“People DON’T KNOW What’s Coming!” Prepare For The CHANGING WORLD ORDER | Ray Dalio

new york city's becoming more dangerous chicago's becoming more dangerous places chica san francisco is becoming more dangerous you're seeing people leave some places for other places the greatest danger for most people is failing to look at the things that could be harmful to them [Music] ray dalio welcome back to the show great to be on your show again dude i'm always excited to talk to you this is an incredible phase that you're going through in your life where you're taking all of this incredible information that you've gleaned through your years in the financial markets we're

living through a truly unprecedented time of uncertainty disruption i think a lot of people are really afraid in terms of what's going to happen to their money with inflation are we headed towards hyperinflation and in your book the changing world order principles for dealing with the changing world order and the video by the same name which is blown up um i think the reason people are reacting to that is everybody has a sense that something is happening something that they don't understand how to navigate and then along comes your book your video which really gives

a lot of context to that and so while in by the end of this talk i really want to give people a sense of what they can do and what we can all do to forestall the essential decline of an empire which is what we're living through right now and but first to get to that i think we have to understand your concept of this is just another one of these and by looking back over the last 500 years of history we can see this cycle that empires go through and the us is just the

most recent one to go through it if you don't mind walking us through a thumbnail sketch of the six stages um of a an empire and then we'll talk about where we're at now and what we can do okay um let's start by describing it's something like the new water to the next new water and what i mean a new order i mean the new system right like um the world order was made in 1945 at the end of a war and um a uh civil war can begin a new order in turn inside of

a country like the chinese civil war began their new order inside the country 1949 and so that's like a new beginning and what they always come out of wars and a war is a fight for how the system works so we'll begin there um after the fight of how the system works it's a it's a great leveler it gets rid of a lot of the debts um and it starts over and then there's a new power um in the united states the new world order it was an american world order because the united states won

world war ii it had 80 of the world's gold gold was money it had the dominant uh military power it had nuclear weapons and because of that we began the american world order we literally got people together in a room and said hey we're going to be entering literally a new order and they lay things out was in bretton woods if i'm not mistaken yeah so i want people to understand like this is people they get together and they actually decide this stuff that's right they carve up the world here are the borders this one

this group gets this piece and so on so forth and then they begin and during and by the way this has happened repeatedly throughout history and so they start off with those new rules of the game and you enter a period of peace and prosperity and it's peace because nobody wants to fight the dominant power the dominant power won and you don't want to fight the dominant power and so you're exhausted i i mean and this is one thing you're careful to point out in the book is like war is horrendous and so part of

what creates that period of stability is just we've seen so many people die there's so much destruction of life wealth which is why you know the stakes are high when you're talking about this that's right and there's a change in psychology really that you're dealing with because quite often these things take place they take a generation or more to take place a lifetime and the people who enter the war do so so boldly but everybody who enters the war and then goes through the war wish they never went through the war because it's so terrible

but they come out as you point out and then they're the war is over they want peace they want productivity and so on and then they and it's a great leveler less wealth gaps and so on and they work well together and they build a period of peace and prosperity that is a long period of peace and prosperity but during that peace and prosperity more and more prosperity takes place and they increasingly bet on that prosperity and people get more in debt and so you see the debt levels rise and you see the um naturally

as prosperity comes it comes in unequal ways and some get richer than others and so wealth gaps rise and then those wealth gaps increasingly create opportunity gaps because the rich people have more resources to educate their children and give them the benefits and so that happens over a period of time while the economy gets more uh indebted and of course as time progresses other countries um also rise those maybe they've even lost the war like germany and japan they rebuild and they become competitors and so what was a unique power of having won the war

becomes less unique as there are more as there was more competition and then you get a new generation of uh people who have a different mentality they get used to those those benefits and so on and they are um let's say less cautious less cautious in their financial behavior and so on and so the classic ingredient also is that that country that wins the war also has the world's reserve currency because okay you need a currency to transact internationally it's like a language you need a language to transact internationally and the winner of the war

gets the world's reserve currency because everybody thinks that's the most stable and they also want to save in it and so when you have a world i think that's important to really double click on there's two things here that i want to go a little bit deeper so one of the most profound things i've ever heard you say and this really hit me is that there's a reason this repeats over and over and that reason is there's only so many personality types and so people just are the way they are and so if you put

them into these predictable situations they're going to react in predictable ways which makes this whole cycle incredibly predictable you can go back you know you did a detailed analysis of the previous 500 years and you just see this same thing happening over and over because hey the money's coming in it's the roaring 20s but the roaring 20s are going to lead to the 30s style depression basically every time because people are over extending themselves because they're they are making the faulty prediction that if i look back at the history of my life because it has

always been this way it's always going to be this way not zooming out and seeing no no you're in a bigger cycle that repeats over and over and over and the reason i want to hammer this home is since by the end of this everybody watching i want you guys to know what to do uh to prepare yourselves for this this is ray's whole point is to make sure that people are actually prepared but you have to buy into the fact that this is predictable otherwise you're going to ignore the advice and so for me

recognizing that people just are a certain way and that thusly given similar circumstances they will react in similar ways and so that was i think really important for me to acknowledge yes and and you could see it not just in the cycle taking place over and over but if you deal with the cause effect relationships they're logical so for example if you have bad financial conditions as measured by if you're spending a lot more than you're earning and you don't have a lot of savings you have more debt or liabilities than savings you're not in

