[00:02:11] Intro: You are 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.

[00:02:31] William Green: Hi folks. I am absolutely delighted to welcome today’s guest, Ray Dalio, who is one of the most successful investors of all time. Ray, it’s lovely to see you again. Thank you so much for joining us.

[00:02:41] Ray Dalio: I’m lucky to be here.

[00:02:42] William Green: I’ve read your new book Principles: Your Guided Journal, which I have here twice in the last few days, and it’s really terrific and I’ve found it incredibly helpful and thought-provoking.

[00:02:53] William Green: And I think anybody who reads it and really engages with it seriously is going to find that it [00:03:00] 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 is really good.

[00:03:09] Ray Dalio: Well, it’s really a guided journal to help people write their principles.

[00:03:14] William Green: Which we try to avoid, right?

[00:03:15] William Green: We don’t- we’d much rather use yours and have you do the thinking for us.

[00:03:20] Ray Dalio: 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.

[00:03:34] Ray Dalio: One of those was, Meditation that gave me the equanimity, the calmness, 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.

[00:03:56] Ray Dalio: These things happen over and over again, and I would 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, and from doing that, a number of people found them impactful.

[00:04:16] Ray Dalio: 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.

[00:04:29] William Green: [00:04:30] And you mentioned early in the book that you, you say, this principled approach is the reason for whatever success Bridgewater and I have had.

[00:04:37] William Green: And you say we can all learn to follow the approach, but you also talk slightly, briefly, and per functionally about how you stumbled upon this approach 40 years ago. And I just wanted to dig into that a little bit. What was, was this the disaster back in 1982, that that led you to think about principles for the first time?

[00:04:56] Ray Dalio: Yes and no. What, what I discovered-

[00:04:59] William Green: And maybe you can explain what happened. So to fill in our listeners, yeah.

[00:05:03] Ray Dalio: What happened is I found that I needed to write down my criteria and test them. So I started with one in the markets. And then because I, you know, it’s tough to wrestle all in your head with everything.

[00:05:22] Ray Dalio: 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’ve 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.

[00:05:44] Ray Dalio: I could have the computer help me, I could be understood by people I was with. We could debate the criteria rather than just screaming our conclusions at each other. And that then led me to do the same thing in when I am managing [00:06:00] the company. Okay, I am having a company. The people you get it grows, you know, from none to 1500 people.

[00:06:09] Ray Dalio: And you know, how do we communicate how we do it? How do you have an idea 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.

[00:06:30] Ray Dalio: If I have a child, if I have everything, this, I’m not the first to do it. And it has been going on and on. So to think I, the way I look at it is everything is another one of those, like a species. What one of those, or what species is it and how does it work and how do I handle that species? Like a doctor having many cases.

[00:06:54] Ray Dalio: So a series of things. First, the markets, then running the business then and carrying it forward to life, that reflection. And so that’s what I want to pass along to people. You know, it the power, the enormous power that when you are thinking just to write them down. And I think like I am happy that my grandchildren will be able to get my advice and other people can get my advice and think for themselves.

[00:07:22] Ray Dalio: And so when you think there are so many successful people in the world, while whatever they’re successful at, they must have [00:07:30] 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.

[00:07:44] Ray Dalio: And I’m going to have them write down their principles for dealing with those things. Then it could be for anything dealing with a medical condition, it could be dealing for with anything. And then you could just call it up and you could say, listen, I’m dealing with this subject. What are the, you could vote up what the best principles are and you could also go to you know, what are this person’s principles, bill Gates’ principles or what 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.

[00:08:19] Ray Dalio: So that’s the continuum. You know, I just found out that it works. I’ve created this journal and that it’s a guided journal to self-discovery. As, you know, the, there are the various stages in it that are helpful. So it, it, it started, you know, like, what is my rule for the markets? And you build one by one and then it’s evolved into this.

[00:08:40] William Green: So the book is built around five exercises that, that I think will help people to create their own principles for work and life. And, and I want to go through them in some detail, particularly the, the first four, and then we will come to the last one later because it’s about the phase of life that you are in and figuring out what phase of life, we are in.

[00:08:58] William Green: It all really starts with the [00:09:00] adage that you need to know yourself, that to know your nature is critical, so you can match it up with suitable parts. And you write, I think in the very last paragraph of the book, something that I think is it, it sorts of took me aback and I started to think, God, I, I have actually got to internalize this.

[00:09:14] William Green: You, you wrote, life is largely a journey to discover one’s nature and to find pods that suit one’s nature, which strikes me as a really deep truth. Can, can you, can you talk about this, IM importance of, of the first step really of self-discovery, of figuring out your own nature and then finding pods that actually suit your nature.

[00:09:36] Ray Dalio: Yes, you wear English accent. I just want to make it clear that that word is paths in, in Thai American . Yes, sorry about that. But that is right. Find your nature, matching your nature with the paths that suits your nature. That is, that is a discovery process.

[00:09:54] William Green: It sounds better in an English accent. Ray, if you want me to narrate your next book, just

[00:09:58] Ray Dalio: No, no, no. I’m sure they wouldn’t understand me and make fun of me if I was in the UK, but I right. We are born with nature and certain nature and then our environments give us a certain preferences, a certain personality, things that we want. And I have seen that through running my company and that is also why I created this Principle You test that is available to everybody free.

[00:10:25] Ray Dalio: So it’s like a half hour test. You answer questions. [00:10:30] 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.

[00:10:46] Ray Dalio: I can, you know, enumerate them. Somebody’s a big picture, adventurer, kind of thinking 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, you know, a great path for me. And that’s the, that’s, that’s the exercise.

[00:11:12] Ray Dalio: So the first. Is that exercise you not only take the test that that gives you, and it will, it will describe you. Almost everybody who has 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.

[00:11:32] William Green: You did many different personality assessment tests yourself and obviously with people like Adam Grant, look, oh, Adam Grant, I should say . you helped to develop this test. The principles you assessment, which I will 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?

[00:11:53] William Green: And then more importantly, perhaps what, what workarounds did you come up with to [00:12:00] really compensate for or hedge against those then, the weaknesses that you found? So

[00:12:08] Ray Dalio: I’m in personality test. I’m what’s called a shaper, which is and then there’s other parts on an adventure and so on. But I’m 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.

[00:12:25] Ray Dalio: 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, 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.

[00:12:50] Ray Dalio: 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 Musk, bill Gates, Reed Hastings, who didn’t Netflix Mohamed Eunice, who it was the received at the Nobel Peace, the prize, the Nobel Prize for inventing so many different things.

[00:13:22] Ray Dalio: Yes. Micro, so many different leaders. And I gave them the personality test and 0.8% of them, they were all the [00:13:30] 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, and that means like meticulous patient , reliable of course in people. There are, in the people’s nature there are values, abilities and skills, and there are different things. So you have to know what they are, and Val match them up.

