Bridgewater's Ray Dalio

to the investment world. Ray, thank you very much for coming and uh for writing this book. We're gonna talk about this principally this evening. UM. I wanted to start though, by asking you, uh this. You're running the largest hedge fund in the world, more than a d fifty billion dollars. How do you have time to write books when you were and running that hedge fund. I didn't write either of those books. Really, what I did was this book

was UM. In order to understand what was going on today, I needed to do a study, right, and what I experienced in life many times before is that the surprises that happened to me were things that never happened in my lifetime, but happened many times in history. When you read the book as I have, and I enjoyed it. It took me a couple of sittings to get through because it's a lot of detail in here. Um. You have a lot of historians that help you because a

lot of history in here. History. I didn't know you have histories. I'm so lucky because I get to speak to so many people who are historians, who are practitioners, you know, people in different countries, Henry Kissinger, Graham, Alice In, you know, just scientists and so on, and then historians. So and then I have a fabulous research team. So I go into this learning immersion, UM and then UM, and I iterate with it. I show them what I've got,

They come back and that's the process. Okay. So you have in here people who have said good things about the book, including a number of Treasury secretaries Hank Paulson, Tim Geitner. Are Summers hard to get three Treasury secretaries agree on anything, but you did. You also have very favorable comments about the book from Henry Kissinger and Bill Gates.

You know both of them, who's smarter? Well, I think, um, I think that they would say they each would say the other guy, and I think I would say that, um, each in their own ways. Okay, so boy, you should go into politics or to pose. Okay, your view is there are three big cycles in history. It's not fair. Yeah. I came with the three things that are happening today, and then I found that there are really five, but the three three big ones. Yeah, alright, so let's go

through the first cycle. The first cycle is when economy comes together gets wealthy. People are building up the economy and eventually they build it up so much they borrow more money and maybe they should and they dilute their currency. Is that fair? Yeah? I could do it in a quicker way. Quicker than that, Well, excuse me, better than that?

How Now, um, there is um, there's a new water, there's a there's usually some fight between the left and the right, or it could be foreign countries and whatever new water. And then when that begins, it's sort of a great equalizer. And capitalism is how fantastic enabler because what it does is it gives people who may not have anything, who have good ideas capital so they get the resources to pursue that. And that's a fabulous thing.

And then as it rises over a period of time, you'll see debt to income ratios rise and so on, because everybody gets more funded because debt is buying power and everybody wants more buying power. And then also you see it naturally UM distributes wealth unequally, and it distributes opportunity on equally, so UM as that wealth gaps rise and widen. And then also because it's opportunity, parents and who have wealthy parents can educate their children in an

unfair let's say, an unequal way relative to others. And so but it over it gets overly indebted. And then because all this buying power which comes in the form of debt as somebody else's assets, then what happens is UM then you lower interest rates. You try to stimulate it. So for example, since every cyclical peak and every cyclical trough and interest rates was lower than the one before it, so that they can stimulate more debt. And then when

you get to zero interest rates, that doesn't work. So they have to print money and they buy money to keep get that pile going up, and that creates the cycle. Okay, so there's part of that cycle, which is a capital markets or UH. And then, by the way, this exists

almost everywhere. And then with that, and then you see the monetization of debt and so on, and with that there are also conflicts, conflicts that are the wealth conflicts, and related to that the political left and the political right and there, and that creates the dynamic that we're talking about now you're signing your book. Two examples where

this has happened before. One is in the Netherlands, where the Dutch economy ultimately they had the only reserve currency, at least in Western Europe, the guilder, and they did some of what you now say we're doing. Is that right, Yeah, the same patterns over and over again. They had in the beginning, big education, they want a war. Then they

became very competitive. They went out in the world taking their goods and they built ships that were the best ships around the world, so they can go anywhere in the world. They brought their arms with them and they made a fortune. And with that they brought their currency. And as they bring their currency, because it's a world currency of reserve currency, others want to own it. And because others want to own it, because that's buying power,

it's the common wamp them. And then because of that um, then they lend it to the Dutch. So in other words, Americans get lent money because others want a whole dollars, and then that allows us, that's the exorbitant privilege, to get more and more in debt, and then what happens is they lose their competitiveness. The British built came along and copied from the Dutch and found oh, they can make ships better and cheaper, and then they became the competitors.