a good financial position that's a fact and if you have a downturn if the country as a whole experiences that problem and you have a lot a large wealth gap you are likely to have a fight i mean so these cycles don't just take place as cycles they take place as conditions that are measurable and so in the book it was very important to me not to just use words and theories of how this thing works but to actually show the measures what is the wealth gap what is the amount of debt what is the

amount of printing what are the conflicts that are taking place because then you can monitor those things all right my friend i have a big announcement my incredible and talented wife lisa is about to launch her new book radical confidence in it she has managed to perfectly capture the process of how to go from feeling lost and insecure to taking control of your life and doing amazing things despite feeling fear sometimes a lot of fear now let me tell you nobody knows lisa better than me but when i read radical confidence for the first time

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bonuses that lisa has created for you at radicalconfidence.com they're only available if you pre-order so act now then once you've done that we'll get back to today's episode all right guys read the book and get ready to be the hero of your own life peace out [Music] yeah so this is where it starts to get a little unnerving so okay you recognize these are patterns they happen all over history and they repeat and then because you're plotting all of this and you can look at these leading indicators that you talk about pretty extensively in the

book there's 18 that you go into detail a couple times you break them down and the ones that maybe are more important than others but as you peg so if there's six stages to this arc um you've said that the us is in stage five and to give everybody an idea stage six is basically revolution war it's the the violent restructuring of the economy and whether we're in the seventh inning of stage five or the third inning i don't know but the fact that we're in stage five which is obviously where there's massive internal conflict

which rings way too true and the massive disparities which you did a really cool graph in your video where you show income inequality and that gap between the lines you filled in with resentment and so you have growing resentment you get populous on the left and the right you get internal conflict people fighting and then you get a potential external power looking at you going they're weakened by their internal conflict and that historically is when a rising power makes its move yeah so i think there are three things three big forces to keep your eye

on and when you see them in their cycle then it's clear first are you earning more than you are spending and do you want people to look at this at an individual level or at a country level well you can have both i want them to look at it as the country but the country's nothing more than the aggregate of the people and so um when you look at those three forces i want to make sure that they're clear and you could align them up and you could see where you are is the country earning

more than its spending and building savings or is it spending more than it is earning and creating debt because one man's debts or another man's assets and when somebody is holding those assets and they're producing a lot more of that money in debt they go down in value money goes down in value as they produce it to produce that buying power and then that gets people um bad returns bad and it produces a higher amount of inflation and it produces bad returns for holding debt or so in other words cash or bonds and then people

get out of cash and bonds and that produces rising interest rates while there's rising inflation and that produces stagflation so i want them to get the mechanics of that because that's happening now you could see it this is not controversial we are producing a lot of debt we're spending a lot more than we're earning and as a result they're printing a lot of money and the printing of a lot of money creates a lot of inflation and with that inflation then nobody wants to you know cash is trash you don't want to hold cash and

you get out of that and that causes rates to rise and that's one of those three factors so you can see it happening and you could also see the cycle of it as shown in the book the second force that is dealing with is the internal conflict force how you are with each other are you operating cohesively common mission and moving in the right direction the system working or or are you at each other's throats on is the system threatened because history's shown when the causes that people are behind are more important to them than

the system the system is in jeopardy and that is a risky situation it's a risky situation because it produces disorder and it can produces a form of civil war and yet those times when you have that you see greater and greater polarity in politics it shows up at greater and greater populism of the left and populism of the right and populists want to fight for their side they're not moderates moderates want to work together to try to find a compromise that's best for the whole populists appeal to their crowd by saying i am fighting for

you and they will fight each other and that fight can be at the threat of the system so in history for example we saw four democracies in the 1930s choose to become dictatorships as one side fights to the other because they become so disorderly and we have a system right now that you could see that it is possible in elections that one side neither side might accept losing and so the system becomes in jeopardy and you see that the moderates leave the system they you can't be moderate you have to pick a side and fight

and so you see this in the french revolution there were moderates in the early part of it that recognizing that there were problems and and wanting to work together the moderates got guilty the the polarity began the same was true in the russian revolution the same was true in the chinese revolution the cuban revolution and so on those polarity gets greater and greater as there's a greater intensity to fight and that is the internal piece and so you could see where we are in that internal piece right now we see that moderates are dropping out

of choosing not to run for re-election and you're seeing in the primary system that the fight is who's over most extreme in representing that and you're seeing this greater polarity and you see it reflected in many statistics the um something like 10 or 15 percent i forgot if it's ten percent of the democrats or seven percent of the republicans that'll remember versus fifth um 15 percent wish the members of the other party would die they don't want the measure there um they don't want them to marry their uh children i mean there is a great

polarity and you're seeing that um lead to changes in where people live they're moving to different areas not just because of tax reasons but because of differences in values and so that kind of you can see it today happening these things but you also can see the arc of them in the book because that it measures statistics it shows these things happening so when you have a financial problems and you have this kind of polarity and you have a bad time you have a lot of fighting internally so imagine where we are in the economic

