The Jordan Harbinger Show - 613: Ray Dalio | Why Nations Succeed and Fail

Episode Date: January 18, 2022

Ray Dalio (@RayDalio) is the founder of Bridgewater Associates — the largest and best-performing hedge fund in the world — and author of New York Times bestseller Principles: Life and Work. His latest book is The Changing World Order: Why Nations Succeed and Fail. What We Discuss with Ray Dalio: What an investor like Ray Dalio is uniquely poised to observe about the ebb and flow of history and the repeating patterns that make the future somewhat predictable. Why transitional (and often painful) cycles -- like recessions, pandemics, and wars -- are necessary to reset and change the rules. How studying these cycles as symptomatic of larger problems is the best way to heal and grow from their discomfort. What the current state of political polarization in the United States bodes for our collective future. How our rivalry with China differs from our Cold War rivalry with the Soviet Union and what Ray sees as our best way of managing it. And much more... Full show notes and resources can be found here: jordanharbinger.com/613 Sign up for Six-Minute Networking -- our free networking and relationship development mini course -- at jordanharbinger.com/course! If you missed the last time Ray Dalio was on the show, make sure to catch up with episode 491: Ray Dalio | The Changing World Order here! Like this show? Please leave us a review here -- even one sentence helps! Consider including your Twitter handle so we can thank you personally!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Coming up next on the Jordan Harbinger Show. There are five types of wars. There's a trade war. There's a technology war. There is a geopolitical influence war, which is influenced by the first two. There's a capital war, and then there's a military war. We are certainly in the first four of those, and that's really a competition. And how competitive we are is almost everything in that game.

Welcome to the show. I'm Jordan Harbinger. On the Jordan Harbinger show, we decode the stories, secrets and skills are the world's most fascinating people. We have in-depth conversations with people at the top of their game, astronauts and entrepreneurs, spies and psychologists, even the occasional Russian chess grandmaster, arms dealer, or tech mogul. Each episode turns our guest's wisdom into practical advice that you can use to build a deeper understanding of how the world works and become a better critical thinker. If you're new to the show or you're looking for a handy way to tell your friends about it, we now have episodes starter packs, and these are collections of top episodes,

organized by popular topic that'll help new listeners get a taste of everything that we do here on the show. Just visit jordanharbinger.com slash start to get started or to help somebody else get started. Of course, I always appreciate it when you do that. Today, the one and only Ray Dalio is back on the show. We're exploring why empires rise and fall, mostly the latter.

Ray has done a lot of research on the cycles of empires and we'll explore what this cycle looks like and what place the United States and much of the Western world actually falls into now. Also, will there be another civil war here in the United States? I was and am skeptical, and Ray and I discuss the factors that go into this, as well as the odds of it actually happening, according to Ray. Lots to discuss today, and it's always so good to talk to somebody who's as smart and informed as Ray Dalio. If you're wondering how I manage to book all of these amazing people on the show every week,

it is because of my network, and I'm teaching you how to build your network for free over at Jordan Harbinger.com slash course. This course is all about improving your networking and connection skills and inspiring others to develop a personal and professional relationship with you. It'll make you a better networker, a better connector, and a better thinker.

That's all at Jordan Harbinger.com slash course. By the way, most of the guests on our show already subscribe and contribute to the course, so come join us. You'll be in smart company where you belong. Now, here's Ray Dalio. Are you sick of talking about this yet, Ray? I don't know.

Maybe you... I'm nutty enough to be excited about it. Yeah. It's important. It is important. I think the key here, and I know I want to get into why you did this study, but it was a little painful for me to read this, but the truth hurts sometimes, I guess, is probably the old cliche.

Do you get that reaction a lot when people read this new book? Well, you know what Henry Kissinger said, and a number of other people said that basically it's a great warning and it's a great education. I have a principle which is if you worry, you don't have to worry. And if you don't worry, you need to worry. Because if you worry and you understand what's likely, then you're likely to deal with it better than if you're just not worrying about it.

And so it paints a picture that's clear, and you can take it or leave it. But it's better to take it and consider it, I think. I would definitely say so. I want to start with why you did this study because looking at what you normally research, and I know I'm oversimplifying it. Look, if I'm studying economics,

I want kind of the next quarter, maybe an annual kind of prediction. I'm not looking five or 10 or 20 years out most of the time, at least most Wall Streeters are not. No, but I'm looking one, two, three, four years out. What I found in my life is that most of the things that surprised me were things that never happened in my lifetime before. That taught me that I needed to study past history.

For example, studying the Great Depression allowed me to anticipate the 2000. 2008 financial crisis. I wouldn't understand it. Some of these things come along once in a lifetime kind of thing. And there were three things that came along that I needed to understand better to do my job. This was done as a study for me and my job of dealing with these things, not as a book. I converted into book because it was important. But the three things that were really unprecedented in my lifetime were, first, the amount of debt creation and debt monetization. In other words, the printing of money to buy government debt is unprecedented. The finances are unprecedented. And as a financial person who watches economics, I saw how it

passes through the system. And that's always happened throughout history. That mechanics is, but it's unprecedented magnitude. The second is the magnitudes of the internal conflict, which are the greatest, and coming from the largest wealth and income gaps, the large, largest political gaps since 1900. I like to measure things, and so you see these charts, and you see it goes back to 1900. And the third is the rising of a great power, the challenging existing great power, China rising to challenge the United States. Those three things coming together, individually, they didn't happen before my lifetime, and then coming together was unprecedented. So I needed to understand certain things like January 6th didn't come out of nowhere.

Right. Okay. It germinated and it's coming to the surface. And it is when we go through it and extrapolate it and we understand how these things, it's telling about 22 to 23, 2004. And if I don't understand these things, it's like not understanding the Great Depression when the 2008 financial crisis. So I did the study. I'm very lucky that I could speak with practically anybody in the world and I talk about things. We have interesting conversations. You know, I learned a lot and they told me, you know, how important it is.

That's why Henry Kissinger, Bill Gates, a lot of people. And so that's why I put it out because I think it's important for people read. You can judge it for yourself whether you think it's important to read, but that's why I did it. Obviously, I agree with you that it's important to read. I was mostly commenting on the discomfort that comes up when you read something that you don't want it to necessarily be true. I mean, obviously, a smart person takes that as a sign that they should look deeper into something instead of shoving it under the rug. I think that's a real problem of dealing with things. I learned, you know, because of the profession I'm in and so on, that I have to be realistic.

I want to look at things realistically and be actually. and including the bad things. Think about if you had a disease, a terminal disease, would you want to know? Or you have a particular problem, would you want to know? Only by knowing and understanding. Don't be shy from knowing because it's discomforting. It's scary to me to not know.

