Billionaire Ray Dalio Shares The ULTIMATE SUCCESS PRINCIPLES That Made Him WEALTHY | Lewis Howes

Ray Dalio 0:00 The greatest problem of mankind is people having opinions that they're stuck on, because it prevents them from moving forward to finding the best answer.

Lewis Howes 0:12 I think you gotta have a dream.

Speaker 0:13 The School of Greatness.

Lewis Howes 0:14 Really? [laughs] Yeah.

Speaker 0:16 Please welcome Lewis Howes.

Lewis Howes 0:18 Welcome back, everyone, to the School of Greatness. I am very excited. We have Mr. Ray Dalio in the house. Thank you so much for being here, Ray.

Ray Dalio 0:26 Oh, I'm thrilled to be.

Lewis Howes 0:28 I am, I am, uh, I'm grateful for you, because you have such a wealth of wisdom, not only on wealth accumulation and finances and the history of the financial system, uh, which we're gonna get into as well, but the more I dive into who you are, you understand people, and you've created this incredible way to build something by understanding people. And in your book, uh, on Principles, it's really more a book about understanding people from my point of view, and the science of how people think, how they work, and how to connect them to a greater idea. And you've done an incredible job at understanding how to do this for your vision and, uh, for your company. So I'm really grateful you're here, and I'm grateful for your mission and your work.

Ray Dalio 1:16 Well, I hope I can be of some use. Uh, I focus on it. I do my best on it, 'cause I think it's important.

Lewis Howes 1:22 I'm curious, the greatest relationship in your life, what, who, who has that been for you? The, the person in your life who's made the biggest impact.

Ray Dalio 1:30 Well, my wife.

Lewis Howes 1:31 Yeah.

Ray Dalio 1:31 She's been a partner for 43 years. Um, you know, so a- at all dimensions, you know? I love her, um, intellectually, spiritually, physically, in all, all dimensions. And so... And we share the most important things, you know, uh, uh, everything from the children and the grandchildren to ex- excitements of life. So, uh, without a doubt, uh, it would be her.

Lewis Howes 2:00 Yeah, and you, you write the book in her honor, which I saw in the beginning. I'm curious, what's the greatest lesson she's taught you about becoming a better man and a better business leader?

Ray Dalio 2:10 Well, I, I, I get to see the world through her eyes, you know, and, and through her heart, so she shows me so many things. I would say it, you know, through all the years it's been many, many, many different things. Right now, um, she's in the process of, over the last 10 years, of helping the poorest, most disadvantaged kids in bad neighborhoods in, in high school to try to get them through high school, and so on. And so she's given me a window into, uh, a different world that has been helpful. Uh, but it's, uh, you know, [laughs] it's everything. It's spirituality, it's, uh, you know, different places in the world. It's, um, so many things.

Lewis Howes 2:56 That's beautiful. Uh, you've seen a lot of pain in your lifetime. Maybe, maybe personally you've experienced some, but just in the world, from the different pains that have happened in the world, whether it be the economy or, uh, injustice, different things that happen, death. You've seen a lot of loss just in general in life, and you talk about how pain plus reflection equals progress. I'm curious, it seems like there always needs to be some type of breakdown in order for people to be able to look back and ask themselves, "Okay, what's working? What's not working? What do I really want, and how do I get there?" Do you think it's possible to have progress without some type of pain in our individual lives?

Ray Dalio 3:35 Well, pain is a heck of a teacher by comparison.

Lewis Howes 3:38 [laughs] Yeah.

Ray Dalio 3:39 I mean, you know, like, when, uh, when you get, uh, pleasure, uh, then you, uh, then you just keep doing what you're doing, but it doesn't teach you to change. You know, pain, when you put your hand on a hot stove or do anything that, uh, got you into a position, teaches you maybe about how to approach it differently. And also, uh, pain teaches you about how reality works. Reality is reality. We're given r- reality. A lot of people say, uh, they wanna fight what reality is.

Lewis Howes 4:11 [laughs]

Ray Dalio 4:11 Uh, y- you know, "Oh, it's, woe is me," and stop thinking about it being differently. Just understand, like, why did that thing happen to me, and how do I put it in perspective? It's like nature does, y- y- doesn't care about you, right? It cares about the, you know, the universe. And so when you have those experiences, just understand how reality works, and also how to approach it better. That's smart, I think. So I think pain is the best teacher.

Lewis Howes 4:45 What do you think has been the greatest pain in your lifetime that you had to learn a lesson from?

Ray Dalio 4:50 Well, of course, um, the greatest pains are losing people that I love the most, which then gets me to reflect on the arc of life, right, and what it's all like. But, um, things in terms of have come differently. I, I, I remember a case that changed me profoundly. To tell you the story quickly, so I started my business in 1975, investing. And it's, you know, it's easy to be wrong in investing.

Lewis Howes 5:20 Mm-hmm.

Ray Dalio 5:20 That's part of the game. Um, but in 1980, '81, I calculated that American banks had lent a lot more money to countries than those countries gonna, gonna be able to pay back, and that they would therefore have a big debt default, and that would cause an economic crisis. And, um, it, it got a lot of attention, 'cause it was a, uh, controversial view. Um, and then and Mexico defaulted in August 1982, so that prediction sort of, wow, came right, and them countries did. And I got a lot more attention because of that was right, and I thought we were gonna go into an economic, um, s- ... spiral, a depression, a big debt crisis, and I couldn't have been more wrong. And, um, I, I was exact- that was the exact bottom in the stock market.

Lewis Howes 6:16 Yeah.

Ray Dalio 6:16 And I lost money. I lost money for myself. I lost money for my clients. I had to let everybody in my company go.

Lewis Howes 6:22 Mm.

Ray Dalio 6:23 And I had to, I was so broke I had to borrow $4,000 from my dad-

Lewis Howes 6:28 Wow

Ray Dalio 6:29 ... to pay some of my family bills. So I mean, I was, it, it, it, it was a lot of pain.

Lewis Howes 6:35 This was '82?

Ray Dalio 6:37 Yeah.

Lewis Howes 6:38 So you were broke then, '82.

Ray Dalio 6:40 Broke. Totally broke.

Lewis Howes 6:41 No money.

Ray Dalio 6:42 No money. No money.

Lewis Howes 6:43 Wow.

Ray Dalio 6:45 And that was one of the best things that ever happened to me. It was very painful, but it was one of the best things for, because it gave me, uh, the fear of being wrong without me losing my audacity. In other words, um, it gave me an open-mindedness. It made me start to think, um, what do, how do I deal with what I don't know? So I, it made me f- uh, find the smartest people I could find who disagreed with me to start to understand their thinking. It made me n- think about how I could m- maintain that, uh, that upside. You know, risk goes with return. So I didn't want to, uh, have an ordinary life.

Lewis Howes 7:31 Mm-hmm.

Ray Dalio 7:31 So I still wanted the big upside return, but how could I do that without less risk?

Lewis Howes 7:36 With upside. [laughs]

Ray Dalio 7:38 That's right. And I, and so that was a problem. That, that was part of my reflection, and that reflection led me to understand how I could diversify better, how I could stress test my thinking better, and so on. Then I brought in the smartest people I could find who were independent thinkers, who would disagree with me.

Lewis Howes 7:55 [laughs]

Ray Dalio 7:56 And then I, a- and, and, and I did that, and that was the exact bottom financially and so on in my life. From that point up to, um, you know, not long ago, Fortune described Bridgewater as the fifth most important coun- private company in the country, in the US. And so it was that pain-

Lewis Howes 8:20 Hmm

Ray Dalio 8:20 ... and reflecting well on that pain that gave me a greater ability to deal with what I don't know. And I learned, this is an important thing to learn, that I learned that, uh, whatever success I had came more from my knowing how to deal with my not knowing than from anything I knew. In other word- What you know in your head is only a small percentage of what the important things and the right things to know is. And so to be able to go outside of one's head-

Lewis Howes 8:56 Hmm

Ray Dalio 8:56 ... and to take in the best of the best of the best, wherever it comes, and then use that to make decisions, and all of that came from that painful, very painful mistake.

Lewis Howes 9:09 Where do you think you'd be today if in '82 you didn't go broke and have that massive pain?

Ray Dalio 9:13 I'm sure I'd have a, y- you know, a very, uh, ordinary, I don't know, life. I don't know. Y- you know, because-

Lewis Howes 9:22 With your- Yeah

Ray Dalio 9:23 ... I wouldn't have known how to have great upside-

Lewis Howes 9:27 Hmm

Ray Dalio 9:27 ... while having acceptable risks.

Lewis Howes 9:31 Hmm.

