The Man Warning The World: The Great Financial Collapse Is Here | Ray Dalio

1. 0:00 – 2:55

   Intro

   1. SBSteven Bartlett0:00

      Are you seeing signs that we're in an AI bubble, and therefore a economic collapse?

   2. RDRay Dalio0:04

      The classic signs, and that has implications for the economy, and it's bad for the society, and everybody loses money. But we also have some other things that are going on that happen around the same time, and I can go through these if you want.

   3. SBSteven Bartlett0:19

      Please.

   4. RDRay Dalio0:20

      So what I'm saying is clear, because I'm a global macro investor.

   5. SBSteven Bartlett0:25

      And you were one of the few managers to foresee the great financial crisis.

   6. RDRay Dalio0:29

      Yes. And so right now we're very excited about AI, and we should be very excited because it's gonna be revolutionary changes, but it's creeping into almost everything. The way I look at it is I look at the human body, and I see like it's replacing the body and so on, and then it replaces some aspects of your mind, levels of thinking and reasoning. But at the same time, we have another problem that's existing, geopolitics. I mean, China is a larger trading partner with most countries than the United States is.

   7. SBSteven Bartlett1:01

      And that's a changing of the world order.

   8. RDRay Dalio1:03

      That is one of the ingredients, right? And then also, you've got large wealth gaps. The government don't have enough money. And so when you have the downturn, then you have people at each other's throats.

   9. SBSteven Bartlett1:14

      So a lot of people, they're thinking about how to sort of secure their future. How do they all prepare?

   10. RDRay Dalio1:19

       Let me say that history has shown that it's not the most intelligent people that are the most successful, but the key thing to keep in mind is-

   11. SBSteven Bartlett1:31

       This is super interesting to me. My team give me this report to show me how many of you that watch this show subscribe, and some of you have told us, according to this, that you are unsubscribed from the channel randomly. So favor to ask all of you, please could you check right now if you've hit the subscribe button, if you are a regular viewer of the show and you like what we do here. We're approaching quite a significant landmark on this show in terms of a subscriber number. So if there was one simple free thing that you could do to help us, my team, everyone here, to keep this show free, to keep it improving year over year and week over week, it is just to hit that subscribe button and to double-check if you've hit it. Only thing I'll ever ask of you. Do we have a deal? If you do it, I'll tell you what I'll do. I'll make sure every single week, every single month, we fight harder and harder and harder and harder to bring you the guests and conversations that you wanna hear. I've stayed true to that promise since the very beginning of The Diary of a CEO, and I will not let you down. Please help us. Really appreciate it. Let's get on with the show. [upbeat music] Ray, for people that might not know who you are, you founded Bridgewater Associates in a two-bedroom apartment in 1975, and you grew it to the world's largest hedge fund. What was the, the total amount of cumulative net gains that you delivered for those investors over that period?

   12. RDRay Dalio2:42

       I think it was something like 53 billion. We produced a, about a 12% return with no-- never any significant losses, and it was uncorrelated with other investments.

2. 2:55 – 12:37

   The AI Bubble: Are We Heading Toward an Economic Collapse?

   1. SBSteven Bartlett2:56

      And you were one of the few managers to foresee the great financial crisis, which allowed Bridgewater to post positive returns of 9.5% in 2008, while the S&P 500 plunged by almost 40%.

   2. RDRay Dalio3:10

      Yeah.

   3. SBSteven Bartlett3:11

      Let me start with the thing that I'm most curious about, because I sat here with an investor called Jeremy Grantham, who you might know.

   4. RDRay Dalio3:16

      Mm-hmm.

   5. SBSteven Bartlett3:16

      He told me that we're staring in the face of an AI bubble, and therefore a economic collapse, potentially.

   6. RDRay Dalio3:23

      If you look at the data, it would be compatible with history for the peak to be very soon. Everything is in line. This is, I think, the biggest investment bubble in American history.

   7. SBSteven Bartlett3:36

      What's your perspective on that?

   8. RDRay Dalio3:38

      He's right. I don't wanna jump to conclusions as much as I wanna explain reasonings that lead up to conclusions. I'm at a stage in my life that I wanna help people understand cause-effect relationships. What they call a bubble is when the price goes up, uh, a lot, and companies do very well, and then it collapses, and that has implications for the economy, and it has implications for the markets. Like 1929 bubble, okay? Or the 2000 bubble, okay? Which was the dot-com bubble.

   9. SBSteven Bartlett4:11

      Does it impact real people as well? 'Cause you said the economy-

   10. RDRay Dalio4:13

       It, it-- Did 1929 bubble bursting impact real people? Yes, the Great Depression followed. Because what happens is, there's a new technology that comes along that's revolutionary. The dot-com bubble, which was 2000, all the stuff that we have that's wonderful new technology, people get into that technology. They say, "That's miraculous. I can bet on that. I'm, I'm sure it's gonna be successful." And then they bet on it. And sometimes they borrow money to bet on it, and they lose sight that the price of it matters. So it goes up and up, and it, it's everybody's thing, you know? It's like right now we're very excited about AI, and we should be very excited 'cause it's gonna be revolutionary changes. And it-- then at the same time, "So I wanna buy some of that." And everybody wants to invest in some of that, and what they do is they don't pay attention to the price, and there's a certain mechanics. People will borrow money. Wealth is not the same as money, so you see a lot of people getting wealthy, but you can't spend the wealth. You have to sell the wealth to get money, 'cause you can only spend money, right? So what happens is when they need money, for one reason or another, taxes change, or interest rates go up, and so they have to pay their debt service and so on. There is a pricking of the bubble so that what happens is it falls, okay? And when that happens, people lose money, and as they start to lose money, the process works in reverse because, uh, when they made a lot of money, they have a lot of collateral, right? They can go borrow money 'cause they're worth a lot, and that compounds on its way up, and then when it comes down the other way, it works the other way, okay? Now you gotta pay your debt. And so, and then you have to start to sell assets, and then there's less demand for things, right? So there's less demands because if you're losing money, 'cause you put some money in the stock market and the company and so on, you're gonna spend less. And as you spend less, then somebody else's income goes down, right? You don't go to the restaurants.

   11. SBSteven Bartlett6:21

       Right.

   12. RDRay Dalio6:21

       The economic downturns that typically follow a bubble, uh, like the Great Depression, the late '20s was fantastic. If you talk about changes and, and experiencing ch- this was the first time there was electricity in houses. So it was the first time that you would have refrigeration and you would have lighting in houses. This was the first time that you had, um, cars popular, that you could, uh... First time airplanes, first time you had radio. And so everybody knew that they were gonna be great in the future, and they were great in the future, but at the same time what happens is as they buy them and they b- stocks go up and they borrow money to buy them and so on, um, and the profits don't live up to the price, then that causes this other dynamic and it produced the Great Depression.

   13. SBSteven Bartlett7:12

       So let's say that I buy this and this is a unit of artificial intelligence. So let's say I buy one share in one of the big AI companies right now. Because investors are so excited about AI, they value this at $100, this unit that I have here. They say it's worth $100. So my n- net worth is now $100. I go to the bank because I have this net worth, this paper worth, $100, and I ask the bank for a 50% loan on this-

   14. RDRay Dalio7:41

       Right

   15. SBSteven Bartlett7:41

       ... thing that I own. They give me $50. Now I have $50. And then something happens in the economy which means that the investors who've invested in this, and investors generally, now need money to pay off their other debts that they have. So this could be a war, it could be some kind of event that takes place, and suddenly everybody rushes to sell their assets like this one. And so when I go to sell this, the f- price of it has now plummeted to, say, maybe $25, but I took a loan at the bank for $50, so I owe the bank $50. But now this thing that I have that was worth $100 a couple of months ago is now worth $25 and I'm $25 in the hole, so I have to quickly sell. And then with everybody selling, all the price of assets drops, people stop spending money at the restaurants, like you say, there's less money around, and then the bubble has burst and we're in this sort of declining ec-

   16. RDRay Dalio8:33

       You got it.

   17. SBSteven Bartlett8:33

       Okay, good. All right, fine.

   18. RDRay Dalio8:35

       And it happens because it must happen. I mean, meaning in these, uh, tremendous tr- uh, changes, uh, there's very little that's known. So anybody who's in the business of making AI, uh, can't be precise. They don't know exactly how much money is gonna come in, right? So there's either one of two things. You either don't invest enough and then the competition runs away, or you ve- in- uh, invest a huge amount and you can't be precise, okay? And so when that dynamic happens, it's a problem. So yes, you said it very well, so I'm gonna repeat one other thing to emphasize. What's quite common now is, uh, you can issue stock for, uh, let's say you raise $50 million and you value the company at a billion dollars.

   19. SBSteven Bartlett9:25

       Mm-hmm.

   20. RDRay Dalio9:25

       Only $50 million was actually spent on that company. But now if you raise that, you're a billionaire.

   21. SBSteven Bartlett9:32

       Mm-hmm.

   22. RDRay Dalio9:34

       Okay? Because the accounting value of that, what do you own? You own stock that is valued at a billion dollars. Nobody paid a billion dollars or whatever it is, right? And now you own that stock, but that stock, um, you can't spend, 'cause you can't spend wealth.

   23. SBSteven Bartlett9:50

       Mm-hmm.

   24. RDRay Dalio9:51

       In order to spend it, you have to sell some of that stock to get money.

   25. SBSteven Bartlett9:55

       Yeah.

