We Study Billionaires - The Investor’s Podcast Network - RWH022: Multi-billionaire Masterclass w/ Ray Dalio

Starting point is 00:00:00 You're listening to TIP. Hi there, we have a very special episode today. Our guest is the legendary Ray Dalio, who's one of the most successful investors in history. Ray founded Bridgewater Associates in 1975 and built it into the world's biggest hedge fund with $150 billion in assets under management. Along the way, he's amassed an enormous personal fortune that Forbes estimates at more than $19 billion. dollars. Ray is an advisor to economic policy makers around the world. He's the author of five books, including the classic number one New York Times bestseller, Principles, Life and Work,

Starting point is 00:00:40 which has sold over 4 million copies. He's created three animated videos titled Principles for Success, How the Economic Machine Works, and The Changing World Order, which have been viewed more than 130 million times. Now he's published a new book titled principles, your guided journal, which is an interactive journal designed to help you create your own principles for every area of life. In today's conversation, Ray gives us an incredibly valuable masterclass on how to invest better, think better, and live better. He talks about how to overcome your biggest barriers to success, how to use his five-step process for getting what you want out of life. Why it's so important to know what phase of life you're in,

Starting point is 00:01:28 and why he attributes his own success to two habits, meditation and writing down his principles. He also talks about the historic transition at Bridgewater, where he recently handed control to a new generation of leaders and shifted to a role as chief investment officer mentor. And he shares his views on everything from asset allocation to China to Bitcoin. For me, this is a conversation that I need to listen to multiple times, because he shares his views on everything from asset allocation to China to Bitcoin. multiple times because it's so full of rich and potentially life-changing insights. I hope you find it equally valuable. Thanks so much for joining us.

Starting point is 00:02:10 You're listening to The Richer Wiser, Happier Podcast, where your host, William Green, interviews the world's greatest investors and explores how to win in markets and life. Hi, folks, I'm absolutely delighted to welcome today's guest, Ray Dalio, who's one of the most successful investors of all time. Ray, it's lovely to see you again. Thank you so much for joining us. I'm lucky to be here. I've read your new book, Principles, Your Guided Journal, which I have here twice in the last few days.

Starting point is 00:02:48 And it's really terrific. And I've found it incredibly helpful and thought-provoking. And I think anybody who reads it and really engages with it seriously is going to find that it pushes them to think much harder about how to think, how to live, and how to invest more successfully. So, first of all, thank you for writing it. It's really good. Well, it's really a guided journal to help people write their principles. Which we try to avoid, right? We'd much rather use yours and have you do the thinking for us.

Starting point is 00:03:19 I think people only learn when they're wrestling themselves with the question. So, you know, I wrote three books on different types of principles. And one of the things that really changed my life, there were a couple of things that changed my life in a big way. One of those was a meditation that gave me the equanimity, the common. the ability to connect my conscious, logical mind with my subliminal emotional mind. But also at an early age, when I would make decisions, I would write down my criteria for making decisions because everything's another one of those. These things happen over and over again. And I would

Starting point is 00:03:58 write down those principles. And that got me to think differently and in so many ways changed my life. The books that I wrote were not books that I wrote as much as principles that I had that I just put together and passed along. And from doing that, a number of people found them impactful. And it's really most important that each individual has their own principles for dealing with their own circumstances. So that's what I wanted to give people that experience. And you mentioned early in the book that you say this principled approach is the reason for whatever success, Bridgewater and I have had. And you say we can all learn to follow the approach. But you also talk slightly briefly and perfunctually about how you stumbled upon this approach 40 years ago.

Starting point is 00:04:46 And I just wanted to dig into that a little bit. Was this the disaster back in 1982 that led you to think about principles for the first time? Yes and no. what I discovered. And maybe you could explain what happens to fill in our listeners. What happened is I found that I needed to write down my criteria and test them. So I started with in the markets. And then because it's tough to wrestle all in your head with everything.

Starting point is 00:05:23 And so I found that I needed to do that. and I could test the criteria. And I found that transformative because when I could test them, I know how they would have worked. I test the logic. When I tested them, I learned in ways that I wouldn't have learned. And then I could systemize the decision making. I could write them into equations. I could have the computer help me.

Starting point is 00:05:48 I could be understood by people I was with. We could debate the criteria rather than just screaming our conclusion. at each other. And that then led me to do the same thing in when I'm managing the company. Okay, I have a company, the people, it grows, you know, from none to 1,500 people. And, you know, how do we communicate, how we do it? How do you have an idea of meritocracy? How do you do that? So, writing down my criteria and the principles and then saying, should we debate that, is that the right way? and so on was very, and then I began to realize that every dimension in my life was like that. If I have a child, if I have everything, I'm not the first to do it, and it's been going on and on.

Starting point is 00:06:42 So to think, the way I look at it is everything is another one of those, like a species. What one of those are what species is it? And how does it work and how do I handle that species? Like a doctor having many cases. So a series of things, first the markets, then running the business, then carrying it forward to life, that reflection. And so that's what I want to pass along to people. You know, the power, the enormous power that when you're thinking, just to write them

Starting point is 00:07:17 down. And I think, like, I'm happy that my grandchildren will be able to get my advice and other people can get my advice and think for themselves. And so when you think, there are so many successful people in the world, well, whatever they're successful at, they must have been successful because of how they made decisions. So I'm encouraging, right now I'm going to build an app that is going to take people's principles, the best people, most successful in all different areas. And I'm going to have them write down their principles for dealing with those things. And it could be for anything, dealing with a medical condition. It could be dealing with anything. And then you could just call it up and you could say, listen, I'm dealing with this subject. You could vote up what the best

Starting point is 00:08:07 principles are. And you could also go to, you know, what are this person's principles. Bill Gates' principles or whoever you want to have their principles and you see so that it's easy for people to think about principles and in a principled way. So that's the continuum, you know. I just found out that it works. I've created this journal. And it's a guided journal to self-discovery. As you know, there are the various stages in it that are helpful. So it started, you know, like what is my rule for the markets?

Starting point is 00:08:43 You build one by one, and then it's evolved into this. So the book is built around five exercises that I think will help people to create their own principles for work and life. And I want to go through them in some detail, particularly the first four, and then we'll come to the last one later, because it's about the phase of life that you're in and figuring out what phase of life we're in. It all really starts with the adage that you need to know yourself, that to know your nature is critical, so you can match it up with suitable paths.

Starting point is 00:09:13 And you write, I think, in the very last paragraph of the book, something that I think is, it sort of took me a back. And I started to think, God, I've actually got to internalize this. You wrote, life is largely a journey to discover one's nature and to find paths that suit one's nature, which strikes me as a really deep truth. Can you talk about this importance of the first step, really, of self-discovery, of figuring out your own nature and then finding paths that actually suit your nature? Yes. Your English accent, I just want to make it clear that that word is paths in in Pyamorgan. Yeah, sorry about that. But that's right. Find your nature, matching your nature with the paths that suit your nature.

Starting point is 00:10:00 That's the discovery process. It sounds better in an English accent, Ray. If you want me to narrate your next book, just like that. No, no, no. I'm sure they wouldn't understand me. I'd make fun of me if I was in the UK. But I, right, we are born with nature, a certain nature, and then our environments give us a certain preferences, a certain personality, things that we want. And I've seen that through running my company.

Starting point is 00:10:28 And that's also why I created this Principles U test that is available to everybody free. So it's like a half hour test, you answer questions. And everybody virtually said, ah, that describes me. And it also shows, if you put another person in it, it describes what your relationship with that person is likely to be like based on what you're like, what your preferences are. So we have these preferences. I can, you know, enumerate them. Somebody's a big picture adventurer kind of thinking.

Starting point is 00:11:04 Some person is more detailed and not adventurous and all of these things. So to know your nature and then you want to match it up with the path so that you say, ah, that's going to be a great path for me. And that's the exercise. So the first exercise is that exercise. Not only take the test that gives you, and it will describe it. It will describe you. Almost everybody who's taken the test says, wow, that's described me in detail. And then it takes you through some other questions to help to make that discovery and then you move on with the path.