Ray Dalio 9:31 Right? In other words, like, like I, I, at the time I reflected it, I, I felt it was like, like the following. I'm on one side of a jungle, and I'm on this one side of a jungle, and I, and you could go, i- in order to b- imagine you could have great success if you can cross the jungle alive to get to the other side, but in the jungle are all sorts of terrible things that could kill you and, and so on. And you have a choice. You can have this bor- boring o- you could have this ordinary life, or you can try to cross the jungle. Now, each one of us would approach that differently. For me, I had to have the greatest life I could have. So I ha- and I have a little bit of a taste of adventure. So how would you cross that jungle? And what I learned was that the best way to cross that jungle would be with a team of people, uh, people who I cared about, they cared about w- me, who could see things that I couldn't see, and I could see things that they couldn't see, and that way you could be effective together. And when I... And so that's what I did. That's how it worked. And what I also learned through that thing is, like, I don't wanna get out of the jungle. I don't wanna get to the other side-

Lewis Howes 10:54 Hmm

Ray Dalio 10:55 ... because the actual act of being in it with them and to do those things is itself rewarding. So I am, I'm confident that I wouldn't have learned that if I didn't have that kind of experience.

Lewis Howes 11:10 So you're still in the jungle today.

Ray Dalio 11:12 Yeah. I'm in my jung- But my jungle, all, everyone's jungle, um, is a life arc. There's a life arc, right? Y- um, you have to recognize the life arc. You know, zero to, I don't know, 80, 85 or something is the life arc. Um, something like that. I'm 71. I know where I am on that journey.

Lewis Howes 11:35 Hmm.

Ray Dalio 11:36 Okay? To, it's important to know where are you on your journey. And then when you start to think about that, like, where will I be in 10 years? I'm gonna be a different person in 10 years.

Lewis Howes 11:47 Hmm.

Ray Dalio 11:47 Okay? Where will the people I love be? Think about yourself. Where will you be in 10 years, and where will the people you love be? It could be your kids. It could be your parents. Where will they be, and what will their experiences and the journey that they're going through and you're going through? And this script in the journey, by the way, is, is, is- Pretty well-known, right?

Lewis Howes 12:13 Mm.

Ray Dalio 12:13 Like, um, I think, give you example, I think it comes kind of in three phases. Uh, the first phase is when you're dependent on others and, you know, you're learning, okay? Then what happens is you get out of school and you become independent, and you go to work, and then it's entirely different. You're in the second phase of your life when others are dependent on you, and you're working, and you're trying to be successful. And then you... And, and, but there are the arcs, and you can see it, uh, markers along those lines. You know, do you get married? When do you have a kid? When... Like, I, I realize, like, when my kids have kids, I'm now in my third phase, okay? So, uh, so you see these things, you know? Yeah, and so you have to see that. So what I want at this phase of my life, at 71, I'm in tr- in transition from my second phase in which I've, uh, worked, and I've won, and I've, you know, I've played b- uh-

Lewis Howes 13:14 Mm-hmm

Ray Dalio 13:14 ... you know, it's like had my battles, and it was great and so on, and now I'm in a, in a mission to pass along the things that were valuable to me. I wanna pass them along to others, and then I'm gonna go quiet, and then I'm in that other phase, y- you know? But-

Lewis Howes 13:32 Right

Ray Dalio 13:32 ... you learn things, and so this is kind of a mentor pass-it-along phase.

Lewis Howes 13:36 How do you stay confident in transition from kind of one identity to a new identity that's something new, that's something unknown, whether it be in your personal transition life or in the financial world where things are unknown, things are transitioning, or it might seem like it? How do you personally stay confident in the transition?

Ray Dalio 13:57 First of all, um, you're really talking about comfort with ambiguity.

Lewis Howes 14:02 Yeah.

Ray Dalio 14:03 Okay? Um, and, uh, the way, uh, the way that I feel it is, uh, life is like an adventure.

Lewis Howes 14:10 Mm.

Ray Dalio 14:10 I mean, if you knew everything, it wouldn't be nearly as good, right? And, uh, so the ambiguity is part of it. It's part of the game. It's just the way it is. And then so to then experience that and, and, and to know how to deal with ambiguity, 'cause the same rules apply. You know, feel it, feel it. What's it like? How does it feel? Where are the pulls to? How do you learn? How do you learn how to approach it? What's it like? Speak to others who have been in there in that spot before. Um, you know, te- taste it, a- and so on. Our preferences change, you know, as you're, as you're going through all those things. So you feel it out. You learn about it. You go to the things that you feel the pull toward.

Lewis Howes 14:58 Uh, I'm curious. You have, you're, you have feelings you've been talking about for a few moments, but I know you're a very thoughtful human being, and you create algorithms for your entire work. Your team, everything is based on algorithms, kind of thoughts and ideas, but I'm hearing you say you're a deep feeler as well. Are you... Would you say you're more led by thoughts or your feelings? And what's your-

Ray Dalio 15:20 No, I think it's the alignment of them. Okay, here's the facts of pertaining them. There is a subliminal mind that we have, and there's a conscious mind. Freud discovered that there's a subliminal mind. Uh, so we ha- And in that subliminal mind, um, we, we just don't see it 'cause you don't, 'cause it's not conscious-

Lewis Howes 15:41 Mm-hmm

Ray Dalio 15:41 ... but it c- it, it, uh, has a big effect. And so feelings and those things are coming through that subliminal mind, and it really has a big control. And then there's a conscious, logical mind, so they, uh, uh, for everybody. And so they're, in your mind, they're like everybody's mind. There are these kinda two minds that are working. Now, uh, uh, I find that when I align them, meditation has had a big effect on me.

Lewis Howes 16:08 Mm-hmm.

Ray Dalio 16:08 I've been meditating since, uh, 1969.

Lewis Howes 16:13 Wow.

Ray Dalio 16:13 Uh, so, uh, so for a long time. Because what that does, literally, it's an exercise where you repeat a mantra, um, the sound, and then you lose sort of a consciousness, and you go into the subconscious mind. But in any case, to reconcile feelings with thoughts, to recognize feelings with logic and align them, like, each has to double-check for me.

Lewis Howes 16:38 Mm-hmm.

Ray Dalio 16:39 Like, if my feelings... I'm, yes, I'm a big feeling person. The, the, the most important things in life for me are what? Inspiration, love, um, you know, what am, what is it about? I mean, what are you doing it for? But at the same time, to be able to get there, logic can be able to express oneself, and, a- you know, uh, in algorithms or so is a, is a good thing. So when they're aligned, it's kind of a double-check, and it works at both levels. So I think that's most important.

Lewis Howes 17:09 When you doubt a decision or maybe just a moment in your life, personal or business-related, doesn't matter, when you do- when you're in doubt of something, what is your personal mantra to get you back to a kind of a centered, aligned place where you can make a better decisions?

Ray Dalio 17:24 Well, um, on the doubts, you know, the question is always, like, how big of a deal is it, and what is the type of bet and so on? And, uh, you know, little doubts, no, okay, that's no big thing. Um, you know, life and death decisions, um, those kinds of things, they're big, you know, those are the big questions.

Lewis Howes 17:43 Mm-hmm.

Ray Dalio 17:43 Um, and what I, um, what I realize, um, uh, on those is, um, doubting is part of that process. You can only be so- sure a certain amount. How do you get to the best triangulation? In other words, take in from the smartest people and your own thoughts and so on so that you're making that. Understand how reality works, and then tr- try to make sure that none of your, um, decisions are the ones that knock you out of the game. In other words, uh, like I've got an expression for people who, uh, who work for me, you can scratch the car, but you can't total the car.

Lewis Howes 18:24 Mm-hmm.

Ray Dalio 18:24 I, y- you know, you can... So realize, okay, you don't win it all. You, you, you know, you, y- you make your best bets, but don't have the one. So you have to eliminate the k- the killer ones, because y- you have enough killer ones, um, and one- and odds are one of them's gonna get you.

Lewis Howes 18:45 Right.

Ray Dalio 18:45 So, so, you know, I approach it basically, uh, that way. You, you know, try to make the diversification, try not to have any killer, eliminate all of those that are unacceptable, and then go for the upside. And, and doubt, but, you know, I'm used to doubt. I doubt... You know, there's, there's everything. Every time you put on a position in the markets, for example-

Lewis Howes 19:07 Mm-hmm

Ray Dalio 19:07 ... I am never sure if... Look, it would be easy if I knew.

Lewis Howes 19:11 Right. [laughs]

Ray Dalio 19:11 So there's a lot of doubt.

Lewis Howes 19:13 Right.

Ray Dalio 19:13 So, uh, so doubt is part of it, but y- you know, d- don't have, don't put yourself in a position that you can have unacceptable.