   26. RDRay Dalio9:55

       Right? And quite often there's an interest rate rise because the, you know, let's say is there's a fever and there's an inflation, then the central bank wants to try to put the brakes on that a bit. Okay, what does that mean? It means people who have debt, in a sense, have to come up with more money.

   27. SBSteven Bartlett10:14

       Mm-hmm.

   28. RDRay Dalio10:14

       'Cause when you own the de- hold the debt, you have to come up with money to pay the debt.

   29. SBSteven Bartlett10:18

       So hit down the spiral.

   30. RDRay Dalio10:19

       And that dynamic works. Between us, we've said it, uh, clearly-
3. 12:37 – 17:05

   Why Economic Bubbles Burst—and How to Prepare Before They Do

   1. SBSteven Bartlett12:37

      Closing off on this point of the bubbles, what is it that makes bubbles pop? So if we are in an AI bubble at the moment, and it is gonna pop at some point, what is the, like, they call it a black swan event-

   2. RDRay Dalio12:47

      There are a few of them. There are bubbles, and then the things that prick the bubbles, okay? The things that prick the bubbles, typically in the beginning, are something that means that I have to sell some wealth to get money, and that's usually a rise in interest rates. It could be something like wealth taxes, something that means I'm a, a very wealthy... But typically the tightness of money, because during that spot, there's inflation pressures, and central banks decide that they wanna tighten monetary policy, and so on. It becomes that the, um, amount of money that I can get by owning that debt at the higher interest rates is greater than the amount of money I could get on my equity investments. That's part of it. Also, what you see is a lot more production of stock, and what I mean by that, issuance of stock. So think of the, the supply and the demand. There's, there's demand, right? And we've been talking about the demand that makes stocks go up.

   3. SBSteven Bartlett13:46

      Mm-hmm.

   4. RDRay Dalio13:46

      You know, how we create this wealth. But there's also, um, supply. So y- you can issue stock. It's very issue. There, there's almost nothing that's easier to produce than stock.

   5. SBSteven Bartlett13:57

      So if I own a company, I can just, uh, print more equity?

   6. RDRay Dalio14:01

      Yes. Today you could probably go out and say, "I'm gonna make a company, and I'm gonna take it, uh, public." And you go to your audience and your crowd, and you can say, "I'm gonna make stock."

   7. SBSteven Bartlett14:12

      Mm-hmm.

   8. RDRay Dalio14:13

      Okay? So it becomes, when there's a, when there's a market that wants stock-

   9. SBSteven Bartlett14:17

      Mm-hmm

   10. RDRay Dalio14:17

       ... there's a production of stock.

   11. SBSteven Bartlett14:19

       And is the-

   12. RDRay Dalio14:20

       Okay? And that supply of stock, together with the other that I'm mentioning, the, the need for getting money and so on, um, causes the, um, the, the bubble to pop.

   13. SBSteven Bartlett14:31

       Are you seeing signs that we're in a bubble?

   14. RDRay Dalio14:33

       Yeah, yeah, yeah. The classic signs that we're in a... And the bubble, I should emphasize, it's not a, um, you're in a bubble or you're not in a bubble. It's a degree thing, okay? There is also that it's in weak hands. I can look at now who is in these companies, right? And is it in strong hands or weak hands? Classic strong hands is that when weak investors, not knowledgeable investors, then put a, a lot of money into it, particularly if that's in a leveraged way. In other-

   15. SBSteven Bartlett15:05

       In a way with debt. [laughs]

   16. RDRay Dalio15:06

       With debt. Or they can buy an opt... A, a, a leveraged version of like the, like there are ETFs now that are leveraged versions of the stock market and the... a- and so on. And so they get into that. It's more like they're crap shooting, okay? And then that's a sign of a bubble. So I'm mi- I've listed a few of those signs. Um, those are the major signs of those bubbles. And so that when it goes down, then you get the fear, then you get the need now to raise cash, and y- that dynama- dynamic works its way out in the form of then the reverse happening. In other words, everything becomes cheap, and everybody has, um, the spending and the things you mentioned.

   17. SBSteven Bartlett15:49

       If we are in an AI bubble and it is gonna burst... You know, I had a friend of mine contact me, and he said, "Steven, I think we're in this, uh, an AI bubble," and he's running an AI company. So he s- he said to me, "I'm gonna raise lots of money now so that when the, the markets come down and investors are fearful, they don't want to invest in companies, people stop spending as much, they start thinking about their subscriptions and start canceling subscriptions, we're gonna be good, and we're gonna be able to buy out some of our competitors who are gonna be struggling." So he's just raised, um, hundreds and hundreds of millions of dollars for his AI company.

   18. RDRay Dalio16:17

       Right, and it's probably like that. Easy.

   19. SBSteven Bartlett16:20

       Yeah, it was easy now.

   20. RDRay Dalio16:21

       Right.

   21. SBSteven Bartlett16:22

       The question here is, like, what should, at different levels, so, like, the, the average Joe on the street up to entrepreneurs that are running companies, how does, how do they all prepare for an economic bubble that might burst?

   22. RDRay Dalio16:32

       He's such a good example, and what that does, in j- just following up through on what we were saying a minute ago, is that increases the supply of AI stock.

   23. SBSteven Bartlett16:41

       Okay. Yeah, 'cause he sold stock at a high valuation.

   24. RDRay Dalio16:42

       Because he's gonna sell more.

   25. SBSteven Bartlett16:44

       Yeah.

   26. RDRay Dalio16:44

       Right? And so as he and others do that more, this greater supply of stock comes in, and, and so he wants to get ahead of it-

   27. SBSteven Bartlett16:54

       Mm-hmm

   28. RDRay Dalio16:54

       ... in that dynamic, and then, you know, that contributes to the, the bubble. But, um, uh, how do they prepare?

   29. SBSteven Bartlett17:01

       How does the average person prep-

   30. RDRay Dalio17:02

       Look, look, I, I would also say something.

4. 17:05 – 23:34

   How to Diversify Your Income Before the Next Downturn

   1. RDRay Dalio17:05

      The future is very unknown, and people should not be timing. Sophisticated investors have a real challenge even in timing a bubble. So on, uh, the important thing always is to diversify. Now we're gonna go back to money, the basics of money management. And I, I, by the way, I personally have gone through the cycle, 'cause I didn't have any money, and then I did, then I had a lot of money, and I remember, uh, the cycle very well. What happens is, as you start off, um, I used to count how many months I would be okay. I have a certain amount of money. How much mo- I, I would be okay if no more money came in, if I lost my job or whatever I w- did. I'd mostly never... I worked two years for somebody. But in other words, if money didn't come in. And it would be months, and then years, and so on to build that security, 'cause I have to take care of my family, and so on. And so what, it, um, as we're looking at these things, these are the choices that you have in order to be able to say, "Do I buy my house or apartment? Do I put my money into cash?" And what happens to money is you have to put it into something. Because, um, they'll pay you interest on it, okay, so that's your cash deposit and so on. And people think that that's the safest. It's not. It's the worst investment over the l- long period of time because inflation will eat it away.

   2. SBSteven Bartlett18:36

      You mean putting it in a bank, just leaving it in a bank is-

   3. RDRay Dalio18:39

      That's right. I- I- in whatever form, a money market fund, a whatever it is that is that short-term, um, deposit it and it'll give me an interest rate.

   4. SBSteven Bartlett18:47

      Okay.

   5. RDRay Dalio18:48

      Okay? And that's what they think about as cash. You know, nobody leaves it literally in cash because if it's literally in cash, it doesn't earn interest, so why shouldn't I put it there and get some interest on it? And so that's cash, and people think that that's the safest. It has the lowest return, guaranteed almost to have the worst return over the longer period of time.

   6. SBSteven Bartlett19:09

      People keep cash because it feels safer.

   7. RDRay Dalio19:11

      That's right, and I'm saying it's not safer because of inflation.

   8. SBSteven Bartlett19:16

      Explain that to me in simple terms.

   9. RDRay Dalio19:17

      Okay. Well, if I got no interest rate, um, then what I would do is I'd lose to, to the inflation rate.

   10. SBSteven Bartlett19:25

       And what's the inflation rate?

   11. RDRay Dalio19:26

       And, and, well, 3.5 or 4%, um, uh, happens to be about where it is now.

   12. SBSteven Bartlett19:31

       A year.

   13. RDRay Dalio19:32

       Yeah, a year.

   14. SBSteven Bartlett19:33

       So that div- I lose $3.5 a year-

   15. RDRay Dalio19:35

       That's right

   16. SBSteven Bartlett19:35

       ... if I just leave it in cash.

   17. RDRay Dalio19:36

       That's right.

   18. SBSteven Bartlett19:37

       Okay.

   19. RDRay Dalio19:37

       Okay? Now I'll get an interest rate on it if I put it someplace, and it'll give me maybe, uh, an interest rate that's somewhere in that vicinity, similar to that. A-

   20. SBSteven Bartlett19:48

       3, 4, 5, 4%.

   21. RDRay Dalio19:50

       And then I have to pay taxes on it.

   22. SBSteven Bartlett19:52

       Oh, you have to pay taxes on the gain.

   23. RDRay Dalio19:54

       Your... Yep.

   24. SBSteven Bartlett19:55

       Okay, fine.