Starting point is 00:11:45 You did many different personality assessment tests yourself. And obviously with people like Adam Grant, or Adam Grant, I should say, you helped to develop this test, the principles you assessment, which I'll include in the show notes for this episode. what did you figure out over the years about your own strengths and weaknesses and the way that you are wired? And then more importantly, perhaps what workarounds did you come up with to really compensate for or hedge against those weaknesses that you found? So I'm in personality test. I'm what's called a shaper, which is, and then there's other parts. I'm an adventure and so on. But a shaper is somebody who likes to visualize something and build it out. And I'm very excited about new ideas and adventure and all of that kind of thing.

Starting point is 00:12:42 So what I find is that I need people who are strong where I'm weak. And I'm weak in paying attention to a lot of details. I mean, I will go to the detail, but I need tremendous amount of leverage who are of different kinds of people. Some people are meticulous and reliable and they'll help keep me out of trouble or, you know, that kind of thing. So I guess that's kind of it in a nutshell. I wanted to find out when I started to transition, think about the transition of the control of Bridgewater, I wanted to find out what were the elements that were in common among shapers such as Elon Moss, Bill Gates, Reed Hastings, who didn't on Netflix. Muhammad Yunus, who it was the, we received the Nobel Peace, the Nobel Prize, the Nobel prize for inventing so many different things.

Starting point is 00:13:43 Microfinites. So many different leaders. And I gave them the personality test in 0.8% of them, they were all the same. And they accounted for 0.8% of the population. So it's, it's, it's that element. you know, you can see that preference. And so for me, it was that I have this personality and I need people who are strong. And that means like meticulous, patient, reliable.

Starting point is 00:14:16 Of course, in people, there are in the people's nature, there are values, abilities, and skills. and they're different things. So you have to know what they are and match them up. You mentioned this whole issue of values and motivations in some depths, the values that drive us, I guess. And you listed a dozen or so of them in the book. And they include to be liked slash loved, to be ethically good, to create something new, to help others, to learn and evolve, to impact the world, to live a peaceful life, savoring the simple pleasures it has to offer, to attain financial success, to understand the world, to have a life filled with fun and adventure, to have good friends, and to have a thriving family. And I was wondering when you look at that list,

Starting point is 00:15:05 A, what drives you most, and B, how has that changed with age now that you're 73? Yeah. So that exercise lists all those and some more, I think. And then what you're supposed to do is you pick the three most important. and then you pick the three least important. And that helps you to make that focus. For me, like I say, for me, it's meaningful work and meaningful relationships. And I am a shaper, meaning I like to visualize things and build them out. And so those are, I like adventure. I like ambiguity.

Starting point is 00:15:48 I like differences. I like going to far away on that unusual places with far away unusual places. I've always had those preferences. That's always been in me. And then by my nature, I just happen to find a way to do that. So let's go to the second exercise, which is really about how you go from the case at hand, the situation you're dealing with, to actually figuring out your best principles for dealing with this type of situation in case it recurs. So you write at one point that your goal in creating

Starting point is 00:16:25 the journal is to help you convert your experiences into reflections about how reality works and principles for dealing with your realities, well, to get you what you want. So let's go back, say, to that example from 1982, where I think there was a debt crisis where Mexico defaults on its debt. We have the worst debt crisis since the Great Depression. And you, bet, I think, that the stock market and the economy would be battered by this, and instead, it actually strengthened. And it was sufficiently disastrous that you had to fire almost everyone at Bridgewater and ended up borrowing four grand from your father. When you think of that process in that case, how you went through this process of reflection on what went wrong,

Starting point is 00:17:10 what happened, what flaws of yours this exposed, or what misperceptions of yours, and how you, how you develop principles based on that. How would that be a good microcosm of what we should do when we screw up? Oh, that's, it was so good. It was such a painful experience. I think, and then I really learned pain plus reflection equals progress. That's one of the principles. I learned that every time I have an encounter, that it's like a puzzle,

Starting point is 00:17:45 that if I can solve the puzzle, you know, what should I do differently or how should I deal with it, I would get a gem and the gem would be a new principle and a learning that would improve my life. And so in that particular case, I learned to fear and deal well with the possibility of being wrong. It gave me a humility I needed to balance with my audacity. In other words, it made me think, how do I know I'm right? And then through that process to try to find out of curiosity, the smartest people I could who disagreed with me and to study their reasoning. And it made me learn really how to diversify my bets so that I could, by diversifying my bets, I could radically reduce my risk without reducing my returns. And it let me also reflect on life.

Starting point is 00:18:45 Like I was at a juncture. I was broke. And I'm, you know, it was, do I go get a job? Do I put on a jacket and tie and take the, you know, the railroad into the city and work at Wall Street or something? Or do I not? And it was like I was sitting on one side of a jungle. And I could, I could have this safe life by sitting on the one side of the jungle and not.

Starting point is 00:19:12 going into the jungle, but I knew that if I wanted to have a great life, I had to cross this jungle of all these threats in the jungle and survive. And then I sort of said, okay, what am I going to do? Am I going to live this safe life? And then it won't be as terrific, or am I going to go into the jungle? And how would I go into the jungle? And then I realized, I learned, okay, let me go into the jungle with people who would be on the mission with me and could see things I couldn't see. And we would protect each other as we went into this jungle. And I found out from that experience that I didn't want to get to the other side of the jungle, to the success and sit on the success because I found being in the jungle with these people

Starting point is 00:19:57 or being on the mission with those people, even through the ups and downs and the threats, was rewarding. That all came from reflections of that terrible mess. mistake, that terrible mistake. We learn a lot from pain. You know, life, I think is, it's almost a trick that what happens is the second order consequences are so often the opposite of the first order consequences. In other words, the things that are really good for us don't feel good. And the things that are bad for us feel good. You know, okay, you eat, you know, the tasty stuff is the stuff that is not probably good for you. The exercise that might be painful is the

Starting point is 00:20:43 thing that you don't want to do and you want to do the painful. So quite often pain or that is the opposite. It's a trick. Can you do the things that are really good for you? And so those kinds of reflections, I think, were very powerful. And our experience really brought a lot of those. And from those lessons that I learned, that was the bottom. In other words, from that point, while there have been some up as and downs, it was almost totally up, almost all the way. There have been, of course, twists and turns and bumps and personal things, of course, terrible personal things that have happened. I lost to the sun. I, you know, all of those things. But to reflect on reality, okay, what does it teach you about reality and whatever? And how do you

Starting point is 00:21:32 approach that. All of those reflections, I've learned a lot from those reflections. And so it's that, you know, at that instance, but, you know, many since. It seems also that you almost rewired yourself over the years to lean into pain so that your initial response to pain wasn't, oh my God, I got to run from this. But, oh, this is painful. What's this a cue to tell me? Yes. It tells you about reality. Like, I think a lot of people get upset if reality is not what they want it to be. That's so stupid.

Starting point is 00:22:14 I mean, reality is reality. So how does it work and how do you interact with it to get what you want rather than sit there in pain, you know? And you can get past it. The pain when you approach it this way isn't nearly as painful. So what is the pain? Most of the pain goes away pretty quickly or diminishes very quickly. The worst things, you know, they can ache or something, but, you know, they'll probably. And so what do you do? Because it's like the serenity prayer. God give me the serenity to accept that which I can't control and give me the power to control that, which I can and wisdom to tell the difference or said differently.

Starting point is 00:22:58 do the best you can and then accept life because that's the way life is. And so anyway, the reflections like that have had such an impact and I want to help people have that. That's why I did the journal. Yeah. And it's also, I think, your ability to see it as a game to have this kind of 30,000 feet view of yourself, to watch yourself playing this game. And I remember a great investor in Canada, Francis Chu, once.

Starting point is 00:23:28 telling me that he would think of himself in the third person when he was investing. It's such an interesting trick. Can you talk about that? Yes, yes. What it is is like going above yourself and looking down at yourself in circumstances with others, with that objectivity, so that you can navigate yourself and others, like, who is the best team I could put together. It isn't always me as being the star. That's not going to get you where you want. It's not around me. It's around, okay, you know, who is where this best idea come from,

Starting point is 00:24:08 you know. And that's what it's like, going above it. How does the world work? How does it operate? I'm looking down at me in that world and others in the world. And what are the interactions like? Do you think you would just wire this way that you were slightly unemotional and objective? Or was this actually just a way you trained yourself to think? Well, first of all, I want to be clear, I'm very emotional. I think the most important things in life are things like love, you know, the emotions, the inspiration, excitement, okay, what is it about? I mean, I think that those are important.

