My First Million

Ray Dalio: This is the Holy Grail of Investing

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Summary

At-a-Glance

  • Verdict: Watch fully
  • Core thesis: Dalio argues that durable investment and business success comes from converting painful mistakes into codified decision rules, then diversifying across roughly 15 genuinely uncorrelated return streams to preserve upside while removing most avoidable downside.
  • Why it matters: The video provides a reusable operating model for decision systems: backtest cause-and-effect rules, automate their execution, seek disconfirming views, and design portfolios and teams so that no single failure mode dominates outcomes.
  • Best use: Use it as a strategic framework for capital allocation, risk management, organizational design, and turning experiential learning into explicit principles rather than as a source of near-term market trades.

Executive Summary

The interview’s investing headline is Dalio’s “Holy Grail”: identify 15 good return streams that are genuinely uncorrelated. His claim is mathematical rather than motivational—at that level of diversification, an investor can reduce about 80% of portfolio risk without reducing expected return, improving the return-to-risk ratio by roughly five times. He presents this as the core lesson he learned after his 1982 macro call was directionally right on Mexico’s default but disastrously wrong on the broader economy, leaving him unable to pay clients and forced to borrow $4,000 from his father.

Dalio’s broader method is to transform judgments into testable, rules-based systems. For every decision, he studied how that decision would have performed in comparable historical conditions, formed a decision rule, and programmed it into a computer. The aim was not a single brilliant forecast: it was a collection of universal, historically tested rules deployed across markets and deliberately made uncorrelated. Intellectual humility is essential to the system; he wants others to attack his views because confident but untested conviction was the failure mode behind his early collapse.

The conversation extends this systems view to organizations and life. Dalio says people should identify their nature, build around values and abilities before skills, and partner with people whose cognitive styles compensate for their weaknesses. His formula is “pain plus reflection equals progress,” where reflection means treating setbacks as evidence about reality, extracting a reusable principle, and eventually making that response habitual. Bridgewater’s culture of radical transparency and personality assessment is presented as infrastructure for doing this collectively.

On macro and portfolios, Dalio frames current conditions through five interacting forces: debt and monetary dynamics, internal wealth and values gaps, geopolitical order, nature, and technology. He rejects a reported claim that his family office is 70-75% in gold ETFs; instead, he says gold may occupy roughly 5-15% of a diversified portfolio, with tactical overweighting during debt crises and monetary expansion. He warns that transformational technology can be a sound long-term thesis while its stocks are still overpriced, and says his bubble gauge is about 75% of the way toward the extremes of 1929 and 2000—high, but insufficient to time a reversal without identifying the catalyst that forces investors to raise cash.

Key Takeaways

  • Claim: The most effective way to improve investment outcomes is to combine approximately 15 good, uncorrelated return streams rather than concentrate on a few attractive bets. | Evidence: Dalio says his diversification math shows that reaching 15 uncorrelated streams can remove about 80% of risk without reducing return, raising the return-to-risk ratio by about fivefold. | Implication: Ken should evaluate portfolios, business bets, and revenue sources by common failure modes and correlation, not by the number of line items or managers. | Caveat: The benefit depends on true correlation behavior, which can change under stress; simply owning many securities or asset labels does not establish genuine diversification.
  • Claim: A robust game plan turns repeated judgment calls into historically tested, explicit decision rules that can be systematically executed. | Evidence: Dalio describes reviewing every market decision against analogous historical circumstances, measuring its track record, writing an if-then rule, and programming it into Bridgewater’s systems; he then searched globally for instances meeting those criteria. | Implication: For operating and investing decisions, capture decisions with their context, outcome, and causal hypothesis; use that record to build testable playbooks rather than relying on founder memory or intuition. | Caveat: Historical success is not proof of future validity, so Dalio’s standard is to investigate why a rule failed in prior periods before claiming it will work now.
  • Claim: Humility is a risk-control mechanism: strong views should be actively challenged, especially after a prior conviction proved costly. | Evidence: In 1982, Dalio correctly anticipated emerging-market debt distress and Mexico’s August default but wrongly expected an economic disaster; he lost money for himself and clients, laid off his staff, and borrowed $4,000 from his father. He says the experience taught him to balance audacity with humility and invite others to “kick” his ideas. | Implication: Create explicit red-team or pre-mortem routines around large capital commitments and strategic assumptions, with incentives to surface evidence that would invalidate the base case. | Caveat: Seeking challenge is valuable only if the process distinguishes high-quality disconfirming evidence from indiscriminate disagreement.
  • Claim: Failure becomes useful only when it is converted into a causal principle; pain without reflection merely leaves people stuck. | Evidence: Dalio’s formula is “pain plus reflection equals progress.” His response to setbacks is to ask what the event reveals about how reality works, identify an appropriate principle, write it down, and—in many cases—encode it into a decision system. He says this process has generated thousands of principles over roughly 35 years. | Implication: After material misses, require a short causal review that ends with a changed rule, control, metric, or experiment—not merely a retrospective narrative. | Caveat: A principle extracted from a single episode can overfit; it should be treated as a hypothesis and checked across comparable situations.
  • Claim: High-performing teams are built around complementary values and abilities, not just resumes and current skills. | Evidence: Dalio ranks hiring criteria as values first, abilities second, and skills third, arguing that skills can be changed as technology and roles evolve. He cites Bridgewater’s personality work and says its value was helping people understand why different styles work together rather than become sources of irritation. | Implication: For key hires and partnerships, assess mission alignment, learning capacity, decision style, and complementary weaknesses before optimizing for tool-specific experience. | Caveat: Personality categories are useful as a conversation and role-design aid, but the transcript supplies no evidence that the specific PrinciplesYou test reliably predicts performance.
  • Claim: A strategic asset allocation should be balanced by default, while tactical trades should be made relative to that base rather than replacing it. | Evidence: Dalio says investors should first construct their best balanced portfolio assuming no market opinion, then express tactical views around it. He characterizes cash as highly certain but the worst long-run performer, and says gold is generally a potential 5-15% portfolio component rather than the 70-75% allocation attributed to his family office. | Implication: Separate strategic exposure design from tactical conviction: define the neutral portfolio and risk budget first, then limit deviations and require a stated catalyst and exit condition. | Caveat: The appropriate allocation depends on the existing portfolio and individual circumstances; Dalio explicitly says listeners should not trade from his comments.
  • Claim: A bubble can coexist with a correct technology thesis, and valuation risk matters before the underlying innovation stops being real. | Evidence: Dalio says great new technologies often generate bubbles because investors confuse “technology will be revolutionary” with “the stock will be a good investment”; he invokes Google versus Yahoo and says even successful companies can fall around 80% in a bubble unwind. His bubble gauge is currently about 75% toward the levels reached in 1929 and 2000. | Implication: Treat bullish secular narratives and entry-price/timing decisions as separate analyses; monitor leverage, refinancing pressure, rates, tax changes, and other forced-selling catalysts. | Caveat: His gauge does not provide timing: a bubble can remain elevated for three or ten years, and timing requires identifying a “pricking” event, often monetary tightening or another source of forced cash needs.

Detailed Brief

Dalio's five-force macro model

  • Claims: Dalio believes current conditions should be interpreted through long historical cycles rather than short-lived news narratives.; He says five forces interact to shape the environment: debt-money-economic conditions, internal wealth and values gaps, geopolitical order, natural disruptions, and technological invention.; His method comes from studying roughly 500 years of history to find recurrent cause-and-effect patterns outside his own lived experience.
  • Evidence: Debt becomes constraining when debt-service payments absorb spending; government deficits also require buyers for newly issued bonds, linking fiscal policy to asset markets.; Dalio argues that widening wealth and values gaps can create irreconcilable political divisions and weaken adherence to democratic processes.; He describes the post-1945 multilateral order as being under strain, with fewer effective institutions for resolving disagreements and more direct conflict risk.; He says droughts, floods, and pandemics have historically killed more people than wars, while technological advances generally lift productivity, GDP per capita, and life expectancy.
  • Caveats: The transcript provides the framework but no transparent model specification, weighting scheme, or performance evidence for the five-force interaction analysis.; Macro frameworks can identify vulnerabilities without reliably producing trade timing.
  • Implications: Macro monitoring should be organized around slow-moving structural indicators and their interactions, not solely headline-driven forecasts.; Investment and operating scenarios should include political fragmentation, fiscal and debt constraints, supply shocks, and technology-driven productivity changes simultaneously rather than treating them as isolated risks.