[00:14:07] William Green: You mentioned this whole issue of values and motivations in some depths, the, the, the, the values that drive us, I guess, and, and you listed a dozen or so of them in the book and, 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.

[00:14:26] William Green: 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, A, what drives you most? And, and B, how has that changed with age now that you are 73?

[00:14:47] Ray Dalio: Yeah, so that exercise lists all the those and, and, and, and Samora, I think. And then what you are supposed to do is you pick the three most important and then you pick the three least important, [00:15:00] and that helps you to make that focus for me, like I say for me it is me, meaningful work and meaningful relationships.

[00:15:09] Ray Dalio: And I’m I am a shaper, meaning I like to visualize things and build them out. And so those are, I like adventure, I like ambiguity, I like differences. I like going too far away on that unusual places with un far away unusual places. I’ve, I’ve always had those preferences and that’s, that’s always been in me.

[00:15:34] Ray Dalio: And then my by my nature, I just happen to find a way to do that.

[00:15:40] William Green: 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, you write at one point that your, your goal in creating the journal is to help you convert your experiences into reflections about how reality works and principles for dealing with your realities.

[00:16:04] William Green: 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, 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 [00:16:30] ended up borrowing foreground from your father.

[00:16:33] William Green: When you think of that process, in that case, how you went through this process of, of reflection on what went wrong, what happened, what flaws of yours, this exposed, or what misperceptions of yours and, and how you, how you develop principles based on that. How, how would that be a good microcosm of what we should do when we screw up?

[00:16:55] Ray Dalio: Oh, that’s, it was so good. It was such a painful experience, I think, and, and then I really learned pain plus reflection equals progress. That is one of the principles. I learned that every time I have an encounter that it’s like a puzzle 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 in a learning that would improve my life.

[00:17:29] Ray Dalio: And so in that particular case, I learned to fear and deal well with the possibility of being wrong. I, it gave me a humility I needed to balance with my audacity. In other words, it made me think, how do I know on Bright? 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.

[00:17:59] Ray Dalio: [00:18:00] And it made me learn really how to diversify my bets so that I could do by diversifying my bets, I could radically reduce my risk without re reducing my returns. And it let me re also reflect on life. Like I was at a juncture, I was broke and I, you know, it was, do I go get a, 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?

[00:18:31] Ray Dalio: 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 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?

[00:18:55] Ray Dalio: Am I going to live this, this safe life or, 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.

[00:19:16] Ray Dalio: 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 or being on the mission with those people, even through the ups [00:19:30] and downs and the threats was rewarding. That all came from reflections of that terrible mistake, that terrible mistake.

[00:19:39] Ray Dalio: We learn a lot from pain, you know, life I think is, it’s almost a trick. 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.

[00:20:02] Ray Dalio: You eat the, you know, the tasty stuff is the stuff that is not probably good for you. The exercise that might be painful is the 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 is a trick. Can you do the things that are really good for you? . And so those kinds of reflections I think we are very powerful and our experience really brought a lot of those.

[00:20:31] Ray Dalio: And from those lessons that I learned, that was the bottom. In other words, from that point, while there have been some ups and downs, it was almost totally up all, almost all the way there have, of course, twists and turns and bumps and personal things. Of course, terrible personal things that have happened.

[00:20:50] Ray Dalio: 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, and [00:21:00] whatever, and, and how do you approach that? All of those reflections, I’ve learned a lot from those reflections. And so it’s that, you know, that instance, but you know many since.

[00:21:12] William Green: It seems also that, 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 this is painful. What, what’s it, what’s this? A cue to tell me?

[00:21:29] Ray Dalio: 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.

[00:21:40] Ray Dalio: That’s so stupid. Hmm. 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 is not nearly as painful. So what is it? The pain, the most of the pain goes away pretty quickly or diminishes very quickly.

[00:22:07] Ray Dalio: The worst things, you know, they can ache or something, but you know, they’ll poly. And so what do you do? Because that, it is like the serenity prayer. God, give me the serenity to accept that which I can’t control and gimme the power to control that which I can, and wisdom to tell the difference or said differently.

[00:22:27] Ray Dalio: Do the best you can and then e [00:22:30] 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 is why I did the journal.

[00:22:42] William Green: Yeah, and it’s a, and it’s a, 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 to I, I remember a, a great investor in Canada, Francis Chu once telling me that he would think of himself in the third person when he was investing.

[00:23:00] William Green: It’s such an interesting trick. [Crosstalk]

[00:23:02] Ray Dalio: Can, right, can you talk about that?

[00:23:03] Ray Dalio: I t’s it, yes. Yes. It, 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 is not always me as being the star that’s not going to get you where you want.

[00:23:29] Ray Dalio: It is, it’s not around me. It is around, okay. You know, who was, where this best idea come from and what, what, you know? So, and that’s what it’s like going above it. How does the world work? How does it operate? I am looking down at me in that world and others in the world, and what are the interactions like?

[00:23:51] William Green: 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.[00:24:00]

[00:24:00] Ray Dalio: Well, first of all, I want to be clear. I am very emotional. I think the most important things in life are, are things like, love you, you know the emotions, the inspiration, excitement. Okay. What is it about? I mean, I, I think that those are important what I do, but I’ll an answer your question. What, but what I do is when I, I just navigate it and no, it was probably brought around by some, to some extent.

[00:24:31] Ray Dalio: 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. And then that has led me to probably I have a very good conceptual memory.

[00:24:52] Ray Dalio: 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 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?

[00:25:15] Ray Dalio: Okay. No, I, I did not like that. I’m blaming the stock market for going down. 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 [00:25:30] feedback. I, I think by the way, life is more like a video game than it is like stool.

[00:25:34] Ray Dalio: In other words, you’re, you’re going out there, you encounter these things, you learn and so on, rather than you sit there and remember what you’re taught. So I had, I, I had those experiences and then I think I, 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 nine, something like 18 or 19.

[00:25:57] Ray Dalio: And I learned to meditate and that had that. So I think I’ve encountered my realities from an early age. I, I, and I learned really, it’s up to me to deal with reality. There is no excuses. And then the meditation, I think, has helped me go above it. And then the writing down these principles is helped me.

[00:26:18] William Green: 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.

[00:26:25] William Green: I mean, what, what, what, what made it so helpful to you as part of this process of detaching from the experience? So you could see reality more clearly.

[00:26:35] Ray Dalio: 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, they, 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 in slow motion [00:27:00] that this is coming at you and they calmly deal with it.

[00:27:02] Ray Dalio: It is a little bit like that. It does that because what you do is the 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 and, and, you know, it’s emotional, but it, you’re not conscious.

[00:27:23] Ray Dalio: They don’t give you the messages. You know, Freud discovered that you’re trying to figure out, you know, what does your mug conscience mind thing? And so because you go down into that and you are there and you connect it and you have that equanimity, it helps to give that kind of ninja like equanimity.

[00:27:41] Ray Dalio: That’s, that’s, that’s how it works. That’s how it, I’ve experienced it.