   25. RDRay Dalio19:55

       Right? Even though you really didn't gain relative to inflation, you still have to pay the taxes on whatever you've earned or something. Anyway, over the long term, it's a lousy return because also think about returns also come from productivity, and over a period of time people learn how to do things better and so on. So then you can invest in, let's call this stocks, okay? That- we'll call that the stock market. This is cash, and then you think on the stocks. And then the stocks can go up or down, um, and then they have this dynamic that we're talking about that creates these big cycles and the busts. And those cycles, when they go down, um, go down, um, 60, 70%. Okay, that's, that's what a bear market looks like. Woo, what a, [laughs] what a dive. Okay, this is gold. Uh, that's gold. Um, the- these are bonds, and this is your house, and that's, uh, Bitcoin. Okay, so these are the choices. They each, um, change for certain reasons. I'll digress into that in a minute. But what happens is they go like this. When gold goes up, uh, tends to be that the bonds will go down, uh, b- in value or your house, and these change in a certain way. And so the best thing to do is to have a div- a diversified portfolio of that. When you have that rather than any one, you, uh, won't reduce your return, but you will reduce your risk.

   26. SBSteven Bartlett21:29

       And diversified means having a little bit of each.

   27. RDRay Dalio21:31

       Right, a certain amount, and you have to know how to balance them because of their volatility. This one, stocks, is more, uh, volatile than this one. And my own recommendations are you start, first of all, with what you need. Should I, uh, buy a place or should I use that money and I could travel more and so on? One of the advantages of the house, the apartment, and whatever is it's your environment. Your environment is important. It produces forced savings. Sometimes that forced savings is good. It is, uh, it typically is taxed better. It's a b- it's a better vehicle for tax over a period of time. But I'm not arguing for this alone, but I'm saying when I'm looking at this, then I think this one, gold, is, um, very interesting because when all of these tend to do badly, this tends to do well, okay? So it's a very effective diversifying because this was money, not un- until, um, 1971, and it's still the second largest reserve currency. Central banks hold reserve currencies. So it has qualities that are different from this, and this has qualities like when the value of money goes down because of inflation, this-

   28. SBSteven Bartlett22:54

       Bonds.

   29. RDRay Dalio22:55

       Okay.

   30. SBSteven Bartlett22:55

       And bonds are basically lending the government money.
5. 23:34 – 28:12

   How to Secure Your Financial Future With Little or No Savings

   1. SBSteven Bartlett23:34

      A lot of people i- in the comments of our last episode, um, they were asking this like, how does this apply for someone who doesn't have much money, maybe doesn't have any assets? Say they're 30 years old, they, um, have, I don't know, $100 disposable income, and they're thinking about how to sort of secure their future. What is the advice for someone in that situation?

   2. RDRay Dalio23:56

      Your only asset is yourself, um, and I guess what you're gonna get from the government. How do you sell yourself at, at getting a better income or how mu- how are you getting money from the government?

   3. SBSteven Bartlett24:08

      Mm-hmm.

   4. RDRay Dalio24:09

      You selling yourself is the main thing. This is one of the big problems now- With artificial intelligence and other machines, uh, replacing people in, in different types of jobs, it becomes more difficult. It produces that big wealth gap while you're having more productivity. Everybody wants more productivity because it means how do you produce things more efficiently? But that's, um, contributes to the income gap because your productivity equals your income to a large extent, and then you have the, and you know, the political dynamic. It's tough to get yourself out of this position that you mentioned. You know, I'm imagining that person, okay? It's not easy. There is this giant polarity. If you're in the top 10% of talent, let's say, the world's your oyster. But nowadays in order to be there, okay, that's, that's difficult. Find something that, uh, gives you the ability to sell your time for good money. Is that gonna be that you're driving an Uber? Is that gonna be that you have the talent and you're being, gonna be able to understand AI and contribute that understanding to a company that values that? Or what is your skill? You found this, okay? And, and you found the way, okay? But you need money, uh, okay? And the, the thing that you wanna do, what you're doing-

   5. SBSteven Bartlett25:36

      Mm-hmm

   6. RDRay Dalio25:36

      ... and I'm lucky enough to do, is to make your work and your passion the same thing, and don't forget about the money part.

   7. SBSteven Bartlett25:44

      Mm-hmm. Yeah. I, I am, I... One of the things that I, I think I didn't realize earlier in my career is that whatever skills you have will be valued differently in different contexts or industries, should I say. So for example, say that my skill here, and I'm not trying to flatter myself, but say my skill here is-

   8. RDRay Dalio26:01

      It's working

   9. SBSteven Bartlett26:02

      ... having conversations, right? Let's say that's what it is.

   10. RDRay Dalio26:04

       Yeah.

   11. SBSteven Bartlett26:05

       There's lots of places I could have conversations, and those places would value my ability to have conversations wildly differently per hour.

   12. RDRay Dalio26:13

       Right.

   13. SBSteven Bartlett26:14

       So I of- often think this and speak to my friends about this when they, they tell me their skills. I say, "Let's look at the different industries and how they would value the skills you currently have differently." A good example, again, you know, you could be an Uber driver or you could chauffeur Ray Dalio. Now, I imagine those two things pay wildly differently, but the same skill of driving a car, broadly speaking.

   14. RDRay Dalio26:37

       I agree with all that.

   15. SBSteven Bartlett26:38

       And so I think that's one way to just... You know, the other way is you go ask your current boss for a promotion. But again, they're gonna value you in the context of their other employees, the market in that industry, et cetera. So it's, you might get 10%, but you're not gonna see a step change necessarily. So that's something that I always say to people.

   16. RDRay Dalio26:54

       Absolutely right. And another, uh, law of something, and I think it's a- almost a law of everything, it's a law if you, um, buy almost anything, is those at the top, whatever the thing you're buying, if you're buying a painting, a piece of furniture, a piece of clothing, a t- uh, a person's time or whatever, command premiums that are many multiples of the average. It's almost like if you could invest 10% more of your time, your effort, your skill to go up-

   17. SBSteven Bartlett27:33

       Mm-hmm

   18. RDRay Dalio27:33

       ... okay, you will get twice as much-

   19. SBSteven Bartlett27:38

       Mm-hmm

   20. RDRay Dalio27:38

       ... for 10% better something like that, okay?

   21. SBSteven Bartlett27:42

       Mm-hmm.

   22. RDRay Dalio27:42

       So that's part of the formula of life and a formula of employment. And so if, I think if you keep what you brought up and what I'm bringing up in mind, that helps you position yourself and know what to do.

   23. SBSteven Bartlett27:54

       Mm-hmm. There should be a button just down below here, and if it says subscribed, you're already subscribed. If it says subscribe, that means you're not yet. And if you're not subscribed, please could you do us a favor and hit that button? It helps the show more than you know, and according to the algorithm, you're someone that watches our show but you haven't yet hit that button. Thank you so much.

6. 28:12 – 30:26

   Bitcoin vs. Gold: Which Asset Better Protects Your Wealth?

   1. SBSteven Bartlett28:12

      We didn't mention this thing here actually, so I probably should talk about it 'cause people are talking about it a lot right now, which is, uh-

   2. RDRay Dalio28:18

      Bitcoin

   3. SBSteven Bartlett28:19

      ... Bitcoin.

   4. RDRay Dalio28:20

      Mm-hmm.

   5. SBSteven Bartlett28:21

      What's your perspective on Bitcoin? I know the market in Bitcoin is down at the moment.

   6. RDRay Dalio28:24

      I have about 1% of my portfolio in Bitcoin because there's different kinds of money. The, and the money that you can't print, that's one kind. This is the other kind of money that you can't print.

   7. SBSteven Bartlett28:37

      Gold.

   8. RDRay Dalio28:38

      Yeah. You cannot crack it with technology. You can hold it. You own it. It's, there's a saying that it's the only, um, financial asset that is not somebody else's liability. Somebody has to give you something for it. It, it has that. So in my category of wanting, let's say, make sure that I have some hard money, which for most people should be between 5 and 15% of their portfolio, I prefer that. I'm pointing to, uh, the gold bars here, uh, rather than, um, the Bitcoin.

   9. SBSteven Bartlett29:15

      Is it still, in your view, a, a gold-like asset?

   10. RDRay Dalio29:20

       Yes, it's, it's a type of money that can't be printed, but there are technologies that can, um, hurt it. In other words, if there's quantum computing, and it can be monitored by, uh, governments and so on, it could be taxed, and digital currencies are somewhat similar.

   11. SBSteven Bartlett29:41

       But you don't like Bitcoin as much as gold because of privacy reasons as well.

   12. RDRay Dalio29:45

       And when the governments say, "I don't want it," they have the power therefore to do whatever they want with it. And central banks will not own any significant amount of that because of the reason I said. They, they want their transactions to be private and in their control. Think about how different it would be for Russia, okay? They confiscated these kind of other assets. Um, they didn't get these.

   13. SBSteven Bartlett30:13

       Gold.

   14. RDRay Dalio30:13

       Okay, gold And so, um, what you're seeing even particularly in this time of conflict is, um, that there's a sense that if I'm holding this, others

7. 30:26 – 35:08

   Who Will Be the Biggest Winners of the AI Revolution?

   1. RDRay Dalio30:26

      won't get it.

   2. SBSteven Bartlett30:27

      You mentioned a second ago the impact you think AI is gonna have on the economy broadly, but also again, to real people's lives. There's lots of debate. I mean, there's been a debate over the last 10, 10, 10 years or so within the world of AI. You had the big AI CEOs originally saying that AI would cause job disruption, and that, you know, you've even had some of the CEOs more recently saying work will become optional in a world of super intelligence. At the same time, we have robotics coming over the horizon. So you've got this sort of convergence of intelligence, and then I don't know, you could think of it like muscles, like physical-

   3. RDRay Dalio30:59

      Yeah

   4. SBSteven Bartlett31:00

      ... muscles or ability. At the same time, um, we're seeing AI accelerate in its capabilities. What does this mean for the average person and their job, and who's gonna benefit from this AI revolution in your point of view?