Lewis Howes 19:22 Where you go broke.

Ray Dalio 19:23 But being banged around a little bit is okay.

Lewis Howes 19:25 Yeah.

Ray Dalio 19:26 Right?

Lewis Howes 19:26 Okay. So how do you have confidence when you're doubting yourself and you're like, "I think this is gonna do well based on all the math and historical evidence and feelings"? How do you have confidence when you, you know, place that bet?

Ray Dalio 19:40 I have enough bets that I, I make the bet so that none, no one of them... I'm, I, I won't allow any one that'll kill me.

Lewis Howes 19:48 Right.

Ray Dalio 19:48 And then I raise, and I'll l- uh, typically only wanna make bets that I feel good about, and I will have them stress-tested, my bets, by having other people stress test it. So y- yeah, just imagine, I don't know, you're playing a chess game.

Lewis Howes 20:03 Mm-hmm.

Ray Dalio 20:03 Okay, now, okay, maybe you're a chess master, but okay, what are you gonna do? You have to still make a move. So okay, what's the best thing to do? Now, imagine you could ask the best chess masters in the world what to do, and think about the pros and cons, and, and make your decision, and, and, and just not make it that also one's gonna knock out of the game. So it's that.

Lewis Howes 20:25 You mention a team going through the jungle with you and supporting you. Whether it be mentors or hiring, how have you learned to bring together this great team that you've assembled, where people are gonna disagree with you? It sounds like people would have different thoughts and be able to w- free to disagree with you on certain things. How do you know when the disagreement becomes toxic? When you can look at it from a point of view of like, "Okay, I need this disagreeing thought," but when does it become toxic where you actually need to let go of that person in your life or on your team?

Ray Dalio 20:59 Well, what's so interesting to me, I think, is y- that y- immediately your question about the disagreement is toxic. Um, that's the first thing that people go to. Somehow they think disagreement is toxic.

Lewis Howes 21:13 Mm-hmm.

Ray Dalio 21:13 And supposedly, um, it's because the part of our brain which is the amygdala, which is this fight or flight, takes disagreement as the equivalent of a fight, and so it, anyway, gets triggered that way. Now instead, uh, um, imagine it's a curiosity. In, in, in other words, I view it as a curiosity. I mean, I could tell if somebody's, uh, wanting to disagree with me or I'm disagreeing with them because I wanna hurt them. I mean, that's a different thing. If you wanna hurt them, okay, then that's a different thing. But I mean, like, disagreement should be a comfortable thing that prompts curiosity and so on, and mutual respect. Like, i- like how could I ever get along with you if I couldn't disagree with you? Uh, like how many times, [laughs] you know-

Lewis Howes 22:03 [laughs]

Ray Dalio 22:03 ... I mean, w- you're gonna disagree. Like, you might one thing, another. Then that's the beginning of trying to find out what's correct in the path. So a good partner is gonna disagree with you, and you have to get past it. So the fact that you're asking that question the way it is, which is a normal question that everybody would ask, so reflects the fact that there's a hesitancy for disagreement, like it's a bad thing and it's a fight and it's nastiness, rather than just a disagreement that needs to be figured out.

Lewis Howes 22:35 And how have you personally learned how to disassociate the, uh, maybe personal attack against your ideas or your position on a, on a, a stance of whatever, between someone personally attacking you and just, "Oh, this is a curious idea that they have. Let me ask them more about it"? How have you learned how to do that-

Ray Dalio 22:54 Well-

Lewis Howes 22:54 ... and what advice would you have for others?

Ray Dalio 22:55 Well, first of all, I learn by it because, uh, it, you know, like, it, it works.

Lewis Howes 23:02 [laughs]

Ray Dalio 23:03 I, I, I mean, uh, uh, uh, you know, like I'm afraid of the opposite, and h- oh, and how can I have... It helps my decision-making. It helps our relationships.

Lewis Howes 23:15 Mm-hmm.

Ray Dalio 23:15 What are they gonna do, bottle it up, and I'm gonna bottle it up? The... Is that smart? I mean, uh, it, you know, that, that sounds stupid to me. You, you don't even know what's true. You can't figure it out. So everybody's confused, 'cause nobody knows what each other's really thinking. And then also, like, uh, you know, you, you won't get to the right answer. And, uh, I mean, that just is too stupid a path for me, for me to do it, and it's too risky a path, and it's so much rewarding, so much more rewarding to do the other, right?

Lewis Howes 23:48 Have you always been like that, or was it until you went broke-

Ray Dalio 23:50 Well, I-

Lewis Howes 23:51 ... or you s- okay

Ray Dalio 23:51 ... I, I think what helped me get that way was the markets, okay? Because, uh, a- again, what happens is, you know, there's just being right or wrong. There's just a winning or a losing. And, and, and, uh, okay, so just imagine you're, uh, you know, it's like being a trained monkey.

Lewis Howes 24:09 Mm-hmm.

Ray Dalio 24:09 Y- y- you know, like it, what works, you, okay, should we push a button? Should we push a button? Okay. L- okay, yes, okay, it makes sense. Okay-

Lewis Howes 24:16 Right

Ray Dalio 24:17 ... we'll push the button. ... is better than, "Oh, I'm gonna push the button, push the button," whatever it is. "Okay, no, I don't see it that way." "Okay, let's figure it out." A- and so on. So I th- and then the scorecard I think probably had the benefit of that kind of notion. I got a scorecard. Okay, I don't know, like I'm not sure. Okay, bu- uh, bring it on. Please stress test me. Oh, that's great. We have, we're good partners. So that to some extent I think, uh, played a role in, you know, my types of experiences. Maybe if everybody had a scorecard on all their decisions and then was a- being able to experience, e- essentially you try it one way, you try it the other way, and you start to see what's better, and you get punished one way, you get rewarded the other way, naturally you wanna go in the direction you get rewarded.

Lewis Howes 25:03 Right. So you stop thinking, "Okay, my way is the way." You start basing it based on data and scorecards-

Ray Dalio 25:09 I-

Lewis Howes 25:09 ... and results

Ray Dalio 25:09 ... isn't that so stupid, my way is the way? I just wanna make the right, the best decision possible. I don't care where it comes from.

Lewis Howes 25:17 Yeah. But did you at one point in your life for a period of time, were you committed to your way and thinking that you had the answers?

Ray Dalio 25:24 Well, I, I, I, like I say, I think before that, uh, 1982-ish incident, I probably was a lot more, "Okay, yeah. Okay, uh, uh," you know, "I think it's right and what I think is right and I'm a smart guy," and so on. So I was like, you know. Y- uh, uh-

Lewis Howes 25:41 Yeah

Ray Dalio 25:41 ... that, life is a good teacher. Just a good, you know, like two by four in the head, you know? And you, you get a couple of those and-

Lewis Howes 25:49 [laughs]

Ray Dalio 25:49 ... y- y- you know, pain plus reflection equals progress.

Lewis Howes 25:52 Yeah. What is thoughtful disagreement in your mind, and how important is that in this moment? Especially with the, this political unrest and economic unrest and just everything. How do people have thoughtful disagreement as opposed to kind of toxic disagreement?

Ray Dalio 26:10 Well, first of all, they, you know, they gotta want it, but let's assume they want it. You know, then there are three things you have to do basically. First, you have to put your honest thoughts on the table and have the other person put their honest thoughts on the table. Okay, so now you know what you honestly think, both sides. That's great. Then you, then there are protocols for disagreeing well. You know, I, I wrote a bunch in the, um-

Lewis Howes 26:38 Mm-hmm

Ray Dalio 26:38 ... in the book.

Lewis Howes 26:39 Yeah.

Ray Dalio 26:40 Um, yeah. And, um, like I could go through some of those types of things. There are certain exercises that you could do. We have, you know, there's a, I have a two-minute rule. You speak for two minutes without the other.

Lewis Howes 26:52 Mm.

Ray Dalio 26:52 You start to think, are you blocking? Um, you have a med- mediator maybe. In other words, somebody when you're disagreeing, if you can't disagree, say, "W- mutually agree that this person will be our mediator." And, and we'll... Or, and, or maybe the, the judge, they'll decide. Maybe it's a group that decides. That, that in other words, you have a protocol for disagreeing and then, um, and then deciding. S- sometimes in that disagreement, hopefully you both learn a lot and you may reach an agreement, but you still may not have an agreement, but then you try to say, "What's the best protocol for moving past that disagreement?" You know, uh, like a j- uh, uh, you have a judge and a jury and-

Lewis Howes 27:34 Mm

Ray Dalio 27:34 ... you know, they have a case and anyway, what, do you have good protocols. So, uh, so you have to have three things. You have to put your, uh, honest thoughts on the table, um, you have to go through processes that helps, uh, uh, to reach the right answer depending on how serious the question is.

