else?

01:19:37.600 | Does it go from, you know, let's call it

01:19:41.940 | six, seven, eight trillion to 16 trillion?

01:19:44.740 | Maybe it could double.

01:19:46.140 | It depends what it is in the world environment.

01:19:48.740 | But basically, if you use gold as a measure,

01:19:51.760 | it just makes no sense

01:19:56.260 | that it's going to be used that much more.

01:20:00.440 | Am I sure about that?

01:20:01.760 | I'm not sure about anything.

01:20:03.360 | But logically, it seems to me that there's a limitation

01:20:07.940 | on its price in relationship to

01:20:10.700 | other things that are like it.

01:20:12.280 | - Let me ask for your deep financial analysis

01:20:15.860 | on a very important issue.

01:20:17.540 | I just talked a couple days ago with Elon Musk.

01:20:20.420 | He wants to put a literal Dogecoin on the moon.

01:20:23.740 | What are your thoughts about Dogecoin?

01:20:25.780 | And do you think it'll be the official currency?

01:20:31.140 | Maybe a reserve currency on the moon and on Mars?

01:20:35.180 | - My reaction is that's cute.

01:20:37.580 | I remember Elon, when he first got,

01:20:39.940 | he first got his money from PayPal.

01:20:42.540 | I think he said to me, it was,

01:20:45.500 | he got $180 million, $90 million,

01:20:48.180 | he decided to say, why aren't we going to outer space?

01:20:52.500 | And he wanted to take a spaceship that would be modified

01:20:57.500 | using Russian technology

01:21:01.540 | to put a plant

01:21:06.340 | and a watering can on the moon,

01:21:09.780 | or on Mars, I think it was.

01:21:13.300 | And he said, first life on Mars,

01:21:17.660 | or first life on that,

01:21:19.300 | as an inspiring notion.

01:21:23.820 | And so then there's always what's behind it.

01:21:27.320 | I have a lot of respect for Elon's ability

01:21:31.380 | to do other things behind it.

01:21:34.260 | And so I would take that as symbolic,

01:21:38.060 | and I'd be asking him what's behind it, what's next?

01:21:41.500 | - And I'm also just on the topic of Dogecoin and memecoin,

01:21:44.860 | and there's some aspect of humor and lightheartedness

01:21:48.460 | that's really interesting about the way we communicate,

01:21:52.420 | what ideas become viral,

01:21:54.100 | or how to captivate people with ideas.

01:21:57.980 | There's something about taking things too seriously

01:22:00.100 | that somehow slows it all down, and it's interesting.

01:22:02.860 | - You're right.

01:22:03.740 | - That's part of human nature somehow.

01:22:05.300 | So humor is part of this whole thing.

01:22:07.720 | You've talked about the importance of writing ideas down.

01:22:14.360 | And you have a fascinating--

01:22:15.620 | - Principles in particular.

01:22:17.260 | - Principles.

01:22:18.340 | And you have this really nice thing in your book

01:22:20.940 | where you actually, I mean, there's such a brilliant way,

01:22:25.060 | sorry, you have such a brilliant way of highlighting

01:22:28.980 | which parts are extra important, and you make 'em bold.

01:22:33.500 | That's a brilliant idea.

01:22:34.700 | Let me just ask the high-level question

01:22:36.360 | of what's a good system for taking notes?

01:22:41.360 | - Well, I find that almost everything happens

01:22:45.540 | over and over again.

01:22:46.800 | And we're in the blizzard of these things happening.

01:22:52.420 | And what I found is that if I'm making a decision

01:22:56.740 | that after I make the decision usually,

01:23:02.160 | or right at the time, if I pause and reflect,

01:23:06.220 | and I write my principle down, in other words,

01:23:09.800 | principle is sort of a recipe, what would I use to,

01:23:14.460 | how would I make that decision,

01:23:16.580 | and what are the criteria around it?

01:23:18.540 | I find that I make it much more clear, it becomes clearer,

01:23:23.220 | and it applies to the next thing that comes along,

01:23:26.460 | it'll be that way.

01:23:28.040 | Because everything happens over and over and over again.

01:23:30.900 | And I think people make the mistake of looking at just one,

01:23:35.520 | like it's the first one, they have, I don't know,

01:23:37.500 | they have the first problem of this sort,

01:23:40.120 | or the first child, or whatever it is.

01:23:42.140 | And this has been happening plenty of times.

01:23:44.760 | And so if you have the principles,

01:23:46.600 | I found that that helped me think more clearly about it,

01:23:50.660 | and it helped me communicate better, like why.

01:23:54.400 | And so over the years, over the last 30 years or so,

01:23:58.900 | that's what I've done.

01:24:00.120 | I did it originally to communicate very well

01:24:02.760 | with the people I work with.