   5. RDRay Dalio31:12

      It means that you will either be cutting edge and capable and among that top fraction of a percent down to 10% of the population who is, um, cutting edge in using it and accelerating, or, uh, you will, if you're in a thinking job, uh, be at risk of being, uh, replaced. We're coming into a world where we can automate everything. The evolution of man was we had the agricultural era, and there was no real inventiveness. And then man invented the machine. And what the machine did is it replaced man's physical necessity. So men used to be like oxen in the agricultural field and so on, and they were replaced by tractors. And then there was, we entered the industrial age. First you had the printing press that allowed people to learn, and then you had these inventions, the Industrial Revolution, the first Industrial Revolution. And what you had is the replacing the physical that that man would do in factories then, and so on. And so the way I look at it is I look at the human body, and I see like it's replacing the body and so on, and it's coming up, uh, higher and higher, and then it replaces some aspects of the mind that you can computerize. And it's coming up and up, and it's replacing higher and higher levels of thinking and reasoning, okay? So that path is part of the evolutionary path that is happening, okay? So then you start to say, "What do I have to offer?" And so in answer to who benefits from it, those who benefit from it are those who are, um, the capitalists with the ideas that replace, uh, the workers. And so if you look at there's revenue for businesses. When you buy something in a store, there's revenue, okay? And if you look at the share that is going to workers, you see that share going down. And if you look at the share that's going to those who own that business, that share is going up. That's, you know, how do they share that revenue in terms of the cost? And you see that that's rising. And so, um, this is an evolutionary process, and it's true that what happens is you get more, uh, free time, okay? So now the so- society has to think, how do I deal with this? So for example, the work week, which used to be, you know, a 60 or 70-hour work week, goes down to less than a 40-hour work week and there's more time. But there needs to be, uh, you know, how do you create a bottom? And so we're going through this phase in which there is this upper end that is making incredible amounts of wealth, as we described, and then this lower end that is, um, then having these challenges. We have a relatively good economy, and the, um, difficulty of college graduates to, uh, get employment has increased significantly. And I can tell you that in, in many businesses it becomes more of a pain in the neck to have a college graduate, uh, let's say do it. They, you have to train them, you have to... And, and many of those tasks, many of that thing can be done, uh, very quickly with the AI and with computerization. And as you get into robotics, you're gonna have that ha- happen, right?

8. 35:08 – 43:38

   Will AI Replace Human Workers Faster Than We Expect?

   1. SBSteven Bartlett35:08

      The speed of the disruption that we're seeing because of the amount of capital that's flowing into these AI frontier models like the cl- Anthropics and OpenAI, et cetera, et cetera, is, is quite different from anything else, sort of the historical precedents as we've seen through the Industrial Revolution where it took time to build the tractors and-

   2. RDRay Dalio35:25

      There's an element of speed. What happens usually is the bubble bursts.

   3. SBSteven Bartlett35:30

      Mm-hmm.

   4. RDRay Dalio35:31

      And now you have the cyclical dynamic of that while the technology, you know, evolves. But the, the supply, demand and the debt problem that we just talked about then come in. And so unemployment is due to u- typically, um, some sort of a combination of a financial crisis that, like we talked about, the debt and stocks going down and people not having collateral and then therefore not buying, uh, assets and that dynamic. That causes the unemployment rate, that factor.

   5. SBSteven Bartlett36:04

      That's the sort of economic reasons, but in terms of the AI agents, robotics being able to replace you, I've sat with Dara from Uber, and Dara said that he imagines in the future the nine million riders that they have around the world doing deliveries will be replaced by autonomous vehicles, autonomous robots. Those nine million- driver's careers that you have will be out of work c- conceivably in the, you know, talking about being honest about the situation.

   6. SPSpeaker36:30

      Yeah. I think, a- again, it goes to physical AI as well, right? So I think 20 years from now, you can imagine that those 9 million will be 20 million, uh, AVs maybe. But we have time between now and then, partially because we don't operate in the virtual world, right? We operate in the physical world. You have to get the regulations up. You have to build the cars. You have to build the sensor stacks. The, the models have to get there. So there is time between now and then, but you can imagine the majority of our trips being fulfilled by robots of some kind.

   7. RDRay Dalio37:06

      The unemployment rate gets very influenced by the bubble bursting and the economy going down. You see that spike.

   8. SBSteven Bartlett37:15

      Mm-hmm.

   9. RDRay Dalio37:16

      You certainly have the evolutionary change that you're referring to.

   10. SBSteven Bartlett37:21

       Okay, so it's both-

   11. RDRay Dalio37:21

       Okay? In other words, there's this evolutionary thing in which they, uh, like he says, um, uh, you know, the tractor replaces the labor or the assembly line worker as technology is replaced, and that is an evolutionary thing that goes continuously for, you know, many years in, in the way that you're describing. Because you asked about the unemployment rate, I just wanted to emphasize that the unemployment rate is very heavily affected by that bubble bursting.

   12. SBSteven Bartlett37:52

       So, okay, you've got two forces at once then. You've got, uh, when the bubble bursts, everybody, as we said, needs cash, so they start cutting their costs. So that's when they start laying people off.

   13. RDRay Dalio38:02

       Yeah.

   14. SBSteven Bartlett38:02

       And they start looking around their company and go, "Forget growth. We just need to survive, so we're gonna lay off that team and that team and that team." And then you see unemployment going up. And then you've got this sort of underlying shift happening at the same time, which is workers are replacing their team members with AI agents or robotics, or in the factories they're now using robots to do factory work, et cetera. And that's the sort of current slow march forward.

   15. RDRay Dalio38:27

       N- right. So I have this chart, okay? What this represents, this line, is the, um, evolution of technologies. In other words, we have greater and greater learning and doing things better, and that's the evolution that we're talking about that also machines replace people or replace their tasks over that period of time. Then you have this big cycle, which is typically lasts for about a lifetime, uh, on average, about 80 years. Uh, we went through that, uh, the last time 1945. There are orders. There's a monetary order. There's a domestic political order. There's a geopolitical order. Okay? You have the bubble bursting, okay? You have this. This is what we're talking about, um, that dive. And then y- when you go through that, you break down these orders. And when they break down, then, um, you would get rid of the debt burden. So you get rid of the monetary system as you're used to it. You, um, may get rid of the domestic order. M- many countries' orders, their systems end. I mean, they all end at some point, and so they can break down quite often in a time of great internal conflict. Does the system last? And that happens at that time. And so that's that big breakdown. But still what you're talking about is, and, and I, and I agree with you, this keeps going up, okay? Because learning, you don't unlearn what you've learned. So as this, uh, goes up and, and you're, uh, uh, you, you still keep this thing going up, okay? But you have the big cycle, the debt, the conflict type of movement. And these little cycles are the cycles that we see in this roughly, on average, let's call it an 80-year period. But, um, uh, you see the, um, you see the recession, and h- uh, recession has higher unemployment, and so on. Then they stimulate monetary policy. They make money looser. Then the economy goes up, and you have prosperity. Then you go into a bubble, okay? That... And you run lower on capacity 'cause you're using up the capacity. Inflation rises. They tighten monetary policy. And then you have the re- the recession that follows. So these movements from one recession to the next recession, that cycle that I've just described, on average has lasted about six years, uh, uh, give or take about three. So that's the way it looks.

   16. SBSteven Bartlett41:13

       So I'll play this back just to make sure I understand it. There is a sort of bigger macro bubble, which is over 80 years, which is the changing of the world order.

   17. RDRay Dalio41:23

       Yep, you get deeper and deeper and deeper in debt over a lifetime. Till, so let's say your debt capacity, you have a certain amount, so the government's debt capacity, for example, it can borrow... When you wipe it out here, then you can build it up and build it up until it starts to squeeze. Debt service starts to squeeze out.

   18. SBSteven Bartlett41:42

       And that's a changing of the world order.

   19. RDRay Dalio41:44

       That is one of the ingredients, right? So okay, we have too much debt. At the same time, what you're building up is you're building up great wealth gaps because capitalism, and I love capitalism, but it, it's, it... here's the reality. It creates big differences in income and wealth, and when it does that- That also creates differences in people's opportunities because the rich people can educate their children well, and they can give them all the benefits. I mean, education is a big benefit, and that's why there should be broad-based excellent education. But all of that happens, and so you see wealth gaps build up. So like the Industrial Revolution leads into the Gilded Age, okay? The Gilded Age looks a lot like now, you know, people buying expensive things and looking very gilded, and then it le- leads to the robber barons, and the robber barons are people who are considered, you know, the, um, that they're, uh, taking advantage, the billionaire class, and it becomes that cycle. So that's the way it works.

   20. SBSteven Bartlett42:55

       So you've got this 80-year sort of, you know, boom, and then there's a collapse, which sort of ends in conflict a- and the changing of the new world order. And then within there, you have these little, um, bubbles, which are really economic bubbles that go up and down, recession. People get very excited. They, they, they contract. They get excited. They contract. And then you have the, the straight line here, which is the sort of techn- technological improvement, uh, across the spectrum of ideas and technologies and all these things. And-

   21. RDRay Dalio43:23

       It keeps going

   22. SBSteven Bartlett43:24

       ... and it keeps going regardless of this boom and bust because, as you say, people never forget. Uh, so a couple of questions on this then. I don't even know which one to dive into first, but let's go for, I guess, just closing off on the last point that I was, I was getting at is there's this narrative

9. 43:38 – 48:35

   Will AI Create Enough New Jobs to Offset Job Losses?