Lewis Howes 27:52 Mm-hmm.

Ray Dalio 27:53 Right? If it's, um... And then number three, uh, you have to have a way of getting past that decision and moving on. Um, I have a basic view, though. Whenever there's any disagreement or anything that's not going well, stop.

Lewis Howes 28:09 Mm.

Ray Dalio 28:10 Okay, pause. Don't just keep banging e- at each other.

Lewis Howes 28:14 When it's escalating-

Ray Dalio 28:15 Pause

Lewis Howes 28:15 ... when people are, uh-

Ray Dalio 28:16 Yeah

Lewis Howes 28:16 ... yelling at each other.

Ray Dalio 28:17 Just pause and, and sort of go above it and say, "What are our ground rules for disagreeing? What, how should we be with each other?" And you turn your attention rather than to the argument at hand, but say, "Okay, if I think this and you think this, how do we do this?" And then once you agree, okay, then you go back into the argument and then you follow those protocols, because half of the problem is that people just don't even agree disa- know how to disagree.

Lewis Howes 28:51 Yeah.

Ray Dalio 28:51 But if, but if you do it that way with those protocols and so on and you get past your disagreement, it's, it's great.

Lewis Howes 28:58 Yeah. I wanna talk a little bit about-

Ray Dalio 29:00 If I'd answer the, uh, part two of your question.

Lewis Howes 29:02 Yeah, go ahead.

Ray Dalio 29:03 It are, um, the greatest problem of mankind, I believe, wow, that's a big statement-

Lewis Howes 29:10 Uh-huh

Ray Dalio 29:10 ... the greatest problem of mankind, and it is an exceptional problem at this moment in time, is people having opinions that they're stuck on that, um, they won't... You know, like I have to have my opinion a- and that's right and so on, because it prevents them from, um, resolving it, uh, from moving forward to finding the best answer, from compromising and, or doing, you know. So like everybody's arguing over everything and, and they, a- and you know, they're, they're, it's almost like they're killing each other. And, and we're in a society, um, you know, I have another principle which is when the causes that you're behind are more important to you and others than the system, the system is in jeopardy.

Lewis Howes 30:07 Mm.

Ray Dalio 30:07 So do you, are you just literally going to go fight? So here we are as we think, will we fight or we ha- or will we have protocols for having thoughtful disagreements and getting past them?

Lewis Howes 30:23 That's why I love your Principles and Protocols. [laughs] I- in your opinion, how has this last couple of years been, in the history of, uh, investing for you, in the history of the last 40, 50 years? I- is this a really, really bad time, uh, in your lifetime, or is this just another bad time, but not greater than previous bad times?

Ray Dalio 30:48 You mean in the world?

Lewis Howes 30:49 In the world.

Ray Dalio 30:50 Yeah. Um, there are three things that are going on now, the three most important things that are going on to great extremes-

Lewis Howes 31:00 Mm-hmm

Ray Dalio 31:01 ... that have not existed since the 1930 to '45 period.

Lewis Howes 31:07 Okay.

Ray Dalio 31:07 And it's important to know those three things, and then to understand them well.

Lewis Howes 31:14 Okay.

Ray Dalio 31:14 Uh, the first is, um, what is going on with money and credit when you get to something like a zero interest rate, and, um, you need buying power, the government needs buying power. But they can't, they can't tax it, they, and they can't... So what we have is the production of a lot of debt that the central bank prints money and buys that debt to spend. And the last time that happened, in the last few years, it happened starting in 2008. Interest rates hit zero. They couldn't lower their interest rates, so they had to print a lot of debt, and the government went in and bought it, okay. And we're coming to the end of a debt cycle, okay, so this is a big thing, like, because where does the money come from, and who will get what? The government will now determine that, and then they'll print it, and it'll devalue money. Okay, this is... And how money flows, a big deal. So that's number one.

Lewis Howes 32:17 Mm-hmm.

Ray Dalio 32:18 The second one are wealth and political gaps that are causing great conflicts. Throughout history, there's always been, the main things that everybody's always fought over is, uh, money and power, particularly political power. So what we have is a situation when you have a large wealth gap and you have an economic downturn, particularly if you put a large, a lot of debt having at the same time, you, you have a fight.

Lewis Howes 32:55 Mm.

Ray Dalio 32:55 I mean, that's been true through history. Um, and it, it's reflected in the political gap. So the political gap is, um, you know, uh, it's classic political gap. Left, right. You know, um, okay. Capitalist, socialist. It, uh, how do you distribute it? How do you, how are you gonna deal with that? That, that becomes the other.

Lewis Howes 33:18 Mm-hmm.

Ray Dalio 33:18 And how you fight. So that's the second of the two. The-

Lewis Howes 33:22 Yep

Ray Dalio 33:22 ... you know, th- this wealth political gap that's causing the conflict. And it's coming at a time where we don't have much money, because we're pri- we don't have mu-

Lewis Howes 33:33 A-

Ray Dalio 33:33 ... a good financial position. We're printing and then, and putting it out. So those-

Lewis Howes 33:37 We're still paying off debts still, right?

Ray Dalio 33:39 Yeah, and, but with made-up money. I mean-

Lewis Howes 33:41 [laughs]

Ray Dalio 33:42 ... meaning, meaning what, what happened, like COVID was a, uh, such a good example. Okay, you have COVID, and a l- a, a lot of people and companies had falls in their income that were, would be ruinous.

Lewis Howes 33:57 Mm-hmm.

Ray Dalio 33:58 Okay? If, if checks didn't go out, we would've had a revolution.

Lewis Howes 34:03 Right.

Ray Dalio 34:03 And, and so that, those checks, and how do you save everything and so on. Okay, so, a- and it's not like the government had real money. Like they, i- it's, it, they didn't have any money. They already owe a lot.

Lewis Howes 34:16 So they just printed-

Ray Dalio 34:16 And so-

Lewis Howes 34:17 ... more money to give to people

Ray Dalio 34:17 ... so they made more debt, and then the government and the Federal Reserve printed it, and the, you know, the checks went out, which diminishes the value of money and so on, and changes things. Yeah. So then the third thing-

Lewis Howes 34:30 Mm-hmm

Ray Dalio 34:31 ... is the rise of a great power to challenge an existing great power. So the rise of China to challenge the United States. In all history, there are world orders. What that means are, are, um, you know, they're the dominant power. You know, it's like in nature almost.

Lewis Howes 34:51 Mm-hmm.

Ray Dalio 34:51 You know, the big bull or something. Anyway, there's the dominant power. And then what happens is, in 1945, um, the Unit- we entered the American world order. We, the United States won the war, a- and it, um, it ended, and then in 1945, well, all, the, the, the winners of the war carved up the wor- world. We had, uh, 80% of what was considered money at the time, gold.

Lewis Howes 35:23 Mm.

Ray Dalio 35:24 80% of the world's money, essentially. We counted for half the world's economy, and the rules were set in the United States, basically. That's why the United Nations is in New York, the World Bank and the IMF are in Washington, DC, because we began the American century. Okay, that's... And then, uh, we are now at a time, we've never had somebody, a- another power challenge us, us in the same way. There was the Soviet Union, but they were always a fraction of the size economically, so couldn't compete on that same basis. They had nuclear weapons, but they didn't have the economic power and so on. And, but now we're dealing with China coming on as a power.

Lewis Howes 36:05 Mm.

Ray Dalio 36:05 I spent a lot of time in China over the last 36 years, by the way.

Lewis Howes 36:09 Mm.

Ray Dalio 36:09 And I admire how they're doing a lot of things.

Lewis Howes 36:12 Right.

Ray Dalio 36:12 I mean, I know it's controversial to say that, but, um, in terms of, like, they're a power.

Lewis Howes 36:18 Yeah.

Ray Dalio 36:18 Whoa. Like, since I started go-

Lewis Howes 36:20 They're a power [laughs]

Ray Dalio 36:21 ... since I started going there, uh, their average income has increased by 30 times. You know, so they're a comparable power, and they're also growing faster, and so that is ch- has an effect. So those three things are things that never happened in my lifetime before, but happened before in history, which led me to do the studies of, of, of what happened in history and the lessons I could gain.

Lewis Howes 36:51 What is that, those three things, uh, money and credit, wealth and political gaps, and the rise of China, what does someone like myself or some 30, 40, 45-year-old, 20-year-old, what should they u- do with that information? What should they be aware of? How should they apply it? Does it apply to people, uh, in America, general America, or does it only apply to the wealthy? W- what should we be thinking about?