cycle we're in the part of the economic cycle where they have given the the government has given a lot of money and credit to people they've put put it out well no surprise that's leading to a lot of inflation okay inflation takes buying power away from people and it also means that then there's going to be higher interest rates and that's going to squeeze people and so that makes that wealth gap and that wealth issue more difficult so that's the second force and the third force is the rise of a great power the geopolitical force

that's going on that we're seeing today with china and russia and so on and how that's changing because when the country when the power of a country diminishes okay when we get weaker financially or how we are with each other and so on there are greater vulnerabilities and there's always the competitive power that learns how to become stronger and competition always happens there's the establishment and then there's the new competition and as they get stronger they get stronger in all ways militarily and commercially and so on and that's the dynamic that we're seeing yeah so

we've got taiwan looming in the the sort of political background you said many times in the book that that's a an indicator that you'd really be looking at if there was a fourth skirmish over taiwan that you would get increasingly worried we definitely need to talk about inflation in a minute so i want to know what people should be doing in that environment but first like the and i don't know if people are like me but the thing that got me to stop and really start paying attention to this was how far into stage five

we are that was the thing that compelled me that i have to slow down i really have to look at this because i actually don't like thinking about money despite my long-standing pursuit of success that's really been about something else for me money has been a byproduct of that um and that's in the book and i don't know if your number has changed but in the book you say that you give a 30 chance of the us falling into civil war i think in the next five to 10 years and that a major conflict with

china at 35 in the next 10 years and you said look it's a guess but you lay out a lot of data before you say that it's just a guess so it's obviously a very well informed guess one do those numbers roughly hold for you still and if they do how do we pump the brakes on this um i i would say those numbers probably are a little bit higher now i would say i was afraid you'd say that strings are progressing a little bit quicker um the do you mind ballparking me if if we're

not at 30 are we 31 are we 40 yeah let's say um let's say 35 to 40 percent um on on each let's say and who and i'm not i'm not being precise but the events that happened in the ukraine um and that is is uh bringing all this up development internationally up um at a little bit quicker pace it's the same dynamic there is there are two sides and there'll be neutral countries just like in the war there was the allies and the axis powers and then there would be neutral countries and so that

part is developing um the u.s uh conflict part is probably progressing a little bit quicker um so i mean let's say the odds of that um on the um on the you um on the world order um the developments in the ukraine maybe i should put those in perspective would you like me to please absolutely okay um there is a a very close relationship a common objective of the russians and the chinese so um there is a um a competition in the world and there's a dominant world power which um is perceived as being overly

controlling so the chinese believe that the policy of containment of the united states um in other words just right within their borders that there isn't a region uh that's suitable for them in much the same way as the united states there's always a geographic region that has an area of influence uh the united states in the area like the cuban missile crisis um cuba um when there's a threatening power um in cuba we reacted to that those that kind of geopolitics um they believe that the united states is sort of containing them and they are

growing in power so that there's that dynamic in russia uh has the same kind of view and so that there's a common let's call it enemy uh competitor and there are five types of wars uh there's a trade war there's a technology war there's a geopolitical influence war there is a capital war and then there's a military shooting war um and we are in the first four of those wars um in in this competition china or with russia with china well we're not in a shooting war with china we are in um a shooting war

of sorts when rush with russia and the ukraine we're providing arms and so they're shooting and so there's a military war going on and uh and we're in it in our way so we're at those particular spots um and the capital war is sanctions we hear the notion of sanctions and what that means is they're economic and the way they work is to shut off um to produce economic pain by either [Music] not letting them get at their money or um not letting them get to goods that they can import and these have happened through

time in japan that was what set us up for uh the bombing of pearl harbor because the united states cut off japan's oil supply supply was in the process of doing that and also confiscated its uh bonds much the same way is happening now and that put them into a corner that led them to um bond pearl harbor and then we went to a military war so that's where we are now and that also is risky because it threatens the value of the dollar because um the right right now debt is dollars any currency the

way you hold it is you hold it in the form of debt you don't hold it just in paper and um uh because it there's a rising inflation and because there's a lot of printing of money and because there's also a greater fear on a number of countries that they too could be sanctioned there is a selling of dollar denominated debt so you're seeing that the bond market is going down and interest started escalating recently yeah that's right and so there is that that dynamic that's going on the capital wars um are the ones that

accelerate immediately before um the uh the military wars usually the coffers are empty they're printing a lot of money and then they're trying to use uh economics as a weapon so we're we're in that part of the cycle now um in terms of how this will transpire i think there are um there are three big questions that we're going to learn about and get answers to pretty quickly um the first is does uh putin and russia uh win or lose um i'll describe wynn as um what he wanted at the outset which is win for

russia would be to have um the ukraine um be some not non-threatening position such as a neutrality a guaranteed neutrality and for russia to have control over eastern provinces and for russia not to be economically devastated instead to be maybe have it something like a 10 or 12 percent decline in gdp and for putin to be in power if those four things happen then the cost of his actions will have been worth the uh what was it obtained from that and that would be viewed as a win um it would be then also a loss

from the western countries the world is looking at the power of american sanctions um because american sanctions are the greatest power the united states has if it was a military power it the world has uh come to the position that a number of countries have had um an equal ability to do harm to the united states militarily as the united states have have to do to them and so we don't have a dominant military power anymore but we do have a dominant sanctions power so if we're still ahead of china um in the united states