Starting point is 00:24:51 what I do, but I'll answer your question, but what I do is when I, I just navigate it. And no, I think that it was probably brought around by some, to some extent, I was born with a, with pluses and minuses. My minuses, I would say is I have a very poor rope memory. If you would ask me about like to remember anything that has no reason for being what it is, names, phone numbers, things, like that bad. And then that has led me to probably, I have a very good conceptual memory. I could describe almost every year of what the markets did and what the economy did and so on for because I experienced it and has a reason for being that way. So I think to some extent my weakness helped me to develop a strength of trying to figure things out. I think that then

Starting point is 00:25:45 being in the markets since I was 12 is a dealing with reality. You know, it's just, you know, what are you going to do? Okay, no, I didn't like that. I'm blaming the stock market for going down. I mean, there's somebody to blame or whatever it is. So, you know, I think the interactions, I started at 12 in the markets, the interactions and then the feedback, I think, by the way, life is more like a video game than it is like school. In other words, you're going out there, you encounter these things, you learn, and so on,

Starting point is 00:26:20 rather than you sit there and remember what you're taught. So I had those experiences. And then I think it's because I also learned to meditate at a fairly early age. I think I was, you know, I don't know, about 18 or 9, something like 18 or 19. And I learned to meditate. And that had that. So I think I've encountered my realities from an early age. And I learn really it's up to me to deal with.

Starting point is 00:26:50 reality. There's no excuses. And then the meditation, I think, has helped me go above it. And then the writing down these principles is helping. So the meditation helped you to see yourself more objectively, as if you were kind of in a calm pond and you can see the ripples. What made it so helpful to you as part of this process of detaching from the experience so you could see reality more clearly? The meditation process gives you. an equanimity, a calm centeredness so that when you look at it, it's a little bit like, you know, in the ninja movies, there's a fight, they're having a fight and everything's going very fast, but then they put it in slow motion because for the ninja player, it just seems

Starting point is 00:27:40 in slow motion that this is coming at you and they calmly deal with it. It's a little bit like that. It does that because what you do is the transcendence. I do transcendence. I do transcendental. meditation goes from your conscious mind into your subconscious mind. And so your subconscious mind is really almost making all these decisions for you. And it's emotional, but you're not conscious. They don't give you the messages. Freud discovered that you're trying to figure out, you know, what is your unconscious mind thing. And so because you go down into that and you're there and you connect it and you have that equanimity, it helps to give that kind of ninja-like equanimity. That's how it works.

Starting point is 00:28:26 That's how I've experienced it. I'm pretty obsessed with meditation, though I don't do transcendental meditation. I do this kind of, I guess I follow a Tibetan Buddhist teacher who I like who had on the podcast. It's remarkable if people want to check that out. But I wanted to get a sense for listeners who presumably many of our, listeners are pretty busy, pretty intense people, they're driven, they want to make money, they want to be more successful, they have in many cases families that they're juggling. How have you found it possible for the people you work with at Bridgewater and for yourself?

Starting point is 00:29:03 How has it been possible for that sort of person to weave meditation into their life so that they give themselves permission to sit quietly? Because it's so antithetical in a way to the whole business. of getting and chasing and trying to achieve something? Well, I tell people, like, if you have a really busy day, you need to meditate more, because what happens is it's not really that much time, right? I mean, and it puts you in that position that everything is easier and better, so you make better decisions you can do more.

Starting point is 00:29:42 And it also doesn't produce stress. It'll relieve stress. So it's just so much more effective to do that. And everybody who has done it for an adequate amount of time so that they get into it, gets it. What I mean is, as I explain to people, when you sit down and you meditate, okay, make it 10 minutes. Do it 10 minutes. rather than, you know, 20 minutes, okay, but do it 10 minutes. What they find in that experience is in the early stages,

Starting point is 00:30:22 their thoughts are reading through their mind. Can I get up and go and all of that? And that must give you the message that you need to meditate. You need to meditate. That exemplifies it. Is it logical that you cannot give yourself the 10 or 20 minutes to do that? And once you start to do that and you realize, do, then you encounter this, you know, pleasurable experience.

Starting point is 00:30:47 It's almost while you're a meditator. So you understand that, ah, it's pleasurable and so on. And you start to see things very differently. It's almost like there's this world of everything's out there. Oh, my God, it's such a world of everything's. And then when you go into this other world, it's like going into the void and there's nothing. but that is such an enormous world. It's almost like it's as enormous as the world of everythings.

Starting point is 00:31:20 And it's a wonderful place to, you know, to be. So I try to explain to people. And invariably, they get it once they can get past the impatience. And you know, probably. I know that I go in a day and I could tell the difference of how I feel. so I will say, oh, I need to go meditate. And I could just take a little bit of time and I meditate and I come out of it as almost a different person.

Starting point is 00:31:51 And do you do it twice a day or once a day, most days? Most days I'll do it twice a day. But I don't feel compelled like I have to stick to some schedule. I find my mood and I usually will do it a little bit before breakfast and a little bit before dinner, but I can do it any time because it just, it just, you know, feels good and it helps me. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people

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Starting point is 00:36:35 five-step process to getting what you want out of life. And I'll just run very quickly through these five steps before I ask you my question. So the first one is, what's your goal? So it's setting clear goals. The second is asking, what are the problems standing in the way of your goal? So identifying and not tolerating these problems that stand in your way. And the third one is, what's the diagnosis of these problems? So you're stepping back and getting at the root causes of the problems. And then the fourth is saying, what's your design for getting around these problems? So designing changes in your approach. And then the fifth one is actually getting it done. What are you going to do to get it done? And you mention elsewhere in the book, you write,

Starting point is 00:37:19 everyone has at least one big thing that stands in the way of their success. Find yours and deal with it. So I was reading this part of the book and I'm looking at this five step process for getting what you want. And there's this sort of deeply unsettling moment as I'm looking at my own life and I'm thinking, God, you know, I'm so disorganized and scattered and thin, stretched and distractible and lacking in structures and systems and processes. And I'm always losing my books and my files are everywhere. I sort of feel ashamed mentioning it. But if you're looking at your flaws like that, whether it's that or, you know, your health or eating or whatever, How would you apply your five-step process?

Starting point is 00:38:04 Wow, that's so great because you found your one big thing. Unless I'm deluding myself and there are other things that are worse, but I think it's pretty bad. I think and you have to feel great about finding your one big thing. Because your one big thing is like if you find your one big thing and you deal with it well, it'll radically improve your life. Then you can go on to your second big thing. But okay, that's it. But let's, yeah, let me take those, those first.

Starting point is 00:38:36 Your goals, like I say, you can have practically anything you want in life, but you can't have everything you want in life. So that means you have to prioritize. What are the things you're going after? That has to do with the earlier part of, you know, know what you're going after that matches your nature to the path. Okay, specify, be clear. Do you know that is after that? or maybe you're discovering it, but make sure you're discovering it. Then when you get there, you will encounter your obstacles and problems.

Starting point is 00:39:07 They will surface. It's not going to be, oh, I get it. I get it. I get that. No, it's not that. So you'll encounter those. Okay. So pause.

Starting point is 00:39:18 Do these steps separately. Don't do them at the same time and do them in that order. So you pause and you say, okay, that's a problem. it's an obstacle. I watch the people continuing to come to the same obstacle and they don't get past it. Like Einstein said, you know, insanity is doing the same thing over and over again and expecting a different result. So anyway, so you get a problem. Then you diagnose the problem to get at your root cause and you can help, you can use the feedback of others.

Starting point is 00:39:50 You don't have to just be in your head. This is the big thing, you know. And that may be your weakness or maybe your circumstances or what. whatever it is, what is the exact root cause for that thing that's standing in your particular way? In your case, you sound like you've discovered your one big thing because you'll feel it. You'll stumble over it all the time. Okay, it's that. Okay.