   1. SBSteven Bartlett43:38

      that there'll be new jobs created because of AI and robotics, and everyone will be fine. A lot of this narrative comes from Silicon Valley.

   2. RDRay Dalio43:46

      Who is producing the technology that doesn't want to be attacked because they're, uh-

   3. SBSteven Bartlett43:51

      Making a lot of money

   4. RDRay Dalio43:52

      ... they may have an a- [laughs]

   5. SBSteven Bartlett43:53

      Yeah, and they're in the Gilded Age

   6. RDRay Dalio43:54

      ... a desire to have a certain perspective. Uh, I think objective, um, people, uh, in Silicon Valley, a- and there are a number of them, would say it's, uh, going to have a big employment. But you, you, you can see it, um, in the wealth, who owns stocks and who doesn't own stocks. Okay, now if you own stocks, um, um, y- you're very happy now, okay? And if you don't own stocks, you're not getting that benefit of owning stocks. So that in and of itself creates a greater, greater wealth even aside from employment. Okay? So there are these forces to create the greater, uh, wealth gaps, right?

   7. SBSteven Bartlett44:37

      Roughly s- 61% of US adults own stock in some form, and most of them hold it indirectly through their retirement plan. Only 20% of Americans directly own individual stocks or shares through a brokerage account. While over half of Americans own stocks, ownership is heavily con- concentrated. The top 10% of households hold almost 90% of the stock. How do you feel about this narrative coming from predominantly Silicon Valley that there'll be new jobs created that we can't yet forecast and everyone will be fine? They point to the Industrial Revolution. They say, "Look, when the tractors came, we thought everyone was finished. When factories came, we thought everyone was finished. But look, we figured some other stuff out."

   8. RDRay Dalio45:19

      Because if you look at that, this is this w- um, thing I'm saying that as your body is more and more replaced with your mind, then you can do that. But when your mind is replaced and your body is replaced, uh, what is it that you have to sell?

   9. SBSteven Bartlett45:38

      What is it that we have to sell as humans once our body and our minds are replaced?

   10. RDRay Dalio45:43

       What man has, um, is emotions and has, um, intuitions. There are certain things that artificial intelligence doesn't have. And so if y- you have to get down to what those things are, y- um, you know, does the, um, robot give a good massage? Does, uh, [laughs] you know, what is it that is left? And so we will wrestle with what it is that is left, okay? But I think that for the foreseeable future, those who can work very well where they have an exceptional human intelligence and work in partnership with the artificial intelligence, that they are going to be at the cutting edge of all of this.

   11. SBSteven Bartlett46:39

       I've got 60 seconds, and I'm gonna show you how much I can get done because of our sponsor called Wispr Flow. And for those of you that don't know what it is, it's a business I invested in that turns your speech into text in any app or device. I'm gonna post into our Slack channel, which rewards whichever team member conducted the most experiments this week. Hi, everyone. Here is this week's experimenter of the week. Congratulations to The Diary of a CEO trailer team, which is Ant, Liv, Dom, and Cam. You guys have won. Okay, now I'm gonna open Gmail. So here is one of our founders on an email chain that I want to connect my team with. All I have to say is, "Add my team's emails," and Wispr will do exactly that. Now a quick message to Juan, who does my schedule every single week. Hey, Juan, can I record on Wednesday at 2:00 PM? Actually, no. Do you know what? Let's record at 3:00 PM on Wednesday. Wispr Flow is four times faster than typing, and it is incredibly easy to use. So if you want to give it a go, all you have to do is head to wisprflow.ai/stephen to download it today. Just like Jon Jones, where marginal improvements in your cognitive performance can have a massive impact, sometimes I podcast for 10 hours a day. Over the last couple of weeks, I've been in filming for a TV show, and then I have, like, one or two days off to get all of my work done, which means there's lots of cognitive load. And so I turn to ketones because I find myself more articulate, able to think more clearly, able to work out better when I'm fueled by ketones. And so the reason I became a co-owner of this company and the reason why they now are a sponsor of this podcast is because I remember one of my team members called Christiana. She tried it once and came up to my desk, and she goes, "This is the best product ever made." And I think in part that's because she really cares about those cognitive benefits as I do, as Jon Jones does, and as I think most of my listeners probably will. So if you haven't tried these yet, all you have to do is go to ketone.com/stephen, and you'll also get 30% off your first subscription order. You'll get exclusive Ketone IQ merch and, of course, cognitive benefits that might just change your life

10. 48:35 – 59:04

    What Would You Tell Your Kids to Do Right Now?

    1. SBSteven Bartlett48:35

       So if you had k- kids that were 16 years old now, Ray, and they said, "Dad, what, what do you think? Based on everything you know about the future, what should I be doing?"

    2. RDRay Dalio48:44

       First of all, there's the question of what, what, what matters most in your lifestyle? The, uh, uh, so I'm gonna get philosophical, not, uh, assuming that the highest income is the best, okay? Um, because happiness, uh, y- you want happiness and health. And so in answering your question, there's very little correlation between the amount of money you have and the level of happiness that you have, past the basic level. And so I could be answer your question first, which the obvious way is to say, to earn the most amount of money. And I wanna start off in saying that, um, you know, my experiences and so on is, um, like, a, I love being in nature. [laughs] And it doesn't cost me hardly anything. I mean, it depends where your pull is. And so don't lose sight of your pull and what it's about. What you want to do is you want to get above the level that you, uh, don't have to panic. We just earlier discussed how many months can I live, and to be able to secure that and to be excited and have that passion or the, whatever it is, the life that I want to have. So I just wanna emphasize, keep in mind of that. But then also, you know, my principle is make your work and your passion the same thing, and don't forget about the money part, right? So know your nature. Uh, um, this is what I tell my grandkids, okay? Yeah, you have a field, and you also have a nature. It's not just your preferences. People think differently. Some are, uh, more adventurous, some are less adventurous, some are more conceptual or artistic and can think with imagination, and they love doing that. Some people don't like that. Some people want to, they make, life should be more concrete and more certain and so on. That's your nature. You're partially, you're a lot born with that nature, and you also de- learn it in your earlier years. We know this of ho- how neuroplasticity works and so on. So we are all on a journey to, um, find the match between our nature and our path. And you find tho- that path, but you can't forget about this money part-

    3. SBSteven Bartlett51:07

       So on that point-

    4. RDRay Dalio51:07

       ... when you're pursuing that path

    5. SBSteven Bartlett51:09

       ... don't forget about the money. So if your, you know, grandkids came to you and they said, "Uh, uh, I wanna become a lawyer," would you say, "Listen, that's forgetting about the money because I think AI might take that job," or would you say yes? Would you, if they said, "I wanna be-

    6. RDRay Dalio51:23

       I think you, uh, uh-

    7. SBSteven Bartlett51:24

       "I wanna do a thinking job."

    8. RDRay Dalio51:25

       Let me say that history has shown that it's not the most intelligent people or the most intelligent species that are the most successful. And it's not no- necessarily those that work the hardest, although these things are very important. It is the, those who, uh, species and, and people who are also most adaptable. And, and so there's gonna be great change in your lifetime, okay? And so yes, today it's artificial intelligence. But if you went back, um, not long ago, we didn't even know artificial intelligence would exist the way it, uh, artificial intelligence today exists. And the future will be like that. So when you're nailing it down, you know, it used to be make sure that, uh, you know how to, um, code. And then Cl- Claude Code comes along, and all of those who are coding, um, are worried about their jobs, okay? So what is it that matters, okay? It is, um, it is the approach to life in a sense that produces that, um, you know, the, the general understanding and also the adaptability. And I think a lot has to do with knowing yourself. That's why in building Bridgewater, uh, the personalities of the person were very important in what suited their jobs. And then I, uh, built this, um, a personality profile test. Then I made it online for anybody to go take. It's about 30 minutes. It's free online. It's called Principles You. That'll tell you a lot about your nature, okay? But your goal is to find that nature and what, uh, what are the paths. And there are several paths, and they're constantly changing to find that nature, okay? You'd experiment, you learn, okay? But y- you know, you probably, uh, were pulled into this job by your nature, right? And so, and you, and you made it work, and here it is. It works in all of those dimensions, and it's like that for everybody.

    9. SBSteven Bartlett53:37

       Yeah. It's, it's, uh, it's interesting 'cause you look forward to the future and I, I think if I was a young person at this stage and I was trying to set out where to aim my career, I would be more confused now than ever before. Especially 'cause they're also contending with this, uh, unemployability crisis amongst entry levels.

    10. RDRay Dalio53:52

        Okay. But if you're talking about you'd be confused because you can't anticipate the future, that's right. That's just the way it is, right? Uh, and if you say, "What is it that I need, given that reality?" Okay. I need to, I need to learn, I need to know how to maximize the use of tools like AI to be able to in- increase what I know and how do I use that to the best of my ability to be as useful as possible doing things that fulfill me.

    11. SBSteven Bartlett54:30

        Mm-hmm.

    12. RDRay Dalio54:31

        Okay? So that's what you need to do. You're asking what you need to do. Uh, just get over the fact that you don't know what the future's gonna be like. So if you're looking for an answer, uh, is it gonna be a computer programmer? Is it gonna be this or that? No, just be y- maximize, uh, your ability to know, which is so easy to do nowadays, right? So maximize that and then maxim- use that to maximize your usefulness and, and jobs that make you happy, and that's the thing that, that's the best I can give you in terms of more my s- 16-year-old. [laughs] That's the best I, I can give them because I, I don't wanna mislead them that it's the thing, that it's the particular job, okay? That'll mislead them.