in the ability to influence have economic sanctions as much ahead because it controls the world's reserve currency that's a biggest asset but in weaponizing the dollar it is leading those to get around and not want to hold dollars because they get worried that they're going to be confiscated so so we will see if that dollar [Music] sanctions power we'll see how powerful it is if it isn't very powerful that's going to be a problem um because others will perceive our weakness well and they'll also realize then um then you only have military power i mean

think about this way if this war is not a difficult war for the united states and europe for the most important it produces higher oil prices and like but um while russia is throwing in military we are throwing in sanctions and these sanctions don't cause law and cost lives um it's not a military war uh so we're fighting it with sanctions and they're fighting it with um with military if you didn't have that how would you fight this war it would be a much more difficult situation and the third thing that we're seeing is how

the world is lining up the world is lining up on which you know there are in wars typically axon axis and exa and allied powers and you could see by the actions that are taken by as to which are lining up um who voted in favor of what at the united nations who is allowing what rules who was trading with the other party who um and russia actually put out a list um who are friendly and adversarial countries um you'll see at the next g20 meeting uh who will be in favor of russia attending that

meeting and who will be in favor of it not attending and that's making clear how the sides are lining up so you're seeing those sides line up and all sides are in preparation for war okay so all right we've got that escalating things are moving faster um between us and china than we thought escalating tensions here in the u.s [Music] inflation is one thing i want to really touch on so what do you do in an inflationary environment as somebody who's not i don't consider myself a savvy investor and so i always wanted i used

to joke with my money manager i want to be as close to my money buried in the backyard as possible and obviously for inflation reasons i have since learned that that is a terrible strategy but what do you do well first thing is you realize that holding cash and debt assets is a bad thing so a lot of money is in cash because people think that cash is the safest investment but they are measuring that in the amount of money that they get nominal returns and they say it doesn't wiggle much but think about it

um it's lost as of the most recent statistics eight and a half percent over the last um inflation is eight and a half percent and they received virtually no interest rate in cash and so there was an eight and a half percent loss of buying power as a result of inflation and so psychology should change and is in the process of changing to realize that you have to think in terms of buying power not the number of dollars you have and you have to think um how much uh are your as your buying power and

so the worst thing is to be in cash like i say cash is trash and to be in to and to be out of the bonds the next thing is to have a diversified portfolio of assets the diversification means some assets that are [Music] inflation hedge prone for example you're better off to own an inflation index bonds than a regular bond what makes something an inflation index like what what are the nature is that going to be gold and precious metals tangible things like what are the things that are resistant to inflation um yes and

inflation index bonds because their returns are tied to inflation interesting i don't i don't understand that well enough to know what how one would do that is that worth going into i don't know what the punch line is going to be yeah um i think the punch line is if you take a look at it uh it's in it's simple it's uh like a regular bond except um its payments are linked to the inflation so they compensate you for inflation so the is this a government bond yep government bond okay and there are some tax

advantages to them too so look into them okay why don't people just flood into that well i'm i think it's it's one type of asset so flooding into any one thing is a is an issue but but moving from the nominal bonds in which the government just says i'll give you this amount of money and it has the unbelief unbelievable and unlimited ability to print the money it gives you um it would favor inflation index bonds um and it could be other assets uh you know some people would say something in terms of cryptocurrencies or

it might be um those other assets um i think what's your take on crypto so crypto is a huge part of my portfolio i think you'd be mortified to see uh just how much so but yeah what are your thoughts on crypto um i think i think that too much peop people pay too much attention to one at the extreme of the other you know um that either somebody's all crypto um or they're all gold or they're all something and i uh i believe that that's a challenge i think that um crypto like gold is

not a productivity earning asset and it can be controlled by governments uh in lots of ways it's been outlawed in a number of places and it also can be monitored the privacy um element is not uh secure from governments doing monitoring and so um and the size of crypto is about the size of um microsoft you know it's all crypto combined and so to um be overly concentrated in it in my opinion is a mistake um but to have some of it uh is a good it is a good thing so the question is always

uh what amount of it so that's um you know i have a little bit about it i'd probably shock you about how little i have you shocked me about how much how much you have but having some of it um so the um and other things i would say is that geographic location is important in other words not just all in u.s and u.s dollar assets um i would say that the three things that that again i'm looking at if i go down countries is first um are they earning more than their spending do they

have a good income statement and balance sheet this is going to be very important in the period of head ahead because the amount of credit that's going to be available to bridge the gap between spending and earning cash flows and so on is going to be quite narrower so a lot of companies even that were able to raise cash and not have good cash flow because of maybe growth expectations in the future we'll find it more difficult that'll be true for individuals it'll be true for um countries so is it does it have a good

income statement and balance sheet will be important the second is um places how are they working with each other is there civil civility or is there civil war on the brink of civil war because countries where they work well together they're productive are going to have a real competitive advantage orderly places safe places to be um but our country is on the rise in that so obviously i'm shocked to say this out loud but the u.s would be in a bad place in terms of that um what are places that have great stability there well