01:24:04.880 | I set up my company, and it was very important

01:24:07.840 | to have good communication.

01:24:09.240 | And then we could debate the principles,

01:24:11.520 | and so that's the process.

01:24:14.000 | I urge people to do that.

01:24:16.680 | There are many excellent decision makers,

01:24:19.260 | and I just wish that they wrote down their principles

01:24:23.480 | when this set, so for example,

01:24:27.580 | we're talking about Henry Kissinger,

01:24:29.680 | and his new book is gonna come out

01:24:31.360 | with a book on leadership.

01:24:32.860 | And don't just describe the leaders,

01:24:37.040 | describe then what about them were the essential elements

01:24:41.160 | to make a good leader under what circumstances.

01:24:44.480 | And so if we think about that,

01:24:47.020 | then also, then you begin to think in a principled way.

01:24:51.760 | And then when you start to think in a principled way,

01:24:55.200 | life becomes, it's so much easier to make decisions,

01:24:58.780 | and it's so much less confusing,

01:25:01.020 | because it's like coming up on a species,

01:25:04.140 | and you say, okay, well, what species is it?

01:25:08.020 | Not just another, it's a thing.

01:25:10.600 | No, what species is it,

01:25:12.340 | and how do I deal with that species effectively?

01:25:15.880 | And so that's what that is.

01:25:17.780 | And so I encourage people to write it down.

01:25:20.300 | I wish anybody who's successful

01:25:22.780 | wrote down their principles or their recipes

01:25:25.200 | for making those types of decisions.

01:25:27.440 | - So the events of interest here

01:25:30.040 | happens over and over and over in similar ways,

01:25:33.520 | as you're looking for the patterns,

01:25:34.920 | and you're defining the process

01:25:36.720 | that's right to respond to those patterns,

01:25:40.420 | and you call that the principles,

01:25:42.920 | and that allows you to deal with the future effectively.

01:25:46.480 | So that codifies the lessons from the past,

01:25:49.800 | to be able to deal with the future.

01:25:52.600 | What advice do you have for young folks today?

01:25:55.560 | In high school, in college,

01:25:57.500 | thinking about how to have a career they can be proud of,

01:26:02.500 | or maybe have a life they can be proud of?

01:26:05.360 | - Know yourself, follow your passion,

01:26:09.360 | make your work and passion the same thing,

01:26:12.680 | while considering the money part,

01:26:15.320 | 'cause money will get you freedom and choice,

01:26:18.440 | and be able to make that.

01:26:19.520 | But if you know yourself, feel the pull,

01:26:24.280 | and pursue that passion.

01:26:28.600 | And along those lines, by the way,

01:26:32.020 | I found that using personality profile tests

01:26:36.740 | has been very helpful.

01:26:38.220 | I've used those for about 25 years

01:26:40.580 | for people to help to understand themselves

01:26:42.940 | and understand each other.

01:26:43.920 | So I created a free one that is called Principles U.

01:26:49.180 | It's online.

01:26:50.320 | It's had remarkable, loving people who've taken it,

01:26:56.220 | learn about themselves, but also,

01:26:59.500 | you can put in somebody else,

01:27:01.240 | and it'll tell you about your relationship with them.

01:27:04.120 | That's like 30 minutes, it's a quick discovery,

01:27:06.820 | but the main thing is to understand on your journey,

01:27:10.760 | your hero's journey,

01:27:12.240 | that you will have mistakes,

01:27:17.140 | and you will have weaknesses,

01:27:19.320 | and to understand those, not fight those,

01:27:24.320 | because by understanding mistakes,

01:27:28.560 | you will learn not to make mistakes again.

01:27:31.080 | I have a principle, which is,

01:27:33.040 | pain plus reflection equals progress.

01:27:37.320 | And so that reflection is important,

01:27:40.340 | to know yourself, know your pulls, know your weaknesses.

01:27:44.360 | And when you also know your weaknesses,

01:27:46.920 | and the strengths of other people,

01:27:48.920 | there are people who have strengths where you're weak,

01:27:52.480 | and you have strengths where they're weak,

01:27:54.640 | and to be able to work well together

01:27:57.260 | is the most effective way of achieving success.

01:28:02.260 | So yeah, it's that journey,

01:28:05.020 | and there's a life arc, and there's a journey,

01:28:08.320 | and you wanna make it the best that you can make it,

01:28:11.360 | and it has, it's like a video game.

01:28:14.840 | You know, it has the challenges, and the obstacles,

01:28:19.520 | and the learning experiences, and the temptations,

01:28:22.920 | and all of that, and the maximizing learning

01:28:26.140 | to go where you wanna go to achieve the life you want

01:28:29.720 | is the most important.