The Depression and war periods that you mentioned in the book, so the Great Depression, for example, being one of them, and war periods, possibly even civil war periods, you write, they're necessary, to reset and change the rules. They're transitional but painful. The swinging of cycles is the norm, not the exception. And you mentioned earlier here at the top of the show,

yeah, a lot of us don't think it's the norm and not the exception because I wasn't alive for the last Civil War. You weren't alive for the last Civil War. But I suppose if you were 20 at the time of the Civil War, it wouldn't look impossible like it does to many people right now where they say, oh, come on, Civil War. In the United States, give me a break. You've been watching too much news, news, max, whatever it is. off Twitter, Jordan, calm down. It seems like the reaction. Right. Step back and look at a picture of

history, like I say. War, 1945, the cycle repeats. I could describe the cycle if you like, but you have a cycle that then ends up in a conflict when you have internally, when you have large wealth gaps and bad finances, then externally when you have a power that's challenging you, the probabilities of a conflict is rises. And you see this through history. And they last, these world orders, you know, last 75 or 100 years or so, but you're right. You know, last one began in 1945 at the end of World War II. And I was very lucky. You've been very lucky in that it's in the beginning part of that cycle. And then you get a new generation of people who didn't go through the war. My parents went through the war, and therefore they're less aware of it.

They're less aware of what causes it. But you see signs of these things, right? Like the January 6th is a symptom. You can imagine that in 2024, maybe neither side will accept losing. Okay. Now, if you have neither side accepting losing, and then you may not have resolution of that according to the the Constitution and determinants of law, and then you have a power conflict. That has a profound change. Now, that's not far-fetched. It shouldn't be far-fetched from anybody. And if you look at the patterns of history, you see that always the extremes tend to become greater, and those in the middle disappear because, you know, there's another principle, which is when the causes that people are behind are more important to them than the system, the system is in jeopardy.

And so when you get into an environment where I want to have you fight for my cause and win at all cost, history has shown you go to greater and greater polarity and you do have a fight. And that respect for things like the technicalities of law and the Constitution, think about It's a remarkable system that we have that when you have somebody by a few votes win the popular vote and somebody win the electoral vote that they say, yeah, I got it and I'll step away and I'll operate by that. That can't be taken for granted. So these things exist.

You need to know it. We realize now more and more just how precarious our system is. And it's funny to talk about this in the context of the United States because I know we're going to talk a lot about China as well. and I take Chinese lessons a few times a week in the morning, and I'm always talking to my teachers. They're usually using a VPN. Sometimes the ones that really trust me,

we'll talk about political subjects, not their favorite subjects generally when they're sitting in Chi on. But if you ask a young Chinese person, could there be massive disorder in China? They'll be like, no, not really. But then if I tell them to go ask their grandparents, they're like, are you kidding me? Have you heard of Mao?

We lost like 20 million people. Why do you think I keep three-day-old rice in a container under the table. There are teachers whose parents had canned food or whatever the equivalent thereof in clay pots, I think, under the floorboards of their house and they're like, why are you keeping food here?

We have supermarkets, we have whatever doordash is in China, and just old habits die hard. These older folks, they live through the equivalent of the Holocaust, essentially, in their country. That's part of the cycle. For example, the inclination to war very much changes. those people who went through those types of a war say, I never want to go to a war. Peace is just so important.

The people who wanted most to fight regretted going into wars. And yet the new generation, in the sense who hasn't been through a war, then basically says, I'm going to fight for this thing, and then they get into wars. And so there's a generational psychology change, even appreciating basics. Can I secure my basics? You know, those people want to basically take the worst case scenario and secure their basics. A lot of people just think that that's nutty because they haven't been through it. But if you see the patterns, I think people have got to understand that causality.

I agree with that. Once we know the cause as well, first of all, we can try to head this thing off at the past if possible, but also we can at least understand why we're heading where we may be heading. And we also can deal with it individually. So there's the collective. How do we collectively operate to make sure we don't have terrible things happen? And then there's individually, if we can't change things, how do I individually navigate this? And so what I had hoped to do, and you see the charts and you see the dot plot, and you can then plot where you're going with numbers. It's not, this aren't a opinions, as you know in the book, these are numbers and graphs of things so you can plot and you could add your dot plot and know where you're going and to know something about, okay, what do I do if this happened so I'm not surprised? So there's the individual taking care of himself. And then there's also, you know, what do you do to avoid this thing happening?

Where there's a wealth gap in an economic downturn, there's always going to be a conflict on how to divide the pie. I think that's a paraphrase from the book itself. A lot of people are arguing, well, look, the economy's doing great, but I think the real danger here is the wealth gap. I grew up middle class, like probably most people listening to this, and a lot of my friends who grew up next door to me, maybe even were a little better off or at least had more stuff growing up, hard to tell what's what now. They are either middle class, working class, lower middle class, whatever you want to call it. Very few of them count on sort of one hand of the people who have really crushed it. and the gap is becoming more and more obvious, and it's not just the same people who are wealthy before are staying wealthy,

and that people I know that didn't have as much are in the same position. It's almost like a lot of people are moving way up the spectrum. I mean, hundreds of times more income than they would ever need, or at least dozens, and then the rest of the folks that I know, and this is anecdotal, but of course the data sort of bears it out, the rest of the people are sliding down in quality of life, which is not how things are quote unquote supposed to happen. Right. And that's mechanistic. Two years ago, I did a study, which was by quintile, top 20%,

next 20%, and so on. And I looked at also aggregated the bottom 60%. And that's a problem. Just to add to it, when you say we're getting more money, I just want to be clear that what happened was a lot of sending out more checks. We all have now that it's been sent out a lot of money, but they just increase the amount of money. And you don't get richer by increasing the amount of money. The only way you get richer is by increasing production. And so what we're seeing is a higher level of inflation, taking away those gains. And so when you have the combination of the three, the bad finances, you know,

if you're spending more than you're earning and you're printing money to do that, that's a sign, second sign, big wealth. You're not going to raise that and irreconcilable differences that people will fight over. And third sign is the rise of an external power or threatened competition that ends up happening at the same time. That confluence is something. And so it's very real. You're talking about it.

I live in Connecticut. And Connecticut has, it's either the highest, one of the three highest per capita incomes in the country high per capita income. 22%, my wife works to help this population, 22% of the high school students in Connecticut are either disengaged or disconnected. Disengaged means that they have an absentee rate, which is greater than 25%, and they're failing classes. And disconnected means they don't know where they are, they've dropped out. So 22% of the high school students in the richest state in the country are in that condition. Okay. Wow. And you're seeing people move from New York and places,

California and so on. There's big things going on. It's a combustible set of circumstances. And therefore, what's happening in terms of populism of the left and the right, and that whole dynamic is very, very normal, very understandable, even though it hasn't happened in our lifetimes. You mentioned earlier that the outside pressure of another economic power is one of the major factors. And China is a real economic rival in a way that the Soviet Union never was. You know, a lot of people will say, oh, but the Soviet Union, you know, we kind of beat them. I'm not necessarily qualified to do this, but I do know when you look at, these are apples and oranges. The Soviet Union was almost like, it just wasn't the same thing.