Starting point is 00:40:15 Now, if I can change that, I'm going to have a radical improvement. So what is my design? Okay. And like one of the best easy designs is work with somebody who's strong where you're weak and help them because you're strong where they're weak. Right. So if you worked with somebody who, let's say you're scattered and you're inclined to do all of that and you work with somebody who's got a personality and you appreciate their work either to help maybe they do some of those things for you that need to be done or maybe they help keep you. you on track or something, then you will have a design that will work. And then if you take that design, so many people form designs, but they don't follow through and don't do it. So step number

Starting point is 00:41:07 five is do it. Okay. Do it. And then you do this on an ongoing basis. That's why I have these loops. You know, all the books and everything have these loops because that's what evolution is like. You learn something and then it starts to fail and you start to fail and then you reflect and then you learn something and you do it differently and then you go up to a new higher level. And so that's what it's like. There's also something really important there in your mindset, I think. And you mentioned in the book that you need to learn to love your mistakes. And even as I was telling you about my hopeless or not hopeless but hapless,

Starting point is 00:41:51 tendencies. There's a pot of me. I start to flush. I start to feel embarrassed. It's like it's a little bit shameful. And I can see that's that's that's that's not a helpful attitude. You know it's our society raises children and so on so much with that way like they go to school and they're they're they're taught to be shameful about their mistakes and the star is the person who gets all of the things right and so what. And that's a one of the reasons that a lot of times children in schools are not the same who excel or not the same people who excel in life. And so when you look at that, it's the opposite. Like if you know and you're confident, then you know you can't learn. I mean, how do you

Starting point is 00:42:41 improve when you have to believe that you're perfect all the time? It just doesn't make sense. Yeah, it's very hard. And there are things that I won't do because I'm like, I'm just not going to be that good at that. And so it's a very destructive attitude. Yeah. And the thing that you can realize is that you can almost do anything if you can do it with somebody who's also good at it. So there are things that you're naturally going to be good at and not. Perhaps, for example, you may be very creative, bod, very scattered.

Starting point is 00:43:17 Okay. Yeah, which is very much how writers, I think, probably tend to be. Okay, so there you are. Okay. And that's why I'm saying, then you work with somebody who is, you know, very not scattered. And they can use your, so you get the best. You can get your creativity and you can get the other. And so many people make the mistake of thinking that they have to be good at stuff. Oh, I have to learn the thing that I don't know how to do well. No, no, no, you don't really need to do that. You just need to find somebody. It's going to. do it well with you. You also have said in the past something really helpful for people like me who are fairly scattered and I have about five different jobs. And so it's not just that I am scattered. It's that my life is actually complicated.

Starting point is 00:44:07 There are a lot of demands on me. And I remember Bob Prince, the co-chief CIA at Bridgewater, saying, I can't remember how many times Ray said maturity is the ability to reject good alternatives. And that seems to me a really important idea as well, this idea of rejecting good alternatives so that you can simplify your life and decide, well, I can't do everything well. Can you talk a bit about that? It seems to me really a valuable insight. Yeah, yeah. I mean, you can go nowhere trying to go, you know, everywhere. You have to prioritize. And you can do a number of things, but you have to get to really have. do you do a number of things. And really the only way I think that you could do a number of things

Starting point is 00:44:54 is also through the leverage of other people. But in any case, you have to be able to reject good alternatives. I find every day fabulous alternatives of things I could do, maybe more so in my life now than ever. And you have to reject those. But everybody's thinking, I have to pursue all those. That's not right. In exercise four, you write about two of the greatest barriers to our success, which are our ego and our blind spots. And part of the problem, I guess, is that our ego makes it very difficult to recognize our weaknesses and learn from our mistakes. Right. Like if I want to bury my haplessness and, you know, and, and abilities from sight, it's going to be really hard for me to learn to deal with them and overcome them. Can you talk about how you go about finding these compensating mechanisms for your own blind spots?

Starting point is 00:45:54 Because obviously, one of the key things that you've done at Bridgewater over the years is to learn to triangulate your views with believable people who are happy to disagree with you. And so this seems to be really one of the most central mechanisms for success in your own life. So there are ego barriers. And ego barrier is the kind of thing like I have the right answers. And it really strikes me as incredibly stupid. There's so many people that will walk it around with opinions and acting on wrong opinions. Like, how do you know you're right? And if you're disagreeing with somebody, probably one of you is wrong.

Starting point is 00:46:38 And how do you know you're not the wrong person? So you have to have, in a sense, it's just. logical that you would want to take in the best and find out what's true and what's the right path. So the ego barrier stands in the way of that. And the blind spot barrier, what I mean by the blind spot is people will literally see things differently. You know, it's, you can take a person in the situation and ask them to describe it and they

Starting point is 00:47:09 will describe it differently. Some people see the big picture. Some people are sensitive to this thing and that. so they're blind. It's not just a matter of ego. And those things will be the case. So if you know that, and then you're curious, you then want to find the person who's going to be able or people who are going to be able to give you the answer. So what I've found is this triangulation. In other words, find kind of the three smartest people on a particular subject to maybe they're successful.

Starting point is 00:47:47 And then almost asked them, like doctors, just imagine you have a disease and you have a doctor, you want the three smartest people, have them debate the merits of these things. If they all line up and they believe it's in that direction, it makes sense, it's probably a good decision. And whatever the disagreements are of these smart people bubbles up the issues that need to be examined more. And then through that believability triangulation, I found I could go into almost any area that I don't really know much about, that I can find myself in that. Like I have a passion for ocean exploration for a certain reason.

Starting point is 00:48:25 I don't know much about it. And it can get complicated. But I can do that or medical or something. So that idea of triangulation among that thoughtful disagreement where there's curiosity and there's learning, it's a fabulous way. to learn and make decisions. Can we use a specific investment example where, say, think of something that all of us are wrestling with, that you're very much invested in financially and intellectually, like the conundrum of China, right, where Bridgewater obviously has billions of dollars invested in China,

Starting point is 00:49:00 has funds there as well. And it's really, it's a puzzle for all of us, right? We're these foreigners looking there, trying to figure out this culture that's totally different from our own. And how do you go about this process of triangulation when you're trying in a very objective way to cut through all the noise where everyone's got an opinion on China and most of their opinions are wrong or ill-informed? How are you cutting through that noise and trying to figure out, for example, the big question of, is this a place that's becoming less open to free market principles or do they just have an idiosyncratic or unique approach to free markets? I don't know if I'm articulating that well, but how do you...

Starting point is 00:49:44 No, you're articulating well, and I can answer your question. First of all, I should say that I start with a real humility in operating and saying, I don't know if I'm wrong or not. And I don't like to go into areas that I'm no expert in, except if I, and in case of China, I have, it's a particular case. I've been going there since 1984. I have contact with, you know, the highest ranking, most immersed people, Chinese and non-Chinese. So, and then I triangulate. You know, I speak with, oh, you know, I won't name them all, but, you know, this one or that, one of that, and they are immersed in it and I get the triangulation. And that leads me to whatever my conclusions are. And then I don't invest more than an amount of money that I can be comfortable getting whacked with. So I diversify. I become highly informed through the triangulation, through the expertise that I've

Starting point is 00:51:02 developed. If it was a place that I didn't develop much expertise in, it would be that I would be driven to have a certain amount of understanding. And I would also know, you know, who are the really, not only smart, but straightforward, honest people, people of good character who will not BS me and so on. It'll be that curiosity of the debate between them that will help guide me. And then I'll tread gently in that direction by putting not too much, you know, not too much and, you know, not too little. So it goes back to this 15, I want 15 good uncorrelated investments, return streams. So that's how I would do it and how to how I do it. So you're setting yourself up.

Starting point is 00:51:52 So you're aware that you could be wrong and you're making sure. sure that your errors won't be fatal if you're wrong. That's right. Right. And have the best insight because in China, it's because I know it very, very well with the right people, right? I mean, that's that's key. There's so many people who are not as fortunate as I am to have those exposures and then, but then they still have to do theirs and then they have to do the triangulations. So it's that. But even though all of that's the case, there are the great uncertainties. What if we go to a type of economic war or a type of, or worse, a military war or all of

Starting point is 00:52:39 these things, in every place, in every location, in every investment, in almost every decision, practically, there's a probability of being wrong and, you know, and painfully wrong. And so like I say, if I have 15 good uncorrelated bets, I will reduce my risk by 80% without reducing my return. And that means I improve my return to risk ratio by a factor of five. So, yes, it's like a casino, you know, on the casinos playing, and they have so many tables and so on many things going on. It's not any one of them on any one night. It's that all that diversification and that, you know, consistency. It's obviously much harder for a regular investor to do this, right? You've, I think, had about

Starting point is 00:53:34 1,300 employees at Bridgewater, and these are very, very smart people figuring out how to how to diversify. If you're a regular investor and you're looking at this very risky world, right, where, you know, we've got inflation and COVID and Warren, you Ukraine and debt crises and rising nationalism and all of these forces that are pretty worrying. How do you think in a practical way about asset allocation so that you take the spirit of what you figured out without necessarily the skill in execution? But so you can at least get some ability to create a diversified, prudently diversified portfolio that's going to help you to get through the next 10, 15, 20 years, more or less, whatever happens. So it's the same thing just more so.