Motivation, life design, and the role of capital

  • Claims: Dalio rejects money and conventional status as adequate definitions of success; money has no intrinsic value absent a purpose for it.; He distinguishes stable personal freedom from the compulsion to pursue a mission, arguing that people should select a path consistent with their nature rather than imitate another person’s appetite for security or scale.; He considers meaningful work, meaningful relationships, radical transparency, self-knowledge, and collaborative pursuit of a mission to be a general formula for success.
  • Evidence: When rebuilding Bridgewater, he says his immediate threshold was simply being able to cover basics and retain freedom rather than achieving a large wealth target.; He describes Elon Musk as a 'shaper' willing to put much of his PayPal proceeds toward the Mars mission without preserving a safety reserve, contrasting this with Dalio’s own recommendation to retain some capital.; Dalio says he spends heavily only on personally meaningful pursuits, citing an ocean exploration ship used by scientists rather than luxury consumption.
  • Caveats: The interview treats personality and purpose largely as self-reported constructs; it does not show how to resolve conflicts between personal nature, family obligations, and business requirements.
  • Implications: Capital planning should distinguish the amount needed for resilience and autonomy from the amount that merely signals status.; Mission intensity is not universally optimal; leaders should deliberately choose the risk appetite and life trade-offs they want rather than importing them from celebrity founders.

Notable Concepts & Terms

  • Holy Grail of Investing: Dalio's name for constructing 15 good uncorrelated return streams to substantially lower risk without sacrificing expected return.
  • Uncorrelated return streams: Distinct sources of return that do not rise and fall together; the critical unit of diversification in Dalio's framework.
  • Pain plus reflection equals progress: A learning loop in which adversity is examined for causal lessons and turned into a reusable principle.
  • Principles / computerized decision-making: Explicit if-then rules derived from historical study and encoded for consistent execution, rather than retained as tacit intuition.
  • Shaper: Dalio's PrinciplesYou personality category for people driven to turn a large vision into reality while moving between high-level strategy and operational detail.
  • Strategic asset allocation versus tactical allocation: First establish a balanced, opinion-neutral portfolio; then make constrained tactical adjustments when a specific view and catalyst justify them.
  • Bubble gauge / pricking the bubble: Dalio's measure of bubble conditions and his distinction between elevated valuation risk and the separate catalyst—often a need for cash—that triggers a decline.
  • Five big forces: Dalio's macro lens: debt-money economics, internal political conflict, geopolitics, nature, and technological innovation.

Operator Notes / Why Ken Should Care

  • Run a correlation and common-cause review across Ken's investment exposures, customer concentration, model/vendor dependencies, and strategic bets; identify whether apparent diversification survives a stressed scenario.
  • Implement a lightweight decision journal for high-consequence decisions: context, forecast, disconfirming evidence, expected-value rationale, rule used, review date, and resulting system change.
  • For each major tactical investment or operating deviation from baseline, require a written catalyst, forced-selling/liquidity scenario, position-size limit, and invalidation condition.
  • Add a formal red-team step before irreversible commitments, assigning at least one capable owner to challenge the causal model rather than merely critique execution details.
  • Audit leadership-team coverage for missing counterweights—especially detail execution, relationship management, and risk scrutiny—and hire or delegate against demonstrated values and adaptive ability rather than résumé skills alone.
  • Treat the video's current bubble commentary as a monitoring hypothesis, not a trade signal; verify its date and compare current rates, leverage, valuations, and liquidity conditions before acting.

Source/Metadata

  • Title: Ray Dalio: The one rule that cuts investment risk by 80%
  • Transcript words: 10829
  • Duration seconds: 3636
  • Timestamp note: No usable timestamps or chapter markers were present in the supplied transcript.
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Full transcript 10579 words · 48 min read
0:00

SPEAKER_00

You want to be successful? Here's the mantra for investing. I got my pen. The most fundamental question is, how do I have the upside without having the downside? That approach was the basis of Bridgewater going from having to borrow $4,000 from my dad to the largest hedge fund, most successful hedge fund in the world. I created a personality test. I gave it to Elon Musk. I gave it to Bill Gates. I gave it to Rick Hastings. Maybe I should probably not tell stories, but no, no, no. That's what we do here. You don't have to make it to the top, and you don't have to be happy. What's the top? There's no correlation between the level of happiness

0:34

SPEAKER_00

in your life and the amount of money that you made. So you have to have a purpose. What do you want to do with the money that is so important? You better answer that question.

0:49

SPEAKER_00

You were, in some regard, a little bit of a late bloomer in terms of traditional metrics of success. Oh yeah. I think you were 34, 35. You had two kids, I think. You had just laid off the five employees that you had had, and you're like, look, dad, I've lost it all. Can you

1:05

SPEAKER_01

close your eyes and remember that conversation? So I started Bridgewater in 1975, and in 1981 and 82, interest rates were not. The emerging countries had a lot of debt, and I calculated that those countries were not going to be able to pay their debts, and they were going to have big

1:27

SPEAKER_00

debt crisis. And that was a very controversial point of view. And then Mexico defaulted in August of 1982. So I was asked to testify to Congress about what this is all about and what might happen to the economy. I thought the economy was going to be a disaster. I couldn't have been more wrong. Okay. So I lost money for me. I lost money for my clients, and I had to lay off everybody. I was so broke, I had to borrow $4,000 from my dad. So then my choice was, am I going to put on a suit and tie, go in, commute, and work for somebody in that capacity? And I knew that I wasn't very good at

2:09

SPEAKER_00

working for people. Now, that was painful. That changed everything in my life. That created the

2:15

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bottom of Bridgewater. And then it just kept going up because of what I learned. I learned two things. First of all, I learned humility to balance my audacity. Okay. I didn't have much humility. I'd say,

2:29

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I'm right. I'm going to be right, and all that. And then I learned how to diversify my bets and

2:37

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substantially reduce my risk without reducing my returns because I didn't want to have reduced the upside. I knew that I had to reduce the downside. And so I really learned and taught myself, really, my mantra. Okay. Here's the mantra for investing. You want to be successful? This is the holy grail of investing. Find 15 good uncorrelated return streams. How did you come up with 15? Well, I just looked at the math of it. Okay. So, in other words, what are the marginal benefits of diversification given the different levels of correlation? And I have that on a chart that

3:24

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keeps reminding me. Okay. If you can get out to 15, you can reduce about 80% of your risk without reducing your return. That means that you increase your return-to-risk ratio by something like a factor of five. Okay. In other words, wow. So that means you can get the upside without having the downside. Okay. And then humility, I wanted people to kick the shit out of whatever I thought, to try to do that and then have that. And that change in that approach was the basis of Bridgewater going from having to borrow $4,000 from my dad to the largest hedge fund, most successful hedge fund in the world. If we wanted to be better investors,

4:15

SPEAKER_00

what do you think the most common mistake smart guys can make when it comes to investing? They don't have a game plan. So what's a good game plan look like? How do you know if you have a good game plan? Well, the way that I did it was, every time I would make a decision, but this is the building of all principles I did, but particularly in the markets, every time I would make a decision, I would go back and study. If I made that decision in these circumstances, how would it have worked in the past? And I would know the track record of that decision. And that would also give me greater understanding of how things work. And so

4:54

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then I would have a decision rule, and then I would program it into the market, into the computer. And when this thing came along, then I started to realize, okay, now I've got criteria. So rather than just the one that I would see, I would say in the computer, dump in all of them. And where do they exist anywhere in the world? And so give me one good decision rule that, wherever it happens in the world, I have a track record of knowing how those work. And wherever it is in the world, you bring me that, and then make a collection of those kinds of things and make them uncorrelated, so it provides your diversification. And so now you're

5:38

SPEAKER_00

executing a game plan. So I have rules that it should be timeless and universal because if it didn't work in a long period of time, I would need to understand why it didn't work then and would work now. So that's how I would build, that's how I did build game plans and execute the game plans. Did Bridgewater have any revenue coming in? Nothing. And so you're waking up in the morning and you're like, I gotta figure this out. It was like, I'm on the edge of a jungle. I could stay out of the jungle, and I can go to safety and have a safe life, employed, regular job. Great. Okay. Or I could go into the jungle and try to work across, get through the jungle.

6:28

SPEAKER_00

All the things that can kill me. And I made a choice of what I wanted in life. I have to have this great upside. I can't not do that. And also part of it was, if I'm going in the jungle, I want to go with people who want to go in the jungle with me, who see things differently than I do. So it's like going through this jungle with these animals or something that can kill you. But if you're in it together, then you can see the animals that'll kill you. And then I loved being in the jungle so much. I didn't want to get out of the jungle. Even after I've achieved success. You didn't want to go to the zoo. You'd rather be in the jungle than the zoo. Yeah. Almost. Yeah.