It wasn't the same situation as China. It was a completely different economy, but also it's a completely different set of circumstances and a completely different country in terms of its economic power? Sure. There are different kinds of power. I go through the eight different types of power. Economic power and military power are both going together. Russia was never an economic competitor.

China is economically competitive. Just put it this way. China is a population that's more than four times that of the United States. So if per capita income is half the United States, that'll mean that it'll be economically twice the United States. That means it can also spend on military and other things in a way that is very, very different. So it's a whole different kettle of fish. That starts to get scary when we look at authoritarian regimes. I think if Denmark was twice the economic power of the United States, people would be less alarmed about this particular situation.

What do you think? Right. I think, first, there are different approaches, different ways of doing things. And I think the real question is whether one is imposing the other on each other. So should we be threatened by that? I mean, they're certainly threatened by the competition, but should we be threatened by that? And I think at the end of the day, the most important thing is how strong is America? Okay.

It's simple. Just be strong. The big war is with ourselves that's standing in that with this internal conflict and the financial things. If we can be strong and do those things right, then we're going to be in the best of shape. There'll be less threat. And there are five types of wars. History is shown, and we see it all the time. There's a trade war. There's a technology war. there is a geopolitical influence war, which is influenced by the first two. There's a capital war, and then there's a military war. We are certainly in the first four of those, and that's really a competition. So how can we be effective in trade? American inventiveness to make technology the best we possibly can. What about the geopolitical influence? And then, of course, capital markets,

that's a big advantage. So those are the things that will influence and how competitive we are is almost everything in that game. There are a couple phases here and of course when you read the book, people will get this, but I'll give a little cheat sheet here

because I don't want to spend, you know, an hour on it, but there's essentially the civilization's phase here with a rise phase, good education, strong leaders, a good system like capitalism that we have here. The top phase, labor gets too expensive, we start outsourcing things, people get decadent, less productive, less battle-hardened, you might say.

There's a lot of borrowing, a lot of bubbles in a wealth gap. We print money to avoid the default, which is kind of where we are now from the look of it. And then we get into populism, essentially. Can we talk a little bit about that? Let's define what that is and why it's appealing, because when you read it on paper, you go, oh my gosh, this is horrible, but then it's like we're just charging full steam ahead into it in any case from the look of it. Right.

So what a great summary very quickly of most important aspects of it. As you come down there and you have this set of conditions, you have both sides saying, this isn't right. And they fight for each other. So you go to greater levels of extremism and wanting to fight with each other. So there's populism of the left and populism of the right. And it hits at the core values. So you're seeing a big difference in values. And That causes the fighter and the fighting. They don't want candidates now, don't want to thoughtfully present their perspective, listen to the other candidates thoughtfully prospect, their perspective, have a debate about which is best, and have the populace consider both of those and make a vote. Okay? That's passe.

Yeah. I'm laughing to myself, for those of those, watching on YouTube, I'm laughing because I'm like, I remember those days kind of, I think. Right. It is fight for me and win at all cost. And America loses all the free, well, look, it doesn't matter where you live. Everyone loses when one side is completely hyperpartisan and willing to be intellectually dishonest and doesn't really care about anything other than winning for their own cause. And the political system by its nature reinforces that because each of the parties

has a moderate part and a less moderate part. But let's say, to use an example, maybe 30% of the population is fairly right, a lot right, let's say, and 30% might be a lot left, and you've got 60% of the population. They represent a large part of each party. And so you have primaries now

in which are going on, 2022 will be first the primary battle, because what they will do is say who will be the winner. And each of those fights will be, who is going to fight for me? And moderates don't come across like they're the fighters for me. And so the parties tend to move more and more to the extreme for the big fight. And that's like the big fight in 24. And as I say, it's entirely possible or almost probable that neither is. side would accept losing. Okay, now, that's a different world. That's a different change in democracy.

How is that resolved? It's resolved through power. That is not something that's far-fetched. And in order to understand how it's worked, it's worked the same way. And the book, you go through, you see these patterns. You know, the French Revolution, Chinese Revolution, the Russian Revolution, the Cuban Revolution. I mean, it's the same thing in terms of the polarity. And you can't be in the middle. It's dangerous to be in the middle. You have to pick a side and fight. Yeah, I was going to comment on that. I always used to say, well, you know, I'm kind of a radical centrist. You know, ha, ha, ha, that's my, that used to be my kind of like dad joke about politics until a friend told me, you know that the moderates in the center, they all die first because what happens is

the left and the right, they both come for the people in the middle because they won't pick aside. So you're getting hunted by both sides. And I mean, if we're talking a civil war, it's literally being hunted by both sides. But if you're talking about a power struggle, it's pretty much the same thing. If you're not going to pick a side, you're just the enemy of both sides, which is a much more dangerous place to be.

And if nobody's going to be hyperpartisan on your behalf, well, now you find yourself with your back against the wall and there's not a whole lot of people around you. Right. And only when I did this, it's like watching the movie happen over and over again. Mm-hmm. You see this happen this way.

So we're talking about it. But it's like if you read the stories happening over and over again, you get it. It creates the dot plot, you know, and you can then fill it in. And hopefully we will see a deviation from that dot plot. Hopefully. I mean, that's the idea, right? But it's a little bit, that almost seems like, what's an analogy here? It's kind of like those people that say, well, my plan for retirement is winning the lottery.

And it's a, well, what are you doing? Well, I'm buying tickets. It's okay, a lot of people are doing that, but that's not necessarily. But Jordan, that's what brings us back to our first point on this. Like you say, it's scary. And I say you have to be realistic. And you have to have a plan. So, right.

You're saying that, you know, you're on the other side like it sounds polyanish. And that's right. But that's why I say, if you worry and we collectively worry, we might be able to do things. We have it in our power because the world and the countries, have more money than more resources than they've ever had before. We know more. We can do more than we can have a higher living standard than we ever had before. If we can cooperate and we must cooperate because look at what that alternative is.

So there are things, you know, that we can do. I'm not saying they're easy, but the alternative is scary. You're listening to the Jordan Harbinger show with our guest, Ray Dalio. We'll be right back. Thank you so much for listening to and supporting the show. I really love creating it. I love that you love listening to it. And I appreciate your support as well.