Starting point is 00:54:31 The average investor, as you point out, is not going to be successful. Like you say, you know, Richard has about 1,300 employees. We spent hundreds of millions of dollars on research, you know, of various types of things. we try to get an edge. And then we're still looking for that power of the diversification. The markets are a zero-sum game. What I mean is it's like a poker. Somebody's going to take money away from somebody else in terms of that zero-sum.

Starting point is 00:55:06 And it's more difficult to compete in than the Olympics. It's more rewarding. More people change it. You wouldn't say, I'm going to go compete in the Olympics. It's very difficult to compete in the markets. So I would say the humility should be very high. That means the diversification also should be very high. And then, you know, we could spend a lot of time on what type of diversification you need.

Starting point is 00:55:29 It's particularly almost easy to do in the markets because the markets almost make all the bets more equal than you would imagine because it's like betting on a horse race. And what happens is they're faster horses and they're slower horses. but the odds are adjusted for that. So you can be equally likely to bet on the least likely horse to win, and it'll have the same expected value as betting on the most likely horse because of the way their handicap. And the same thing exists in the markets. It's almost like they're almost the markets will make them more equal in terms of that edge.

Starting point is 00:56:13 So what it means is that that diversification is, Now, what do you diversify? You have to understand a little bit about what makes markets move together and not. I don't think you want me to digress into that, but you can see. You can just even look at how things have changed over time. But it's something that we're not going to be able to cover, you know, here now because it's just too lengthy. But yes, and you could go back and you could see, ask whoever you're asking about the investments, go back and take them to like the year 2000, each one of them. I go back to 1900, but maybe it's not so easy for you to go back to 1900. But if you take that investment and you see how the one did, and then you see how they did

Starting point is 00:57:05 in relationship to the other, and you go through 2008, or you go through this period recently, you can see how they performed and how they performed in relationship to each other and how the diversification would have worked. So those are the things that should be done, I think. So broadly speaking, you'd want, so let's say a regular investor has, you know, a Vanguard index fund that has, you know, the total stock market or the S&P 500 or something, and they have an international index fund or something like that. And then you'd also want to have, what, some inflation index bonds, some cash, like gold. Right.

Starting point is 00:57:46 And you, they're all like return streams, I call them. You know, you plot them and they go up like this and so on. And you do that. So now you look at the one over a period of time, knowing that the future might be different from the other, but looking at how they move in relationship to each other. And then you say, okay, if I put this one with this one and so on and they match it. Now, I could explain more about financial engineering because there are some twists there. Like, how do you risk balance them?

Starting point is 00:58:15 You know, some have more risk than others. By raw risk, I mean volatility. For example, the stock market is more than twice as volatile as the bond market, depending on what part of the bond market, what stock, but roughly twice volatility. So if you put 50% of your money in each, it'll still be dominated by the stocks. So how you find the right bonds, you know, longer duration bonds will have greater volatility or whatever, You put those things together in a way where you see how they balance each other so that they provide that diversification. And obviously a lot of people got carried away over the last few years and put too much money in the US because it had gone up for so long and it had been great.

Starting point is 00:59:00 Put too much money in cryptocurrencies because it seemed like the casino where you could only win and too much money in high tech stocks that people said you could more or less pay any price for even if they weren't profitable. When you look at that sort of behavior and you think of this principled approach that you take to investing, is there a principle that we should bear in mind that would protect us from that sort of hubris, overconfidence, over concentration, trend following, dangerous herd chasing? Yeah, first of all, I want to say, I can't tell you how many times in my 50 years the exact same thing. happen. So you kind of know you smell them, you know, they have that smell to them. But I would say the best thing you could do is go back in history and see the other cases, almost imagine. Everything's another one of those. You know, so I go back to that case and I think I was in, you know,

Starting point is 01:00:04 there was the nifty 50. There was the dot-com bubble. There was the real estate bubble. You know, there's so many of them. And I have criteria to identify them. But that's me as a professional doing that kind of research to have criteria. But the markets reflect the opinions. So for that reason, when everybody agrees on something, they're probably expensive. And when everything is hated and you think it's the worst, everybody, then it's probably cheap.

Starting point is 01:00:44 And people confuse the fact that, let's say, a good company or is not a better investment than a bad company, any more than the horse and the horse race, you know, that the worst performing horse has odds that are much higher if he comes in. And so because of that, you have to know what to look for in those things. But I don't think that that kind of, I think you have to be careful about that and diversify well, you know, and beware of fads. But if you diversify well, you know, it'll be easier and better because it's very difficult also to distinguish a fad from a new reality. Is crypto a new reality or is it a fad? Is this technology thing, you know, a new reality or a fad, you know, those can be difficult to decide.

Starting point is 01:01:46 So, you know, go back to the diversification. And have you updated your view on crypto now that many of these cryptos have been crushed? I think I'd rather not get, I can get into it, but we want to talk about the life cycle and the other parts. Yeah. The book, I think, because I want to help people with their principles. principles. I mean, yeah, I mean, but everybody's interested in crypto and, you know, but I don't know that we should. Do you think we should digress into it? Can you give us, I think people will be so curious. I think it's worth giving a sort of two or three sentence

Starting point is 01:02:20 synopsis of a top, you know, a brief view of whether you think there's anything there or whether you've kind of come to think, no, I don't think that's much there at all. Well, there's a technology, the blockchain technology, which I think is an excellent technology. And I think it's very important to distinguish it from a digital currency. And if we're dealing with digital currencies, let's use Bitcoin as an example. There are all sorts of things. There's stable coin and blah, blah, blah, all sorts of things. but by and large, let's talk about Bitcoin.

Starting point is 01:03:04 Now, first of all, I believe we're in an environment in which we're creating a lot of debt and money. And money as we know it and financial assets such as debt assets, which is just a commitment to receive a lot of money, is I think we're an environment that's not going to be a good environment and people will want to look for alternative storeholds of wealth than those in turn in money. Having said that, like all the digital currencies basically don't replicate anything. You know, they move up and down for all. It's not like it's tied to it's an inflation hedge or it's this and that. It's mostly. So it's not an effective storehold of wealth.

Starting point is 01:03:50 You almost have nothing to hang your hat on. And it's tiny. Bitcoin right now probably has a total value. of maybe a quarter of what Microsoft stock is and so on. So it becomes a preoccupation by people that is disproportionate with its true reality. I mean, why study that? There's so many things, so many different investments that you can study. And it's as a storehold of wealth, there's not privacy to it.

Starting point is 01:04:23 There may be privacy from the public, but, you know, it's very easy. It's everybody's tracking what you're doing on it and so on. So it's not private. And as a medium of exchange, it's not very effective. It's not like you can go there and easily buy stuff with it. You can buy some stuff with it, but not much. So it wouldn't be my favorite storehold of wealth. I mean, you know, I own a tiny bit of it just because of the element of, you know, who knows?

Starting point is 01:04:53 And it can be there. But I'm not. And also to experience what it's like. But I do think that in time there will be better digital currencies. Like I believe that you can create a digital currency that will give you the equivalent of the inflation rate. And that's buying power. Because I believe that most currencies are most dead instruments, which are, as I say,

Starting point is 01:05:23 there are a promise to receive currency over the duration of them. I think that they will have poor returns relative to inflation where I think you could get something that'll be a good digital currency, but they don't have it now. And so many things have sort of come and gone as fads, you know, NFTs and, you know, this coin and that coin and so on. So anyway, that's what I think about it. Thanks. No, that's very helpful. One of the things that obviously you've been extraordinarily successful at over the decades has been looking at the economy as another machine and looking at how the different forces interact with each other. And as you've mentioned in the past, there are five really key forces, which include

Starting point is 01:06:12 money and credit and internal conflict and external conflict and acts of nature and man's inventiveness. It seems like the most key in many ways at the moment is this whole issue of money and credit and creating debt and liquidity. Can you talk a little bit about how that understanding of this force of money and credit, which people like me who don't have any kind of economic training really struggle to understand, how that enables you to look, say, at the situation in the US and say, okay, this is a difficult environment for investors. So this is going to be challenging in terms of inflation or in terms of Fed policy. Can you just put that historical knowledge, an economic knowledge of how the machine works in some context.