Ray Dalio 37:16 No, I, I, it's a, it, it affects everybody, you know? It, it affects... Like, we know, let's start with ourselves. Most importantly, forget about the outside thing. Can we be healthy and strong, and what do we need to do? Like-

Lewis Howes 37:33 Mm

Ray Dalio 37:34 ... to know that you, you have to be in it together. Like, if we can row in the same direction, okay, if, if we can have thoughtful disagreement and get past that, if we can be in it together, like the wealthy and the poor, and, and, and, and, you know, and if you figure it out... And, and I know it sounds so difficult, but at the same time, if you read history and you see what happens when it's not, when you have a civil war, like we could be on the brink of a civil war. I, I, I... That sounds so crazy, but the truth is-

Lewis Howes 38:11 Mm

Ray Dalio 38:12 ... in most countries and, and, and in e- almost every century, there was a civil war or a revolution, some form of civil war or revolution. Um, so it's almost inevitable that we're gonna have something, okay?

Lewis Howes 38:28 Uh-huh.

Ray Dalio 38:28 You either resolve it, or you, you, you start fighting so badly that you dam- you really do terrible-

Lewis Howes 38:35 Until you resolve it

Ray Dalio 38:35 ... things to each other.

Lewis Howes 38:36 Until you resolve it, yeah.

Ray Dalio 38:38 Uh, well, the w- the, uh, once you cross a certain line, there's no coming back, okay? Because you do the damage. You, you, you, you demonize, and y- that person's such an enemy or that class of people is such an enemy that y- that the communication's gone and the fi... Well, you see this in politics today. In other words, is there a respect for the system and a mutual respect of trying to fight, find, resolve these types of things, or will they go to any lengths to win? Because a, a constitution or law will only carry you to so far, okay? There has to be an element of respect for it, right? If you think about the presidential election, it's quite something that we as a country, as a people, um, when somebody might win the popular vote, somebody else wins the electoral vote, there's not even an argument. Like, in other countries, you might say, those who had the popular vote would say, "What the hell? I've won the popular vote. I think it matters," and somebody says, "Electoral vote," and so on. Okay, there's not a question about that. Okay, now, um, when you start to say, "Okay, is it this vote or that vote or this thing or that?" And how far are you willing to go to fight, and does the rules matter? When you start to get cross that line and you do harm, you hurt and you alienate-

Lewis Howes 40:14 Mm

Ray Dalio 40:14 ... then you go to accelerate this process. And people should know what that looks like, how terrible it is. So maybe if they know what it looks like and how terrible it is, and they can empathize a little bit, but I, I see people don't, don't see it. I'm living in Greenwich Conne- uh, Connecticut. Um, Connecticut has the highest per capita income in the country, and it's got the largest wealth gap.

Lewis Howes 40:40 Mm.

Ray Dalio 40:41 Most of the people, uh, in Connecticut are pretty poor.

Lewis Howes 40:45 Really?

Ray Dalio 40:45 I mean, some cases, very poor.

Lewis Howes 40:48 Oh.

Ray Dalio 40:49 Oh, I'll give you an example. This is the community my wife works to help, um, high school students. 22% of the high school students in Connecticut are either disengaged or disconnected. What that means is, disengaged means they're, have an absentee rate which is greater than 25%, and they're failing classes.

Lewis Howes 41:10 They don't show up to class.

Ray Dalio 41:12 That's right. They're, they show up, you know, uh, three-quarters of the time, and they're failing, uh, or... That's disengaged. Disconnected is they don't know where they are. They've dropped out of school. 22%, one in five, so school-

Lewis Howes 41:26 Wow

Ray Dalio 41:26 ... is not working for them, and they're in desperately poor areas. Like, okay, we had the cor- coronavirus, and so her efforts and our efforts are philanthropic. That's what got her involved. Um, they don't have computers. They don't have connectivity. They, they don't, they have, they have problems getting food. They get food in school. They need the food in school because they don't have adequate food, okay? And this is Connecticut, and it's right up the road. So we had to... We, we bought these kids, 60,000 kids, computers, and then we're-

Lewis Howes 42:01 Wow

Ray Dalio 42:01 ... trying to get connectivity and so on, and you start to see this, okay? This is the same world. Now, I, um, I, so I live in one neighborhood with my community, and then there's the other. They don't understand each other. They're, they're, um, they haven't lived there. They haven't empathized, and in fact, there are resentments on both sides, right? Like, um, the people in my community, they don't feel, uh, uh, the- They're very rich by comparison-

Lewis Howes 42:35 Mm-hmm

Ray Dalio 42:35 ... to, um, those other people. But also to take care of their families, to educate them. They have their own challenges.

Lewis Howes 42:43 Mm-hmm.

Ray Dalio 42:43 The work/life balance and so on. They have their financial insecurities and so on. So that's what they're focused on. And then they might think, "All these other people, they're not taking care of themselves. Why don't they pull themselves up by the bootstraps?" Do you know what it's like to be a kid growing up in that neighborhood and trying to... What? What are you talking about? You can't pull yourself up from... I mean, well, well, you, you know, there's a problem. There's not enough food. There are gangs. They even are walking to school-

Lewis Howes 43:12 It's scary, yeah

Ray Dalio 43:13 ... past neighborhoods that are gang shootings, and you can't... and there are not enough police to do it. Okay, so these two worlds ex- And then the others, uh, say, "You know, well, um, here we are, and you're walking around with your fancy cars and your, you know, fancy clothes, and, and so on, and we're suffering. I mean, come on." And so they don't understand each other and so on. We have to get past this. We have to be in it together, I think. Otherwise, we're gonna kill each other.

Lewis Howes 43:42 How do we... What's the main thing that both sides need, whether that be in Greenwich, Connecticut, or in the USA on different sides? Is it empathy? Is it compassion? Is it a awareness? What is that thing that both sides need in any rich-poor dichotomy?

Ray Dalio 43:56 Well, there's the, there's the intellectual e- uh, thing they need and the emotional thing they need. Okay, intellectually, what they need is... Well, and l- maybe emotionally, the fear and the understanding that where this will lead will be devastating, okay, if they don't deal with it. If they don't deal with it together, and you look at history, you need the fear. You can't give people necessarily empathy or love. I m- You know, we could say, "Oh, they should care about the other person." Okay, that's too much to ask. Uh, I mean-

Lewis Howes 44:40 Yeah

Ray Dalio 44:40 ... you know, that's not realistic. Okay, but realistic is that you, if you don't, if, if we all don't get it together, are gonna have... You know, you like all that stuff you got? Well, you ain't gonna have it anymore.

Lewis Howes 44:55 Mm.

Ray Dalio 44:55 And, and all of a sudden, the things that are the most basic, uh, in terms of, uh, take care of it. And then if you start to realize, um, that it's productive. Like, if you, if... What, what do you need to be successful? It's all I had when I grow up was, um, I had, uh, parents who loved me and took care of me. I went to a public school, okay? And I came out to a world in which there was equal opportunity. Uh, uh, those are all the only things you need. A- And you know, healthcare, but when you're young you don't need much of that. So, um, those are the only things you need. Um, now even in these communities sometimes you can't get the parents, but you, you can get people who care about them, their teachers and so on. But you have to, to stri- to strive for equal opportunity is-

Lewis Howes 45:45 Do you think we have equal opportunity?

Ray Dalio 45:48 No, of course not. I mean, look at any s- any of the statistics. I mean, I, I, I can give you examples. I, I studied, um, this issue because, uh, first we... When populism started to come around, and, um, I thought that was... I needed to study, uh, Donald Trump as, as a populist. And so, and then it's all around the world, and I, and I needed to study the n- the different quintiles, the top 20%, next 20%, and so on. And I saw what the pictures of the lives of the majority of people are like, the bottom 60%. Um, um, and equal opportunity, um, no. Let, uh, put that in perspective. The, those in the top 40%, um, spend, um, on average on their kids' education five times as much money as those in the bottom 60%.

Lewis Howes 46:40 Mm.

Ray Dalio 46:40 It's a self-perpetuating thing. It's not a bad thing. Those parents care about having their kids well-educated. So because they do and they take care of their kids, they're taking care of their kids, they're getting them well-educated, and so on. But not being well-educated means you're not gonna have equal opportunity as... And so as that gets narrower and narrower, it, you have that phenomenon that you, y- you know. So there are a lot of ways you can measure whether there's equal opportunity. If we, if... But I don't even know we can agree that we should have equal opportunity. I mean, like I, I, I'd almost take a poll, uh, you know, of the American people and see, could we agree that we should have equal opportunity, okay? That'd be an accomplishment. Okay. Then if you could do that, then we say, "Can I take measures, metrics by which key performance indicators, by which I could say how are we doing on the equal opportunity goal?"