7:11

SPEAKER_00

To play off that analogy, I think a lot of successful people, and I think you've even said this, where you're like, as long as I could do what I want during I do. So it's going through this jungle with these animals or something that can kill you. But if you're in it together, then you can see the animals that'll kill you. And then I loved being in the jungle so much. I didn't want to get out of the jungle. Even after I've achieved success. You didn't want to go to the zoo. You'd rather be in the jungle than the zoo.

7:41

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[SPEAKER_00] Yeah. Almost. Yeah.

7:44

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To play off that analogy, I think a lot of successful people, and I think you've even said this where you're, as long as I could do what I want during the day and what I love, then I'll be happy. But I have to imagine that when you're 33 or 34 or something like that, and you have young kids and you got a little bit of a tiger in you, you're, I want to provide, I want to win. I want to be the best. No, it wasn't like that at all. For me, it was two levels, just very simple. Can I pay for the basics? I don't need a big house. I don't need a big anything. [SPEAKER_01] My kids can go to a good public school. They have great public schools.

8:16

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Did you have a number where you're, man, if I can make a hundred grand a year. What I started to do was I started to count how many months, and then years, of living that way could I afford if it shut down? But you said two levels. So that was level one. It's freedom money. You money. What was that number for you? I don't remember what the number was, but it wasn't, it wasn't, it was an easy-to-achieve number. Like a million dollars. But, but oh no. Less. Oh, much less. At that time. Was there ever a grand vision, or was it always, well, what's the next level? Let's see if we can do that.

9:12

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No, no, no, no, no, no. It was, I could imagine great things. I'll tell you a personality test. When I decided that I wanted to pass the leadership of Bridgewater along to others, I want to be investor, let them run the business. And I want to do that because I'm hooked on the markets. I created personality

9:25

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[SPEAKER_00] tests. I started with Myers-Briggs, and then I went to various kinds of personality tests. And I then gave [SPEAKER_00] the personality tests to people like Elon Musk. I gave it to Bill Gates. I gave it to Reed Hastings. I gave it to [SPEAKER_00] Muhammad Yunus. I gave it to other people to see the elements of what they are like. I put it online [SPEAKER_00] for free. I created it. [SPEAKER_00] We took it. [SPEAKER_00]

10:06

SPEAKER_00

Okay. You took it. Okay. Well, there's a type of person that represents a very small percentage of the population. And Elon Musk is it, then Bill Gates, and Reed, a number of these [SPEAKER_02] people of this that I would call a shaper. And they are people who love to go from visualization [SPEAKER_02] to actualization and to be on that mission and so on. And that's my personality type. I have a certain [SPEAKER_02] personality type, and they have to do certain things. And I remember Elon, and he's that personality type. [SPEAKER_02] Okay. Making money is not a big deal for him. I should probably not tell stories, but.

10:33

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[SPEAKER_02] No, no, no. That's what we do here. We tell stories. We can all take it out later. [SPEAKER_02] But the excitement, the compulsive thrill of climbing that and aspiring to that was my personality type. And he doesn't need to, he doesn't need a house. He doesn't need security. He doesn't need anything. I mean, he didn't even need my level of needing. It sounded like you had a story of him where that's an example of. Well, yeah. Yeah. Hey everyone, pausing really quick, because I know that you are probably scrambling to write down all the stuff that Ray's talking about. Well, the good news is that we did it for you. So we made

11:17

SPEAKER_00

a guide. The link is in the description on YouTube. And this guide breaks down the five frameworks behind one of the greatest investing track records of all time. So you can actually use them and also spend time listening versus taking all the notes that you're probably taking right now. So you can get it for free right now. You can click the link below in the description, or you can scan the QR code right here. All right. Back to the episode. When he first started Tesla, he had made something like $180 million from PayPal. And he decided that he was going to take half of that money and he was going to go to Mars. And he had no experience in

11:59

SPEAKER_00

terms of going to Mars. And so he had this vision. And when I said to him, I suggest that you put aside a little bit of money, take a piece of that, just so that way, if things don't work out, you've got that. No, no need to do that. And he had that strong compulsive need, but there is, I think everybody has a certain nature. Okay. Whether you're born and your environment, you have a nature. And that's why I created these personality tests for any of your

12:16

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[SPEAKER_00] listeners. PrinciplesYou is what it is. It's free. It's online. Take it. You'll understand more about [SPEAKER_00] your nature. And there's a feature in there where you can have somebody else that you have a relationship [SPEAKER_00] with take it. And then they'll tell you about the relationship. So we took it last night, [SPEAKER_00] based on your, after we talked the other day. So Sam tells me, he's, I'm a shaper. And you had

12:20

SPEAKER_00

told me you're a shaper, Elon. And so I was, I was, wow, okay, I hope I get shaper. I think I want to be in that club. So I'm taking it. I'm answering as honestly as I can. Is degenerate an option? Yeah. [SPEAKER_01] Did you get degenerate? [SPEAKER_01] Happy, but foolish. [SPEAKER_01] [SPEAKER_01] Yeah. With a new type. You're a moron. Is that what? So I got Explorer. And I was, that was not what I expected at all. Did it characterize you? Yeah. I mean, it called, it very much called, I'm driven very much by curiosity, seeking new knowledge, new experiences, learning, being very objective and truthful about

13:23

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what I'm experiencing and almost taking pleasure, even when you have a bad result, because it means you got to learn. And so there was, which is so true for me, I get the most fun doing that. So I guess it really was true. And I think why I may not have been a shaper, a lot of the questions would You're a moron. Is that what? So I got Explorer. And I was, that was not what I expected at all.

13:57

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[SPEAKER_00] Did it characterize you?

14:04

SPEAKER_00

Yeah. It called, it very much called, I'm driven very much by curiosity, seeking new knowledge, new experiences, learning, being very objective and truthful about what I'm experiencing, and almost taking pleasure even when you have a bad result because it means

14:22

SPEAKER_01

[SPEAKER_00] you got to learn. And so there was, which is so true for me, I get the most fun doing that. So [SPEAKER_00] I guess it really was true. And I think why I may not have been a shaper, a lot of the questions would [SPEAKER_00] ask about part of the visualization to accusation. And I think I do a lot of that, but I'm not very [SPEAKER_00] detail-oriented. I don't care about the details. I overlook details. I'm not a perfectionist. I don't [SPEAKER_00] care. I'm much less than Sam. Sam really wants everything to be great. [SPEAKER_00] Okay. And one of the elements of a shaper is, and by the way, that's where you're seeing your nature and

14:49

SPEAKER_01

[SPEAKER_00] what your satisfaction is and what you're likely to be most successful, it is that. [SPEAKER_00] Yes.

15:00

SPEAKER_00

What the issue of a shaper is, they want to go from visualization to actualization. And then they go from this very big picture down to what are those details. So I remember Elon gave me the key to his car, and that had a little button, and he showed the screen, and he got into the details a lot. And we're talking about how he wants to put a watering can with a plant on a rocket to send [SPEAKER_02] it to Mars, to say first life on Mars, to inspire things, and so on. So 10,000-foot level and 10- centimeter level. Right. That liking and then taking that and going. Okay, so yeah,

15:27

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that we all have our person. And so the success in life, the joy really, is knowing your nature and

15:32

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[SPEAKER_00] finding the right path for your nature, because you can't fight against your nature. Right.

15:40

SPEAKER_00

[SPEAKER_01] So look, Ray, we've only known each other for 30 minutes, but I'm going to show you [SPEAKER_01] something that might gross you out. But when I was young and drunk, I gave myself a tattoo. [SPEAKER_01] And the tattoo that I gave myself is on my feet, and it says, act now. [SPEAKER_01] Oh, good. So tell me, you were at the tattoo parlor.

16:03

SPEAKER_02

[SPEAKER_01] Have you ever heard of the phrase stick and poke? No.

16:07

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[SPEAKER_01] Okay. So if you're in jail, this is where it comes out of, but a lot of [SPEAKER_01] punk rock people do it. You get a sewing needle and you dip it in ink, and then you just make lots

16:18

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of little dots on your skin, and that's a tattoo. And so when I was, I was actually maybe, I probably,

16:33

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sometimes I say 19. In reality, I was probably 22. I just don't want to be that mature when I say I did it. I was angry that I wasn't moving fast enough in life. And I was, I'm so, I'm so angsty. And at the time I partied a lot. And so I was drunk, and I was, I'm going to tattoo act now on my feet. So when I wake up, that's the first thing that I see, is I got to take action. And does that work for you?