    13. SBSteven Bartlett55:19

        You talked about this 80-year cycle which results in this new world order, and it sounded like you were saying that near the end of the cycle you see wealth inequality, and you see the Gilded Age where some people have lots of nice things and other people at the other end are struggling, and this is a function of capitalism.

    14. RDRay Dalio55:36

        First of all, um, it's a reality that it's not only just a, um, a, a, a wealth gap difference, and if the majority system is not working for the majority well, you're gonna have a problem. And yes, it is, um, it's contributed to these things where one wants to create more opportunity through education and through other basics, that there's a certain level, at a floor, that nobody should go underneath because it's bad for them and it's bad for the society. And just to embellish on that point, my wife and I live in Connecticut. It's the, on a per capita income basis, I think it's the second richest state. But 22% of the high school students have either dropped out of high school or are failing with absentee rates of greater than 25%. And as a result, a lot of it is gangs, shootings, drugs, and so on that leads to a lot of incarcerations, and the bill for incarcerations has become, uh, larger than the education budget. When you have that kind of cycle and so on, the system has to work for most of the people, uh, and so and so. You, you, um, you, you have that, um, dynamic. But it all comes down to productivity. And so, um, the way I look at it is the government run by almost anybody can't make these things run well. I mean, governments do not [laughs] make things run well. So what is it like to give them the money and expect that they're gonna make things work well? And so you look at this set of circumstances, and you say, "Who is gonna make it work well?" And, and I don't know the answer. And these are budget considerations and so on. You have to prioritize the things that make it work well, and, and you know what that is? That is, uh, educating people to be productive and civil. We don't talk enough about civility, you know, how we work together to be able to achieve a, a, a productive result. And the way these cycles go, it's more likely that they're gonna have a big fight, and we're gonna have, you know, a debt problem and those kinds of things than w- how we're going to come together and work out how to achieve this environment which takes care of wonderful education and productivity of people and all of that to make the society work better, uh, for most people. And that's the way it looks, and that's what's happened.

    15. SBSteven Bartlett58:21

        Capitalism leads to inequality, it seems.

    16. RDRay Dalio58:24

        Yeah.

    17. SBSteven Bartlett58:25

        So-

    18. RDRay Dalio58:26

        That doesn't have to. There are some societies, um, like in, in Singapore, some of the Scandinavian countries, some, some societies, there is a, a, a floor that everybody e- uh, can have, um, good education, adequate housing, and adequate healthcare, the foundations, okay? Because if you go below those levels, uh, the society will pay terribly for it because those people will become liabilities, not assets of the society. They'll be

11. 59:04 – 1:04:07

    Can Higher Taxes on the Wealthy Really Reduce Inequality?

    1. RDRay Dalio59:04

       disruptive.

    2. SBSteven Bartlett59:04

       So what about wealth taxes? 'Cause this is the big debate now. The, uh, the big debate in the UK at the moment is tax the rich. It's been all over our news over the last couple of weeks. The big debate in New York and LA is wealth taxes and tax the rich. Good idea, bad idea?

    3. RDRay Dalio59:18

       It's a very difficult i- idea in the following ways. I'm just talking about the mechanics. They have to sell the wealth, and, and that contributes to get the money to pay the taxes. That's one of those things that can cause the bubble to burst as we're talking about.

    4. SBSteven Bartlett59:38

       Mm-hmm.

    5. RDRay Dalio59:38

       And then, um, operationally it's very difficult, unlike if they did it as, um, stepped-up tax bases. In other words, r- right now when you die, your capital gains gets put aside, and you don't have to pay capital gains taxes. You pay inheritance taxes. And there are ways that you can raise taxes and not hurt the economy. But we do have to realize that it will lessen investment because what wealth is mostly used for is to put it into investment. So you have to do this with a, at the same time, the improvements in those that are going to improve productivity like education and so on. If you're just making transfer payments, wealth payments, and you undermine the productivity of the society by doing that, in other words, you're just giving it for consumption and so on, and the money's going from what was capital expenditures and those kinds of investments that make, uh, a better, more productive society to go to, in a sense, consumption and so on that doesn't produce that prod- productivity, that's gonna be a problem. So you have to think, how do you make people productive, and how do you make your society productive for most people? Or you're going to have to find a way where you say that other group of people who is not productive, um, the overall society can have a higher level of productivity, but we're going to still establish this bottom that I'm talking about, the bottom in education, the bottom in conditions. And then you have to say, who is capable of doing it, building a so- a, a society that will be productive?

    6. SBSteven Bartlett1:01:29

       And who is that?

    7. RDRay Dalio1:01:31

       Well, y- as I say, you have this dynamic problem that, um, um, typically a privately owned, capitalist owned business will do better than their government counterparty.

    8. SBSteven Bartlett1:01:47

       Okay, so business is more productive typically than a government entity.

    9. RDRay Dalio1:01:51

       That s- system.

    10. SBSteven Bartlett1:01:52

        So entrepreneurship. You need entrepreneurship.

    11. RDRay Dalio1:01:54

        Uh, uh, s- yeah, and capitalist. In other words, people who are capable of making the thing they're responsible for productive, okay? Run efficiently, run efficiently.

    12. SBSteven Bartlett1:02:05

        You need-

    13. RDRay Dalio1:02:05

        So you need those i- indisputably, and if you're doing that in government, you need that in government in order to be able to do it, and government has its own, uh... it, first of all, it doesn't attract many of those people, and then it also has by its nature, knowing many people have gone into it, it, it is almost dysfunctional as it causes all of this arguing and problems. So those who wanna be most productive tend not to go there, and it also, um, it doesn't, uh, distribute well. These people do not n- they're not on the ground. They don't have the direct contact. They don't know what it's like. And as I'm describing, I see this-

    14. SBSteven Bartlett1:02:47

        Politicians

    15. RDRay Dalio1:02:48

        ... uh, yeah, the politician who says, "I'm, um, I'm going to..." You know. So you still have to come back to the question, who's gonna make it run efficiently? This is something that I've made for you. I've realized that The Diary of a CEO audience are strivers. Whether it's in business or health, we all have big goals that we want to accomplish. And one of the things I've learnt is that when you aim at the big, big, big goal, it can feel incredibly psychologically uncomfortable, because it's kind of like being stood at the foot of Mount Everest and looking upwards. The way to accomplish your goals is by breaking them down into tiny small steps, and we call this in our team the 1%. And actually, this philosophy is highly responsible for much of our success here. So what we've done so that you at home can accomplish any big goal that you have is we've made these 1% diaries, and we released these last year, and they all sold out. So I asked my team over and over again to bring the diaries back, but also to introduce some new colors and to make some minor tweaks to the diary. So now we have a better range for you. So if you have a big goal in mind and you need a framework and a process and some motivation, then I highly recommend you get one of these diaries before they all sell out once again. And you can get yours at thediary.com. And if you want the link, the link is in the description below.

12. 1:04:07 – 1:09:01

    Is the UK in Decline—and What Would Turn It Around?

    1. RDRay Dalio1:04:07

       What is the UK currently a cautionary tale of? It's the classic cycle. They have gotten over-indebted, underproductive, and they've run out of choices. In other words, there's not enough money, okay? And because there's not enough money, um, to, to do all the things, then they've gotten this internal political conflict going. And you've had, uh, six out of the last seven years, you've had a, a new pri- prime minister, because somebody else comes in and they got their promise, [laughs] and, and the promise doesn't pan out, and it doesn't take long f- to be that that, "I don't believe your promise anymore." So you bring the people in, and then you throw them out. So-

    2. SBSteven Bartlett1:05:00

       We, we just had a pri- new prime minister yesterday.

    3. RDRay Dalio1:05:02

       Yeah, I know. I'm, I'm... it's all part of this cycle. And so what happens is they don't have the financial m- and the people move. It's just logical, right? It's just when you're heavily indebted and you're not as productive and you've got large wealth gaps, what are you gonna do? It's politics. Um, y- you're gonna say, "I can't raise taxes, because if I raise taxes, besides having great in- conflict, um, people are gonna leave." Uh, okay. "So I can't, uh, I can't cut benefits, because those who are receiving whatever those benefits are, are the ones that are suffering. I mean, what am I gonna do, cut those benefits?" So now, uh, okay. Uh, but wait a second, I'm running a big deficit or, [laughs] or I don't have enough money. So where does the money come from? How do I get out of not getting more in debt? And then what does that mean for the person who's lending to you? They don't wanna lend to you, right? So you're not gonna get the money to finance the deficits. It's mechanics.

    4. SBSteven Bartlett1:06:06

       So what is it they have to do to get out of that situation?

    5. RDRay Dalio1:06:09

       They're gonna have to have a, you know, a major restructuring. You're gonna have to, um-

    6. SBSteven Bartlett1:06:16

       Go bankrupt

    7. RDRay Dalio1:06:16

       ... wipe out. Yeah. Well, well, the, the way the central banks work now is they do a mixture of printing money, which produces inflation, and then restructuring the debt in some way, like maybe changing the maturity. W- uh, um, and in these cycles, uh, quite often they put in capital controls because they think people are leaving, so they don't want them to leave and take their money with them. So they put in capital tr- controls that says you can't leave with your money, okay? And they'll have exit taxes, and that's the type of thing that happens until, you know, there's a period of great turbulence. Then you, um, through a combination of restructuring the debt... Restructuring the debt means, like, quite often you lengthen the maturity of the debt.