Lewis Howes 47:42 Right.

Ray Dalio 47:43 And then, and then monitor that, and you say, "Ah, it's getting better," or, "Ah, it's getting worse." If we could do that, we'd accomplish a lot.

Lewis Howes 47:50 Yeah. We gotta get to that point first. [laughs] This is fascinating. I'm, I'm curious about m- the mindset of making money, and there's a massive wealth gap. There's, there are people that, who are making money, and some just seem to be making more and more money, and others that are always seem to be stuck in the ability to make money, to save money, to invest money. They always seem kind of trapped in not making it. What would you say is the mindset that wealthy people have around making it and growing their money for them, versus the mindset of people that stay stuck in not making it?

Ray Dalio 48:30 Well, uh, I w- I want to distinguish there's big differences in opportunities.

Lewis Howes 48:35 Yes.

Ray Dalio 48:35 So let's- Say, supposing you have two people of comparable opportunities-

Lewis Howes 48:41 Yes

Ray Dalio 48:41 ... and then they were going to do that.

Lewis Howes 48:44 Yeah.

Ray Dalio 48:44 Okay. The marshmallow test-

Lewis Howes 48:47 Yeah

Ray Dalio 48:47 ... as you, uh, uh, as you know apparently, is you take a kid, and you say, "Okay, uh, you can have one marshmallow now, or you could have two marshmallows in 15 minutes," or something.

Lewis Howes 49:01 If you don't eat the first one, yeah.

Ray Dalio 49:02 If you don't eat the first one, right?

Lewis Howes 49:05 Yep.

Ray Dalio 49:05 Okay. Once you start to realize that deferred gratification is gonna make you better and so on, and you start to count, count, and you say like something like, "How many days, weeks, months, or years can I live if I don't have money come in?" And you start to focus in on that, that's the first step, okay?

Lewis Howes 49:38 Yeah.

Ray Dalio 49:38 Like the marshmallow test.

Lewis Howes 49:39 Mm-hmm.

Ray Dalio 49:40 Okay? So I want to save. You gotta start there. Then if you do that, you're necessarily gonna go, "Save in what?"

Lewis Howes 49:52 Mm.

Ray Dalio 49:53 And then you'll start to get exposure to how these things are different, okay? Then you start to care.

Lewis Howes 50:02 Mm-hmm. [laughs]

Ray Dalio 50:03 Well, I can have one of these and one of those, and you start to experience, and then you start to learn, and basically that's what makes the difference.

Lewis Howes 50:13 Mm-hmm. That's it. The, so first having the ability to have delayed gratification, then obviously diving in, researching, testing, and, and trying different things. But the more and more you can say you don't want something now for greater later is the essential key.

Ray Dalio 50:29 Well, and what it does then i- when it comes to the money, that means money.

Lewis Howes 50:34 Yeah.

Ray Dalio 50:34 Now, a- at that moment that you don't want it, you have savings. That means I want savings.

Lewis Howes 50:41 Right. [laughs]

Ray Dalio 50:42 Okay? Now, you got savings. So the next thing inevitably that's gonna come at you is, where do I put it?

Lewis Howes 50:51 Mm-hmm.

Ray Dalio 50:52 And then you get your choices, and then you experience it and you learn, right?

Lewis Howes 50:57 Yeah, 'cause there's lots of places to put it for investments. There's real estate, there's stocks, there's building your own company. There's different places to invest. What have you found are the top places that people should be investing?

Ray Dalio 51:10 Well, I think first, you, y- you start with what are the most important things that you're closest to. Like, is it your business? Uh, uh, uh, first, calculate how many days, weeks, months, or years you can live on your saving.

Lewis Howes 51:28 Mm-hmm.

Ray Dalio 51:29 Because when you do that, you'll start to... You'll gain security. You'll gain that, okay? So look at how much you're spending, okay, and then say, "How much do I need?" And whatever that number is, you're gonna need more than that, because it may go down rather than go up. So okay, now do I have a year's spending?

Lewis Howes 51:53 Mm.

Ray Dalio 51:54 Okay? Y- so I think, I think you, you start there. Then you start to think, um, "What are the things that are most important for me?" Like, and then you start with your, your business or your residence that have a symbiotic relationship and that you know well. Let's say i- i- if you'd start with your business, okay, you're closer to that, investing in yourself w- with whatever that may end up being. That may be your best investment.

Lewis Howes 52:27 Mm. Not-

Ray Dalio 52:28 Okay

Lewis Howes 52:28 ... not real estate, not stocks, not the market.

Ray Dalio 52:32 W- well, it depends. If you're, i- if you're not... You know, if you're doing something where you can do it yourself, and that's the thing. But if you're in a job, th- and, and that, that's not the thing-

Lewis Howes 52:42 Right

Ray Dalio 52:42 ... 'cause you, 'cause you're in a different position, okay? But anyway, if you... And then I- I- I really think there's something good about your home, a basic thing about your home, because, uh, it's nice forced savings, and it also means that you s- you fix it up. You, you know, y- you're saving. You find out-

Lewis Howes 53:06 Right

Ray Dalio 53:06 ... there's, oh, well, if I add this thing or that thing, and you're enjoying it.

Lewis Howes 53:11 Mm-hmm.

Ray Dalio 53:12 So when you're enjoying it, and you're controlling it, and it's yours and so on, uh, th- that's, that's pretty good. And if, you know, if they keep mortgage tax deductions and so on, you know, there might be some benefits to it also. Okay? But that's not a black-and-white answer. You know, so you could take-

Lewis Howes 53:32 Yeah

Ray Dalio 53:32 ... a sharp pencil and say, "Is it better to rent or buy?" Okay, that's a different question. Maybe, yes, it... But by and large, am I gonna move? You know, all of those other questions. But so when you start with, okay, what is it that's close to home, and how much? You need a certain amount that's liquid. Y- i- in other words, you, you got it in your house. You gotta make a mortgage payment or something, and all of a sudden you're, uh, you know, you know, it's not liquid, and you lose your job. Well, that can cause you trouble. So how much do I have that's liquid? How much do I have that's not liquid? Okay, and you start to get those things right.

Lewis Howes 54:12 Mm.

Ray Dalio 54:12 Okay? Ah, I've got enough liquid. I got enough, okay, uh, not liquid in those other things. Okay. Pretty soon you're, you're getting yourself in good shape.

Lewis Howes 54:24 Yeah.

Ray Dalio 54:25 You do those things, you know, you're pretty much in good shape, and then you're also having some experiences, and then you go beyond that, you know?

Lewis Howes 54:34 Mm-hmm.

Ray Dalio 54:34 And then, uh, so you start to, okay, what... You know, okay, what's a stock? What's a bond? And then, you know, you learn through experiences. I'm, uh, I learned- Through my, my experiences. I started when I was, uh, a kid, 12. I used to caddy, and I took my caddying money and I put it in the stock market, and, uh, I was lucky. It, uh, uh, what happened to me by, by the way is I took my caddying money and, um, I, I bought the only company that I ever heard of that was selling for less than $5 a share, and I thought that that, you know... Well, I, I was really dumb. I thought, um, I'll buy more shares, so if it goes up, I'll make more money. Uh, and it was the only company, and it was a company that was about to go broke, but somebody, some other company acquired it, and it tripled. And I thought, "Ah, this is an easy game-

Lewis Howes 55:28 [laughs]

Ray Dalio 55:28 ... and I like it. Easy money." So but, you know, you experiment and you learn.

Lewis Howes 55:32 You're a very philanthropic individual. You and your wife, uh, your foundation, your company, you give back in a lot of ways. Some might be through donations, like computers. Some might be through financial. Some might be through just your work and your content on LinkedIn, which is amazing. I recommend everyone subscribe to you on LinkedIn. The content there is amazing. You're giving back in lots of ways. I'm curious, what's the greatest gift a rich person or someone with money can give someone who doesn't have money?

Ray Dalio 56:00 To give the knowledge. Uh, teach a man how to fish is better than to give him a fish. I mean, I think you can give them both. You can give education, and you can sure- uh, but, uh, ability, the, the capacity to be productive. Because, you know, uh, if I can give you the capacity to go out in the world, it's like go into a jungle. I give you a knife, and can you live in the jungle? Okay, if I give you that capacity, that's the best thing I can give you. That's why I wr- I wrote the book, and, you know, pass it along. I wrote those principles over years, and I wrote them down, and that's what I want to pass along. That's the most important thing.

Lewis Howes 56:38 Yeah.