17:28

SPEAKER_01

[SPEAKER_00] Yeah. I tend to need to tone it down, where I'm, I need to think and plan. [SPEAKER_00] Because I've had a little bit of success in my career, and I think occasionally you need to be a little more strategic. But yeah, I'm usually a bull in a china shop. And the thing about it is that you have to find the people who are different from you, who compliment you.

18:12

SPEAKER_00

Well, on the leadership test, you don't just say the personality that you are. It's also where you're very weak. So it was, on mine, it was connecting, supporting, kind of a lot of the social side. So my business partner, Ben, who's the guy who emailed 77 times to you and your team to get you to be on this podcast, he's for, I think for four years, been emailing, trying to make this happen because he's an amazing connector.

19:12

SPEAKER_00

[SPEAKER_02] He's an amazing supporter. He wanted this moment to happen, even though he's not at the table. And to him, that's a win. To him, connecting is the win. And so he's my, he's been my business partner. We've had this unbelievable success as a partnership, even though we couldn't be more different if we tried.

20:11

SPEAKER_00

[SPEAKER_01] So let's pause and reflect on that very important point for success, that people who think differently from you, who you ordinarily can get annoyed at, are your paths to success. That if you can understand that, it was very interesting when I did this in Bridgewater. I did the personality tests, and then they start saying, oh, you're a ESTP, and I'm a whatever it is. And then they started to understand, and they understood how they would work together rather than get annoyed by the other person. Yeah, that was a big deal. And so success comes from that. Success comes from failure, right? And learning from it. Okay.

21:23

SPEAKER_00

And success comes from working together. I would say meaningful work and meaningful relationships. If you're on a mission to do something great, okay, go to Mars or whatever it is that you're going to go do together, and you have meaningful relationships, and you have radical transparency, and you know your nature, and you know how to work with others, that's the formula for success, right? [SPEAKER_01] Yeah. Another example is Dr. Dalio is when Sean came in, the notes were already printed off. There you go.

22:11

SPEAKER_00

[SPEAKER_01] I'm late. I don't have it printed, but we have a very different dynamic. But for six years, we've built one of the biggest business podcasts in the world, despite being completely different in our nature. [SPEAKER_01] So I hope your audience hears this, right? Yeah. It's pause and reflect. What are we here for? We're here for pretty much the same reason, just a little bit different settings. I'm 76. I want to pass along whatever I add to help people in that way, right? That's my goal. Okay. Your goal also is to, obviously not only your goal, but your effectiveness in being able to help people. Otherwise I wouldn't be listening. Okay.

23:01

SPEAKER_00

So I just wanted to pause on that formula. Okay. That if once you get that formula, pain plus reflection equals progress, and how do you work together and all that? Wow. And follow your nature. Can you guide us on the reflection part? Because I think everybody understands the word, but I bet we don't really talk a lot about how each individual person does it. And so are you, is writing your reflection? Do you talk to, do you have two or three people you call who tend to give you high-signal feedback or advice? What is your process to actually

23:29

SPEAKER_00

do the reflection? Pain part comes involuntarily. That hits you. When the pain comes, eventually the pain will go away, but people can skip the reflection, and they can be hung up in their pain. So you first have to make this transition. Now meditation has helped me a lot. I've done meditation, transcendental meditation, since 1969.

23:36

SPEAKER_02

[SPEAKER_00] Can you guide us on the reflection part? Because I think everybody understands the word, but I bet we don't really talk a lot about how each individual person does it. And so, is writing your reflection? Do you talk to, do you have two or three people you call who tend to give you high-signal feedback or advice? What is your process to actually

23:46

SPEAKER_00

[SPEAKER_00] do the reflection? The pain part comes involuntarily. That hits you when the pain comes. Eventually the pain will go away, but people can skip the reflection and they can be hung up in their pain. So you first have to make this transition. Now meditation has helped me a lot. I've done meditation, transcendental meditation, since 1969. Explain what that even is. I've only heard you and Jerry Seinfeld swear by transcendental meditation. What is it?

24:05

SPEAKER_00

Transcendental meditation is a very simple exercise of, you sit there calmly and you repeat a sound that is a word that is called a mantra that doesn't have any meaning. And so, let me, an example might be, oh, no. Okay. So you're sitting there and you repeat, ohm, in your head. And when you do that, you can't have thoughts because when your thoughts are in ohm, your thoughts are in ohm. And then the thoughts can't come in. And then eventually, when you get this habit down, then the ohm goes away and you go into pretty much a subconscious state, very relaxing, very calm. And so it's a real calming exercise.

24:58

SPEAKER_00

And it brings you into your subconscious mind. Okay. Your subconscious mind is really controlling you a lot, almost, right? There's a conscious mind, a logical conscious mind that you hope is logical and you're aware of. And then subconscious means below your awareness. There are all the things in your mind that influence you, your emotions, your subliminal stuff. And it goes into that subliminal stuff and it calms you down. And it's also where creativity comes from. It's like if you take a hot shower and these ideas come to you, but if you try to muscle ideas, you can't make them come. But that hot shower, that relaxation and so on, I found that very helpful.

25:39

SPEAKER_00

I know I've developed an instinct. Habit is a very important tool, if you know how to develop the right habit. So the habit means that you have an instinctual positive reaction to something. So I have a reaction, which is, okay, that's a lesson in reality. In other words, pain. Okay. So it's now like a puzzle for me. Okay. The puzzle is, how does reality work? It'll tell me something about how reality works. And I have to deal with reality to make it successful.

26:04

SPEAKER_00

And so what is my principle for dealing with that reality, to deal with it in the best possible way? Okay. That's my instinct now. So now when you've got that instinct, it's a whole different thing, right? Because you start to say, okay, there's pain and you have your curiosity. Okay. Now you take your curiosity and you say, what does that tell me about how reality works and how I should deal with reality? Okay. Okay. And if you solve that puzzle, then you will get a gem. And that gem is a principle that you can carry with you to be better. Right. And so if you start to recognize it as that, and then I do write.

26:14

SPEAKER_00

So what's that, what does that mean? Do you journal every morning, every night? No, no, no, no, no, no, no. It's just when thoughts come to me or circumstances come to me, or I'm also making decisions. I'm reflecting. And then what has happened to me is I found that all those reflections are cause-effect relationships because principles are, if this happens, what do you do? And that kind of thing. And then I put those in computer code. Okay. That's how I built Bridgewater. I built, okay, if this happens, you do that. Okay. And you put it in computer code.

26:28

SPEAKER_00

And I made them all computerized decision-making systems for markets and almost everything. And because I've done this for 35 years or something on almost everything, I've got thousands of these principles that I've written down. And they are the ways of achieving success in whatever kind of decision. If the Fed does this, or if somebody you love dies or whatever it is, okay, how do you reflect on them? What does that mean? I would recommend, I put out a journal that people can use so that they can journal their own principles and they have the reflections and so on. If they start to think that way, pain plus reflection equals that, and you reflect well.

26:49

SPEAKER_00

Then what happens in the meditation is it connects your subliminal self to your conscious. [SPEAKER_02] I'm on board with all that. I think that if I put myself in your shoes between the ages of 35 to 52, you went from nothing to the largest hedge fund in the world, which I want to hear all about. But when you're 34, 35, 36, and the first three years of starting your business anew, I would have to think, like most small business owners, you're like, I just got to pay the bills.

26:55

SPEAKER_02

[SPEAKER_00] I could always find the way to pay the bills. The question is, what was it? And I think, by the way, along those lines, that's where your priorities get tested.

26:57

SPEAKER_00

You think about what do you really want and how do you weigh one thing against another thing? Okay. I want survival and opportunity and I want to play the game. And I don't really care. I don't care much about convention. I don't care much about how I look to the outside world. I don't care about things that can inhibit maybe that choice. I think people also get stuck. They get stuck because they don't realize there are multiple possibilities. And so some people say to me, but you don't understand. I'm in this job. I don't like the job. I think my boss is a jerk and this isn't where I want to go. Okay. But they feel I have to be there. Okay.

27:00

SPEAKER_00

And the reality is if you're clever and you figure it out and whatever, and you try, there are many ways to have a really happy life. And by the way, a lot of money is not an important thing. Sometimes we get hung up on this, like it's got to be this conventional life, which is, okay, I've got to do this. Okay. Is that really what it is? Even experiment with it. Listen to this quote, Sean, that he had. He said, I cannot say that having an intense life filled with accomplishments is better than having a relaxed life with savoring. Though I can say that being strong is better than being weak and that struggling gives one strength. That was pretty cool. That's true.