um there are parts in the united states that are work better than parts other parts of the united states meaning like local government bonds or something like that well i'm i'm out talking about the uh like where you want to be and then that'll be but yes it could be bonds it could be places i'm talking now the places the um uh for example we just had the shooting in new york city um on the subway and and new york city's becoming more dangerous chicago's becoming more dangerous places chica san francisco is becoming more dangerous

um you're seeing people leave some places for other places um you're seeing them leave i don't know to texan texas austin or uh to florida and so on so there are differences in um in within the united states and differences from the united states people need to think about picking up and moving and actually going and being in a different place yeah and those are also the better places economically because when um people do leave and they do that uh those who leave um are higher income and higher taxpayers and as a result there's more

of a hollowing out that takes place in that so which creates an economic problem as well as you know a lifestyle problem so i think you're going to see greater differentiation in places which affects where you want to be and where people um who can afford to be there want to be and also affects what their economies and markets are like and that's sown then the united states um so um yeah and the third element is um so um are they financially strong in other words income more than expenses and good balance sheet are they

civil with each other so they're working together rather than hurting each other and number three is are they um um in a position where they're likely to be in a war or are they likely to be out of a war um you know you don't want to be in a war so and those places investing wise history has shown um do worse because they have to spend more money there's more uh problems more pain that's being exchanged neutral countries in wars uh do very well as it turns out uh so elements of diversification so it's

a long-winded answer to your question but i would not want to be in debt or cash and and those instruments i would want to diversify well with a bias toward uh inflation-protected assets and i would want to diversify between locations countries um in terms of the investment based on the criteria i've just mentioned okay that all makes sense now you've said that competing in the markets is harder than competing in the olympics uh which i found funny and distressing all at the same time you said that you guys at bridgewater spend hundreds of millions of

dollars on research alone and that somebody like me is going to have to compete with that so what's the advice for the average person that isn't going to be doing that and how often should people be reassessing i feel like in a turbulent environment should i be looking at this like every week like how often and do you like if you were managing your personal account without computers at least without the you know sort of hyper auto trading um how often are you looking at it and how do you avoid trying to compete against the

best of the best of the best i i think that you have to understand what a good strategic asset allocation mix is that is how to create a good well-diversified portfolio assuming that you don't know how to make these buy and sell decisions because because what happens is think of it it's it's it's like a poker game and you're playing against others and those others are putting in most lose most most buy at the highs and sell at the lows most behave emotionally most don't have the same information so it's it's a very difficult game

like i say you know you wouldn't think i'm going to go try to compete in the olympics but more people think that they can compete in the markets they think i think the markets are going to go up or down and the track records there are terrible for most people okay because of those handicaps relative to others so for that reason you start off with a well-diversified balanced portfolio because diversification can reduce your risk without reducing your return if you understand how to get equally attractive investments that are not correlated with each other that diversify

each other you can build a diversified portfolio it would take too long for me to explain you know how to do that right now but uh that becomes the headline um and um i um um i described it um in my book um principles for life and work um also uh tony robbins described it and uh he asked me about it and and then described it in um his book i forgot the name of it money master the game okay and and he describes it pretty well and for the that i'm you know i direct

you there um i'm going to be writing a book um i'm in the process of doing it about economic and investment principles and then i'll describe it more completely but right now that's the best i can do in this interview now for sure that that already is really helpful hello my friend you know that i believe success requires you to see failure as the ultimate learning tool success requires you to be disciplined and gritty and to never ever quit on your dreams i say all of that because one thing is certain the road to achieving

your goal is not smooth or linear i wish it was but it's not it's going to be bumpy sometimes scary some days you'll take two steps forward and slide 10 steps back and that's why success also requires you to know how to pull yourself out of a rut and get unstuck fast life is short you can't be messing around with your goals you've got to make progress every single day so i've pulled a class from impact theory university called how to get unstuck which you can watch for free with the link on your screen or

by clicking below when you join me for that free preview of that workshop from impact theory university i'm going to teach you my strategy for how to understand exactly where you need to be going how to identify the obstacle that's blocking you and the best way to make the most progress towards that goal and keep your momentum right click that link and let's get to work all right i'll see you on the inside let's talk about um day trading for lack of a better word so i think about this a lot because i'm i'm in

the world of nfts as a creator far more than as somebody who's buying them and as i look at web 3 the reason i don't treat it as an investment i don't think of nfts as an investment class even though people are treating it like that they're treating it like a hedge against inflation and some people treating it like a get rich quick scheme it's that same idea that the vast majority of the money is being made by i think less than five percent of the wallets and so 95 percent of people are getting beaten

to death while five percent of people make all the money and it feels like that's a similar idea to how somebody like myself who i know enough to like get moving to do the research and things like that but i don't want to be in there trying to day trade so is this in some ways you you definitely want to be thoughtful about your mix diversifying making sure you're going for uncorrelated asset classes uh following the guidance that you just gave us but is there also an element of don't try to time the market it's

time in the market and so get my diversified portfolio set and forget or do i need to be in there like constantly re-upping rebalancing that kind of thing um it's a little bit like um you can start off with and i i think this is most important what's your strategic asset allocation mix and then it's like going to the poker table and then you say what is my angle where's my where do i get to take money away from others because i'm better at it okay but you start everybody should start with a balanced portfolio