Starting point is 01:06:58 So we're better at looking at the situation and saying, oh, this is the type of weather in which I'm operating. And I need to carry an umbrella or a Macintosh or boots or, you know, build a bomb shelter or what. I don't know if I'm explaining that properly, but it's difficult for the rest of us to understand to gauge how serious the situation is. Obviously, in a question and my answer to the question, I can't give you all of the complete explanation of how the machine works.

Starting point is 01:07:30 I did a video how the economic machine works in an animated video. I think 140 million people watched it, or you can look that, but that's about 30 minutes. But I'll give then some examples. And, okay, there's a cycle. There's a short term money, credit, debt, market, economic cycle. we call it the business cycles also. And what happens is, you know, you go from a recession, growth is slow, inflation is low. Central banks produce a lot of money and credit.

Starting point is 01:08:06 It's stimulative. It's like creates that. Credit turns into debt. That is something that they have to be paid back. Credit is something that's stimulative. It gives buying power. So it starts to create a cycle. That goes up.

Starting point is 01:08:19 It leads to creating bubbles. and reaching a point where there's inflation and so on. And through this process, the three main players or three main types of players are those who I'll call a borrower debtors. Is it economic to borrow and be in debt or lender creditors? Is it economic to be a lender creditor? and of course there needs to be the same amount of those because one man's lending has to be an immense borrowing. But you can see how those incentives are changed by the system because they'll put in at the one part of the system to get it going and so on.

Starting point is 01:09:05 Real low, real interest rates, lots of liquidity and so on. And during such times it pays to be a borrower, you know, debtor. And then in the cycles, then it goes to the opposite that it pays to be a creditor. So, for example, now you have a situation where short-term interest rates are relatively high in relationship to other things. They went from giving money away for negative real interest rates to that. They changed the incentives. The action of that move from the one to the other in changing interest rates changes the value of asset classes, because every asset is a lump sum payment for future cash flow.

Starting point is 01:09:51 And so the present value of that with the interest rate has an effect. And there are such things so that you can watch those. They've repeated over and over again for the same reasons. So like this cycle looks like just another one of those cycles, essentially. We know where we are in the cycle, roughly. You know, you're at the point where you're approaching the late in the tightening, but you haven't yet achieved that particular goal so you know what they're going to do, blah, blah, blah, blah, blah.

Starting point is 01:10:19 You know, there's a lot of those things for each investment. So you have to know those mechanics and you go through it. But it's like watching, you know, everything happening over and over again. What I do to try to help people now, I'm at a phase in my life, I hope we'll talk about the life cycle. Yeah. But I'm at a phase in my life where my goal isn't anymore to be. more successful, I've gotten everything kind of I wanted that way. My goal is to pass along the

Starting point is 01:10:49 things that I've learned to help other people be successful. So what I've done is to put some of my thoughts on social media, but particularly LinkedIn, gives them more complete pictures of those. So if people want to follow those things, and I break them down also in videos, the videos that I put out or make it pretty clear, you know, how these things work, but I can't really do a lot in answering the question in a couple of minutes. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates

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Starting point is 01:14:41 Yeah, no, that's very helpful. And so, I mean, in purely practical terms, the things that you've been saying about the difficulties facing the U.S. and this kind of timeless universal money and debt cycle, the mechanics that you've seen again and again, the bottom line is it should make investors pretty cautious, right? it should make people think. Yeah, but again, I don't want them to tactically make the decisions because things become cheaper at the same time.

Starting point is 01:15:08 So cautious means just constantly diversify well. But, you know, the things that one of the things that I've learned is that many things that have surprised me, surprised me because they never happened in my lifetime before, but they happened many times in history. It's just like a pandemic or a big declaration. crisis. What happened in 2008 was the same thing that happened, you know, in 1933. And so the three things that are happening now that prompted me to do the research, which is in the book, Principles for dealing with the Changing World Order, were the amount of debt and money creation and its effect on

Starting point is 01:15:52 currencies, an effect on the world and the value of money and all of that. So I needed to study that going back a long time. The second is the amount of internal conflict. We have the largest wealth and values differences. This is all measured. It shows up in the book or the videos. You can see the gaps. Largest wealth and values and then political differences that is causing these conflicts. So the worst internal conflicts, politically, socially, and all of those. And then number three, is this is the first time in my lifetime, most of our lifetimes, therefore, that we have a great power conflict where, you know, the world order that we started was in 1945, just like they always do, there's a war, their winners of the war, somebody comes out of it rich, somebody comes out of it

Starting point is 01:16:48 poor, and then we set the American world order in 1945. The United States accounted for half of the world's GDP. It had 80% of the world's money. The money was gold at the time. It had a monopoly on military power. And so then you see that change. And so we're now seeing a type of conflict that we never saw before. Soviet Union was never an economic power, was just a military power with nuclear weapons. So it was never. And so we're seeing that great power conflict. Those three things led me to want to study history and to watch the rises and declines. Because I knew the same things happened basically in the 1930 to 45 period, but I wanted to go back. So I went back 500 years and I studied and see the same things happen over again.

Starting point is 01:17:39 So that would be my template. You know, the quick and easy way to do it is the free video online that describes that. Yeah, and we had a great discussion of it last year. So I'll include in our show notes a link to the last podcast where we talked about that book, which is it's a fantastically helpful book. But I wanted to turn while I have you to the last section of this book, the journal, which is obviously about the arc of life, the three phases of life as you see them. Can you talk about why it's important for us to understand these phases and also to know where we are in them? most people's lives are there's a life art and most people's lives transpire in like ways that you could see over and over again you know and so I break it down it seems to me like there

Starting point is 01:18:30 there are three big phases in life the first phase is you're dependent on others and you're learning of usually your parents then you go out on your own others be. become dependent on you and you're working. You're trying to be successful. And almost every year, practically, not every year, but in neighborhoods of years, you're this age, you get married at this age, or you get your life partner, maybe at that age. This age, you have kids. When you have kids, your parents are now entering their third phase. And so there are all those things that we all know. So I put in that life arc, you know, a checklist. What happens? happens in the first, you know, when do you first have a romance? When do you first? And you can see the

Starting point is 01:19:21 list and there's a checklist. And when you go through the checklist, you can check off how many of the things happen to you wherever. And you can see right where you are. And because by looking at that checklist, you could also see what's coming next. And you could see by and large not only what's coming next to you. But if you look at it over, let's say, what are the things I can expect over the next 10 years as likely? And then you could do that for your loved ones. What does that mean for your parents? Where will they be over the next 10 years? Where will you? What about your children? And what about your friends? And what are these phases in your life like? And how should you approach that? So by having them in that perspective, you can step back and you can, you can, you can, you can

Starting point is 01:20:08 that in perspective and you can, you know, learn and think about, okay, there's the next 10 years. Like, I'm 73. Okay. Okay. Where will I be in 10 years? And what will I be like? I mean, I kind of have a picture of what that's going to be like. And that's true at every age.

Starting point is 01:20:28 And where will my kids or my grandkids be? And what do I want that to be like at that time? And so that's true for everyone. And so in the beginning part of the book, you know, we look at what's your nature and what are the paths and so on and how do you get there? And then at the end of the book, it's not a book, you know, it's a journal, but it's got these parts in it. Most, the journal for those who don't have never seen it, it's a paper journal that you can write in, but it has QR codes. So you can go into it, you can put your information on the, you know, on the computer and it gathers it. and it accumulates this information also shows you videos and things.

Starting point is 01:21:12 But it's really just meant to help you reflect on your principles. And so in that life art, it's very important to know where you are. It's quite unsettling as well. I mean, I found it, I was talking to my wife over dinner about it last night going through it. And you're like, oh, God, I'm 54. I guess I'm approaching the final stages of the second phase. And you start to think about it. And you're like, okay, so, but also you say, for example, that the second phase, the part that I've been in tends to be one of the unhappier times of life.