27:06

SPEAKER_00

Yeah. I guess you don't have to make it to the top to be happy. And I think that's been, What's the top? You work your ass off to get a lot of money. Okay. Just think about that. Is that it? What's the money for? Money doesn't have any intrinsic value. Right. So you have to have a purpose. Why are you getting the money? What do you want to do with the money? That is so important. You better answer that question. Right.

27:09

SPEAKER_01

[SPEAKER_00] What is that going to get you? Okay. Does that get you better friends? Okay. Does it get you a better marriage, a better relationship with your kids?

27:13

SPEAKER_00

What is your definition of success?

27:16

SPEAKER_01

[SPEAKER_00] Success is you knowing your nature and then finding the best path through that nature so that you look back on that and you say, ah, that was the life I wanted to have. [SPEAKER_00] Do you think that you could answer that for yourself? [SPEAKER_00] I tried to do it. I'll read what I wrote. So when I was 27 years old, I tried to write this out because I think I had actually read your principles PDF around the same time. [SPEAKER_00] What is that going to get you? Okay. Does that get you better friends? Okay. Does it get you a better marriage, a better relationship with your kids? [SPEAKER_00] What is your definition of success?

27:27

SPEAKER_01

[SPEAKER_00] Success is you knowing your nature and then finding the best path through that nature so that you look back on that and you say, ah, that was the life I wanted to have. [SPEAKER_00] Do you think that you could answer that for yourself? [SPEAKER_00] I tried to do it. I'll read what I wrote. So when I was 27 years old, I wrote, I tried to write this out because I think I had actually read your principles PDF around the same time. [SPEAKER_00] And it made me start asking these questions because one of your core principles is figure out what you want and then understand the rules of nature.

27:37

SPEAKER_01

[SPEAKER_00] Study cause and effect to understand what patterns of behavior and actions might lead to the thing you want. [SPEAKER_00] So here's what I wrote. You can judge it. [SPEAKER_00] I said, what I want out of life. [SPEAKER_00] I said, I want to have the ability to shape my own life. [SPEAKER_02] I want to be my own biggest fan. [SPEAKER_00] I want to make adversity part of the recipe. [SPEAKER_00] I want to treat other people well. [SPEAKER_00] And I want to reread this every year, every morning.

27:53

SPEAKER_00

So I never forget what each day is for. I want to rewrite the list every year. So I see myself evolving. I want to focus on what matters. [SPEAKER_01] Number one, my loved ones, because they love me even if I don't do anything on this list. Number two, my health, because without it, I can't do anything on the list. [SPEAKER_01] Number three, my work, because it makes life fun. [SPEAKER_01] Number four, being somebody who lights up the room because it feels good to make others feel good. [SPEAKER_01] And number five, learning because it's the master key that unlocks all doors. [SPEAKER_01] And I keep going a little bit.

28:17

SPEAKER_00

[SPEAKER_01] And then I say some of the things that I'm weak at. [SPEAKER_01] I said, I want to be somebody who doesn't just want things, who makes them happen. [SPEAKER_01] I need my execution to catch up with my ideas. [SPEAKER_01] I want to be the most optimistic person you know. [SPEAKER_01] And I want to win, but not just win. [SPEAKER_01] I want to win on my terms because that's the most satisfying way to do it. [SPEAKER_01] Congratulations. [SPEAKER_01] That's fantastic. [SPEAKER_01] And this was 10 years ago. [SPEAKER_01] And then you reflect and you modify. [SPEAKER_01] Okay. [SPEAKER_01] And then, so now you know what you want.

28:58

SPEAKER_00

[SPEAKER_01] Do you change your goals every year or anything? No, it's my nature. My nature really doesn't change. My phase of life changes. Okay. So, I'm in a different phase of life.

29:20

SPEAKER_02

[SPEAKER_00] Right now, I really feel compelled to pass along everything that I have that is of value to other people. [SPEAKER_00] Right. [SPEAKER_00] Because I'm late and I'm approaching my end. [SPEAKER_00] So, that whole is my joy. [SPEAKER_00] We have different joys. [SPEAKER_00] We have different circumstances. [SPEAKER_00] In the middle part of our lives, there's work-life balance and your kids and your whatever. [SPEAKER_00] And so, these arcs of life, there's an arc of life, almost like a script. [SPEAKER_00] You know exactly, at this age, I graduate. [SPEAKER_00] And at each phase, you know what it's like. [SPEAKER_00] And so, you have that arc.

29:57

SPEAKER_02

[SPEAKER_00] But your nature doesn't change, I don't think.

29:59

[SPEAKER_00] I was listening to a podcast about you, and there was this funny story. [SPEAKER_00] I think this was when you were selling research. [SPEAKER_00] You said that you hired a guy, I forget his name, but I think he was a door-to-door Bible salesman. [SPEAKER_00] Yeah. [SPEAKER_00] And did he know anything about research or finances? [SPEAKER_00] Not much, but he was curious. [SPEAKER_00] And he was, like I say, there are three things. [SPEAKER_00] There's skills, abilities, and values. [SPEAKER_00] And most people look at skills. [SPEAKER_00] And they look at the resume to determine what skills they have.

30:31

SPEAKER_02

[SPEAKER_00] In my opinion, it's the opposite order that's most important. First, values. What are the person's values like? Then, what are their abilities? Because if you have abilities, you can change what your skills are. We're in a world now that maybe programmers are no longer going to be the most important people. And maybe all of a sudden you were growing up with, okay, man, you need to program because you're doing this. And then all of a sudden, man, that's a lousy job because something comes along, right? So, how do you adapt? What are you going after? And then the least important is the skills.

30:53

SPEAKER_02

And so, in thinking about that, what's our relationship going to be like? How do we pursue a dream? [SPEAKER_01] Is he bright? [SPEAKER_01] What are his abilities? What can we do? How do you discover? Most of your curiosity, most of everything, is in the discovery, okay?

31:09

SPEAKER_00

[SPEAKER_02] It's not in the remember-these-rules and so on. [SPEAKER_02] The future is in the discovery. [SPEAKER_02] So, that's what I'm looking for, right? [SPEAKER_02] That's what even talent identification is because talent is more important than money, okay? [SPEAKER_02] The money people are trying to find those people, okay? [SPEAKER_02] So, if you look at, okay, what did Elon Musk have? [SPEAKER_02] He didn't have money. [SPEAKER_02] And how did people make money? [SPEAKER_02] They invested in Elon Musk. [SPEAKER_02] They found him, and they invested in Elon Musk. [SPEAKER_02] Human capital versus financial capital, right? [SPEAKER_02] That's right.

32:04

SPEAKER_02

Let's talk about you when you were younger. What would people have seen in the talent identification at that phase?

32:08

SPEAKER_00

[SPEAKER_02] I think it would have been tough. [SPEAKER_02] I was a C student. [SPEAKER_02] I didn't like high school education. [SPEAKER_02] I liked markets. [SPEAKER_02] I had a passion for markets. [SPEAKER_02] I got into CWB Post College, which was LIU, on probation. [SPEAKER_02] But I had a passion. [SPEAKER_02] So, tell the story, if you can, of how you got that passion, [SPEAKER_02] how you started, you said, I love markets.

32:32

SPEAKER_01

[SPEAKER_00] Most teenagers don't know they love markets. [SPEAKER_00] I used to do odd jobs as a kid, mow lawns, shovel driveways, and then caddy. [SPEAKER_00] And so, I would caddy. [SPEAKER_00] I would walk around.

32:41

SPEAKER_00

I got $6 a bag. [SPEAKER_02] I didn't like high school education.

32:43

SPEAKER_01

[SPEAKER_02] I liked markets. [SPEAKER_02] I had a passion for markets. [SPEAKER_02] I got into CWB Post College, which was LIU on probation. [SPEAKER_02] But I had a passion. [SPEAKER_02] So tell the story, if you can, of how you got that passion, [SPEAKER_02] how you started. You said, "I love markets." [SPEAKER_00] Most teenagers don't know they love markets. [SPEAKER_00] I used to do odd jobs as a kid, mow lawns, shovel driveways, and then caddy. [SPEAKER_00] And so I would caddy. [SPEAKER_00] I would walk around. [SPEAKER_00] I got $6 a bag. [SPEAKER_00] And when I would get up to $50, I would talk to people I'm caddying with about the markets.