    8. SBSteven Bartlett1:07:07

       Okay.

    9. RDRay Dalio1:07:07

       I think what's needed is a strong metal

    10. SBSteven Bartlett1:07:11

        What does that mean?

    11. RDRay Dalio1:07:12

        Right now there's a left and right, and they're extreme. And as long as they're at war with each other, that's gonna make things worse.

    12. SBSteven Bartlett1:07:20

        Yeah.

    13. RDRay Dalio1:07:21

        If you can find that middle course so that those at most extreme, um, are more alienated than those who s- say, you know, "We're gonna have to figure this out together." And then what I would do, that leadership, that core, I would have, um, something like a bipartisan commission in which smart people, meaning who understand how economics and these things work, of both parties work together to, uh, come up with a small s- and difficult plan. In other words, you're going to have to make difficult changes in order to make that, um, work well. But if you can achieve that, you know, like sometimes in history, great leaders of opposing sides have been able to come up with a plan. I mean, that's how the Constitution was made. You come up with a plan for operating that way, and then you impose those difficult changes. And then when I say this, I, I say that that's very difficult and very long shot. But, um, unless you have bipartisan support, unless you do it in a way where the pain is shared, um, and there's a sense that there is a, um, we're doing the right thing, as well as not a sense, just a reality of doing the right thing, to make most people productive, that is the best path forward.

13. 1:09:01 – 1:11:26

    Where Should Young Entrepreneurs Build Their Business Today?

    1. SBSteven Bartlett1:09:01

       If you were a young entrepreneur, you know, t- 21 years old, would you build a company in the UK now if you had a choice? And if not, why not? And if so, why?

    2. RDRay Dalio1:09:14

       I would, uh, exist without, and try to exist without borders.

    3. SBSteven Bartlett1:09:18

       What does that mean practically?

    4. RDRay Dalio1:09:19

       Uh, in other words, put aside all of these things that we're talking about to a large extent and say, "Where are the places in the world that are, that have the vibrancy, that have the capital, that have, uh, the elements that are needed?" There are bright spots in the world, and I'd wanna be a- around the most intelligence, doing the most cutting edge, terrific things, and be global. In other words, don't be just stuck in a provincial place. Go to these places that are what I might call almost renaissance states, that are h- good things are happening, and these qualities exist that not only good education, the civility, the vibrancy. Be in w- those places. But be able, not just in one. There's a Chinese ex- as, uh, not a Chinese, Hong Kong expression, I think, that a smart rabbit has three holes. And what it means is, like, if the one place that you go to, uh, it may not be the place that, um, remains the best place. There are riskier places. The riskier places are those that don't have the elements I mentioned, the education, the civility, the productivity, all of those things.

    5. SBSteven Bartlett1:10:34

       So would you, would one of those places for you be the United Kingdom? 'Cause me and my friends talk about this sometimes. You know, I've got, I invest in lots of companies there, and the founders come to me and ask me these kinds of questions, which is, is based on everything that's going on with this turmoil and the big cycle, um, what's gonna happen if I continue to build my company here in the United Kingdom?

    6. RDRay Dalio1:10:51

       I, I think that, um, I think the United Kingdom, as it goes through these difficulties, is as a whole a more difficult place. And then there are pockets of it that when they're operating are, in their pockets, very stimulative, um, having those elements. Just like in the United States there are places and pockets that have those. However, they're within a system and a place that is, um, not, um, not healthy.

14. 1:11:26 – 1:13:31

    Does a 2% Wealth Tax Actually Work?

    1. SBSteven Bartlett1:11:26

       The real dominant narrative we're seeing, as I said, this week, is that because there's this problem, you said there's not enough money, the, the most popular n- narrative, which I think is supported by about 70% of people, is that people over 10 million net worth, this, this is something proposed by one of my former guests, Gary Stevens, so he did a documentary last week, should have a 2% wealth tax.

    2. SPSpeaker1:11:49

       My preferred way is to stop people from hoarding enormous amounts of wealth for enormous amounts of time. That's my, that's basically my preferred method. There's also the wealth tax method. There's also capital gains as a method. There's a lot of different ways here. There's a lot of different ways here. But you have to deal with the problem of if you do not, do not tax very wealthy individuals and very wealthy families, their share of the pie will obviously grow over time, and they will, and they are, as we are watching, squeezing out ordinary families.

    3. SBSteven Bartlett1:12:15

       And this is kind of, it would raise, I think it was, I think they said 20 billion dollars or something like that, but it would raise some money. Um, so the, the big debate in the country at the moment is, yeah, do we... One way to raise money would be this wealth tax. Proponents of that, or I should say, um, people that are against that, say people will leave.

    4. RDRay Dalio1:12:32

       If you took all of the money of people in the, in the top, not, in other words, taxed at 100%, you're not gonna come up with enough money, because it's a such a small percentage of the population and, uh, but, and, but in addition, yes, the people will leave. Then you change the laws so that you make them retroactive. In other, in other words, you say the law means you're gonna be taxed as of a past date so that if you leave, um, we're gonna get your money Or then you put in capital controls. All of this has happened before. Wealth taxes would be new. Wealth taxes are administratively difficult, 'cause how do you value all this wealth that is not easily valued and such things? But yes, what you've just said is, um, well-recognized.

15. 1:13:31 – 1:15:12

    The 80-Year Cycle: Are We Entering the Collapse Phase?

    1. SBSteven Bartlett1:13:31

       You mentioned earlier that this big cycle takes place, this one here on the front of your book, The Changing World Order, happens roughly ev- every 80 years.

    2. RDRay Dalio1:13:39

       Yes. It, it's like health. What I mean is it varies. On average, let's say, what is the l- life expectancy of a person? But life expectancies or how long people live vary. I wouldn't, uh, uh, emphasize too much, um, the amount of time exactly, as much as I would, uh, look at your condition.

    3. SBSteven Bartlett1:14:05

       Where are we in this, um, at the moment w- in terms of the symptoms or markers of the next big collapse Well, we're, we're over in this vicinity over here. Um, you know, at, we're on the... Um, when we say that, um, the US, the UK, number of other countries are, um, later in that cycle when there's the loss of the things that we've been talking about, overindebtedness, more overindebtedness, the loss of power. So we're in the collapse period of the decline.

    4. RDRay Dalio1:14:38

       Yeah, the decline. I'll call that the, the decline.

    5. SBSteven Bartlett1:14:40

       And you've studied this for how long in terms of-

    6. RDRay Dalio1:14:43

       Oh, 500 years.

    7. SBSteven Bartlett1:14:44

       Yeah.

    8. RDRay Dalio1:14:44

       Uh, the cycles for 500 years and in a number of countries that's in that book. These are objective measures. This is not subjectivity. You can measure these things. You can measure the level of indebtedness. You can measure the, uh, education levels and the competitiveness. You can measure all these things in clearly measurable numbers that show the health, just, um, like a physical exam.

    9. SBSteven Bartlett1:15:11

       When

16. 1:15:12 – 1:20:28

    Can the Next World Order Have More Than One Superpower?

    1. SBSteven Bartlett1:15:12

       there's a new world order because of this decline, through history over the last 500 years, has there ever been two superpowers that emerge as the dominant superpowers, or is it just tends to be one?

    2. RDRay Dalio1:15:23

       In the past, prior to World War I, there was no... W- World War I happened, and then World War II happened because the world came together and there was one world, essentially. Before that, there were regions, and they would have the different powers, and you could have a powerful... China or India could be very powerful at the same time as the UK or, uh, the Dutch and whatever would be powerful, and they weren't in that one world. And the basic issue is when you have one world and you have disagreements, you're always gonna have disagreements. How do you resolve those disagreements?

    3. SBSteven Bartlett1:16:08

       Well-

    4. RDRay Dalio1:16:09

       War, okay? It do- maybe it's not physical war, maybe it's whatever it is, but there's a disagreement. Where does the border lie? Where does this... Okay. The rules-based order is a theoretical, um, conception of the United States c- at, coming out of World War II because there's the idea of how do you govern, and you have representatives, and you have them in the United Nations, and so on. And, uh, you know, that's a nice theory, but the reality is when that comes and is inconsistent with power, which wins, power or that rule-based system? So by nature, to answer your question, it means tends to be a dominant power. We will see. China and I think the United States, I think, um, the most likely beneficial outcome is that it becomes more regional, okay? China has no desire to occupy, control other countries for, for various cultural reasons and things that I can go into. And, and they, their basic objective is to not be cut off, not be harmed, and then also be as good as they can be and, and be competitive following their approach to a system, which is very much a top-down controlled system that's an extension of Confucianism, which is like the family, and that's what they want to do. You can possibly have this region thing, but you're not gonna have the dominant world power if that's the case. You have some chance that there's a great conflict, but I think that, um, there's enough wisdom, in a sense, to, um, not wanna go there.

    5. SBSteven Bartlett1:17:57

       So there's always, there's pretty much always been a superpower through different cycles. There's been one dominant power through these historical cycles. You're saying that you believe in the next decline, there won't be one dominant power, which has been the US for the last 80-odd years. There will be two, because you, you can't foresee there being a conflict of the scale that would result in one dominant power.