And then as the competitors are operating, they take market share away, quite similar to lots of technology companies and what's going on now. And then what happens is then they get more in debt, and then they have the other cycle that's operating, and then you have the challenges of that. They had the Dutch, they typified by the Dutch tool bulb craze where people were spending a lot of guilders buying toil bulbs. Right, So that imploded and the British came in and they built a big economy,

and then they kind of went south a bit. They had the same and then we came along the United States became the biggest economy world around eighteen seventy and since World War Two we've been the dominant economy. So now we have a lot of debt. You'd say, yeah, trillion, good of that, So how are we going to pay off at that? By the way, well is the only way. In the end, it's always print the money. You know, it's always print the money because you see the one

man's debts or another man's assets. And so if you're holding a bond and you receive a you don't get compensated for inflation. Let's say people think cash is a low investment, low risk investment. Well, they're earning no interest, and when you have a seven percent or five percent inflation, you lose five percent of your buying power. Or if

you're owning a bond, you have the same thing. And so what happens is not only is there the debt that is coming from the new debt created to run the deficits, but there become sellers of that debt because the owner as an asset, it's not a good asset. And then there's so much selling. And what that means is that you either have to interest rates have got to go up, or and then that grinds things down to a close or what they do is they have

to print money. And so the history of all of these cycles is that the coffers are empty because you can't continue to spend more than you earn and give it to somebody expect them to like it, and then you devalue it and that becomes the cycle. And so you see the classic cycle of the ingredient is um the cycle I'm talking about in terms of supply to man. And so what you want to do is presumably let

people know this is occurring. So maybe they could take action by letting their congressman or governors know something about this or not. Well, I think there are two two things. What you can do to make a better side in your contribution, but also how you can individually take care of yourself in a situation that might be difficult. Okay, so let's finish on the third part of the cycle. The third part of the cycle is somebody's rising up. And right now you would say China is rising up?

Is that correct? It there's just numbers and you look at it and okay, so if I want to do something about it, and I want to live in a time when China is not rising up so much, and were better off in the US economy. What should I do? Should I lobby my members of Congress not to print so much money? What should I do about it? If anything? Um, well, again it's the cycles. I think. If I think, if we go back and we look at history, there are three main things that you can do. Okay, first as

a society individually and then collectively. Um, how do you earn more money than you spend? And how do you build a balance sheet that has more assets than liabilities. That's a healthy and so keeping that in mind, the second is um internal conflict or cooperation? Can you have internal cooperation because you realize what the consequences are? So I think that in the two twenty for elections, there is a reasonable chance that neither party will accept losing

the elections. And that is something that means that democracy or a type of civil war of sorts could develop in a way. This is realistic. I'm not being um exaggerated by that. And when one looks at those types of things, there is a worry that one should have about the divisiveness and what it means for each other. And the same is true internationally. So basically, if you

anybody who has gone into wars this through history. Um, the people who are the most convinced that that's the thing to do all regretted going into wars because of what wars are like. So the things that I would hope to convey is, first of all, what are the arcs? Is that right or wrong? In the arcs measured not opinionated. Just look at those measurements so that you could see that. And then as we think about it, like I have a principle, if you worry, you don't have worry, and

if you don't worry, you need to worry. And what I mean by that is if you worry and you start to think what this direction could be and what it's like, then um, maybe you deal with the things that prevent those worries. Where if you don't worry, maybe you get into trouble without worrying or with a confidence that there are things we can do. The world has now more resources than it has ever had, and there are things that can be done. Now you're managing a