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Now, back to Ray Dalio. It is really scary. Yeah, it is quite scary. And we'll talk about some proposed solutions, I suppose, in a little bit here. But, you know, let's scare people a little bit more. Why not? You mention often in the book that societies that perform well are civil to one another. I'm wondering where you think the United States is in that spectrum right now. Because when I talk to people in person, even some of the most extreme people, they're still working. They don't treat people horribly to their face. But then you'll talk to you. look online and it is a completely different universe of communication. And it's almost like,

well, which one of these is real? I think you've summarized it very well, right? There's a great deal of change that has taken place at a very fast pace. And the communications of what people are seeing, when you go to work, you're doing your work and you're not dealing with the issues. And so you have something in common, perhaps. But when you're really dealing with the actual measures of what they say and how they vote or actions they take and you plot those things, you put numbers to them and you plot those things, you can see what's happening. And you could see that it's not civil debate. I described how it used to be that both candidates would present their positions or what

they could do for the country and people would consider that and the vote and how it's all different. Yes, it's very, very different. And you do the dot plot and you can see. that. So yes, do we have irreconcilable differences? I think that's the real question. I think if you hear a lot of these issues we do, and people will move. They'll change location, not just because of taxes, but because of going to be with people whose values and their circumstances are more like them. And you're seeing that happen. You'll see a big difference probably between the relationship of states and the federal government. I think more in the future, states' rights, you know,

like the sanctuary city issue, when the federal government says you should do this, do this, and the state or local government says, I'm not, then you have the breakdown of the system. They don't just go to the rule. Then you have a power-driven set of circumstances. And I think we're moving. oh, it's more like that than it was. And we see the dot plot, and if you look at history, so that's what I'm saying, I think is pretty clearly going on. I mean, why do they move from California to Texas? Some of it's taxes, for sure, yeah?

Yes, some of it is taxes, but also things like the regulatory environment, how people should be with each other. You know, I believe in, you know, I don't know, one place, self-sufficiency. another one says, I believe, in the greater humanity of helping each other. Some places, this group is evil. Billionaires are evil or poor people are evil or something. And you get to that, all those things, pulling people in different directions, pulling them apart. There's, you know, a section in the book that almost helps each person identify which they're going to be categorized with

and which there probably is going to be the equivalent of their affinity group. It could be economic. It could be ethnic, racial, it could be values. And you go down that. You saw the part. That's how you will be looked at. Do you encourage people to relocate based on where they fall in that particular type of spectrum or based on those criteria?

I don't encourage people to do anything in a sense because that's like, Do I encourage people to have a particular religion? Do I encourage people to have a particular food that they prefer? The preferences that they make are their own preferences. I'm just trying to convey the consequences to make them aware of such things. Like, for example, I've stayed in Connecticut and I'm trying to deal with this because I feel that's my home. Okay? And that's a personal preference.

I have friends who have gone to other places because they have a preference. I can't tell you what path you should do. I can only make you aware of the likelihoods of these things happening in certain ways, and then you make your choices. I guess what I'm trying to get to the root of the relocation thing is, it sounds like your point with relocation, or one of your points with relocation is, since people are relocating,

that sets up potential for further conflict, because if you're talking about a very mixed and diverse, I live in California, and you have opinions of all kinds all over the place, depending on where you live in California, that's one thing. But if everybody who lives in a large swath of California all has one opinion and everybody, and I put everybody, let's say 90% of Texas has another opinion, it's much easier to have a real conflict when you have that kind of like a lack of exactly. I think what you're touching on, I explain it in the books is this hollowing out process.

Yes. But what happens is because of going to the affinity group or that place, which tends to have people more like that. Then, for example, the richer people move to places that more richer people are in and tend to protect wealth more. And as a result of that, the tax base moves. And as a result of the tax base moves, there becomes a hollowing out that produces a dynamic. It's more difficult to have public services. The circumstances get worse. And then that produces its own dynamic. That makes that conflict worse and that becomes a less hospitable place to be, which creates a force to move, which reinforces that cycle. That's how it works mechanistically. Right. No, that makes sense because

if I, let's say I'm doing pretty well. I live in Michigan or whatever, where I grew up, and I realize, hey, you know, I'm so sick of paying high taxes. I'm going to vote somebody in office that doesn't do that. And now we have bad roads, bad schools, bad policing like Detroit did or does. And then everybody who has money says, I'm going to move to Bloomfield Hills or a suburb, or just an enclave that's nicer, but we don't have enough cops. Let's just do a private security force for our area, and you know what? We're going to redo the roads. It'll be private. We're going to buy this up and take it out of city hands, and my kids are all going to go to private schools, because if you've seen the public schools, they're terrible. You can't even go there. They have metal detectors. People are getting stabbed. So then the people who can't

afford to live in that enclave live in the equivalent of Baghdad or Fallujah or whatever. I mean, it's a hyperbole, but they live in a place where the schools are bad, the roads are bad, and there's no cops. And it's not very much hyperbole. I've described Connecticut. I live in Greenwich, Connecticut, and the public school system spends about $24,000 per student per year. Right up the road are towns like Bridgeport, Connecticut, in which they spend something like $14,000 a year per school. And if you drive around the neighborhood, it does look as you're describing and there's poverty. They need more remediation than they need more money, not less money, because they have an environment and a set of circumstances where there's poverty, not just schools. So it's like you're describing, right?

There's a certain amount of hyperbole, but not much hyperbole in a lot of places. The place where my dad grew up, there's no, trying to get this right, I believe there's no trash pickup. it'll take the cops something like days to get to you. I mean, literally, they're not starting to drive there as soon as you call it in. They just might not show up at all, and it might be an hour because there's like 28 square miles or something that they have to cover and 80 cop cars, something along those lines. It's just absolutely ridiculous. And the power system is damaged in a lot of areas. There are entire blocks where one house has two old people in it or an old person in it or two houses do, and every other house is abandoned. So they don't service that.

place with things like sanitation or fresh roads or pretty much anything, they're on their own. People don't understand that because we, a lot of people lived, you know, they're in Greenwich, Connecticut. How much time do they go 15 minutes up the road and go to Bridgeport, Connecticut? My wife, the state capital of Connecticut is Hartford, Connecticut, used to be the insurance capital of the world. It has that type of thing. And my wife is working to, you know, try to help that population. She's with the mayor, and they're in this control room kind of thing where they have the cameras on different places. And there are kids who have a problem walking to school because they have to pass through areas where there are gangs that have gang shootings. And she asks

the mayor, well, why can't you have the police a sure, safe passage? He said there are 275 police. That's all we can afford because there's police or this thing and that, and it's just what you're describing. So there is a, how does this take place? It's a reality. Not everywhere, but people need to get around and look at these things or look at the statistics. The values gap is also something you mentioned quite a bit, not just the wealth gap, the values gap. And you touched on this a little bit earlier, but I'd love to hear more about this because it does seem more and more, especially if you pay attention to anything online, that the United States is not only dealing with a wealth gap that's quite obvious, but a values gap that is totally different. And each side calls the other side

immoral and feels like they're completely in the wrong slash evil. You mentioned before, people will say, well, poor people should work harder, but billionaires are evil, depending on who you ask. And that's a huge problem if people actually believe really either of those kinds of things wholesale. All the surveys show that large majority, really, would take the population. There's a middle, but if you take those that have fundamentally big, big differences in terms of demonizing the other, say, I don't want to be with the other, those kinds of things, it represents something like 60% of the population. That's not made up. That is a reality. And you see that demonization in these patterns. And you see how it works with the media. Okay. So there's a dynamic that you

repeat over and over again. And the media, certainly true today, also likes to sensationalize and be on one side or the other and demonize. And so to find out what's true and to balance things like what are the pros and cons is not really common. It barely exists. And it's difficult. It's not easy to be talking about the reasonableness and the issues of both sides and to try to deal with the merit of both sides, I guarantee you, like the history, the middle gets guillotines, hit to the cross or imprisoned or shot. Do you remember, is it a little bit before my time, I don't know how familiar you are with this, you might not have been paying attention, but like the fairness doctrine.