[00:27:46] William Green: I, I’m pretty obsessed with meditation though. I, I do not do transcendental meditation. I do this kind of I, I, I guess I follow a Tibetan Buddhist teacher who I, I like, who had on the podcast. It’s remarkable if people want to check that out.

[00:27:58] William Green: But I, I, I wanted to get a sense for, for listeners who, presumably, many of our listeners are pretty busy, pretty, pretty intense people. They’re driven, they want to make money, they want to be more successful. They, they have, in many cases families that they are juggling. How, how have you found it possible for the people you work with at Bridgewater and for yourself?

[00:28:20] William Green: How has it been possible for that sort of person to weave meditation into their life so that they give themselves po permission to sit quietly, [00:28:30] that they, because it’s so antithetical in a way to, to the whole business of getting and chasing and trying to achieve something.

[00:28:38] Ray Dalio: Well, I tell people like, if you have a really busy day, you need to meditate more.

[00:28:43] Ray Dalio: Because what happens is it’s not really that much time, right? I mean, and, and, and it puts you in that position that everything is easier and better. So you make better decisions, you can do more. And it also does not produce stress. It will relieve, relieve stress. So it’s, 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.

[00:29:19] Ray Dalio: What I mean is as I explained to people, when you sit down and you meditate, okay, make it 10 minutes. , I don’t know, do it 10 minutes rather than, you know, 20 minutes. Okay, but give, do it 10 minutes. What they find in that experience is, in the early stages, their thoughts are running through their mind. Can I get up and go?

[00:29:42] Ray Dalio: 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 you do, [00:30:00] then you encounter this, you know, pleasurable experience.

[00:30:03] Ray Dalio: It is almost, well, you’re a meditator, so you, you understand that, ah, it’s pleasurable and so on. And you start to see things very differently. It is almost like there’s this world of everything’s out there. Oh my God, it is such a world of everything. And then when you go into this other world, the, it’s like going into the void and there.

[00:30:27] Ray Dalio: Nothing. But that is such an enormous world. It is almost like it’s as enormous as the world of everything. And it’s, it’s a wonderful place to you know, to be. So I try to explain to people, and it invariably they get it once they can get past the impatience and, and you know, probably, I, I know that in, I go in a day and I could tell the difference of how I feel.

[00:30:56] Ray Dalio: 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 an almost a different person.

[00:31:06] William Green: Hmm. And do you do it twice a day or once a day?

[00:31:09] Ray Dalio: Most days. Most days I will do it twice a day, but it is but I don’t feel compelled. Like I have to stick to some schedule.

[00:31:19] Ray Dalio: I find my, to my, 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 I just, it just, you know, [00:31:30] feels good and, and it helps me.

[00:31:32] William Green: I wanted to move on to the third exercise in the book, which is about mastering the five step process to getting what you want out of life.

[00:31:41] William Green: And, and I’ll, I’ll just run very quickly through these five steps before I, before I ask you my question. So the first one is, what’s your goal? So it is setting, 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.

[00:31:58] William Green: 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 is your design for getting around these problems? So designing changes in your approach. And then the fifth one is actually getting it done.

[00:32:16] William Green: What, what are you going to do to get it done? And, and you mentioned elsewhere in the book, you, you write, everyone has at least one big thing that stands in the way of their success. Find yours and deal with it. So I, I was reading this part of the book and I’m looking at this five-step process for getting what you want.

[00:32:33] William Green: And there’s this sort of deeply unsettling moment as I’m looking at my own life and I’m thinking, oh God, you know, I’m, I’m so disorganized and scattered and thin, stretched and distractable and lacking in structures and systems and processes and my, I’m always losing my books and my files are everywhere.

[00:32:53] William Green: I, I sort of feel ashamed mentioning it, but if you are looking at your flaws like that, whether it’s that [00:33:00] or you know, your health or eating or whatever, how would you apply your five step process if you-

[00:33:06] Ray Dalio: Wow, that’s so great. Because you found your one big thing.

[00:33:10] William Green: Unless I am diluting myself. And there are other things that are worse, but I think it, it’s pretty bad.

[00:33:14] Ray Dalio: Yes. I think it’s, I think, I think, and, and you have to feel great about finding your one big thing, because the, 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 onto your second big thing. Hmm. But, oh, okay. That, that is it.

[00:33:33] Ray Dalio: But let us slow. Yes. Let me take those, those, those first. 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. One are the things you’re going after that has to do with the earlier part of, you know, know what you’re going after.

[00:33:51] Ray Dalio: That matches your nature to the, the path. Okay. Spec be, be clear. Do you know that? Is that right? Or maybe you are discovering it, but make sure you’re discover. Then when you get there, you will encounter your obstacles and problems. They will surface. It’s not going to be, Ooh, I get it. I get, you know, boom, I get that, I get that, I get that.

[00:34:12] Ray Dalio: No, it’s not like that. So you will encounter those. Okay. So pause, do these steps separately. Don’t do them at the same time and, and do them in that order. So you pause and you say, okay, that’s, that’s a problem. It is an obstacle. I watched [00:34:30] the people continuing to come to the same obstacle and they don’t get past it like Einstein says, you know insanity is doing the same thing over and over again and expecting a different result.

[00:34:39] Ray Dalio: So anyway, so you get a problem. Then you diagnose the problem to get at your root cause, and, and you can help, you can use the feedback of. You don’t have to just be in your head. This is the big thing, you know, and that may be your weakness or may be your circumstances or whatever it is. What is the exact root cause for that thing that’s standing in your part, your particular way?

[00:35:04] Ray Dalio: In your case you sound like you’ve discovered your, like you’re one big thing because you’ll, you’ll feel it, you’ll stumble over it all the time. Okay? It’s that, okay? Now if I can change that, I’m going to have a radical improvement. So what is my design? Okay. And the, like, one of the best easy designs is work with somebody who is strong, where you are weak and help them because they, you are strong.

[00:35:31] Ray Dalio: We’re they’re weak, right? So if you worked with somebody who, let’s say you are scattered and you’re inclined to do all of that, and you work with somebody who’s got a personality, who will, and, 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 on track or something.

[00:35:53] Ray Dalio: Then you will have a design that will work. And then if you take that design, [00:36:00] so many people form designs, but they don’t follow through and don’t do it. So step number five is do it. Okay. Do it. And then you do this on an ongoing basis. That is why I have these loops, you know, the you know, all the books and everything have these loops because that’s what evolution is like.

[00:36:18] Ray Dalio: You, you learn something and then it starts to fail and you start to fail and, 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 is what it is like.

[00:36:33] William Green: There’s also something really important there in your mindset, I think. And you, you mentioned in the book that you need to learn to love your mistakes.

[00:36:41] William Green: And even as I was telling you about my, my hopeless or, or not hopeless, but hapless tendencies there’s a part of me I start to flush. I start to feel embarrassed. It is like it is a little bit shameful. And I can see that’s, that’s, that’s not a helpful attitude.