hundred and fifty billion plus about them? And why is it explained this to me? I really don't know the answer. Hedge funds seem to come and go sometimes they're hot, sometimes they're cold. Sometimes they go out of business. You've been in business for almost half a century and you've got a hundred fifty billion. What did you do that nobody else has been able to do. What we were able to do, UM was to be able to structure portfolios in a way that we're UM better in terms

of the returns, risks and correlations of our investors. So to give you that an idea, in other words, UM, you could balance things in a way. I could take different alpha's, different bets in different markets, and I could carry that and put that in a fund called pure Alpha. Then I could take different asset classes and put that in a fund which was called pure beta. And then

we could engineer it for the customers risk levels. Do you want it at twelve percent volve, volatility eight percent involved? And then they would whatever benchmark they wanted we could put the alpha on top of, so they could say I want the SMP five hundred plus a six percent ball operating that way. I know it all sounds complicated, but we could design and structure things to their liking that would produce an attractive, rich risk in return that

also was not correlated with their other investments. You wrote a book a few years ago called Principles that sold millions of copies. Usually books in the business world on sell millions of copies, and millions of them were sold in China as well. Um, what is it that was in that book that was so exciting to people? When I would make decisions, I would not just make the decisions. I would think about, what are the criteria that I would use to make the decisions, and I'd write them down,

those are the principles. And then in our culture, which is this idea of meritocracy, we would say that those criteria good or bad, and then we would try to put them into algorithms and equations. And so I would do that almost like a diary kind of thing, and I would see the same things happening over and over again, and the next time it happened, I would go to the principle, and we could together go to our principles.

And so it accumulated that over a period of time, and they were practical, they're not theoretical principles, and people seem to find the valuable. Now it is said that you use these principles in your firm, and you operate the firm and in the principles right more or less, but it's very constant self examination. Employees have to be self examined by their peers. You're self examined by your peers, right,

or other people in the firm. It's hard to get people to want to do this and where they be examined so intently over the years, and it's so logical, But that doesn't mean everybody wants to do it. Um, it's um so in one sentence, it's an idea meritocracy. You know, the best ideas win out from wherever they come from, in which the goals are meaningful work and meaningful relationships. That we're in it together through radical truthfulness

and radical transparency. So if we disagree, that's a good thing. It's no reason to have anger and to have the art of thoughtful disagreement and examine how do you scientifically find out what's true? How do you test things? And so on? And that's been essential to our success. So you know, you're very intense. You're obviously into the numbers, but you're so big into transcendental meditation. Right, Yeah, that's

helped me a lot. It's been probably the biggest whatever success I've had, maybe more attributable to transcendental How did you get into transcendental meditation? The Beatles help you or something? Yeah? Yeah, Um, it was exactly that. In ninety eight the Beatles went to India and they meditated, and then I heard about it. And then in nineteen sixty nine in New York you could, Um, you can bring some flowers and you could do that and you could learn how to meditate, and and wow, um,

I recommend it's the best thing gift. I could do it every day or almost every almost. Yeah, I try to do it every day. I try to do it about twice a day. And if I could take a second to describe it, um um, what it is, um is it frees your mind of thought, and it takes you from a conscious state into your subconscious, and your subconscious is where creativity comes from and equanimity and all of that. Like if you're calm and great ideas come to you, and when you have that equanimity, then you're

as you're approaching everything. Things are just the way they are and you have to deal with them. And it's a little like being you know, in the uh Ninja movies, it's a little bit like being the ninja, and everything seems slower and you can handle it better. And so and you align your subconscious which is where the motions and also inspirations come from, with your conscious mind. And when they're aligned and you have that equanimity, it's a

great thing. You're gonna write a book on transitentle meditation. Let me ask you this. The average person watching right now probably doesn't have a hundred and fifty billion dollars to manage the investment of. So what can the average person do to invest reasonably? Well, well, you know, um, like I didn't have any money, and I remember the cycle and what it was is I would start to think, um, how much money do I have to how many weeks, months and then years can I take care of myself