33:13

SPEAKER_01

[SPEAKER_00] Because everybody talked about the markets then. [SPEAKER_00] This was a time where, if you got a haircut, your barber's talking about what stocks to buy. [SPEAKER_00] So then, naturally, I took my caddy money and I put it in the markets. [SPEAKER_00] And the first stock I bought was the only company I heard of that was selling for less than $5 a share. [SPEAKER_00] And I stupidly believed that if I bought more shares, I could make more money if it went up. [SPEAKER_00] Okay. [SPEAKER_02] And so I did. [SPEAKER_02] The company was about to go bankrupt.

33:38

SPEAKER_00

Another company acquired it.

33:44

SPEAKER_02

[SPEAKER_00] It tripled in price. [SPEAKER_00] And I said, "I like this game." [SPEAKER_00] And I thought that this game must be probably an easy game. [SPEAKER_00] Because in the newspapers, the Wall Street Journal, they had all these thousands of names of stocks [SPEAKER_00] on all of those things. [SPEAKER_00] And I just figured I have to pick one or two that go up. [SPEAKER_00] There's a big selection. [SPEAKER_00] I should be able to do that. [SPEAKER_01] And then I started in the game. [SPEAKER_01] And then I realized the game is not easy.

34:20

SPEAKER_00

[SPEAKER_01] I still know the game isn't easy. [SPEAKER_01] But then I got hooked on the game. Did you have any peers at the time? Or were you an oddity? [SPEAKER_01] No, there were no kids who were doing that. [SPEAKER_01] So, books? [SPEAKER_01] Where were you getting smarter? [SPEAKER_01] How did you start? [SPEAKER_01] I remember Fortune had the Fortune 500. [SPEAKER_01] And when they had the Fortune 500, they would have little tear sheets. [SPEAKER_01] And you could say which annual report you would want. [SPEAKER_01] You would check it off and mail it in.

34:47

SPEAKER_01

And I checked off all of them. And then I'm going to lug these things to the house. And then it became my little library.

34:59

SPEAKER_02

[SPEAKER_01] And I would talk. [SPEAKER_01] And then I'd fiddle around.

35:03

SPEAKER_00

[SPEAKER_01] And that's how I did it. [SPEAKER_01] Whenever I was reading Snowball, Warren Buffett, and now I'm hearing you talk about it, I think the lucky thing, I don't know what it is, is that you found something that you liked at such a young age. [SPEAKER_01] For a lot of people I know that are like that, Bill Gates was like that. [SPEAKER_01] A lot of people are like that. [SPEAKER_01] They found something. [SPEAKER_01] And then also, learning is different. [SPEAKER_01] Learning prior to puberty is different. Or at around 12 or 13, it's like learn a language, learn something, learn a sport, and so on.

35:20

SPEAKER_00

[SPEAKER_02] But when you learn it prior to that, it almost goes into you. [SPEAKER_02] So yeah, that was part of it. [SPEAKER_02] Were you a hustler? [SPEAKER_02] Because now we see you as this guy who's very wise, he's sharing all his knowledge. [SPEAKER_02] And when I studied Buffett, it was kind of the same. [SPEAKER_02] Buffett is this charming, wise, patient guy. [SPEAKER_02] But if you read about him as a kid, he was at the horse tracks. [SPEAKER_02] He was studying betting.

35:36

SPEAKER_02

He was finding slips on the ground and cashing them in that others had overlooked. He was setting up pinball machines in barbershops and fishing golf balls out of the pond and reselling them. [SPEAKER_00] He was a hustler. [SPEAKER_00] Were you a hustler as well? [SPEAKER_00] No, on the golf course that I was at, they would hit them into the pond. [SPEAKER_00] And I could walk around in the pond and feel them. [SPEAKER_00] And then I would pick up the golf balls and sell them.

35:52

SPEAKER_00

That's funny. I didn't know he did that. Sam called you a late bloomer. And I find that term interesting. You don't know this about Sam, but he really wanted to be successful.

36:00

SPEAKER_02

[SPEAKER_00] He studied a bunch of successful people. [SPEAKER_00] He had a spreadsheet he shared with me.

36:05

SPEAKER_00

[SPEAKER_01] We met when he was, we were 24 years old, maybe. [SPEAKER_01] He shared this thing of when did our heroes make it? [SPEAKER_01] And he showed that he had a timeline for Bezos, for Jack Dorsey, for all the kind of tech entrepreneurs that we were admiring. [SPEAKER_02] When did they start? [SPEAKER_02] How many years did it take for them to actually win? And he had mapped them all out. I had broken it down into their apprenticeship. So, to learn, and then starting their first hit. And he reverse engineered and almost hit it exactly. He's like, "By 30, I'm going to have this many millions in the bank. And I know today I'm here, but I will be here."

36:33

SPEAKER_00

And that's almost the median. Okay. Two things. First of all, I think you should publish that. Okay. And I suspect it has a big range around it. Okay. I was thinking Ray Kroc, McDonald's. He was like 55 or something. [SPEAKER_02] Okay. [SPEAKER_02] So it's a big range, but they certainly are driven. [SPEAKER_02] Yeah. [SPEAKER_02] When I was younger, I met someone who's actually my partner now, and he was successful at a very young age. [SPEAKER_02] And he was probably 15 years older than me. [SPEAKER_02] And I was like, I didn't grow up with a lot of money. [SPEAKER_02] And I was like, "I want to be free. I want to feel, I want to, I want to, I don't know.

37:12

SPEAKER_00

I want to feel free." And I was like, "What's the number I need?" And he said, "$20 million." So I said, "All right, that's the number." [SPEAKER_02] I have to make $20 million by the age of 30. [SPEAKER_02] And it was definitely money. [SPEAKER_02] And he was probably 15 years older than me. [SPEAKER_02] And I was, I didn't grow up with a lot of money. [SPEAKER_02] And I was, I want to be free. I want to feel, I want to, I want to, I don't know. I want to feel free. And I was, what's the number I need? And he said, $20 million. So I said, all right, that's the number. [SPEAKER_02] I have to make $20 million by the age of 30.

37:56

SPEAKER_01

[SPEAKER_02] And it was definitely money. [SPEAKER_00] I was money-oriented, and it worked.

38:03

SPEAKER_00

I got 31, but it was so, I felt it was so easy to have a goal and then reverse engineer and back into it. Because then all I had to think was step one, right? Step two, step three. Great. And that was smart because 20 million, right? We'll do it. Okay. And do it. And you also thought being free. Yeah. And then you can go for it. That was what I was trying to tell Elon. And he said, no, I don't need it. Okay. Don't need the safety net. Because if I'm listening to this, I'm hearing you say, I just need a nice bed to sleep in. I want my freedom. I want my kids to be going to a good public school, all of that. At the same time, you've made $20 billion. Right.

39:15

SPEAKER_00

So, so, so somebody listening could say, well, at some point, did he just way overshoot his, his, his, his needs?

39:19

SPEAKER_01

[SPEAKER_00] I wasn't shooting for that. [SPEAKER_00] Yeah. [SPEAKER_00] It's a byproduct.

39:24

SPEAKER_00

I played a game that I love that pays well if you play it well. Right. I'm very passionate with personal finances, and particularly amongst the average Joe, of don't buy shit you don't need, which people don't tend to follow. Or spend less than you make, which people don't tend to follow. Do you still do anything in your life that is a pretty frugal thing? Oh yeah. I, I, I, I instinctively can't waste. I'm reluctant to fly a private plane. I'm, I don't like expensive watches. I heard someone make a joke that most of your suits are from Banana Republic or something like that. It's something like that. Where do you spend well? Right. So spending is also a skill.

40:33

SPEAKER_00

I spend money on the things that I enjoy. I love boats. I have a house on the water. I don't have a yacht, but I have an ocean exploration ship that I'm, I'm very excited about, that I give to scientists, and I'll tag along. I cannot do a normal yacht. [SPEAKER_01] Okay. [SPEAKER_01] But when I'm, but when they're doing this ocean exploration, Jacques Cousteau had an effect on me. When I was growing up, I watched him dive and do exploration. And then my son, I have a son whom I took diving, and they learned how to dive. And he then went to work at National Geographic as a filmmaker and so on. And then we have this common passion of ocean exploration.

41:09

SPEAKER_01

[SPEAKER_00] So to create a ship that's a laboratory, that they do research and so on and so forth, that's a great joy. [SPEAKER_00] But I couldn't be, I'm listening. [SPEAKER_00] I'm not against anybody doing any of these things. [SPEAKER_00] I just want to be clear.