[00:36:56] Ray Dalio: You know, it’s our society raises children and so on so much with that way.

[00:37:02] Ray Dalio: Like they go to school and 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 on. And that’s almost one of the reasons that a lot of times children in schools are not the same, who excel, are not the same people who excel in life.

[00:37:23] Ray Dalio: And so when you look at that, it’s the opposite. Like, if you know and you’re confident, [00:37:30] then you know you can’t learn. I mean, how do you improve when you have to be believe that you’re perfect all the time? It just does not make sense.

[00:37:39] William Green: Yes. So it’s very hard and, and there are things that I won’t do because I’m like, no, I’m just not going to be that good at that and so it’s a very, it’s a very destructive attitude.

[00:37:49] Ray Dalio: Yes. 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, but very scattered.

[00:38:09] William Green: Okay. Yes. Which is very much how writers, I think probably tend to be-

[00:38:14] Ray Dalio: 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, so you get the best you can get your creativity and you can get the other. So, so many people make the mistake of thinking that they have to be good at stuff.

[00:38:35] Ray Dalio: Oh, I have to learn the thing that I don’t know how to do Well, no, no, no. You don’t really do need to do that. You just need to find somebody who’s going to do it well with you.

[00:38:45] William Green: You also have said in the past something really helpful when, when, for people like me who are fairly scattered and I have about five different jobs, and, and so there’s a, so it’s not just that I am scattered, it’s that my life is actually complicated.

[00:38:58] William Green: There are a lot of demands on [00:39:00] me and you, I, I remember Bob Prince, the Co-Chief CIO 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, of rejecting good alternatives so that you can simplify your life and decide, well, I can’t do everything.

[00:39:20] William Green: Well, can, can you talk a bit about that? It seems to me really a valuable insight. Yes.

[00:39:26] Ray Dalio: Yes. I mean You can go nowhere trying to go, you know, everywhere. You, you have to prioritize, and you can do a number of things, but you have to get to really, how do you do a number of things. And the really, the only way I think that you could do a number of things is also through the u leverage of other people.

[00:39:45] Ray Dalio: 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 is thinking, I have to pursue all those. That is not right.

[00:40:06] William Green: In exercise four, you write about two of the greatest barriers to our success, which are our ego and our blind spots.

[00:40:15] William Green: 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, I like if, if I want to bury my haplessness, and, you know, and, and, and inabilities [00:40:30] from site is going to be really hard for me to learn to deal with them and overcome them.

[00:40:34] William Green: Can you talk about how you go about finding these compensating mechanisms for your own blind spots? Because obviously one of the key things that you have done a Bridgewater over the years is to learn to, to triangulate your views with believable people who, who are happy to disagree with you. And, and, and so this seems to be really one of, one of the most central mechanisms for success in your own life.

[00:41:02] Ray Dalio: So there are ego barriers. And ego barrier is the kind of thing, like, I, I have the right answers and it really strikes me as incredibly stupid. There’s so many people who were walking 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.

[00:41:24] Ray Dalio: And how do you know you’re not the wrong person? So you have to have in, 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.

[00:41:46] Ray Dalio: You know, it’s you can take a per a person in the situation and ask them to describe it, and they 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 [00:42:00] and those things will, will be the case.

[00:42:03] Ray Dalio: 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 answers. So what I’ve found is this tri triangulation, in other words, find kind of the three smartest people on a particular subject to maybe they’re successful.

[00:42:29] Ray Dalio: And then almost ask them like, 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 is probably a good decision. And if, and whatever the disagreements are of these smart people bubbles up the issues that need to be examined more.

[00:42:52] Ray Dalio: 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 get, find myself in that. Like, I have a passion for ocean exploration for a certain reason. I do not know much about it. And it’s, it can get complicated, but I can do that, or medical or something.

[00:43:11] Ray Dalio: So that idea of triangulation among that thoughtful disagreement where there’s curiosity and there’s learning, it’s a, it’s a fabulous way to learn and make decisions.

[00:43:23] William Green: Can we use a specific investment example where, say, think, think of, think of something that all of us are [00:43:30] wrestling with that you are, you are very much invested in financially and intellectually like, like the conundrum of China, right?

[00:43:36] William Green: Where Bridgewater obviously has billions of dollars invested in China, has funds there as. And it is really, it is a puzzle for all of us, right? We’re we are these foreigners looking, looking, they’re trying to figure out this culture that’s totally different from our own. And h how do you, 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, everyone’s got an opinion on China and most of their opinions are, are wrong or ill-informed.

[00:44:05] William Green: How are you cutting through that noise and trying to figure out, for example, the big question of is, is this a place that’s becoming less open to free market principles? Or do they just have a, an idiosyncratic or unique approach to, to free markets? What I, I don’t if I’m articulating that well, but how do you- [Crosstalk]

[00:44:24] Ray Dalio: No, you’re, you’re articulating well, and I can answer your question.

[00:44:28] Ray Dalio: First of all I should say that I’ve I start with a real humility. In operating and saying, I don’t know if I’m wrong or not. Hmm. And I don’t like to go into areas that, you know, I’m no, I’m no expert in ex except if I and in case of China, I have, it’s a particular case. Then going there since 1984, I have contact with, you know, the highest ranking, most immersed people, [00:45:00] Chinese and non-Chinese.

[00:45:02] Ray Dalio: 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 or 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.

[00:45:31] Ray Dalio: So I diversify. I become highly informed through the triangulation, through the expertise that I have 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, let who are the really, not only smart, but straightforward, honest people, people of good character who will not be asked me and so on.

[00:46:00] Ray Dalio: And 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 in, you know, not too little. So it goes back to this fifteen, I’m on 15 good uncorrelated investments, return streams. So that’s how I would do it and how to I do it.

[00:46:25] William Green: So you are setting yourself up. So you are, you are aware that you could be wrong [00:46:30] and you’re making sure that your errors won’t be fatal if you’re wrong.

[00:46:33] Ray Dalio: That’s right. Right. And have the best insight because in China it is because I’m, I know it very, very well with the right people. Right. I mean, that is, that’s key.

[00:46:46] Ray Dalio: There’s so many people who are not as fortunate as I am to have those exposures. and then but then they, they still have to do theirs and then they have to do the triangular Asian. So it is that. Oh, and, but even though all of that’s the case, there are the great uncertainties. What if the, what if we go to a type of the economic war or a type of, or worse of military war or all of 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.

[00:47:24] Ray Dalio: 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 is like a casino, you know? Yes. On the casinos playing and they have so many tables and so on. Many things going on.

[00:47:53] Ray Dalio: It’s not any one of them on any one night. It’s that all that diversification and that, you know, consistency. [00:48:00]

[00:48:00] William Green: It’s obviously much harder for a regular investor to do this. Right. You, you’ve, I think, had about 1300 employees at Bridgewater, and these are very, very, very smart people figuring out how to, how to diversify.