01:28:31.560 | That's kind of maybe a long-winded way of saying it,

01:28:34.320 | but to learn, I think, I'll try to say it simply.

01:28:39.320 | There's a five-step process.

01:28:41.360 | Step one is know your goals, know what you're going after.

01:28:46.360 | You could have almost anything you want,

01:28:50.280 | but you can't have everything you want,

01:28:52.280 | and so you have to prioritize,

01:28:53.860 | and you move in that direction.

01:28:56.120 | On the way to your goals,

01:28:57.380 | you're going to encounter your problems and your obstacles.

01:29:01.120 | So identifying, no, step two is understanding your problems

01:29:05.680 | and your obstacles, identify them.

01:29:07.720 | Step three is to diagnose them

01:29:10.760 | to get at the root cause of the problem,

01:29:13.900 | and that could be many root causes,

01:29:16.560 | but it could also be your weaknesses,

01:29:18.440 | or weaknesses of others,

01:29:19.720 | but you have to be objective about them.

01:29:22.160 | Once you diagnose them, then you go to step four,

01:29:26.080 | which is to design a way to get around them,

01:29:29.200 | and then, after you have that design,

01:29:33.960 | you implement that design,

01:29:35.740 | so you have to follow through and do it,

01:29:38.220 | and you do that, and that will then produce its new results,

01:29:42.940 | which should be better results.

01:29:44.780 | I call this kind of the looping process.

01:29:47.700 | It's the evolutionary looping process,

01:29:50.260 | and you just keep doing that,

01:29:53.380 | and you learn over a period of time,

01:29:55.140 | and you move in the direction that you want.

01:29:58.500 | - Last question, and you only have one minute to answer it.

01:30:02.680 | You dedicate the book, quote,

01:30:05.040 | "To my grandchildren and those of their generation

01:30:08.680 | "who will be participants in the continuation of this story.

01:30:12.920 | "May the force of evolution be with you."

01:30:15.760 | So let me ask, where is this force of evolution

01:30:18.480 | taking human civilization,

01:30:20.520 | and what in this story that evolution is writing

01:30:24.720 | gives you hope?

01:30:26.560 | - Evolution is a direction toward improvement,

01:30:32.000 | and the greatest force is

01:30:36.120 | man's capacity to adapt and invent,

01:30:40.280 | and so you see in the charts in the book,

01:30:42.960 | you see that this upward movement,

01:30:46.640 | life expectancy,

01:30:48.840 | health, all the things that we think are better,

01:30:55.200 | you see there's a chart,

01:30:57.160 | and it shows that over a period of time,

01:30:59.320 | and you barely see the downturns

01:31:03.000 | from depressions and wars in that.

01:31:06.020 | That is the greatest power.

01:31:08.080 | Man's ability to invent and adapt is evolution,

01:31:13.080 | and that's the greatest power,

01:31:15.420 | and that is what gives me justifiable hope.

01:31:20.080 | - And a continuation of that, like we mentioned,

01:31:22.400 | with Elon, maybe we'll become a multi-planetary species,

01:31:25.720 | so not only will we keep creating amazing things

01:31:28.600 | here on Earth, we'll keep expanding out into the cosmos.

01:31:31.880 | - My time horizon doesn't have me analyzing that yet,

01:31:36.640 | but I hope so, and I agree that

01:31:41.180 | that would be in the natural--

01:31:42.160 | - So I'm not gonna ask you

01:31:43.280 | for the best financial system on Mars.

01:31:46.160 | I think we'll focus on Earth for now.

01:31:48.000 | Ray, thank you so much for your brilliance,

01:31:49.720 | for the books you've written,

01:31:51.260 | for the works you've done,

01:31:52.180 | for the inspiration of millions,

01:31:54.600 | and thank you for spending your valuable time

01:31:57.400 | here with me today.

01:31:58.480 | - Thank you.

01:32:00.000 | - Thanks for listening to this conversation with Ray Dalio.

01:32:02.720 | To support this podcast,

01:32:04.160 | please check out our sponsors in the description.

01:32:06.900 | And now, let me leave you with some words

01:32:09.000 | from Ray Dalio himself.

01:32:11.480 | Every time you confront something painful,

01:32:14.000 | you are at a potentially important juncture in your life.

01:32:17.200 | You have the opportunity to choose healthy

01:32:19.360 | and painful truth, or unhealthy but comfortable delusion.

01:32:25.740 | Thank you for listening, and hope to see you next time.

01:32:28.820 | (upbeat music)

01:32:31.400 | (upbeat music)

01:32:33.980 | [BLANK_AUDIO]

Ray Dalio: Money, Power, and the Collapse of Empires | Lex Fridman Podcast #251

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