41:16

SPEAKER_00

Sure.

41:16

SPEAKER_01

[SPEAKER_00] It's not like, I think whatever brings you joy, it's okay. [SPEAKER_00] It's like that. [SPEAKER_00] Right.

41:23

SPEAKER_00

And we're uncomfortable. My members, my family, my wife would not be comfortable with much jewelry or anything that would be fancy jewelry or something. That's just how we grew up. And the kids are the same thing. My kids have grown up. And I would say whatever you enjoy, it was like, if you enjoy the threads and the beauty or the watch, and you really are enjoying it, that's fantastic. I know you're into the ocean. Do you believe in aliens? And do you have access and any cool insight into things like that? [SPEAKER_01] I have no knowledge of aliens. [SPEAKER_01] Oh, come on. [SPEAKER_01] What do you believe? What do I believe? I have no beliefs that are just beliefs.

42:13

SPEAKER_00

So people, I've heard different people saying things, and here's what I believe, which is there's the enormity of our galaxy. There are something like 100 billion solar systems, okay? And in the universe, there is something like 100 billion galaxies. And so there are a lot of combinations out there. So I would have to believe that the probabilities of there being life in other forms and so on are great, okay, out there. However, I've also heard scientists say that that's much smaller than one would think about those things. But I haven't gotten into the subject.

42:32

SPEAKER_02

[SPEAKER_00] All I'm giving you is what I heard about those things. [SPEAKER_00] And it's not a subject that I've spent much time with. [SPEAKER_00] Right. [SPEAKER_00] Yeah, I think you had a phrase like probability-weighted beliefs or something like that, right? [SPEAKER_00] Yeah. [SPEAKER_00] It's like not all beliefs are obviously equal. [SPEAKER_00] Some you have high conviction in, and some you have much lower, based on an analysis or an assessment. [SPEAKER_00] It's just my way, and also markets teach you this way, right? [SPEAKER_00] What is expected value? [SPEAKER_00] How to go? [SPEAKER_00] Humility. [SPEAKER_00] Okay.

43:07

SPEAKER_02

[SPEAKER_00] If you have an opinion, what's the opinion worth? [SPEAKER_00] Hey, how much time, we've spent almost all of this time talking about frameworks for thinking. [SPEAKER_00] And very little of it was about business or finances. [SPEAKER_00] How much time of your day do you spend thinking about some of this high-level stuff versus actually picking or deciding, making a decision on a trade? [SPEAKER_01] They're connected to me. [SPEAKER_01] Okay. [SPEAKER_01] I'm a global macro investor. [SPEAKER_01] Okay. [SPEAKER_00] Okay. [SPEAKER_01] Which is, by the way, I think it's the best kind of investing because it brings you into, okay, global.

43:34

SPEAKER_02

[SPEAKER_01] That's cool. [SPEAKER_00] Okay. [SPEAKER_00] If you have an opinion, what's the opinion worth? [SPEAKER_00] Hey, how much time have we spent almost all of this time talking about frameworks for thinking. [SPEAKER_00] And very little of it was about business or finances. [SPEAKER_00] How much time of your day do you spend thinking about some of this high-level stuff versus actually picking or deciding, making a decision on a trade? [SPEAKER_01] They're connected to me. [SPEAKER_01] Okay.

43:56

SPEAKER_00

[SPEAKER_01] I'm a global macro investor. [SPEAKER_01] Okay. Okay. [SPEAKER_01] Which is, by the way, I think it's the best kind of investing because it brings you into, okay, global. [SPEAKER_01] That's cool. [SPEAKER_01] You deal with the whole world. Macro. That means big stuff, important stuff. Okay. And then how do you place your bets? And so it's connected to all of this stuff. It's connected to the politics and the geopolitics and all of that. And it's connected to history.

44:45

SPEAKER_00

I did a study of the last 500 years of how things are working only because I learned in my life that if I haven't seen something before that didn't happen to me in my lifetime, I should see whether it happened before my lifetime, and so on. And then when I did that, because there are these big cycles, there are orders, right? We'll call it a monetary order. There is a political order. Okay. Political and social order. There is a geopolitical order. In other words, systems of how they work, they all break down. Okay. There's throughout history. You read history, but they happen in these big cycles, and they break down for the same reasons.

44:56

SPEAKER_01

[SPEAKER_00] All the time. [SPEAKER_00] They break down for the same reasons. [SPEAKER_00] So as a global macro investor, in a sense, I'm connected to that. [SPEAKER_02] So the book that I ended up writing, which is A Changing World Order, I plot things. [SPEAKER_02] And so you see them on graphs, and you can see these things happening.

45:11

SPEAKER_00

[SPEAKER_02] Simple measures of financial health and how does that all work, and what are the consequences when you see that. [SPEAKER_02] So, yeah, I'm into that. [SPEAKER_02] So it's connected. [SPEAKER_02] When you said, do I see the big stuff? [SPEAKER_02] Okay. [SPEAKER_02] Yeah, the big stuff matters a lot, right? [SPEAKER_02] But you see it in these. [SPEAKER_02] You realize that a lot of people are looking at the news. [SPEAKER_02] The news lasts a minute. [SPEAKER_02] Okay. [SPEAKER_02] Can you put the news in the context of what's happening? [SPEAKER_02] Watch what's happening. [SPEAKER_02] Just let's take a look at those things.

45:40

SPEAKER_00

[SPEAKER_02] You want to take a minute on that? [SPEAKER_02] Yeah, yeah. [SPEAKER_02] Okay. [SPEAKER_02] Okay. [SPEAKER_02] So one of the things that I learned about is that there are five big forces that interact over a period of time to determine that. [SPEAKER_02] And that is the debt money economic force. [SPEAKER_02] Okay. [SPEAKER_02] And there is a big debt cycle. [SPEAKER_02] Okay. [SPEAKER_02] So it's, and it's a very simple thing. [SPEAKER_02] If you acquire more debt than you're earning over that, your debt service payments will squeeze out your spending. [SPEAKER_02] Okay. [SPEAKER_02] [SPEAKER_02] They grow.

46:24

SPEAKER_00

[SPEAKER_02] And that is in your circulatory system. That's like plaque being built up in your circulatory system. And when that happens and it becomes painful, you have a debt restructuring. And also one man's debts are another man's assets. So if you're producing a lot of debt, let's say government's running a large budget deficit, that means it has to sell bonds. And then who are the buyers of the bonds?

46:42

SPEAKER_02

[SPEAKER_00] And how does that work? [SPEAKER_00] So it has a mechanical part of it. [SPEAKER_00] That's one of the forces. [SPEAKER_00] The other force is wealth and values differences.

46:44

SPEAKER_00

So there's the political force, which has wealth gaps, values gaps. As they become greater, that's a greater threat to democracy. That's a greater threat to, in other words, when you get to, do you have irreconcilable differences? So you're not going to compromise and you're not going to even follow the system. That's a risk. Okay.

47:12

SPEAKER_02

[SPEAKER_00] That's a risk now. [SPEAKER_00] Okay. [SPEAKER_00] We have the first risk. [SPEAKER_00] We have the second risk.

47:33

SPEAKER_00

Right. Okay. Check, check. Okay. Third risk is the geopolitical risk. [SPEAKER_01] So there's orders, right? [SPEAKER_01] The way the order works is who's in control? [SPEAKER_01] What are the rules of the game for the world? [SPEAKER_01] And so the way it works is you have a war. [SPEAKER_01] The winner of the war sets the rules, and we call that the order. 1945, we ended the war. America sets the rules, and so on. And we created what was a multilateral type of system. Almost representative. The United Nations, the World Health Organization, the World Trade Organization. So all those world organizations are out the picture. We no longer have a multilateral world order.

48:41

SPEAKER_00

Okay. So how do you resolve differences? You fight. Okay. You're going to have conflict. How do you get past the disagreement? There's no court you go to. You can't do it that. Okay.

49:30

SPEAKER_01

[SPEAKER_00] So now you have those three things. [SPEAKER_00] Okay.

49:44

SPEAKER_02

[SPEAKER_00] That's happening. [SPEAKER_00] Number four force always through nature is nature in particular. [SPEAKER_00] Droughts, floods, and pandemics historically have killed more people than wars. [SPEAKER_00] And they are a big force as they come up.