[00:48:12] William Green: If you are a regular investor and you are looking at this very risky world, right? Where, you know, we’ve got in inflation and, and covid and war in Ukraine and debt crises and, you know, rising nationalism and all, all of these forces that are pretty worrying, how do you. In a practical way about asset allocation, so that you take this, you take the spirit of what you’ve figured out without necessarily the skill in execution, but, so you can at least get some, some ability to create a diversified prudently, prudently diversified portfolio that’s going to help you to get through the next 10, 15, 20 years.

[00:48:55] William Green: What, what more or less whatever happens.

[00:48:58] Ray Dalio: So it’s, it’s, it’s the, it’s the same thing, just more so the average investor, as you point out, is not going to be successful. Like you say you know, Bridgewater has about 1300 employees. We spent hundreds of millions of dollars on research, you know, of various types of things.

[00:49:20] Ray Dalio: We try to get an edge, and then we’re still looking for that power of the diversification. Compete. The markets are a zero sum game. What I [00:49:30] mean is it’s like a poker you, you have, somebody’s going to take money away from somebody else in terms of that zero sum. And it’s more difficult for, to compete in than the Olympics.

[00:49:39] Ray Dalio: 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.

[00:49:58] Ray Dalio: 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 in a horse race. And now 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 that they’re handicapped.

[00:50:34] Ray Dalio: 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. So what it means is that that diversification’s important. Now what do you diversify? You have to understand a little bit about what makes markets move together and not, and 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.[00:51:00]

[00:51:00] Ray Dalio: 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, and you could go back and you could see, ask your whoever you’re asking about the investments, go back and take them to like, the year 2000 each one of them, I, I go back to 1900 , but maybe it’s not so easy for you to go back to 1900.

[00:51:26] Ray Dalio: But if you take that investment and you see how the one did, and then you see how they did in relationship to the other, and you go through 2008 or you go through this period recently, you could see how they performed in how they performed in relationship to each other and how the diversification would’ve worked.

[00:51:44] Ray Dalio: So those are the things that should be done.

[00:51:48] William Green: So, so broadly speaking, you’d, you’d want, so, so let’s say a regular investor has, you know, a, a Vanguard index fund that has, you know, the total stock market or the s and 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 commodities like gold, right?

[00:52:10] Ray Dalio: You and, and you, they’re, they’re all like returned 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.

[00:52:28] Ray Dalio: And then you say, okay, if I put [00:52:30] this one with this one and so on, and they match it. Now I could explain more about financial engineering. Cause there are some twists there. Like how do you risk balance them? 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.

[00:52:56] Ray Dalio: 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 and 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.

[00:53:16] William Green: And obviously a lot of people got carried away over the last few years and put too much money in in the US because it had gone up for so long and it had been great. 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 were not profit.

[00:53:37] William Green: When, 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 D, danger, dangerous herd chasing?

[00:53:58] Ray Dalio: Yes. First of all, I want to [00:54:00] say, I can’t tell you how many times in my 50 years the exact same things 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, and see the other cases. Almost imagine like everything’s another one of those, you know?

[00:54:22] Ray Dalio: So I go, I go back to that case, and I think. I was in, you know, there was the nifty 50, there was the.com bubble, there was the real estate bubble. You know, there’s so many of them, and I use, 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.

[00:54:50] Ray Dalio: So for that reason, when everybody agrees on something, they are probably expensive. And when, when everything is hated and you think it’s the worst and everybody, then it’s probably cheap. And people confuse the fact that I, 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.

[00:55:20] Ray Dalio: You know, that the worst performing horse. Has odds that are much higher if you, if he comes in. And so [00:55:30] 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, and aware of fads.

[00:55:44] Ray Dalio: 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. So, you know, go back to the diversification.

[00:56:11] William Green: And have you updated your, your view on crypto now that many of these cryptocurrency-

[00:56:16] Ray Dalio: I think I’d rather not get, I, I can get into it, but we want to talk about the life cycle and the other parts Yeah. Of the book. I think because I want to help people with their principles. I mean yes. I’m I mean I, but, but everybody’s interested in crypto and, and you know, but I don’t, I don’t know that we should, do you think we should digs into-

[00:56:36] William Green: Can you give us a, I think people will be so curious. I think it’s worth giving us sort of two, two or three sentence synopsis of a top you know, a brief view of whether you, whether you think there’s anything there or whether you’ve kind of come to think. No, I don’t think there’s much there at all.

[00:56:51] Ray Dalio: Well there’s a technology of the blockchain technology, which I think is an excellent technology and I think it’s [00:57:00] very important to distinguish it from a digital currency.

[00:57:06] Ray Dalio: And if we’re dealing with digital currencies, let’s use B Bitcoin as an example. You know, there are all sorts of things. There’s stablecoin and blah, blah, blah, all sorts of things. But, but by and large we’re d let’s talk about Bitcoin. Now, first of all, I believe we’re in an environment in which we’re going to , we’re creating a lot of debt and money.

[00:57:27] Ray Dalio: And the 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 altern into the store holds of wealth, then, then those, and, and turn in money.

[00:57:44] Ray Dalio: Having said that like all the digital currencies. Basically do not replicate anything. You know, they move up and down for all. It’s, it’s not like it’s tied to, it’s a, it’s an inflation hedge or it’s this and that. It’s, it’s mostly, so it’s not an effective store hold of wealth. You almost have nothing to hang your hat on.

[00:58:07] Ray Dalio: And it’s tiny. Bitcoin right now probably has a, a total value of a, maybe a quarter of what Microsoft stock is and so on. So it’s, it, it becomes a preoccupation by people that is disproportionate with its a true reality. I mean, why study that? There’s so many things, so many different [00:58:30] investments that you can study and it’s as a store hold of wealth there’s not privacy to it.

[00:58:36] Ray Dalio: Because 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 is not private. And as a medium of exchange, it is 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.

[00:58:54] Ray Dalio: So it wouldn’t be my favorite store hold of wealth. I mean, I, you know, I own a tiny bit of it just because of the element of, you know who knows. And I, it could be there, but I am not. And, and also to experience what it’s like. But I do think that in time there will be better digital currencies.

[00:59:16] Ray Dalio: Like I believe that you can create a digital currency that will give you the info, the equivalent of the inflation. And that’s buying power because I believe that most currencies are, are most dead instruments, which are, as I say, they’re 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.

[00:59:46] Ray Dalio: And so many things have sort of come and gone as fads, you know NFTs and you know, this coin and that coin and, and so on. So anyway, that’s what I think about it.

[00:59:58] William Green: Thanks. No, that is very [01:00:00] helpful. Well, 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.

[01:00:12] William Green: And as, as you’ve mentioned in the past, there are five really key forces, which include money and credit and internal conflict and external conflict, and acts of nature and man’s inventiveness. It seems like the, the most key in many ways at the moment is this whole issue of money and credit and creating debt and li liquidity.