Ray Dalio 56:39 But, but if you've g- but if you've got money, you can help people, uh, a lot in a lot of different ways, which is thrilling.

Lewis Howes 56:48 What would you say, then, are the three greatest skills that people that aren't financially abundant or that are struggling financially should learn to master in order to be in a better position financially? Three skills, what would you say they should learn?

Ray Dalio 57:02 Well, as I said before, I remember watching the movie, uh, I was young, David Copperfield with W.C. Fields, and he speaks to David Copperfield, and he says, uh, he said something like, and I'll put it in dollar terms, "You earn $100, and you spend $105, that's misery."

Lewis Howes 57:28 [laughs]

Ray Dalio 57:29 "If you earn $100, and you spend $95, you'll have a good life." I mean, uh, it wa- wasn't exactly like that, but it was... But, but basically, I know so many people who don't earn much but are there. Because if you start to think about what it is that it costs you to live in terms of, let's say, the basics, you know, uh, give me a bed to, uh, sleep in, give me the, uh, food, let me be educated, and so on and so forth, I think most people can get themselves in a position where, you know, they're net positive.

Lewis Howes 58:10 Mm-hmm.

Ray Dalio 58:11 So if you can be net positive, and you can do that, that, you know, that's number one, uh, you know, uh, as I carry that.

Lewis Howes 58:21 Yeah.

Ray Dalio 58:21 So that's, you know, that's number one. Then I guess it was the list that we went to. You know, the second is, you know, what do you do next in terms of what do you need, what do you invest in?

Lewis Howes 58:32 Mm-hmm.

Ray Dalio 58:32 You know, and then, and then, y- you know, going beyond it. And then there, avoid the following mistake, the most common mistake of investing, thinking that the investment that did good is a good investment.

Lewis Howes 58:47 Hmm.

Ray Dalio 58:48 People, rather more expensive. The things that, quite often, those markets that did really, really well became mo- more expensive, and everybody, smart money, is all the time compe- comparing them and competing. So what happens is, um, the naive money buys the thing that was hot-

Lewis Howes 59:15 Hmm

Ray Dalio 59:16 ... or is hot, the thing that has been terrible, which might be the thing that's beaten down. So I would say also an important element... Uh, okay, so here's another one that's really important. Diversify.

Lewis Howes 59:31 Hmm. So don't put all your eggs in one basket.

Ray Dalio 59:33 Right. Because what I learned about this is that, first of all, all investments, uh, compete, and it's not easy to te- tell, tell whether one investment's better than the other. Because if people could do that, life would be easy, and everybody'd make a ton of money.

Lewis Howes 59:49 [laughs]

Ray Dalio 59:50 Um, so and this is a competitive game that's very difficult to compete in, so it's very difficult to say which one's better or worse. You could take experts, and you could, uh, and do all sorts of tests, and you'll find out that they can pick that, and you can't tell whether the worst ones are gonna be better. So because of that, you understand that, um, uh, even picking the best ones is difficult, and particularly if you're naive. Like, we spend hundreds of millions of dollars each year on research to try to give us an edge.

Lewis Howes 1:00:24 Wow.

Ray Dalio 1:00:24 Okay? Now, you've got to compete with us. So, uh, competing in the markets is more difficult than competing in the Olympics.

Lewis Howes 1:00:33 Wow. [laughs]

Ray Dalio 1:00:33 You wouldn't go think I'm going to compete in the Olympics, but there are more people who try harder in order to do that, so it's a zero-sum game.

Lewis Howes 1:00:43 Hmm.

Ray Dalio 1:00:43 So but diversification- Um, that they're different, uh, will reduce your risk without, uh, reducing your return.

Lewis Howes 1:00:54 Yeah.

Ray Dalio 1:00:54 So if you know how to diversify well, so, um, that's critical. So I would say, again, um, get, get your savings right, and the reasons I say, I would say, um, have great humility about what you, what you don't know. Don't buy the thing that was hot-

Lewis Howes 1:01:15 Mm

Ray Dalio 1:01:15 ... uh, just 'cause you think it's hot. Um, and then know how to diversify well. That- those would be the most important things I could convey.

Lewis Howes 1:01:24 I love that you talk about the, the sports analogy, the Olympics. You're speaking my language now as a former football player. Some of the greatest quarterbacks seem to get not too high. There's- they get excited, but not too excited, and not too low, uh, when things go good or bad. How important is that skill to be emotionally resilient on both levels, high and low, for you? How important is that skill to invest-

Ray Dalio 1:01:51 Oh, yeah, it w- uh, it is one of the most important things possible, and it's not easy to do. Um, so I needed to, uh, d- you know, do two things. Um, I found that by writing down my principles and the rules-

Lewis Howes 1:02:08 Hmm

Ray Dalio 1:02:08 ... and then testing how they would've performed over time, and that's where the algorithms came, so that I can basically, just like a machine-

Lewis Howes 1:02:20 [laughs]

Ray Dalio 1:02:20 ... play it click, click, click, click, click, okay, with execute the game plan. You know, don't do it, uh, because I know what the experience is like. The experience is like-

Lewis Howes 1:02:32 [laughs]

Ray Dalio 1:02:32 ... you're wrestling around with it. You're losing money. Like, w- the day you put on a trade, it doesn't go either straight up or straight down, it goes against you. So now, I don't know, you're losing money. Okay, how, how much should you lose? What's your game plan? You've gotta know your game plan and stick to the game plan.

Lewis Howes 1:02:53 Mm-hmm.

Ray Dalio 1:02:53 And you can't be shaken out, and yet, um, th- the emotions are gonna cause you to doubt yourself, and plus it brings you stress, all of that. So you have to execute a game plan that's very well thought out, right?

Lewis Howes 1:03:07 Yeah.

Ray Dalio 1:03:07 Um, then over time you start to develop some better instincts. Like, if you're excited and you're going along, be scared, you know?

Lewis Howes 1:03:16 Yeah. [laughs]

Ray Dalio 1:03:16 If you're, if you're doing something you're really worried about and, and nobody else is doing it, may be good. Don't be dissuaded.

Lewis Howes 1:03:25 Hmm.

Ray Dalio 1:03:26 See, the markets are very different than consensus decision-making. It's counter-consensus, because the consensus is built into the price.

Lewis Howes 1:03:35 Right.

Ray Dalio 1:03:35 So if everybody loves something, it's expensive, and if everybody hates something, it's cheap. So where most people say, "Ah, this is like... Oh, what a great company. Okay, Amazon is a great company. We got Amazon's a great company" [laughs]

Lewis Howes 1:03:52 [laughs]

Ray Dalio 1:03:52 Who doesn't got that Amazon's a great company? Okay, and then, okay, I'm gonna go own Amazon, okay? But if everybody's got that it's, it's a great company, and it, it becomes increment less great than they anticipated, bam, that baby goes down.

Lewis Howes 1:04:09 Hmm.

Ray Dalio 1:04:09 So you have to, um, start to develop some of those instincts or a game plan.

Lewis Howes 1:04:15 And what, what financial advice would you give to millennials who, who don't have these, these tools yet, besides obviously getting your book and, and starting to practice some of these things? But I feel like millennials are overspending more than ever, they're uneducated on finances and on personal finances. What, what advice would you have there?

Ray Dalio 1:04:33 Pay attention to the feedback you get-

Lewis Howes 1:04:35 [laughs]

Ray Dalio 1:04:35 ... from the realities you encounter.

Lewis Howes 1:04:38 Yeah.

Ray Dalio 1:04:39 Okay? I mean, you know, pain plus reflection.

Lewis Howes 1:04:42 [laughs]

Ray Dalio 1:04:43 You will get the pain. Pay attention to it, listen to it, because you're gonna get the pain.

Lewis Howes 1:04:49 Yeah. And do you think it's... You, you have the wealthiest friends in the world, you're friends with, uh, some of the wealthiest people in the world. Do you think it's easier to, uh, get wealthy- wealthy or stay wealthy? Which one is harder to do, get there or stay there?

Ray Dalio 1:05:08 Ah. Stay there is definitely harder to, to do than get there. Getting there can also be, like, has an, a certain element of luck.

Lewis Howes 1:05:16 Hmm.

Ray Dalio 1:05:16 You know? Um, I was in the right place at the right time. I held this thing or, uh, bought it, or I am at that company, I'm working at that company-

Lewis Howes 1:05:26 Hmm

Ray Dalio 1:05:27 ... and, you know, all of a sudden it goes from this to that and, it, you know, you're lo- holding onto it, and it goes. Okay, that's, pshew, oh, wow. Okay, it's winning the lottery kinda thing. Okay, do that again.

Lewis Howes 1:05:42 Right. [laughs] Right.