Are you familiar with that at all in media? It was essentially that if you ran two hours with a conservative, you had to run two hours with somebody who was effectively on the other side of the debate. It wasn't always exact. Yeah, I have a recollection of that. I knew through my whole experience that the vast majority of the population of audience and media wouldn't have it otherwise by and large, that it was basically the notion of accuracy and not partisanship was fundamental. Certainly people cared more about accuracy

previously just because journalists had, they weren't competing for clicks, for example, if things were given different airtime and there was more of maybe even because there was more of a monopoly on print and news media, but for people who are not familiar, in 1949, the FCC created the fairness doctrine. It was a policy that required the holders of broadcast licenses to present controversial issues of public importance to do so in a manner that fairly reflected differing viewpoints. So basically you kind of had to balance things out, and I'm sure it wasn't exact,

but they got rid of it in 1987, and dot, dot, dot, dot, now we've got people who are just claiming ridiculous things because they're feeding a monster that gives them impression so they can serve ads, among other reasons. I didn't know that. We certainly see those things happening,

I would say, but I didn't realize is in the media, if you can intentionally lie and produce harm, slander, and so on, and it can be proven in case that you intentionally did that, and you cannot be held accountable in any way. Right. Yeah, you can say it's entertainment. We can say ridiculous things, and then we can make the argument that no reasonable person would ever take a conversation that I have with you seriously because work totally unreasonable and we always have been. And that's why I have unreasonable viewpoints all the time. And if you don't understand it's entertainment, then it's on you.

But I can present it as this is news and I'm totally unbiased and you should definitely believe everything I say. And also I have a miracle cure for COVID that you can buy for $100. You can do that stuff. Yes. So I think the important thing is we see this. We're commenting on what is. What in the book I try to show is that this is happening repeatedly.

Over and over again, it's like seeing the movie for, you know, the umpteenth time. Do you think that part of the reason that this is happening now is because, well, politicians, especially in democracy, they have to prioritize short-term versus long-term thinking. And I remember hearing about this in the 90s where we were talking about the rise of Japan, which had happened, I think, in the 80s and early 90s, where they were planning for their years ahead in how they were going to grow the company and invest in technology or whatever it was. and CEOs in the United States were mostly looking at shareholder value

over from quarter to quarter. And now it's probably even shorter term. It seems like politicians are stuck in that same loop. Would you agree with that? Yes. You know, Larry Summers described it to me as the average time horizon is nine months in the future, roughly nine months in the future. And then there's motivations.

For example, giving people more, which means spending, more, which means you can borrow and spend more. Nobody pays attention to whether that spending is coming from borrowing, then leads to, I will be a more popular candidate if I borrow and spend more, and I will get elected, and then somewhere down the line, the other guy will deal with the debt. All of those things lend itself to short-termism. For example, not spending adequate money on education, there's hardly any better investment in terms of productivity. Okay. Right. The return on investment for education is just enormous plus it banks a fairer system, but there are structural reasons. And so, yeah, there is a short-termism, of course, and that creates a cycle. Like,

if I borrow, I spend more, but then I have to pay back in the future, and that creates a cycle. And of course, when the time from paying back in the future comes, because that's painful, then they will print more money to make that easier, which will devalue the money. That's it. That's right. There's a cycle. It seems like authoritarianism, does it just elongate the cycle? Because it seems like when you look at some of the data, it looks like maybe authoritarianism is better for building more stable societies because they can think long term. They're not really in any danger of being replaced in an election. I am not advocating for that. I take it your. not a fan of authoritarian governance generally. I shouldn't put words in your mouth. I assume that's your opinion.

I grew up in the United States. As far as I'm concerned, I would love to keep it exactly like it been, right? In other words, the element of freedom, the flexibility of choice, the choice by the people, and so on. Sometimes they may not make the best choices, but they have the flexibility and it's in their interest. And if it works well, it's just such a fabulous system. And then what you see in the cycles, you just see the mechanics of the cycles. And it went back to Plato and his describe of the Republic. In a sense, what you have is a democracy, because democracy has existed for thousands of years, really. And democracy, the big risk of democracy

is anarchy. When you have bad conditions and people start fighting with each other, then there's the issue of who's going to get control of those places. In the 1930 to 45 period, you had four democracies choose to be autocracies. Their parliaments chose it. That happened in Germany, Italy, Japan, and Spain. They said, somebody get control of this. And so that disorder leads to the strong, and then Plato would say that then you ideally have the benevolent despot who is sort of, okay, I'll take control, I'll make the trains run

on time, and we'll take care of that. And then with time, you get the evil despot who is then operating that way, and nobody can sustain that. You always have to have the change. And so then you have the revolution again, and then you keep on with the process. You know, there tends to be a cycle of those types of things, and we have to know our vulnerabilities. So to keep you, you what we cherish, we have to behave well with each other, respect the rule of law, respect the constitution, respect thoughtful disagreement, and work together. And then we have, you know, what we ideally aspire to, I think. Yeah, you mentioned revolution, and there are people on the extreme sides calling for that sort of thing. The problem is that, and I think this is actually from

your books, I'm not telling you something you don't know, but maybe you can comment on it. the winners who may have fought for equality or a place at the table or whatever it is, they never actually make things fair. History shows they never actually make things fair. They simply put themselves and their group on top and then redistribute resources. Well, there are many, many cases, a great leader, you watch these arcs, will win the war, will then have to deal with the remaining opposition. So they have to consolidate power to go on their mission in some way or another.