[01:00:32] William Green: 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, for investors, so this is, this is going to be challenging in terms of inflation or in terms of fed policy.

[01:00:56] William Green: Can you just put, put that historical knowledge and economic knowledge of how, how the machine works in some context for us? So, so we are better at looking at the situation and saying, oh, this is, this is the type of weather in which I’m operating and I need to carry an umbrella or a Macintosh or, or boots or, or, you know, build a bomb shelter or what I, I don’t know if I’m explaining that properly, but I it’s difficult for the rest of us to understand, to gauge how serious the situation is.

[01:01:24] Ray Dalio: Obviously in a question. And my answer to the question, I can’t give you [01:01:30] all of the complete explanation of how the machine works. 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 in. And that’s, but that’s about 30 minutes. But I’ll give then some examples and okay.

[01:01:48] Ray Dalio: There’s a, a cycle. There’s a short term money, credit, debt market, economic cycle. We call it the business cycle 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 that’s stimulative. It’s like creates that credit, turns into debt.

[01:02:12] Ray Dalio: Debt is something that they has to be paid back. Credit is something that is stimulative. It gives mind power. So it starts to create a cycle. That goes up. It leads to creating bubbles and re 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 will call borrower debtors.

[01:02:39] Ray Dalio: Is it economic to borrow and be in debt or lender creditors? Is it economic to be a lender credit? 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 what they’ll [01:03:00] put in at the, at the one part of the system to get it going and so on.

[01:03:03] Ray Dalio: 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 these 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.

[01:03:29] Ray Dalio: They went from giving money away from negative real interest rates to, 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 we every asset. Is a lump sum payment for a future cash flow. And so the present value of that with the interest rate has an effect.

[01:03:52] Ray Dalio: And there is 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 laid in the typing thing, but you haven’t yet achieved that particular goal.

[01:04:14] Ray Dalio: So you know what they’re going to do, blah, blah, blah, blah, blah. 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 happen over and over again. What I do to try to help people, now I’m at a [01:04:30] phase in my life.

[01:04:31] Ray Dalio: I hope we’ll talk about the life cycle. Yes. But I am at a phase in my life. Where my goal is not anymore, to be more successful. I have gotten everything kind of, I wanted that way. I, my goal is to pass along the 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.

[01:04:58] Ray Dalio: So if people want to follow those things and I break them down, and also in videos, the videos that I put out are, 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.

[01:05:14] William Green: Yes, no, that’s very helpful. And, and, and so I mean, in purely practical terms, the things that you’ve been saying about the difficulties facing, facing the US in this kind of timeless universal, Money and debt cycle.

[01:05:26] William Green: The, 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-

[01:05:33] Ray Dalio: Yes, but you left on Yeah. Or, but again, I do not want them to tactically make the decisions because things become cheaper at the same time. So cautious means just constantly diversify.

[01:05:43] Ray Dalio: Well, but yeah, the, 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 [01:06:00] a pandemic or a big debt crisis. What happened in 2008 was the same thing that happened, you know, in 1933.

[01:06:08] Ray Dalio: And so what I, 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 currencies and effect on the world and the value of money and all of that.

[01:06:30] Ray Dalio: So I needed to study that going back a long time. The second is the amount of internal conflict. We, we have the largest wealth and values differences. It, it, 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.

[01:06:54] Ray Dalio: So the worst internal conflicts politically, socially, in 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 did. There’s a war, they’re winners of the war.

[01:07:18] Ray Dalio: Somebody comes out of it, rich, somebody comes out of it poor. And then we set the American world order in 1945, we, the United States, accounted for half of the world’s G D P. [01:07:30] 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.

[01:07:39] Ray Dalio: And so we are now seeing a type of conflict that we never saw before. Soviet Union was never an economic power. It 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.

[01:08:03] Ray Dalio: But I wanted to go back, so I went back 500 years and I studied in this, see the same things happened over, over again. So that would be my template. You know, the quick and easy way to do it is the free video online that describes that.

[01:08:18] William Green: Yeah, and we had a great discussion of it last year, so I’ll, I’ll include in our show notes a link to, to the last podcast where we talked about that book, which is, it’s a fantastically helpful book.

[01:08:28] William Green: 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, the, 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?

[01:08:46] Ray Dalio: Most people’s lives are, there’s a life arc and most people’s lives transpire in like ways that you could see over and over again, you know, and so I, I [01:09:00] break it down.

[01:09:00] Ray Dalio: It seems to me like there are, 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 become dependent on you, and you’re working, you’re trying to be successful. And, and almost every year, practically not, not every year, but in neighborhoods of years, you’re this age, you get married at this age, or you get your life partner and be at that age.

[01:09:30] Ray Dalio: This said you have kids. When you have kids your parents are now entering their third face. And so there are those things that we all know. So I put in that life a, you know, a checklist. What happens in the first, you know, when do you first have a romance? When do you first? And you can see the list and there is a checklist.

[01:09:53] Ray Dalio: And when you go through the checklist, you can check off how many of the things happened 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 a by and large, not only what’s coming next for you, but if you look at it over, let’s say, what are the net things I can expect over the next 10 years as likely, and then you could do that for your loved ones.

[01:10:19] Ray Dalio: 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 [01:10:30] 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 all, you can put that in perspective and you can, you know, learn and think about, okay, there’s the next 10 years.

[01:10:45] Ray Dalio: Like I’m 73. Okay, , okay, where, where will I be in 10 years? And, and what will I be like, I mean, I kind of have a picture of what that’s going to be like. That is true at every age. And where will my kids or my grandkids be? And what do I want that to be like? What that time? And so that’s true for everyone. And so the beginning part of the book, you know, we look at what is your nature and what are the paths and so on, and how do you get there?

[01:11:15] Ray Dalio: And then at the end of the book, book, it’s, 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 under have never seen it there. It’s a, it’s a, 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.

[01:11:36] Ray Dalio: And it gathers and it accumulates. This information also shows you videos and things. So but it’s really just meant to help you reflect on your principles. And so in that life arc, it’s very important to know where you are.

[01:11:50] William Green: I, it’s quite unsettling as well. I mean, I found it. I, I was talking to my wife over dinner about its last night, going through it, and you are like, oh God, I am 54.

[01:11:58] William Green: I’m, I guess I’m [01:12:00] approaching the, the, 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, the, the, the second phase, the part that I’ve been in tends to be one of the unhappier times of life. And you think about how much you’re worrying about your kids and whether they’ll be okay and all the, the struggles balancing work and family and stuff and Exactly.

[01:12:22] William Green: It’s kind of helpful, right? You start to see, oh, it’s not just me. It has been a different-

[01:12:26] Ray Dalio: It’s everyone practically like, like you say If you look, there’s part of it that tracks happiness. Mm. And I studied, okay, what are the happiest and how does happiness change? I won’t take everybody through that, but you know, in the early years and then you get into the, out, just out of university or whatever you’re graduating, you know, those are very happy years in the that middle that you’re referring to when there’s work-life balances and, 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.