Starting point is 01:21:44 And you think about how much you're worrying about your kids and whether they'll be okay and all the struggles, balancing work and family and stuff. Exactly. It's kind of helpful, right? You start to see, oh, it's not just me. It's been a difficult period. It's everyone practically. Like you say, if you look, there's part of it that tracks happiness. I studied, okay, what are the happiest and how does happiness change?

Starting point is 01:22:10 I won't take everybody through that, but, you know, in the early years and then you get just out of university or whatever you're graduating, you know, those are very happy years. In that middle that you're referring to when there's work-life balance and you're trying to juggle a lot and you're trying to be successful and you're struggling with yourself and you're struggling with your family and also there can be times of disenchantment the marriage isn't going exactly like you dreamed or the job okay i'm not the superstar because life is tough and you go and you encounter that middle part of your life and to those things are known you know they happen they're they're normal almost and you expected it and you expect it.

Starting point is 01:22:58 And also there are principles for how do you deal with each one of those better? And then you come. And then I watch people have a difficult transition from one phase to the next phase. Because, you know, let's say you go from the second phase and whether we call it retirement or something. And all of a sudden, you know, you're in a habit. You're addicted. Am I important?

Starting point is 01:23:21 Do I matter? What is my status? All of these things that people then get. And they just don't yet know. what that new phase is and become comfortable and enjoy that new phase. I've mentored a lot of people who've gone very, very successful people who've gone, okay, from being successful to then that new phase and then understanding how to find joy, because the happiest phase is really that phase, which really almost comes on typically around 60 or after 60. It actually, surprisingly, ironically,

Starting point is 01:23:56 is actually the happiest phase in all of life, and this across cultures typically, because, okay, you don't have the work, life balance any minute. Your parents are gone. Your children are on their own. You have a freedom. You're not trying to prove yourself. And there are all the joys of all of those types of freedom

Starting point is 01:24:19 if you approach it well. And so people understanding these things and understanding, you know, principles for dealing with them are really beneficial. You have kind of a brutal line in the book where you say that in phase three, you can save a life without obligations

Starting point is 01:24:36 and are free to die. Free to live and free to die. And that actually was a sentence out of Joseph Campbell wrote a hero's journey, which was a hero of a thousand face, very interesting. And that's what it really is. You're free to live

Starting point is 01:24:54 and then free to die. And what free to die means is the relief of knowing that you can die and it'll be okay for your next generation and so on. You know, sometimes we feel like we have to take care of everything, you know, and you go beyond it. And there could be a relief and an understanding of, you know, that phase. It's like the serenity prayer, I think. You know, again, God give me the serenity to accept that which I can't control and so on. You're there you are, do the best you can, and then just go with what reality is like. Acceptance seems very central because there's a sentence towards the end of the book where you say about the third phase, this final phase of life,

Starting point is 01:25:46 the key to this time going well is accepting the life cycle, including the end. In this phase, wisdom and spirituality tend to be at higher levels than at other times in life and generally are good to have? And it may be wonder, are you finding yourself becoming more spiritual with age? Or are you still just looking at everything and thinking we're all just machines within machines and there's nothing more. I don't think that the, yes, I'm becoming more spiritual as it goes in because you rise and you sort of see things in perspective, you learn more.

Starting point is 01:26:19 But the mechanics is not the inconsistent with the spirituality. Spirituality to me means a connectedness with the whole, essentially the rising, you know, above yourself and realizing that you're part of this whole and that beautiful acceptance. But that hole works in kind of a mechanical way. Some things we know about, some things we don't know about. but it is that, okay, it's like the life arc, and it's like all of those things. You know, there are still cause-effect relationships. So when I say machine, I just mean that there are causes to everything that happens. It's interesting. I saw something that you wrote recently on

Starting point is 01:27:06 Twitter where you shared some principles from Martin Luther King, and one of them was an individual has not started living fully until they can rise above the narrow confines of individualistic concerns to the broader concerns of humanity. And another, you said, every person must decide at some point whether they will walk in the light of creative altruism or in the darkness of destructive selfishness. And it seemed to me that a big part of your trajectory has been becoming increasingly focused on serving others altruistically now that you're in this different phase of life. Is that fair to say that that's kind of been your personal arc to a great degree. Yes, to some, yes, to a significant degree. And I learn more and more about it. But also

Starting point is 01:27:55 meaningful work and meaningful relationships have always been important to me. But, you know, in the in the game and so on, but the relationships part is important. And I, and I've always believe that win-win relationships are better than lose-lose relationships. And that love is a great power. that if, when I mean love, maybe it's not what we mean, but in other words, the caring of each other and the caring of the whole creates so much better. It works so much better than the selfishness, which means it's almost a destructive force. And so, of course, as I get older, you know, I see that so much more. And then I see. this, like what we're in now, the everybody has practically these opinions that they think

Starting point is 01:28:56 they're right and they want to fight for. And I see the destructiveness. Who knows who's right and can we tolerate each other more and give, pull it together? But I could see that destruction. So yes, I think it's more also apparent at this time. But it is, yeah, as you go above it, where do you want to be? What is the place you go to? What do you like? What feels good? People are nice with each other. They're civil with each other. They care about each other. Those are the environments. They have less stress. They're more efficient. I think it's pretty obvious in terms of that element of what you want. It was really interesting to me, Ray, that in the book, some of the language you use to talk about your principles, you said,

Starting point is 01:29:43 at one point, that your principles become like your self-made religion that you're living every day. And you said that as you write down these principles, it helps you to ascend to higher and higher levels. And I was really interested in that idea that they've almost become like your version of the 10 commandments or the 613 commandments in the Old Testament, where you've gone through life figuring out, this is kind of my operating manual. It's interesting to me, this kind of connection with religion? Well, what is a religion? I mean, a religion really doesn't have to be, most religions don't have the notion of

Starting point is 01:30:23 the same thing as, you know, the afterlife and, most religions are a way of living life. What are your principles for living life? And you could take those in pre-packaged forms so you could take them in pre-packaged forms. so you could take them in prepay. Here they come and I'm going to adopt the principles. Or you can choose them yourself. And I think that today, why not choose them yourself? Why not pick out what your real principles are?

Starting point is 01:30:54 Because it's like your religion. How are you going to live it? Or is it going to be something that it's indoctrinated and you just follow and believe? So that's all religions are, really, is the principles of how you're going to interact. That's really what they are. So when you write down,

Starting point is 01:31:14 what are your true principles and why you're coming to, okay, how do you really want to live your life? You know, people can go into a religion and they go there and they say, I'm religious, and then they come and they live,

Starting point is 01:31:28 do different things and so on. Anyway, choose your religion, choose your principles, make up your own. I actually have been doing this over the last few days. And it's a really thought-provoking process where you actually force yourself to think about what do I actually believe. And so, for example, I found myself, you know, I have lots of post-its on my wall in my study that whenever I hear something or learn something that I think is profound, I put it down.

Starting point is 01:31:55 And so there's one, for example, that says, it's from the Old Testament where it says, when I fall, I shall arise, which is a reminder really just of the, your emphasis on determination, on just continuing to plug away, regardless of how many times you fail and mess up. Another one I thought was really striking. There's something from David Hawkins, who I always think about a lot, a remarkable writer who said, be kind to everything and everyone, including oneself all the time with no exception.

Starting point is 01:32:25 So it's wondering if there are things you've come across where, let's say your family, your kids, or your wife, or your colleagues have sort of shared with you principles that they've come up with that have had a profound impact on you, where you, you, this, this process of other people learning from your principles, provoking them to write their own, has then kind of come back to you and you thought, yeah, yeah, that's true. I want to incorporate that one.

Starting point is 01:32:50 Well, there, you know, there are, of course, many. I think that the principles I see that exist, that are working, many people have discovered. They're not, you know, you might think of it as something and then you think, ah, I discovered it. But many people have discovered almost all good principles. Not always. So, but I mean, yeah.

Starting point is 01:33:22 You make the important point, though, that it has to suit you. I think that's one of the things that comes through the journal. It's not. It's not enough just to take on somebody else's. It's got to truly suit your view of the world. That's right. Because you have your own values. You have your own preferences.