bring about stopping the fighting internally. And then they build a system that starts to improve things. And you can see the arcs and the charts in the book because you can see, okay, education is the leading indicator. You start with education. You start with the system. And then you build that particular system. And then they also has to build a system that transitions well to the next leader because no leaders last as long as a good empire or a good dynasty. So you have to have a transition of a system. And democracy in the United States has worked pretty damn well. We only had one civil war, but it requires the cherishing of it and the operating that way in order for that arc to continue. So I think you can see in these cases over and over again what's good,

what's bad and you can see the consequences. And yes, I think about the post-World War II period. What a wonderful period that was for the United States in the world. And also for Americans who had a middle class and they were in it together and they restructured things and they built things and they worked together. And then we have the cycle get overextended. And so that's how it looks to me. I mean, that completely makes sense. I'm wondering what you think of are maybe the primary differences and let's say China versus American thinking, right? If we're talking about the cycle and the authoritarian versus democracy, you know, that aside, it seems like China has a much longer, I mean, they talk about this all the time, that they have a much longer perspective. They're thinking,

they have tons of five-year plans. They have a lot of, maybe it's more philosophical than practical, but they talk in like much longer time periods. And they kind of always have, right, because you talk about dynasties and emperors. They're not thinking, hey, man, I only got 20 years left. They're thinking, well, I'm going to have at least a few more generations to accomplish this particular project. That is, I know for a fact, because of direct contact, that that's right. History in China is their religion. They study it. Every senior person can go back and to take each of the dynasties. And they have amazing detail, history that they recorded way back then. So when they say civilization, what they really mean is like they had bureaucracies then civilized in records and all of those things,

and they see these cycles happening over and over again. I studied the dynasties. It starts, China was united in 21B.C. and you could see these cycles happen. And they all have it in their mind. And so a leader in China will view himself as what part of the cycle is he in. So let's say there's a new order. Their new order began in 1949. The Communist Party takes over, Mao Zedun comes in. Then there's a classic script. Consolidate power and then start to make the changes. Then fast forward, Deng Xiaoping comes in. And then how do you get richer and you modernize it? And they went through that particular process. And then you have the each leader knows where they are in that cycle and how to operate. in that cycle. It's top of mind because they've seen the stories happen over and over again. So you're right. It's a longer term history. It's not a nine-month perspective. That is how the thinking works. This is the Jordan Harbinger show with our guest, Ray Dalio. We'll be right back.

By the way, you can now rate the show if you're listening on Spotify. This is a huge help. It makes the show more visible on Spotify. Just go to Jordan Harbinger.com slash Spotify or search for us in your Spotify app and click the little dots on the right to make it happen. And now for the rest of my conversation with Ray Dalio. I don't know what kind of answer you're able to give to this, but a lot of people will say, well, hey, Xi Jinping is almost like bringing China back to Mao slash emperor era. And there's a lot of critique on, even on Chinese media, where there's a picture of Xi Jinping seated in like a carved wooden dragon chair. Have you heard about this? And everyone's like, he's trying to be the emperor now.

And it's interesting to see because I can't really think of an equivalent in the United States. States because we don't have anything like that. I guess maybe if Joe Biden said on a golden throne, we might say, look, he's trying to be the king. It's not, you know, this isn't going to work. It seems like Xi Jinping has a different idea and is almost breaking that cycle a little bit. What do you think? I think China's far more complicated and there are terrible misunderstandings. And it's very difficult to just summarize those things. There are very, very, very different perspectives of Chinese living in China. For example, regarding the public, having all their information, public and controlled by the government and all the data, like they would say

that that gives me comfort and safety or something. We're having their kids, the government says, your kids can't do video games more than once an hour a day. Now, in the United States, they would say, hey, that's a parental decision. What the hell is the government doing, deciding that in their, they would. So these things become very, very, complicated, and you know in all countries there's a reading into all different things, so I can't really possibly summarize all of that in terms of the reactions. There are different approaches, certainly. And so I think it is definitely a more autocratic, top-down approach versus, you know, one of the Chinese leaders described me. You know, the United States is a country

of individuals and individualism. And that makes it bottom up. And so there are different perspectives, but it's, you know, it's complicated. I think the main thing here is to whatever extent there could be an understanding fine, that would be good. But to realize that let's focus internally on how strong we can be, making our system work well and so on, and different people will have different systems,

let's be as competitive as we can by doing the tried and true things right, right? And we know what those things are. Yeah, you mentioned in the book that the biggest challenge for leaders is to develop a capitalist system that is both good at growing the pie and limiting inequalities within the system. So the wealth gap was something we talked about earlier. Education was something we talked about earlier. Things like health care probably, at least now certainly comes to mind. I probably wasn't even thinking about it two years ago or five years ago.

certainly now. Well, what you see over and over again, which is common throughout history, this is almost a universal truth, that drawing from the largest population to give opportunity to is both functionally great. You will get the best talent if you can draw from the largest population, and it also makes it sense of fair inequality to produce equality, which then makes the system stable. This goes back to, in all societies, if you go back to China, and this meritocracy, some would say began with Confucius in meritocracy and exams and how they did it. And you could see it in different cultures, that one thing, like you have to create that and together to create productivity that raises living standards and so on. And then, of course,

with consideration in terms of helping those who can't help themselves. But by and large, that's been a tried and true thing through that whole period of time. Because you have to make things better and you've got to pay for them too. And so to the extent that each individual is as self-sufficient as possible and you enable them, that they can pay for it and they can contribute the most, that's never perfect and so on. that notion is basically universally and timelessly ingredients for a successful society and a fair society. So investment in, yeah, first of all, I agree.

I couldn't agree more. I think a lot about the investment in infrastructure, education, obviously do as well. You mentioned your wife is working in that probably full time, trying to figure out how to help some of these populations that don't have access to resources. We know what happens when these are neglected. If you don't know and you're still not getting it, take a stop over in Detroit and drive around for a few hours and you'll see what that might look like when taken to some of the extremes. What do you think of programs like, I'm trying not to be partisan here, but just because it's top of mind, what do you think of something like build back better, essentially stalling in Congress? I mean, we don't have to get into the nitpicky details of that particular plan, but do you think we need something that is a bold move that says, hey, look, broadband health care resources, mental health facilities, whatever else?

Do you think we need a bold step or do we need very small measured steps instead? I think we need a bold step and simultaneously those are in many cases great investments, if done well, to pay for themselves through their productivity. Right. Like we encountered, as I say, through experiences, so our experiences are sort of the teachers, that when COVID came along, kids didn't have this population, didn't have computers, and didn't have connectivity. Okay.

That's like not having water or not having electricity. Okay. It's basic. When you look at some of these things, that kind of infrastructure in terms of those basics is a great return on investment as well as something that makes the system fair. And there are a lot of those, right? So you have to be conscious about those types of things, right?

But do you get to pay for it and how does that work because there's a financial part of this that has to also work, right? Because when you create a debt and you're selling the debt, there are buyers of that debt. So there's a supply demand. And if they don't buy that debt, then you have a problem that you have to print a lot of money and then you produce an inflation. And so how you balance those things requires both a skill level and a sense of what the objective is, right? In other words, you have to have the skill to know how to balance those

things. That's an economic financial skill. How do you produce those things and so on? And then how do you sell the bonds to balance those things? And then you have to have the goal in mind. And that goal has to be really that kind of equal opportunity and drawing. So you're being both productive and also creating, you know, prosperity that the majority of people benefit from. Some of these things like the wealth gap, the health care gap, access, which we just talked about, are on your, or parts of your list of red flags or indicators for strong internal conflict. Do you have others that we can be aware of? I mean, the United States is clearly facing a lot of these right now.