okay most everybody they have careers to do and and i think they're arrogant they think they can go in there and they can take money away maybe some can but if you're going to play that game um the first thing is um also test your decision rules um don't just go in and then you say i'm gonna wing it and and and and do it and um because you won't even have enough sample size in your decision rules to know whether you're good at it or bad at it what after the first five times you're

going to pronounce how you are it's a learning experience just like any other learning experience to develop your expertise what i find is really important is to take my decision rules and test how they would have performed in the past to at least giving you my some perspective of what my i might expect in the future but you have to think through a game plan and operate that way so i by and large would say first the um the most important things you could do are actually the simplest things you could do to build that

strategic asset allocation mix not to be out in their day trading your life's fortune away that makes sense to me i want to go back to the idea of we've got the cycles it's so far every global reserve currency ever has collapsed and been replaced and so it would certainly be hubris to think that the us's time as uh that reserve currency is going to last forever but in your video you showed a guy like holding up the the falling line and trying to forestall that effect and hopefully you know carry it out longer or

at least make it a more gentle tapering out um what can we be doing to forestall some of the internal conflict um how do we get there's i know there's a lot of momentum going that stops people from making more than they spend at the government level um but are there techniques like if if i could convince you to run for office and you got elected um what would you do to forestall that well again there's those who control the system and what should be done and then there's what the individual should do to assuming

that they can't control the system so your question really is i view it in terms of those two parts um what's necessary is um you have to earn more than you spend as a society and so we look at our country as a whole um and so you have to get financially sound yeah and this is what people talk about with austerity right well or productivity in one way or another you have it's the same thing yeah so productivity would be make more money so you keep spending what you're spending but make more money that's

right okay and um and that that opportunity has got to be uh as much equal opportunity across the population because um if it is for the averages may be very misleading and if most people are not benefiting or have that opportunity it is something that is suboptimal for the development of the country because you don't know where the talent comes from what's the lever we pulled to do that though well let me get it out and then i'll get to the l to how i would do it okay i'm just saying okay what you have

to do is two basic things you've got to be um you've got to be financially strong so you've got to get you have to be productive so that your income um is greater than your expenditures and you've got to be good with each other you work well together you're not destructive with each other and compromise if you do those two things like you're good with each other and you're you know so you're productive and you're financially sound you've got to do those things now under those things there are a number of things you have to

end you have to engineer educate your population well they have to learn how to be civil with each other you have to provide a system that produces that allows productivity to be good blah blah blah but to answer your question and really get to the punch line because that's what i need to do you need to create a system that both increases the size of the pie and divides it well okay and most importantly divides opportunity well not just the output well but opportunity but also uh the wealth well so you have to increase the

size of the pint of iowa um and the way that i would uh do that is i would start by having a bipartisan cabinet and bring together smart moderates people who can work on both sides because i think that the first thing is that the polarity is going to kill us i think we're going to fight before we're going to resolve smartly what we should do so i would want to have a bipartisan cabinet and i would also want to have a program that's like a manhattan project in which i take the smartest from both

sides and work um to engineer a program that is like that so that when they come out with the program there's the moderate left and the moderate right in a sense who are who who are agreeing because uh we each have our own ways of doing this thing you know and but what we'll do is we'll kill each other over which exact way we do it and i think that to have a common uh bipartisan program that is raising productivity and redistributes opportunity and wealth well is the most fundamentally important thing so i would have

that bipartisan cabinet and then i would have those moderates have to deal with the extremists on their body their parties because i believe that more likely it's going to be the extremists who are going to destroy the system threaten the system because they won't be able to compromise the fight will be so bad and the answers do not lie in the extremism yep i would agree with that very much um so if you were to guess what were what are going to be some of the elements to create that are going to come out of

that manhattan project like if you had to throw some of your own ideas in the ring uh i'm sure you've thought through this well it you know it's it's it's kind of like very easy you can see what happens before um education and infrastructure are two areas that are fabulous in terms of um being great investments and not are not treated as great investments i um my wife particularly and me um peripherally uh work in the state of edu and uh connecticut for education i'm gonna give you a picture um connecticut is usually average per

capita income number one two or three in the country and in connecticut um in high high school students 22 of the high school students are disengaged which means that they have an absentee rate of greater than 25 and they're failing classes and or disconnected means they've dropped out of school and they don't know where they are so one in five students more than one in five students um education system is failing they will be on the streets they will be not doing good things on the on the streets they are likely to be incarcerated there

are um gangs and gun shootings and so on um uh that almost end okay that almost end that there have to be um [Music] there's a level of bottom to which you can't let the society go and um we've found through uh largely her efforts and so on um that for um seven to nine thousand dollars per student we could get them through high school and into jobs and then they'd be productive what is it about that money how do you allocate that to break that cycle um there are things that you can do at

certain points in their life particularly between 8th and 9th grade that you can help them make that transition and understand how they're doing and then work with providing supports to make them successful some cases putting them in a direction where there's they go into trade programs so that they'll be prepared for jobs and so on but there are my main point is um that's only just one example uh as i see we're operating a lot philanthropically in different areas and we see so many cost benefit um to creating improvements in great investments that would have