    6. RDRay Dalio1:18:20

       The strength of each country will be how they take care of themselves. Uh, are they going to be strong, or are they going to be weak based on how they educate their population, how they spend their money, how they manage themselves? Those will determine the relative powers of those countries, right? And so that'll be true certainly for the United States and China. And so as we go forward, how will those systems deal with those issues in the best possible way? And that I, I would say as long as the United States remains a power, but it's in-- it has a risk of, uh, of having a very bad set of circumstances through debt and conflict and these things that erode it. It'll be from within that those things, um, particularly, uh, could change that relative balance of power. And similarly, if China managed itself badly, it, that could change that Given that if they both remain powerful entities, then what you're going to see is, um, I believe more the recognition that there are regions, okay? Just like the, there's the Americas, okay? And that becomes heavily much more the region and where that spills over. And then there's the region, um, around China, the, um, AP- APAC countries, um, and tho- that region, and that there would be the development within those regions. And I do believe the avoidance of the big war, that would be very, uh, detrimental. There are issues like the Taiwan issue, but the Taiwan issue will be handled by, i- in my opinion, most likely not militarily in the sense that, um, there will be a great war between the United States and China over it, but in the pressures that are going to be created so that there is a reunification of

17. 1:20:28 – 1:30:16

    What the Iran Conflict Could Mean for the New World Order

    1. RDRay Dalio1:20:28

       China.

    2. SBSteven Bartlett1:20:28

       You mentioned conflict there. The United States are at war with Iran, and it seems to be a war that they can't seem to get out of. This is gonna have an impact, presumably, on lots of things you've described here, but also the feelings of people at home. As, you know, we, we face the prospect of the United States sending troops on the ground into Iran because this, the Strait of Hormuz is gonna become this ch- choke point to global energy, and they're gonna, you know... And what does Trump do about that? He can't- It's like Vietnam. He can't leave, or else he is gonna look bad. Um, he, if he stays, he looks bad. Midterm's coming up. What's your thoughts on this war in Iran? Do you think it was a bad idea? Do you think it was a good idea? Do you think it was-- Do you think it's-- Does it play a role in all of this stuff here, the US replacing-

    3. RDRay Dalio1:21:13

       Yeah. Th- this war in Iran, I think it... Here's what's happening. Internationally, I, I, I, I get to speak to world leaders and, and so on and, and particularly, uh, in Asia. There's, um, a recognition that, um, the United States, uh, doesn't want to, uh, fight a war. So the, the litmus test is, uh, do you c- who controls the Strait of Hormuz? And that the United States, um, becau- the population in the United States is worried about, uh, gas prices and losing people and, and they want it to b- be all over fast, that, uh, you can't fight a war that way. And so what you have is the United States will not show up in Asia.

    4. SBSteven Bartlett1:22:06

       What does that mean, show up in Asia?

    5. RDRay Dalio1:22:08

       In Asia, there are all these countries who believe that the United States was gonna play an important role as a counterbalancing influence for power in the region because China's the dominant power, and the others are much less power. And so the United States being in there was going to balance those power, and because they have a military presence, the idea of having bases in their countries was believed to be that will help that happen. Okay, now there's a recognition that not only they won't show up, but maybe these bases can become liabilities, and that the, uh, Chinese have a lot of influence and power, uh, under that set of circumstances. For example, uh, chips come out of Taiwan. We could imagine what would happen if they blockaded chips leaving Taiwan, okay? You'd see the world stock markets crash. You would see terrible, terrible things. That represents a non-military power, just even the ability to threaten that. Say the Chinese say, "For five days, we're not gonna have it." What will the United States literally do? Or if you go to, um, countries like, uh, the Philippines, which has a treaty with the United States that's like a NATO treaty, how would the American public react that we're going to send, um, military, you know, a- aircraft carriers and so on into the Philippines to stop the Filipinos from being picked on by the Chinese? I mean, so what you're seeing is a change that is very similar to the British Empire in terms of, um, uh, being, uh, weaker. I remember a time not long ago that, um, the United States would just have to almost hint to a country that we would like this thing, it, it to be this way, or you would like it to do that, that, and they would do it because of the American power, not just military power, but economic power and so on. Well, as you're seeing that power being eroded, for example, China is a larger trading partner with most countries than, um, the United States is, or capital turning up. So, uh, these things matter. So you're, uh, you're seeing that kind of a shift in power. I'm a global macro investor, and my goal is to be as accurate as I possibly can. I can't let biases stand in my way of doing that, so I look at statistics and measures and indicators and so on. So what I'm saying is clear. It is, it, you know, it's apparent. It's mechanics.

    6. SBSteven Bartlett1:24:59

       So what does that mean for the Iran situation then? Does it mean that it-

    7. RDRay Dalio1:25:02

       Well, it means that it's a very, very difficult situation. What, what is, uh, all through history, and the Chinese know this very well because their way of m- having a war is conveyed in the art of war and also the tribute system, as they call it. You cannot easily go in and control a country for a long period of time occupying. There are, you know, ninety million Iranians, and they will be there Uh, no matter what happens. Now the question is, do you have what it takes to, um, take control of the Strait of Hormuz by way of example and allow... In other words, do you allow that to be in the hands of the Iranians, or do you not? And are you willing to pay the price to be able to, um, put yourself in the position? Which means take a lot of pain, and then, um, enforce that for the, I don't know, forever and ever future, because it's not just take control today. It means, okay, how is that going to go on, and what does that mean in these other locations? Does the United States, they're gonna do the same thing with the Chinese in Asia? They're gonna do the same thing all around? Probably. Okay. So what does that mean? Okay. A change in the world order.

    8. SBSteven Bartlett1:26:29

       It sounds like a big mistake.

    9. RDRay Dalio1:26:31

       Oh, yeah, it, it was a big mistake, and also what it did is it shone a light on the vulnerability. Before, it didn't, it wasn't apparent.

    10. SBSteven Bartlett1:26:43

        Vulnerability of?

    11. RDRay Dalio1:26:45

        The United States in being able to enforce. You know, when there's always the threat, we'll come in there, uh, the, the strait is open, we're not dealing th- with this, and there's always the threat that the United States will, uh, remain control, and that would be true in Asia and other places. Now a light bulb goes off. In other words, the, uh, like the British ands- uh, the, the Suez Canal, we didn't realize. Now we realize.

    12. SBSteven Bartlett1:27:16

        That threats no longer work.

    13. RDRay Dalio1:27:18

        That that power no longer exists.

    14. SBSteven Bartlett1:27:21

        I guess we shall see. Ray, thank you so much for, uh, committing this season of your life to being more of a public educator, because your books here that have been read by millions, millions, and millions of people, and the videos that you produce that have been watched by tens and tens, hundreds of millions of people, um, have been so formative for so many of us understanding the world in simplified ways. And what I love about the work that you do is you explain the world through principles versus tactics and strategies which are a little bit more ephemeral than understanding the underlying principles. And I think it does two things. It helps us understand the world in ways that are, allow us to see past the current short-term moment that we're in, but it also helps us think generally, um, from a more macro perspective about how all these things connect together, and I think that's broadly applicable. The idea of, like, principled thinking is broadly applicable to all areas of life, whether it's your relationships or your business or your health, whatever it might be. Um, you've writ- really written the definitive books on this subject matter. I've got all of them here. Um, I mean, Principles is the first one that I ever read, but then I watched all of your, your videos on your YouTube channel, which, uh, explain it in animated ways. Those are absolutely stunning videos. They're unbelievably stunning videos. And I... It's funny 'cause, you know, I've watched a lot of videos, YouTube videos in my life, but there's some that I have just never forgotten, and your book and your video are, about the book on your YouTube channel, which I'll link to below, are a video on YouTube that I've just never forgotten. 'Cause it suddenly helped me understand the bigger picture in a way that I don't think I would have ever understood otherwise. There's no... I didn't go, I didn't go to my history classes in school. Um, I'm never gonna read history books necessarily. So, um, that video you made, but also the book itself really helped me understand there's always a bigger picture. And funnily enough, I go looking for the bigger picture and the cycles, shall I say, in all other facets of life and psychology. Because when you're dealing with humans, you are dealing with cycles. Uh, that's what, what I've, I've come to realize, and you can find them and spot them everywhere and then prepare for them accordingly. So thank you for the wonderful work that you do in this regard. I'll link all of these books below. Highly recommend reading them. And they're not for boffins or super smart people. They're for everybody, and, uh, they're written in such a way.

    15. RDRay Dalio1:29:21

        Yeah.

    16. SBSteven Bartlett1:29:21

        So I appreciate that.

    17. RDRay Dalio1:29:21

        Thank you for saying that. I find the videos are very digestible.

    18. SBSteven Bartlett1:29:25

        Mm-hmm.

    19. RDRay Dalio1:29:26

        One, How the Economic Machine Works, it's, I think it's 30 minutes, and it's been watched by 140 million people.

    20. SBSteven Bartlett1:29:34

        Amazing.

    21. RDRay Dalio1:29:34

        And, and people get it. So I think it's my responsibility to try to communicate also in a clear, simple, digestible way. So I like to take a, a concept that's in a book and make it into a 30, which is to try to pass along what might be helpful to people. So thank you.

    22. SBSteven Bartlett1:29:54

        Thank you for committing your, your, this season of your life to that. I really appreciate it, and so do many millions of my listeners. So thank you. YouTube have this new crazy algorithm where they know exactly what video you would like to watch next based on AI and all of your viewing behavior, and the algorithm says that this video is the perfect video for you. It's different for everybody looking right now. Check this video out. I bet you you might love it

Episode duration: 1:30:16