Starting point is 01:33:42 You have your own reasons. The things that are comfortable to you. That's why the journal exists. In other words, you, what do you care about? What do you want? What do you feel after you reflect? that's that's so important that's what I mean like you create your own principles or your own religion in a sense of how you live your life so know yourself and then with that of what you're

Starting point is 01:34:12 like and where your pull is and so um there are no you know there's some comment i shouldn't say no but you know like like a principle is there's no success is not how much money you make or how much status you have or whatever it is. You know, and there are many ways to live a successful life. Successful means that it's your definition of what's successful. What is bringing you happiness? You know, it could be, I don't know, being a surfer and a living in nature and supporting yourself, however, like, I don't know, tending bar or something and you have a great,

Starting point is 01:34:57 or it can be anything else. All of those choices are yours. Don't adopt somebody else's choices. And then follow the principles that you have in order to get them. Are you surprised that after 47 years of building Bridgewater into this huge, you know, the world's largest hedge fund and one of the most successful of all time, clearly, are you surprised at how much joy you're getting from letting go of the reins and handing it over to the next, generation. It's, it's, because it seems to reflect this understanding of what the third phase is

Starting point is 01:35:32 about, right? I know, I'm not really surprised. I would say if I was going back 20 years, I might have been surprised, but I've really wanted this. I really wanted this. It's like I really want others to be successful without me, you know, I want them to be successful without me. I want them to be successful without me. And it's like parents and having grown children. What do you want more? Do you want them? Do you want to be needed or do you know you want them to be successful without you? I mean, to have a good relationship, not without. You want to have a good loving relationship, but you want them to be. And that's the relief that comes. And I've wanted that and I've been trying for that with a couple of failed attempts and which is also how things go.

Starting point is 01:36:25 When I started the transition, I said to myself, well, I think it'll probably take me two years, but I also know that I have a principle. If you haven't done something three times before successfully, don't assume you can know how to do it. And I know that it's a, you know, a founder-led organization transitioning is notably, you know, a difficult thing. So I said, I think it will, you know, I'll take me up to 10 years to do it. And it took me 12 years to do it because of things. And so, no, it's something that I wanted and I'm so enjoying. It's like watching your kids be successful without you.

Starting point is 01:37:10 It's just, it's great. So I did want it for a long time. Maybe if I went back 20 years, maybe I would say, you know, I was in the phase where I liked being the one and doing the things I did. But pretty on early after that event in 1982, I also didn't want to be the all-knowing decision maker because I know it doesn't work well. I like that back and forth.

Starting point is 01:37:36 So, no, for a long time, I've wanted this. And now I get to experience it and savor it. I wanted to just ask you one last question really about ocean exploration, which is something that obviously in this new phase of life, you're free to enjoy to a much greater extent. And it's kind of extraordinary what you've been doing, right? I know that you've owned several submarines and that you and James Cameron, the director of Titanic and Avatar bought a stake recently and a submarine maker.

Starting point is 01:38:07 And you said at one point, ocean exploration seems to me much more exciting and important than space exploration, which is interesting because people like Jeff Bezos and Elon Musk and Richard Branson were all obviously focused on going upwards into space. And I wondered if you could just give us a sense of why there's something so magical about this kind of ocean exploration that excites you so much. Well, if you take the world, the ocean is about 72% of the world's surface, so more than two thirds, and it goes up about halfway. So the Mount Everest is the tallest mountain.

Starting point is 01:38:48 And if you take going down the Mariana's trench, they're about the same distance, about 11,000 meters. And so all of that is so unexplored. So imagine that there were, it's bigger than all the continents combined. And it's filled with life and all different other things. So it's really alive. Like if you want to go see other species, you know, you're not going to see aliens in outer space. You want to see aliens. You go down to the ocean and it's got life and so on.

Starting point is 01:39:22 And it's our most important asset for climate, for nature and so on. So imagine that there were these continents that were never discovered, so important, so beautiful, so amazing, otherworldly. you know, that's what the ocean is and it's right there. And so that's why it's, I think, amazing. So yes, what I'm doing, I'm very excited because what I do is Ocean X is the name of it. If anybody cares to look at it, go on the website and you can see it or you can follow it on TikTok and so on. It's not me doing it. It's an organization scientist and all of that, laboratories and so on.

Starting point is 01:40:10 It's very, very exciting. And I can have a very big impact. You know, I created the best ocean exploration and media vehicle that there is through Ocean X. You'll see it online. And that, what it does is it enables explorers and scientists to go down there and it captures what they're doing in media. And it communicates that. So we're doing then a show like Jacques Cousteau did.

Starting point is 01:40:45 When I was growing up, I watched Jocka Stowe. And so it shows the scientists exploring and it takes the people in that. And that's going to be done on Disney Plus and National Geographic. And Jim Cameron is the executive producer. He's producing the media part and so on. So it's very exciting. It's very important. I think it's very impactful. And that's why I'm doing it. And when you're down in the depths of the ocean and you're seeing these extraordinary things, that presumably in many cases no one's ever seen before, does it stir something in you that's more

Starting point is 01:41:25 kind of mystical and transcendent? Yes, it's the spirituality. It is the greater whole. It's the marvel of it, all, you know, oh my God. And just unimaginable. It's totally unimaginable. It brings me into this realization again, you know, there is, man is preoccupied with man. Man is one of something like 10 million species. And they all are going about their lives and they're all, and many of them are stronger or better than things that man is and so on. We're preoccupied that. And we're just one of those, you know, and one of the newer, shorter-lived species and so on. So when you get a sense of all of that and the marvel, the designs of these things, they light up, you know, like below 350 feet, 85% of the species are either bioluminescent or blithe fluorescent. They light up,

Starting point is 01:42:31 they operate in ways that are unimaginable, you know, and they have broken. brains and there's an echo system of how they all relate to each other. Yes, you feel the connection with the greater whole, you know. And it tallies with your love of adventure as well. Wait, which you figure out from your assessments all those years ago. So you're getting to live out your destiny, be true to your personality, which is nice. It's the pull, you know. It's not all that difficult. Where's the pull? Where's the pull? Where's the pull? Where? Where do you feel the pull? It's like eating food.

Starting point is 01:43:08 Do you like the taste of it? If you like the taste of it, then you pursue it. That's why the work and pleasure, you know, have got to be the same. And you have to pay attention to the money part because, but not enormous amounts, enough to give you the freedom, to have the freedom, the security and so on, to have what you want. And that's, I think, pretty much, you know, what is a good life for most people, if they define themselves what that good life is. All right.

Starting point is 01:43:39 Well, thank you so much, Ray. I'm very much enjoying the fact that you're in this phase where you're sharing all of your hard earned wisdom. I'm definitely a big beneficiary of it, both from your books and from our conversation. So I really appreciate it. I'm very grateful for your generosity and sharing your principles and chatting with us today. It's been a real gift. Well, thank you.

Starting point is 01:43:59 It's been a gift to me, too. I mean, first of all, I enjoyed it. But more importantly than that, like I say, my goal is, to try to pass some of these things along, you and I are helping your listeners. And I feel great about that. So thank you. It's been a real delight. All right.

Starting point is 01:44:16 Thank you so much. Take care. Stay well. You too. All right, folks. I hope you enjoyed this conversation with the legendary Ray Dalio. If you'd like to learn more from Ray, you may want to look at the show notes for this episode. I've put together links to an array of resources that I hope you'll find useful, including

Starting point is 01:44:35 his books, his videos, and his free personality assessment, which will tell you more about what you're like, how you think, and how you interact with other people. I'd also really encourage you to check out Ray's new publication, which is titled Principles, Your Guided Journal. As Ray intimated in our conversation, it's not so much a traditional book, it's more of an interactive journal that helps you to develop your own principles. I'm finding it really thought-provoking, to do the exercises in the journal, and I'm pretty sure it will help you in your own life if you engage with these tools and techniques that he's sharing with us. I'll be back soon with some more fantastic guests, including my old friend Guy Speer,

Starting point is 01:45:18 who I'm planning to interview in person in Switzerland next week. In the meantime, please feel free to follow me on Twitter at William Green 72, and as always, do let me know how you're liking the podcast. It's always a pleasure to hear from you. Thanks so much for listening. Take care. Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by the Investors Podcast Network.

Starting point is 01:45:44 Every Wednesday, we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision consult a professional, this show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - RWH022: Multi-billionaire Masterclass w/ Ray Dalio

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