a big effect but it starts with real education and because you have to have an educated population and a civility it's a very difficult thing when the children are raised children are raised where um you know it's quite often a single parent in a slum where there's drugs where there's guns where there's gangs who are you going to relate to what what is your best likelihood of an income it's through drug dealing and it's with gangs that's your community and so on that cycle has got to be broken um and i'm only giving that as

as one example but there are so many um cost effective ways of putting in money infrastructure like to not have laptops and connectivity is today the equivalent of not having running water and electricity or the telephone and we see it with education we were again in connecticut we found 60 000 students didn't have computers how are they going to get educated so you know we we got them the computers but uh and the society that would allow that is something wrong and then connectivity so certain basic infrastructure i mean there are a lot of good

investments that are not necessarily they don't necessarily come from um the business profit seeking world profit is a good but highly imperfect way of allocating resources because in some cases something you know building a road may not be profitable uh but it might when the united states built roads and it built railroads and so on it uh dramatically increased productivity so there's infrastructure and changes that that have to be made and there's great advances on these things great advances on how to educate using computer technology that also not only helps the student learn but it

also helps the computer learn about the student and how they think so there's a lot of potential think about it this way the world is richer today we we have more per capita income we have more um technology and know-how it just has to be redeployed in a way where it maximizes the efficiency and the and essentially the equi equi equality of opportunity so that we pull together ins but now that's a dream you know uh is it a likelihood it's not a likelihood okay because people in these cycles go to fight and and and

you know they're focused uh more on um them winning yeah i want to i want to put a point on that so as you were talking about it i was like okay how do we end up here how do we get people out of this there's a couple things that i see so as a kid of the 80s um loving america was cool and like it was just natural all my friends loved america and recently i had a friend who was like oh i went on vacation and i put up an american flag outside my

door and i was like i guarantee that's going to get ripped down he was like oh yeah it's already been ripped down and i was like that's crazy like we live in l.a like this is a major american city and for that to be considered offensive so anyway i think about these kids so i don't know how much you know about my obsession and why i work as much as i do i worked in the inner cities i worked with these kids that you were talking about like up close you get to know them you

love them you want them to succeed you want them to do well so you start asking a basic question they're really smart not universally it's normal distribution but you've got some really smart people in the inner cities just being destroyed by their zip code so i'm like okay wait how did we end up here like what would they have to do no whatever and for me i came down to a lot of this is mindset like they they've been told the world doesn't want you to succeed so they don't even try which if you believe

that the world is just stacked against you and that it's impossible then of course why would you try so i was like okay we've got to get the right ideas in their heads so that they will take the right actions to learn and get educated now i didn't get deep enough to you know learn about how many people don't have computers and connectivity and all that that's distressing but when i think about why because you said in a society like ours something is wrong if you're allowing that to happen and my answer to that is

you've got the civility quotient of in some cases i just don't want to see the other side have their way so if the right answer comes from the wrong side then i'm going to fight against it if i'm the other side then you've got we can't agree that the country is worth loving so even just saying like hey we've got to put aside our differences because we're all americans and let's make sure that we are elevating all americans it's like nope like i can't rally behind the flag i can't get behind this idea and so

now all these people are stuck in this purgatory of nobody's looking at metrics to say hey we're trying things is it actually working and if the metrics aren't improving then we have to change the policy but that's not happening because of all the fighting but i do think that it's partly because you have that we can't even agree to rally around the country does that strike you as a without patriotism i don't know is patriotism a force for good evil how do you see that i think good produces a good type of patriotism so i

went through the same cycle and i'll talk about metrics too um the reason i put metrics in there is um every six months or 12 months i'm going to update the metrics so that everybody could look at those objective numbers and see are we improving or are we deteriorating and i think if the politicians the people in government were held accountable for those numbers so that you can objectively see is education is the wealth gap rising is there um greater productivity these are measurable things you can then see there and and they're not just measurable

about outcomes they're measurable about health you know if you have a better healthy income statement balance sheet you are healthier and financially and so on so those metrics will put out but um yeah no i saw the cycle um united states world order began in 1945. i was born in 1949 and i benefited from it and i and it was um not just an american perspective that american dream it was a world dream it was the only country in the world where there was really a sense of equal opportunity i was very lucky i had

two parents who who cared for me they loved me took uh gave me good guidance i went to a public all public schools um and i came out to a world of equal opportunity that's all i needed okay that's all almost everybody should get why shouldn't everybody get that and it was a place where anybody from all over the world could come and you were not um you could be a citizen and it was the only place in the world where you could really be a part of that and not considered an outsider so all

that immigration brought the best talent and we operated in a place where there was rule of law and everybody respected the law they were property protections and you could make a life that was the type of life that you've had the type of life that i've had where we're free free to free to speak free to um do those things to have opportunity and and so on free to invent free to do what you're doing and i'm doing and that is the american dream and that was a beacon for people all around the world that

was what the united states was and so on and that is good that is good okay now we have something different and we have a dynamic which is going on because we all abused that because we had to spend so much money because we became decadent in terms of over spending on some things and under taking care of other things and so on and now if there's a fight and that that becomes that dynamic so yes if we could recreate the realization of what that was what the is the american dream what is fair how