We're more polarized and extreme than, well, I don't know. Are we more polarized than ever before in history? It seems like the Civil War time surely was more polarized. I don't know how they measure that. In the book, there are different conflict measures. I created conflict gauges. And so there are different kinds of conflict. And so if you were to go back, you would go back to the Vietnam War, Martin Luther King, demonstrations, and so on in 1967, 68, 69-ish.

And then you go back to the Civil War period. If you take political conflict, those conflicts since 1900. So there are a number of charts in the book that shows the different kinds of conflict. But by any measures, we have high right now conflict. You can say, is this the all-time record? It depends on which ones you're looking at. You know, that's what the picture looks like. What are some of the red flags or indicators of strong internal conflict?

We said wealth gap and things like that. What else is there? As you might remember, I gave 18 indicators with measurements for each. So there are numbers on each of those indicators. But I don't want to take you through all 18. I gave you three, which is the financial condition, the internal conflict, the external conflict. Number four, just out of curiosity, is acts of nature have killed more people and caused more civilizations to change. But they're kind of the random things like the pandemic or a drought or something that's coming along.

also then innovation and then share of world GDP for trade. So in other words, how competitiveness are you in the world? Education in terms of all the measures is very important. Inventiveness, those would be the most important ones. You can see there charts for each one and numbers for each one so that you can compare one country's military strength. For example, with another country's military strength, that's very important. So education levels, productivity, inventiveness, each one of those indicators is measured in an

index so that there's an index there that you can go country by country and you can compare, have a number that allows you to compare it with the other country to see how strong it is in those regards. And when you take each one of those and you put those together, there's an overall strength index that you can see move, but you can see what type of strength because there are different kinds of strength, such as the ones I mentioned. Right. Yeah, the book has useful, is it a rubric? Is that the right word? Ways to compare these things that aren't just sort of arbitrary or are less arbitrary than a conversation without any visuals and without any paper in front of you. It's a health index. And as a health index, it's also, we use it as a leading indicator. It's like health. If you look at this health index, it's like a personal health index. How's your blood? What's the urine? How overweight are you? Do you smoke? And so on. And by going down that, that's been shown, and we show it here, as a leading indicator with what happens over the next thing.

10 years. So it's measured and shown, and these are just health measures that one sees and that are leading measures of also one's condition. So you can see the conditions improve or deteriorate. I think it's a good way to measure the success of a leader or the success of a government. You could just look at those health indexes and then if they're improving, then you're doing better. And if you're not improving, then they're doing worth, like wealth gaps in terms of that and political issues. They're all measurable. I believe you wrote, outside conflict is more likely when there's an internal vulnerability like a civil war or internal strife. Why is outside conflict more likely when there's, let's say, internal conflict? Is that prompted by leadership

trying to galvanize the country, or is there something else going on? Both. There's the attack. Like if you're more vulnerable and I'm a competitor, at the most vulnerable moment, I'm more likely to cause you harm. Sure. Okay. Okay, that makes sense. If I'm winning, okay. And that internally, it's to find the external enemy that will galvanize the country.

Right. Okay, that makes sense. It's both you're attracting outside conflict to you're attracting an attack theoretically and also leadership then may take the bait on that, even if it's not really an attack like Pearl Harbor, but something more like, I don't even know, China. trying to take Taiwan under its control or something, or like Russia does this in Eastern Europe, right? They have a lot of internal conflict and strife right now, huge wealth gap, a lot of things aren't working, and suddenly Ukraine is a big deal to Vladimir Putin. You could say that

there's many reasons for that, but one of them almost certainly is to galvanize Russian nationalism. Well, there's through history, you see, but it's also like in the animal species, when does the one take down the other? The other gets older or more vulnerable. and the attack comes, and that's when it happens, right? You don't want to go attack somebody who's going to be stronger than you. You don't pick a fight, but you look for the vulnerable moments, and then you attack during that vulnerability,

and then you have the galvanizing, and both of those are at work. What's one of the biggest military risks that you see right now? I know one of the things that you wrote about in the book was Taiwan. I'd love to talk about that. My wife, or families from Taiwan. I've been there a bunch of times.

also been to China, and I pay attention to the news there. It seems like that is a very sort of precarious situation. A lot of my friends who are military experts will say this is almost certainly the next big thing. Even looking at what's going on in Ukraine, the next big thing for the United States could very well be the Taiwan issue. Taiwan, I would say if it wasn't for the Taiwan issue, which is a ticking time bomb, then what you would probably have is the intense competition. in the areas I said, trade, technology, capital wars, and geopolitical influence. So if you're talking about a military, it's an existential issue. I can go through all the history and why that means that, but that's right.

And then China and Russia have close relationships. There's always in history. There's the common enemy. draws others together. And so their equivalent to Taiwan is the Ukraine. And for them, that means that it's the neighboring place that they believe is in their sphere of influence and that there's threats if they don't control it and they won't tolerate. That's an existential question for them.

You know, it would be, I don't know, like NATO setting up on their borders is to them, something like, I don't know, Russia or China setting up in Mexico or something. And so there were those geopolitical issues, and that's how the world is changing because also the power differences have narrow in the ways that we're talking about, the military powers. And by the way, the capacities in all the different ways to do harm to each other have advanced at least as much as all of our. other technologies have advanced over since the last war. So it would be terrible if we got into that kind of war. But you picked the number one hotspot.

As a China watcher, how likely do you think it is that that will happen in the next, I hate to put a timeline on things, the next five or ten years? Are we going to see something, some major action from Beijing? Or do you think a lot of it will play second fiddle to economic cooperation? and trying to keep stability for the sake of development? I don't really know that I'm going to be able to do that. I put in the odds from the indicators based on that and there's really not reliable as something like a one in three chance.

Not insignificant, not insignificant at all. And I don't know that I'm right. But also I put in a 30% chance based on some of the indicators of, you know, an internal civil war type of thing. So I don't know these are uncomfortably high odds, you know. Yeah, I would agree. I would imagine also that China's paying close attention to how the world reacts to the Ukraine situation. Because if everyone says, well, you know, and they rationalize that Ukraine was part of this

and it wasn't that bad and just give them half of this, that sort of gives China a pass to act more boldly when it comes to Taiwan. I don't want to get into, I don't know, you know, we're probably getting beyond my capabilities of conjecturing and anybody's capabilities of conjecturing, you know, each of those moves. I can only study history and learn the lessons from history. And I do know that as a principle, what you're saying is quite generally true. In closing here, what should us sort of normal folk do to prepare? Because it sounds like, okay, we've got a ton of problems. We should vote for infrastructure bills that make sense and develop the country because we know it has good ROI.