[01:13:01] Ray Dalio: And also there can be times of disenchantment. The marriage is not going exactly like you dreamed or the job. Okay? I am 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, they’re normal, al almost, and you expect it.

[01:13:24] Ray Dalio: And also there are principles for how do you deal with each one of those better? And then you come and [01:13:30] then I watch people have a, a difficult transition from one phase to the next phase. Cause 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, you’re in, in a habit.

[01:13:45] Ray Dalio: You’re addicted. Am I important? Do I matter? What is my status? All of these things that people then get and they just do not yet know what that new phase is and become comfortable and enjoy that new phase. I’ve ma 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.

[01:14:11] Ray Dalio: Because the happiest phase is really that phase, which really almost comes on typically around 60 or after 60. It actually, surprisingly, ironically, is the, actually the happiest phase in all of life from and across cultures, typically, because okay, you don’t have the work-life balance. Amen. Your parents are gone.

[01:14:34] Ray Dalio: Your children are on their own. You have a freedom. You are not trying to prove yourself. And there are all the joys of all of those types of freedom if you approach it well. And so people understanding these things and understanding, you know, principles for dealing with them are any really beneficial.

[01:14:53] William Green: You have kind of a brutal line in the book where you say that in phase three, you can save a life [01:15:00] without obligations and are free to die.

[01:15:02] Ray Dalio: Free to live, free to live and free to die. And that actually was a, a sentence out of Joseph Campbell wrote a Hero’s Journey, which was a hero of a Thousand Face.

[01:15:10] Ray Dalio: Very interesting. And that’s, and that’s what it really is. You’re free to live and then free to die. And what Free to Die means is the relief of knowing that you, 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, and, and you go beyond it.

[01:15:37] Ray Dalio: And, and there could be a relief and an understanding of, you know, that, that phase it is like the serenity prayer. I think, you know, again, you know, God, give me the serenity to accept that which I can’t control and so on. You are there, you are. Do the best you can, and then just go with what reality’s like.

[01:15:57] William Green: Acceptance seems very central because there’s, there’s a, there’s a sentence towards the end of the book where you say about the, the third phase, this final phase of life. 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.

[01:16:18] William Green: And it, it may be wonder, are you finding yourself becoming more spiritual with age or are you still just looking at everything and thinking we are all just machines within machines and there’s-

[01:16:29] Ray Dalio: Well, nothing [01:16:30] more? Well, I don’t think the, 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.

[01:16:37] Ray Dalio: You learn more. But the mechanics is not the inconsistent with the spirituality. Spirituality to me means a connectedness with the hole, essentially the rising you know, above yourself and realizing that you are part of this hole and, and that beautiful acceptance, but that hole works in kind of a mechanical way.

[01:17:04] Ray Dalio: 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.

[01:17:21] William Green: It’s interesting, I saw something that you wrote recently on 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.

[01:17:39] William Green: 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, it seemed to me that a big part of your trajectory has been becoming increasingly focused on serving others altruistically now, now that you’re in this different [01:18:00] phase of life.

[01:18:01] William Green: Is that, is that fair to say that that’s kind of been your, your personal ad to a great degree?

[01:18:05] Ray Dalio: Oh, yes. To some yes, to a significant degree. And I learned more and more about it but also meaningful work and meaningful relationships have always been important to me. But, you know, I, in the in the game and so on.

[01:18:20] Ray Dalio: But the relationships part is important, and I, and I’ve always believed 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.

[01:18:49] Ray Dalio: It works so much better than the selfishness, which means it’s, it’s almost a des destructive force. . And so as I, of course, as I get older, you know, I see that so much more. And then I see this, well, like where we’re in now, the everybody has practically these opinions that they think they’re right and they want to fight for.

[01:19:15] Ray Dalio: And I, I see the destructiveness, who knows that? Who is right? And, and can we tolerate each other more and, and give, pull it together. But I can see that destruction. So yes, it, I think it is more also apparent at this time, but it is, yeah. As you go above it, [01:19:30] where do you want to be? What is the place you go to?

[01:19:33] Ray Dalio: What do you, what, what do you like where, what feels good? People are nice with each other. They are civil with each other. They, they care about each other. Those are the environments. They have less stress, they’re more EF efficient. You know, I think it’s pretty obvious in terms of that element of what you want.

[01:19:52] William Green: It was really interesting to me, Ray, that in the, in the book, some of the language you use to talk about your principles, you, you said 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.

[01:20:10] William Green: And I was really interested in that idea that they, they’ve almost become like you, your version of the, 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.

[01:20:28] Ray Dalio: Well, it what is a religion? I mean a, a religion really does not have to be, most religions don’t have a, the notion of the same thing as, you know, the afterlife and, and, and Most religions are a way of living life. What are your principles for living life? , and you could take those in prepackaged forms.

[01:20:52] Ray Dalio: So you could say, you could take them in prepack, here they come and I’m going to adopt the principles. Or you can choose them yourself. And I [01:21:00] think that to today, why not choose them yourself? Why not pick out what your real principles are? Because it is like your religion. How are you going to live it? Or is it going to be, you know, something that it’s indoctrinated and you just follow and believe.

[01:21:15] Ray Dalio: So, so that’s all religions are really, is the principles of how you’re going to interact. That is really what they are. So when you write down 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, and they say, I’m religious.

[01:21:38] Ray Dalio: And then they come and they live, do different things and so on. Anyway. Choose your religion, choose your principles, make up your own.

[01:21:46] William Green: I, I actually have been doing this over the last few days and it is, it’s, it’s a really thought-provoking process where you actually force yourself to think about what, what do I actually believe?

[01:21:56] William Green: And so for, for example, I, I, I found myself, you know, I have lots of post-it’s on my wall in my study that whenever, whenever I hear, hear something or learn something that I think is profound, I put it down. And, and so there’s one, for example that says, it’s from the Old Testament where it says, when I fall, I shall arise.

[01:22:13] William Green: 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 is something from David Hawkins who I always think about a lot, who, a remarkable writer [01:22:30] who, who said be kind to everything and everyone, including oneself all the time, with no exception.

[01:22:36] William Green: So I was wondering if there are things you’ve, you’ve come across where, say your family, your kids, or your wife or your colleagues have sort of shared with you principles that, that they’ve come up with, that have had a profound impact on you. Where this process of other people learning from your principles, provoking them to write their own has, has then kind of come back to you and you thought, yeah.

[01:22:58] William Green: Yeah, that’s true. I, I, I want to incorporate that one.

[01:23:01] Ray Dalio: Well, they’re, you know, they’re of course many. I think that the principles I see that exist, that are working, many people have discovered, Hmm, 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, almost all the all good principles.

[01:23:28] Ray Dalio: Not always. So, but I mean, yes.