and my family? And I would calculate that I would be at okay, fifty two years if no income was going to come in, And then I would start to think, um, and then if I'm holding a portfolio in something, maybe I could lose half, so I better cut that number in half. And then I start to think of what are my uses of the money, what do I need to do? And I would think about how do I

immunize that? And you start and you build like that, and you know how to save and and saving you know things like don't put it into cash deposits that get eroded by inflation and taxes and so on, and you start to develop it. And the thing that you can do, the most important thing you could do, is not be in cash and and those deposits, particularly now when there's such negative real rates. And to have a

well diversified portfolio. And that well diversified portfolio that's a whole subject of what does that mean and how to do it, But it's a well diversified portfolio of not just asset classes, but of uh countries, of um uh you know, of of different thing currencies, diversified. But let's let me ask you an average person who isn't you know, a billionaire. Should they expect to get a great return over on their money of five percent a year? Is

that a good target? Six eight percent? What do you think is a reasonable target for somebody doesn't want to take undue risks? Well, nowadays the structure of the markets and where everything is priced um if um and done the normal way, we'll give you probably a return in the vicinity of with a lot of risk around it. Uh, maybe in the vicinity of four percent three three and three percent three four, Okay, something that might not equal inflation,

probably would be very close. And then you have to pay taxes on it um because there are so many financial assets. But one thing you can, they'll send you more money. As we talk today, the stock market in the last couple of weeks has been correcting, if that's the right verb, and a lot of the errors out of the so called bubble. Should people be selling everything and getting out of the market now because the markets are going down? Or is just the time to buy?

First of all, I'm not here to give a lot of advice, but I'll give you the following thoughts. We won't tell anybody, just give us, okay, just just on our own. Uh. What's happened is the they produced a lot of debt and gave out a lot of money, and so everybody's got money. And it's also very easy to borrow money to buy things. And as a result, if you create much more buying power, then you create goods and services. You've got a lot much more inflation.

And the Federal Reserve has been behind the curve slower to tighten monetary policy, and as a result, we're now starting to see the rise in interest rates to be able to deal with that. As that happens, all assets compete with each other. So now that free money is still going to be cheap money, but it's going to be a bit higher, so interest rates. Let's say bond yields have gone up about one percent. Now you take that and you adjust everything is the present value of

future cash flows. But it means that that interest rate goes up a percent. That means all the other assets have to adjust. We're in a process of making that kind of adjustment. That means the days that we've had before, the easy days where they not money on you and you don't have much inflation and you don't have much tightness, those are past and now we're in a different kind of part of the cycle. How do you foresee crypto

impacting the world order? Uh? I think it's interesting. I have a tiny percentage of my portfolio wanted to to diversify. But it is a very vulnerable incident because they can track who is operating on it. It can be tracked. It will be outlawed, probably by different governments, and in terms of its size, it has issues. So I think too much attention is spent spent on um crypto or somebody might be a gold bug, or somebody might be I don't know they hold gems or whatever they do.

But I think that we're now in an era where we're going to have different types of money. We're going to question money is a medium of exchange, but it's also a store hold of wealth, and we're going to be questioning what are the right store holds of wealth in in the value And you're going to see around the world, not only the digital versions of that take place in many forms. You're going to see other forms

of that competition. I think in the year's at we are not investing, and you're not transcendental meditating, and you're not writing books and doing philanthropy. What are you doing? You have any Outsidember Number one is my grandkids? Okay, my my kids, my my family of course, um and one of the greatest blessings in life that whenever can possibly have his one. How many grandchildren you have? I have? Ford? Now, what do they call you? Papa? Not Mr Dahlia or

something like that. Thanks for listening to hear more of my interviews. You can subscribe and download my podcast on Spotify, Apple, or wherever you listen