We're not sure what those bills are. I'm not trying to get political here. Great. But what else? I mean, we vote in accordance with our interests, but what else can we do? You know, someone's going to be like, ask them about Bitcoin, but you know, what other strategies would you have? I think there are two ways of answering your question. What should individuals do so that we have a better society and better chances of going forward? Or what should individuals do, assuming that they can't determine that. What we should do as a country, in my opinion, it's very simple. We should understand and worry about that dynamic and work together in a bi-policy, bipartisan way. I mean, basically what I would be doing is, you know, if I was president of the United States, I'd probably

have a bipartisan cabinet, and I'd probably send aside representatives from both parties to have a mission like the Manhattan Project and so on, where they're smart in engineering and they engineer policies that will increase the size of the pie and distribute it well so that they can find a united policy, and then to deal with the extremists on each of their party to build a middle and somehow. I don't know, you know, maybe that even requires a third party. I can't even say, but I, you know, the middle and working together is going to be fundamentally the most important thing we can do, I believe, you know, collectively. Individually, it is to really understand this, understand the patterns, understand the particulars. You know, some of the things we talked

about, and a lot of them we didn't that are in the book, that are, you know, how does an individual, how do you store wealth? How does that work? In other words, I think, for example, an investor should have like two portfolios. The first portfolio is the I will be okay portfolio. In other words, it's a diversified portfolio of things that if things were not good, it's like your insurance policy I'm coming about those things. So to know how to do that. And then you have the what's good, generally speaking, type of portfolio. And then things to know about the measurements and, like you say, when to move, where does that work for, to know how it works. So I think that that would be important. That's one of the big reasons I wrote the book. How hopeful are you that we can come

through this successfully as a country? Those goals make sense. And they don't seem incredibly lofty but I also wonder what your level of confidence is that we can make that work. I tried to be as accurate as I'm saying, and I don't want, I want to be mechanical and probabilistic. As I say, I think that there is something like a 30% chance of the internal conflict that becomes disorderly a civil war of sorts. And I think that there's, you know, 30, 35% chance of that. I'm trying to be as accurate. And I think it's pretty easy to watch the dot plot and see where we're going and how close to the edge you are as leading indicators. So that's what I think.

Ray, always a great conversation. If you ever want to take a 99.9% pay cut, you got a future in podcasting. I just follow your lead, man. It's such a great conversation. Thank you for doing it. By the way, we've got more with Ray Dalio. He's actually been on the show several times. Here's a trailer for one of his previous appearances.

I think now it's very clear that this is an event that is a, an event that has happened before, but not during our lifetime. Of course it is. The last one that happened was in 1918, and it happened right at the end of World War I. Today, how many pandemics, wars, depressions, revolutions, and so on, have we been through? And they happen over and over again for the same reasons. Three big things that are happening now, that haven't happened in our lifetimes before, but happened in the 1930 to 45 period.

First, a long-term debt cycle that turns to the point where central banks can no longer ease monetary policy. And so we're at the end of a long-term debt cycle in which there has to be a lot of printing of money, much like in March 1933. Three, two, there are wealth and opportunity gaps and values gaps, which are very large. And those are the sort of things that produce some form of revolutionary changes. Three, there's a rising power that is comparable to the existing world power that is challenging it in the United States now with China. So when we look at the world, we have three big topics that we need to talk about, and they're very big and important to understand. The capacity of humans to adapt and change and do things is enormous.

But the likelihood of being able to work in an intelligent, cooperative way to do the right things would have to be considered a long. shot. For more with Ray Dalio, including the predictable cycles that contribute to the rise and fall of great and once great nations on the world stage, and where Ray sees these cycles heading now, and how we should prepare ourselves for the less comfortable cycles we're bound to experience in the future, check out episode 389 of the Jordan Harbinger show. Always love talking to Ray Dalio. It's important to figure out how we navigate things like a depression, because it can happen again. It probably will happen again. And just because something hasn't happened in our lifetimes, that doesn't mean that it won't happen or that it can't

happen. History shows these things happen all the time in cycles. Sometimes we just ignore those cycles. Same thing with civil wars. You know, it's a bad idea to assume it won't or can't happen here. Usually, we think things like this are impossible simply because it hasn't ever happened while we've been alive. If you like economics and you like history, I really think you'll enjoy Ray's new book, lots of economic history of major world powers here as well. I love learning about these types of things because properly dealing with what you don't know is crucial. When you bet, you're going to be wrong a lot. So we have to handle that productively. We have to plan for worst-case scenarios. We know that it's liberating to plan for the worst, right?

The end-of-the-world portfolio he goes into in the book, this is a portfolio of things that Ray thinks will outlast a lot of economic catastrophe, if there is some. Diversifying our portfolio and our investments protects us against scenarios that we cannot see. Also, and this won't be new for those who've listened to the show for a while, Ray recommends that we tag along with super smart people. And honestly, this show is my attempt to, one, con people into hanging out with me who are super smart, but then record the conversation and produce this show for you so that you're hanging out with us. See how that works? Not a bad deal, if I do say so myself. The book, again, is great at explaining how societies form and reform and the cycles that we find ourselves in. So if you like books

like sapiens about humans and human societies, this is like the macroeconomic governmental version. of that. Big thank you to Ray Dalio. Links to all things Ray Dalio will be on the website in the show notes at Jordan Harbinger.com. Please use our website links if you buy the book. It does help support the show. Transcripts are in the show notes. There's a video of the interview going up on our YouTube at Jordan Harbinger.com slash YouTube. I'm at Jordan Harbinger on both Twitter and Instagram, or just hit me on LinkedIn. I'm teaching you how to connect with great people and manage relationships using systems and tiny habits, the same ones that I use. That's our six-minute networking course and that course is free, it's over at Jordan Harbinger.com slash course.

Dig that well before you get thirsty. Most of the guests you hear on the show, subscribe and contribute to the course, so come join us. You'll be in smart company where you belong. This show is created in association with Podcast 1. My team is Jen Harbinger, Jace Sanderson, Robert Fogarty, Millio Campo, Ian Baird, Josh Ballard, and Gabriel Mizrahi. Remember, we rise by lifting others. The fee for this show is that you share it with friends when you find something useful

or interesting. If you know somebody who loves Ray Dalio or is into macroeconomics or thinks we're in a crazy cycle like we talked about today, share this episode with him. I hope you find something great in every episode of this show. And the greatest compliment you can give us is to share the show with those you care about. In the meantime, do your best to apply what you hear on the show so you can live what you listen and we'll see you next time. This episode is sponsored in part by Something You Should Know podcast. Finding a new great podcast shouldn't be this hard to let me save you some time. If you like the Jordan Harbinger show, you'll probably like something you should know with Mike Carruthers. It's one of those shows that makes you smarter in a practical, useful way.

Same curiosity vibe we go for here, just in a fast-focused format. Mike brings on top experts and asks the exact questions that you'd want to ask, and the topics are all over the place in the best way. Recently, they've covered things like why we care so much what other people think, the benefits of laughter, why sports fans get so invested, and what makes people like you or not. The through line is always the same. Smart ideas you can actually use in real life. Something you should know has been featured in Apple's shows we love, and it's got thousands of five-star reviews because it's consistently interesting. So if you want another show that scratches that I want to understand how people in the world really work itch, search for something you should know wherever you get your

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