[01:23:31] William Green: So 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 is not, that’s right. It’s not enough just to take on somebody else’s. It’s got to truly suit your view of the world.

[01:23:44] Ray Dalio: That’s right. Because you have your own values, you have your own preferences, you have your own reasons, the things that are comfortable to you.

[01:23:56] Ray Dalio: That’s why everybody, that is why the journal exists. You know? In [01:24:00] other words, you, what do you care about? What do you want? What do you feel after you reflect? That is, that’s so important. That’s what I mean. Like, you create your own principles or your own religion in the sense of how you live your life. So know yourself and then with that of what you’re like and where your pull is.

[01:24:23] Ray Dalio: And so there are no, you know, there’s some comment. I shouldn’t say no, but you, you know, like, like a principal 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 s a successful life. Successful means that it’s your definition of what’s successful, what is bringing you happiness.

[01:24:52] Ray Dalio: You know, it, it could be, I don’t know, being a surfer and living in nature and, and supporting yourself, however, like, I don’t know, tending bar or something, and you have a great, 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.

[01:25:18] William Green: Are you surprised that after 47 years of building Bridgewater into this huge, you know, the world’s largest hedge fund and, and one of the most successful of all time, clearly, are you [01:25:30] surprised at how much joy you are getting from letting go of the reins and handing it over to the next generation? It’s, it’s it, because it seems to reflect this understanding of what the third phase is about, right?

[01:25:42] Ray Dalio: No, I’m not really surprised. I would say if I was going back 20 years, I might have been surprised, but I have 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. And it’s like parents and grown, having grown children.

[01:26:09] Ray Dalio: What do you want more? Do you want them, do you want to be needed or do you, no, 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, a couple of failed attempts and which is also how things go.

[01:26:33] Ray Dalio: I, I, 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, a principle, if you haven’t done something three times before successfully, don’t assume you could know how to do it. And I know that it’s a, a, a you know, a founder led organization transitioning is notably you know, a difficult thing.

[01:26:57] Ray Dalio: So I said, I think it will you know, I’ll [01:27:00] take me up to 10 years to do it. And it took me 12 years to do it because of things. And so I, no, it’s something that I wanted and I’m so enjoying, it’s like watching your kids be successful without you. It’s just, it’s, it’s, it’s great. So I did want it for a long time.

[01:27:18] Ray Dalio: 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, you know, pretty on early after that event in 1982, I also didn’t want to be the all-knowing dis. Decision maker, because I know it doesn’t work. Well. I, I like the, you know, that back and forth, so, no, for a long time I’ve wanted this and now I get to experience it and savor it.

[01:27:47] William Green: 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 are, you are 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 Avatar bought a state recently and a submarine maker.

[01:28:11] William Green: And you said at one point, ocean exploration seems to be much more exciting and important than space exploration, which is interesting because people like Jeff Bezos and Elon Musk and Richard Branson are 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 [01:28:30] of ocean exploration that excites you so much.

[01:28:33] Ray Dalio: Well, if you take the world, it’s the ocean is about 72% of the world’s surface, so more than two thirds, and it goes up about halfway. So the, to Mount Everest is the tallest mountain. And if you take going down the Marianna’s trench, they’re about the same distance, about 11,000 meters. And so all of that is so unexplored.

[01:29:02] Ray Dalio: 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 is 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.

[01:29:24] Ray Dalio: And it’s our most important asset. It, it 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, that’s why it’s, I think, amazing.

[01:29:47] Ray Dalio: So, yes, what I’m doing, I’m, I’m very excited because what I do is I’ve, OceanX 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 [01:30:00] and so on. It is not me doing it. It is an organization. SCI scientists and all of those laboratories.

[01:30:06] Ray Dalio: And so on. 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 OceanX. You will see it on 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.

[01:30:31] Ray Dalio: So we’re doing then a show like Jacques Cousteau did when I watched, when I was growing up, I watched Jacques Cousteau. And so it shows the scientists exploring and it takes the people in that, and that’s going to be done on Disney. And national Geographic and Jim Cameron is the executive producer.

[01:30:52] Ray Dalio: He’s producing the, the media part and so on. So it is, it’s, it’s very exciting. It is very important. I think it’s very impactful, and that’s why I’m doing it.

[01:31:03] William Green: And, and when you are down in the depths of the ocean and you’re seeing these extraordinary things, so presumably in many cases, no one’s ever seen before, does it, does it stir something in you that’s more kind of mystical and transcendent?

[01:31:16] Ray Dalio: Oh, it’s the, yes. It’s, it’s, it’s the spirituality. It is the greater hole. It is the marvel of it all, you know? Oh my God. And just [01:31:30] unimaginable. It is unimaginable. It, it brings me into this realization again, you know, there’s, man is preoccupied with Man, man is one of something like 10 million species.

[01:31:44] Ray Dalio: And they all are going about their lives, and they’re all, and many of them are stronger or better than things a man is, and so on. We’re preoccupied that, and we’re just one of the 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 you, and the marvel, the designs of these things, they light up and, you know, like below 350 feet, 85% of the species are either bioluminescent, Orly of fluoresce, they light up, they operate in ways that are unimaginable, you know, and they have brains and they, ooh, it’s just, and there’s an ecosystem of how they all relate to each other. Yes. You feel the connection with the greater whole, you know.

[01:32:34] William Green: And its with your love of adventure as well. Wait, who’d you figured out from your assessments all those years ago? So you’re, you’re, you’re getting to live out your, your destiny, be true to your personality, which is nice.

[01:32:47] Ray Dalio: It’s a, it’s the pole, you know?

[01:32:49] Ray Dalio: It’s not all that difficult. Where is the pole? Where do you feel the pole? It is like eating food. Do you like the taste of it? If you like the, the taste of it, then, then you [01:33:00] 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, not enormous amounts enough to give you the freedom, to have the freedom, the security and so on to have what you want.

[01:33:18] Ray Dalio: And that is I think pretty much, you know, what is a good life for most people if they define themselves, what that good life.

[01:33:25] William Green: All right. Well, thank you so much, Ray. I am, 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, I’m definitely a big beneficiary of it, both from your books and from our conversation.

[01:33:36] William Green: So I really appreciate it. I’m very grateful for your generosity in sharing your, your principles and chatting with us today. It has been a real gift.

[01:33:44] Ray Dalio: Well, thank you. It has 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 that’s, I feel great about that. So thank you.

[01:33:58] William Green: It’s been a real delight. All right, thank you so much. Take care, bye. Stay well.

[01:34:02] Ray Dalio: Yes, you too.

[01:34:04] William Green: 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 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.

[01:34:30] William Green: 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.

[01:34:47] William Green: 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 Spier, who I’m planning to interview in person in Switzerland next week.

[01:35:07] William Green: In the meantime, please feel free to follow me on Twitter @WilliamGreen72, 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.

[01:35:20] Outro: Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. 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 Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.