Ray Dalio 1:05:44 Okay.

Lewis Howes 1:05:44 And, and then again, and again.

Ray Dalio 1:05:45 Can you do it again? And can you make the thing, the, the thing work over and over, and can you hold onto it, and so on? Yeah, because th- that's, that's where... You know, it's like, um, well, using your sports analogy, right? You, you know, you can luckily crack it, the, crack the bat and, you know, I mean, or whatever, you, the Hail Mary pass, and so on. When you have to do it on an ongoing basis regularly, that's the test of talent, and that's harder.

Lewis Howes 1:06:22 Yeah, yeah. I've got a... I wanna respect your time, Ray. I've got two final questions if that's okay with you. We might go a minute over if that's okay with you.

Ray Dalio 1:06:29 No sweat.

Lewis Howes 1:06:30 Uh, before I, I ask those questions I wanna make sure people get your book, because this is decades of wisdom. Uh, one of the greatest mentors financially you'll ever meet is right here in this interview, and this book is decades of wisdom from testing, pain, pain after pain, trial and error, uh, and incredible lessons from- Uh, Ray's mentors that he's learned from and applied in his life over and over again with an algorithm approach to life. And for me, the thing I love about this is it's so much about emotional intelligence from what I learned in the book. A lot of it is understanding yourself, understanding people, understanding emotions, which is one of the reasons I created the School of Greatness, was to create the tools for people that they didn't teach us in school. They don't teach us how to be emotionally resilient, which is something you've learned through. When you put a lot of money in something and you lose it, you gotta learn to be emotionally resilient. So make sure you guys get this book. Also, follow Ray on LinkedIn. Your LinkedIn posts are amazing. A lot of bite-sized information from the book there. Uh, and so go follow you, Ray Dalio, over there on LinkedIn, Twitter, Instagram, Facebook as well, all Ray Dalio. And principles.com has incredible content and information there. So if you want a, uh, more mentorship from Ray, then you've got the information. You've just gotta take action on it. You also have, uh, a... I don't know if you're talking about the personality test, but this is coming out in a few months.

Ray Dalio 1:07:59 Yeah. Uh, let's talk about that.

Lewis Howes 1:08:00 This is a test that I took that you've been developing for years with behavioral scientists and researchers on how to understand the people that you're hiring or working with, or people in your family, in your life-

Ray Dalio 1:08:11 Or yourself

Lewis Howes 1:08:12 ... or yourself. So you know what you should be taking action on or creating in your life, what you're good at and things like that. I took this test. Powerful. I've taken a lot of personality tests, but this is probably one of the best and most accurate. That's gonna be coming out soon. So what, they can get on your newsletter list? Or what should they-

Ray Dalio 1:08:28 Yeah. Um, it, it'll... By the way, it'll all be free.

Lewis Howes 1:08:32 Amazing.

Ray Dalio 1:08:33 So, uh, but y- yes. Um, if you go to principles.com, that w- y- you can, uh, you can get-

Lewis Howes 1:08:41 You'll s- you'll see the information there. If you're following Ray anywhere on social media, I'm sure when it comes out you'll be talking about it. It'll be posted online and in, in your newsletter. So make sure to subscribe to that, because this test will help you understand yourself better and make better decisions in your life, and also the people around you, so. And I didn't know it was gonna be free, so that's amazing. So it should be out here in a few months. Make sure you guys go to principles.com to check that out and get access to it when it comes out. Two final questions for you, if that's okay.

Ray Dalio 1:09:08 Yeah.

Lewis Howes 1:09:09 Number one, this is a hypothetical question I ask all my guests at the end. It's called the three truths, and I'd like for you to imagine that you get to live as long as you wanna live, Ray, uh, but for whatever reason, it's your last day on earth. And for whatever reason, hypothetically, all of your content, like your book, your social media, the, this interview, your videos, for whatever reason, you've gotta take them with you to the next place. So no one has access to your content anymore, or your principles. But you get to leave behind three things you know to be true from all the lessons you've learned in your life, uh, and what I like to call your three truths that you'd share with the world. What would you say would be those three truths for you?

Ray Dalio 1:09:49 I, I guess I would relate it to what I would say before about, uh, the principles, which is that, um, life is a, a, a, an, a journey, an adventure that is an arc. It has a life arc. Um, and to know how to, uh, play that well, to have principles that you believe in and that you, um, related to that is, um, that knowing how, knowing how to deal with what you don't know is more important than anything you know, and that I think the most important thing in life is meaningful work and meaningful relationships. If you, if you love your work and you have a passion that you're pursuing, like you do, and you have meaningful relationships either in that work or beyond that work, there's nothing richer. You can't get a better life.

Lewis Howes 1:10:50 And those are beautiful truths. Thank you for sharing those. And before I ask the final question, I would acknowledge you, Ray, for, for being an incredible giver in the world, because of someone who is one of the richest people in the country and the world, you're, you've accumulated so much, but you're wanting to give so much back now, and I really acknowledge you for that, for your service.

Ray Dalio 1:11:08 But it's a pleasure. It's, I think, like, I'm not gonna do anything... Just so you understand, I pa- people, you know, pat on the back and everybody says, "Okay, thank," and you're, am I, and whatever and so on. But the truth is there's an evolutionary process. You take care of yourself-

Lewis Howes 1:11:25 Mm-hmm

Ray Dalio 1:11:25 ... and, and so on, and what do you need? And then there's an increment of, like, how much, okay, y- you heap on yourself versus you look around you and you start to see what's needed and so on. And so there's a natural evolution, I think. I, I think most people would have that kind of evolution, so I don't think it's such a big deal.

Lewis Howes 1:11:50 Well, not everyone has that. There's some people that just continue to wanna focus on themselves and their ego. And the fact that you, you don't need to write a book and share all this stuff. This probably took a lot of time and energy. You could've kept just doing your thing, but you're, you're providing this, you're providing free tools, and you're taking the time to show up for interviews like this an- and share your wisdom, which a lot of people don't have that wisdom, so-

Ray Dalio 1:12:11 Well, let me ask you, why are you doing your School of Greatness?

Lewis Howes 1:12:15 My mission is to serve humanity at the highest level, and-

Ray Dalio 1:12:18 Okay. Well-

Lewis Howes 1:12:18 So I'm, I'm doing it f- I'm doing it from an, uh, a pain, if I, if I think about it. Because I f- I felt very insecure as a kid growing up. I felt like I didn't have the tools to m- to manage my pain emotionally, physically, mentally, financially. And I wanted to learn for myself by interviewing the greatest minds, like yourself, and then create a, a platform to share the wisdom for free to people. So for me it's, it's a selfish need, but also how can I impact the most people with my personal needs as well?

Ray Dalio 1:12:48 We understand each other.

Lewis Howes 1:12:50 Yeah.

Ray Dalio 1:12:50 I get it. I mean, I, [laughs] so, right.

Lewis Howes 1:12:52 Yeah.

Ray Dalio 1:12:53 So it's, it's your selfish need-

Lewis Howes 1:12:56 Right. [laughs]

Ray Dalio 1:12:56 ... that brings you so much joy. So we get each other, right?

Lewis Howes 1:13:00 Yeah, exactly. [laughs] Exactly. Well, I appreciate you. I acknowledge you, Ray, for, for showing up. And, uh, my final question, 'cause I know I'm a f- a few minutes over now, is what's your definition of greatness?

Ray Dalio 1:13:13 Greatness is self-actualization. I think it's, um, evolving well and contributing to evolution.

Lewis Howes 1:13:22 I love it. I'm, I'm very grateful for you sharing, and I'm c- I'm grateful that you've evolved well over the years, that you could share this wisdom with us. And, uh, when you have your next book in the future out, hopefully we can have you back on and share some more great wisdom with our audience. But Ray-

Ray Dalio 1:13:36 I look-

Lewis Howes 1:13:36 ... thank you

Ray Dalio 1:13:36 ... I look forward, and thank you for doing this.

Lewis Howes 1:13:39 Thank you for your time and, and all your inspiration. Appreciate it.

Ray Dalio 1:13:42 My pleasure.

Lewis Howes 1:13:43 If you wanna learn how to become happier in your life, then make sure to check out this video right here.

Speaker 1:13:49 Sky's the limit possibilities. But if it goes through the lens of who I am as this past story, this limitation, this person that tried to achieve it and failed-

Lewis Howes 1:13:56 Mm-hmm

Speaker 1:13:56 ... is someone who gets love by failing over and over-

Lewis Howes 1:13:59 Right

Speaker 1:13:59 ... is someone who has to stay small.

Lewis Howes 1:14:01 Significance by failing, right?