49:58

SPEAKER_00

And number five, all through history, is man's inventiveness, particularly of new technologies. And that raises living standards. And so if you were to see life expectancy always rises, productivity per capita GDP by all measures, as we learn more, we have that. And so there's the interaction of those five forces. Those five forces, you can measure them, and you can measure their interactiveness. And that is what is now happening. So if you know those cause-effect relationships, I think they're connected. I've read something that your family office, I don't know if this is right. You can correct the record.

50:45

SPEAKER_01

[SPEAKER_00] And number five, all through history, is man's inventiveness, particularly of new technologies.

50:54

SPEAKER_00

And that raises living standards. And so, if you were to see, life expectancy always rises, productivity, per capita GDP, by all measures, as we learn more, we have that. And so there's the interaction of those five forces. Those five forces, you can measure them, and you can measure their interactiveness. And that is what is now happening. So if you know those cause-effect relationships, I think they're connected. I've read something that your family office, I don't know if this is right.

51:23

SPEAKER_02

[SPEAKER_00] You can correct the record. [SPEAKER_00] Your family office has 70% or 75% in gold ETFs right now. No, no, no, no. Is that wrong? That headline is wrong? Totally wrong. [SPEAKER_00] Totally wrong. [SPEAKER_00] I believe that, from an investor's point of view, they should, it depends what their portfolio is constructed in, [SPEAKER_00] they should have between 5% and 15% of a portfolio in getting that 15 uncorrelated difference. [SPEAKER_00] They should have something like that.

52:19

SPEAKER_00

They should have it overweighted if they're tactically doing it. It tactically means, let's say there's a certain time to own it and a certain time not to own it. [SPEAKER_02] A certain time to own it is particularly when there's a debt crisis and the government is flooding with money.

52:37

SPEAKER_02

That's an ideal time to own it. So there's a timing question. So I believe that one should create a strategic asset allocation mix, meaning, what is my best balanced portfolio if I have no opinions? [SPEAKER_00] It's not going to be cash, because cash always is the worst performing over a period of time. [SPEAKER_00] People think it's the safest, it's the surest to do poorly over the longest period of time. [SPEAKER_00] High certainty, low performance. [SPEAKER_00] So what you want to have, the best thing to do is have a well-balanced portfolio of assets because you can lower their risk through diversification. [SPEAKER_00] Because if you have one, it goes like this.

53:04

[SPEAKER_00] But if you have another that does the opposite with it, you could have that. [SPEAKER_00] So there's a strategic asset allocation mix, and then you make your tactical bets relative to that, and so on. [SPEAKER_00] But here's what I would describe. [SPEAKER_00] The mechanics, let's say. [SPEAKER_00] There is such a thing as bubbles. [SPEAKER_00] What is a bubble? [SPEAKER_00] A bubble is not whether the stock will pay off in the long run because, in bubbles, even the most successful companies go down 80% or something along those lines. [SPEAKER_00] So typically, when there's borrowing of money or whatever, and there's an increase in wealth relative to money.

53:45

SPEAKER_01

[SPEAKER_00] Okay.

53:48

SPEAKER_02

[SPEAKER_00] Wealth and money are two different things. [SPEAKER_00] Okay. [SPEAKER_00] Wealth is, you can make up wealth.

53:59

SPEAKER_00

If you have a $50 million offering on a billion-dollar valuation, then all of a sudden you're called a billionaire. And it was $50 million, and then the world has a billion dollars in wealth. But what happens is, as wealth builds up, you can't spend wealth. You have to sell wealth in order to get money because you can only spend money. And so when wealth builds up a lot, then there comes the need for money. Now, what creates the need for money? The need for money often is that they borrowed the money to buy the wealth, to invest in the wealth, and then maybe interest rates go up. And then all of a sudden, they have to pay their debt back.

54:48

SPEAKER_00

And so where do they get that money from? [SPEAKER_01] They sell the wealth in order to get the money, and so there's this dynamic that's taking place.

54:56

SPEAKER_01

And then it has another number of ingredients, like it's all the rage to buy it, and everybody buys it. [SPEAKER_02] Everybody buys maybe more than they should because they don't diversify. [SPEAKER_02] And what happens is it's all the rage, and so is it logical? [SPEAKER_02] And there are these elements that create a bubble. [SPEAKER_02] Okay. [SPEAKER_00] There are, right now, on that scale, I have a bubble gauge. [SPEAKER_00] I measure all these things, and I have this bubble gauge going back across countries to about 1900, and so I can see where they are. [SPEAKER_00] And these, by the way, typically take place quite often when there are great new technologies.

56:02

SPEAKER_01

[SPEAKER_00] A reason to be exuberant. [SPEAKER_00] The reason to be exuberant and to better, and people confuse investing in, they say, [SPEAKER_00] I believe that technology is going to be great and revolutionary, and it is. [SPEAKER_00] Okay. [SPEAKER_00] But that doesn't mean the stock will be great. [SPEAKER_00] There's a lot of reasons that the stock could be too high, and competitors come in, and there's a Google and there's a Yahoo. [SPEAKER_00] So what's the bubble gauge saying right now? So the bubble gauge is saying it's about 75% toward where it was both in 2000 and 1929.

56:38

SPEAKER_00

So it's pretty high up there. Okay. In Japan, in its bubble in 1990, it got higher even than those cases. So it's high. But people pay too much attention. Let's say if I just did the bubble gauge, I could tell you probably with good probability that it won't be good for the next. I couldn't tell you whether it's going to be three years or 10 years, but it won't be a good investment. But it won't tell you timing. [SPEAKER_02] Timing, you need the pricking the bubble. [SPEAKER_02] Okay.

57:03

SPEAKER_02

So what causes it to prick the bubble? So if you've got a bubble and then you see, okay, here are the things that prick the bubble, then you've got a good combination of things to do your market timing because the timing is going to be on the pricking of the bubble. The pricking of the bubble typically is creating the need for the cash, for converting that wealth into cash for one reason or another. Quite often, the most typical thing is tightening monetary policy. Okay. So what you have typically is that when stocks go up and bonds go down, then what you have is the future expected return of equities becomes low relative to interest rates.

57:33

SPEAKER_02

And when interest rates go up, let's say a tightening of monetary policy, that's a classic dynamic. Other things like wealth taxes could do it.

57:43

SPEAKER_00

So in other words, for example, if you say you're going to have to pay wealth tax, then whoever has the wealth is going to have to sell some of the wealth to get the money in order to be able to pay. So looking out for those things in terms of the timing is my machine. Take that for whatever it's worth. [SPEAKER_02] I don't want people to trade on this, and so on.

58:25

SPEAKER_01

[SPEAKER_02] But I'm just trying to answer the question that there are mechanics. [SPEAKER_02] Okay. [SPEAKER_02] Everything that happens has causes that make it happen. [SPEAKER_02] And so you understand the mechanics of the cause-effect relationships.

58:48

SPEAKER_00

[SPEAKER_02] You can see all this and understand it that way. So in other words, for example, if you say you're going to have to pay wealth tax, then whoever has the wealth is going to have to sell some of the wealth to get the money in order to be able to pay. So looking out for those things in terms of the timing is my machine. Take that for whatever it's worth.

59:06

SPEAKER_01

[SPEAKER_02] I don't want people to trade on this and so on.

59:09

SPEAKER_02

But I'm just trying to answer the question that there are mechanics. Okay. Everything that happens has causes that make it happen. And so, if you understand the mechanics of the cause-effect relationships, you can see all this and understand it that way.

59:21

SPEAKER_00

[SPEAKER_02] Is Bridgewater the biggest hedge fund because you had the best performance? [SPEAKER_02] Is it the biggest because you were the best at marketing? [SPEAKER_02] Why did it become the biggest? [SPEAKER_02] It became the biggest hedge fund because we most consistently made excellent returns with minimal risk. [SPEAKER_02] And we were uncorrelated with the stock market or any other market. [SPEAKER_02] That was the main thing. [SPEAKER_02] It made, I think, 11.8% a year for something like 31 years when I did it. The worst down in a year was 2,000 because of COVID, and we didn't know how to deal with COVID. [SPEAKER_01] Well, that was down through about 13.

1:00:07

SPEAKER_00

[SPEAKER_01] The next two times it was down 2%, okay? [SPEAKER_01] And that was not correlated with anything. [SPEAKER_02] The losses. [SPEAKER_02] You lose 50%, you have to have 100% to make money. [SPEAKER_02] And so the compounded effect of that, and it was comfortable, so that's why. Out of the 30 years, how many did you lose?

1:00:26

SPEAKER_00

I think it was 3%, 3%, 3%, 4%, whatever, but not significant.

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