does that work and rekindle then then that has a tremendous power in being able to bring that back but the dynamic of history shows that it's more likely that it goes the other way but yes if we rekindle that the idea of heroes you know we don't have any heroes uh why don't we have any heroes because we're tearing people down heroes of role models people who we admire there are many people i admire you know and i've seen in my lifetime you know we should see more of those role models as as as examples

of how to be but we're yes we're missing that we've become a decadent largely a decadent society that's at each other's throats and we're in trouble yeah we're in trouble innovation speaking of there's there's like almost a distrust now of people that strive for success there's a distrust of science to some extent there's um i feel like and maybe i'm crazy because the stats will bear this out but it feels like we used to be the place everybody would want to come if you had that entrepreneurial dream and you wanted to build something and you

wanted to generate wealth and innovate something this is where you would come and then i look at somebody like elon musk who honestly man just seems like an alien i don't know how he's pulled off everything that he's pulled off it's absolutely bananas and yet there are people who just can't have it they can't have the level of success that he's had and aren't necessarily even looking at it from the lens of the innovations that he's created do you think that that's a predictable change in attitude that people have and they they lose the desire

for innovation is it is it just being decadent or is there uh a rebellion against um education i don't know i don't i was so shocked to hear that there are people that aren't inspired by what he's doing but instead are like just opposed um i think it's i think everybody's got these opinions and they're so critical and um not you know if everybody could just take care of themselves you know it's it's like um start with oneself um the aspiration and i think the reality should be to be self-sufficient plus okay here here's my

view success doesn't have to be making the most money or the most contribution success for a successful life is that you have the life the type of life that you want for you um but you earn more than you spend so that you're self-sufficient and and if every individual could do that you would have self-accountability and yes and a successful society um and so it's not a bad thing it's a it's a good thing when people produce things that others want and they end up making in many cases billions of dollars it doesn't have to

be the billions of dollars to be successful but let's not resent that like i think uh when we think about um the prejudice the prejudice of either against the billionaire or against the poor person um that that that prejudice um i think supposing um we didn't we eliminated the the billionaires most of the billionaires one thing is inheriting the billions the another thing is creating the billions um most of that comes from coming up with something that people wanted and then they and people spent a lot of money on that thing and i think if

you were to take those items that they created and you say the society is not going to have those items would you have rather not had them i think it it it's all a matter of um [Music] stop the fighting be productive have the life that you want um you know not um not not all this fighting and criticism that is going to tear down each other yeah one thing that i've heard you talk about that i really resonate with is the idea of leading with understanding listen first try to figure people out um i

know your stance on china has become uh controversial i guess but when i hear what you say it's basically understand them even if they end up becoming our enemy to understand them would be incredibly important is that a life strategy you have of trying to understand people are you somebody who sees yourself as as somebody bringing people together what what do you think is that importance in terms of understanding others well just just from really just on seeking understanding is a very practical thing and it's interesting as could be and then um and then it

has a lot of really good results because with that understanding you can understand how to trade things to have win-win relationships rather than lose loser relationships so um yeah i think that um most people are operating in their perspective of uh you know what's good for them right and and then um the best are uh operating with the concept of win-win relationships that they understand that um if i have a win-win relationship um i can you know like i have a principle one and one equals three um and if if you if there are two

of you and you can trade things and you can help each other that's a win-win relationship and and that is the best but in order to do that efficiently you have to understand their perspective and also their perspective is not um uh as much like a characterization of good and evil it is them doing what they believe is in their interest now that may do you harm and you might call that evil but you know it's almost that back and forth so um so when you have that open-mindedness so you can understand understanding somebody else's

perspective is not the same as uh believing that what they're doing is right you may have a choice but if you have somebody who has a different religion or a different way of doing things um to at least have an understanding of that to see it through their eyes right um you know you can reject it you could say i don't want it or but even then you have the capacity to deal with it in a much more informed way than if you don't understand it so understanding i think is is um and that is

important and then of course the world works in a real in a way where it's the reality that they will move in a certain way and then you move in a certain way in those interactions and if you don't have that understanding of the reasons why you're never going to be able to play the game whether that's a playing a game against them or playing a game with them to try to produce the best possible outcome you're never going to be able to do that well and so yes i see this tremendous misunderstanding because there's

a tendency to demonize the other side okay and that's you know and so it becomes a distorted reality in which there's an inclination to go fight and there's misunderstandings well if even if you're going to go fight make sure you've got understanding [Music] yeah so i um when i i was introduced to taoism when i was probably 16 and so that gave me when i was young i really had an obsession with china and chinese philosophy and i studied laoziwanza and just really became enamored with the east and eastern thought and so for me it's

been almost strange to watch china take on a very different tenor in terms of the way the u.s perceives china right to see this stuff escalating and getting darker and darker what i find interesting is like you said to understand them is not the same as to agree with them and i think that that's very important first of all i'm not a scholar on it so i don't know um but what i when i take that what you're saying and i apply it to the us of okay lead with understanding lead with trying to figure

out where they're coming from lead with recognizing that if you don't and you encamp into this us versus them it is inevitable that you conflict and so when i look into the future i have whether i like china or think they're out of their minds i have no interest in going to war with them just the loss of life is just too catastrophic to even contemplate so i started thinking okay like how do we bring these together and you had a key insight in the book that i thought was really powerful and you said look

no matter what you think about china you have to understand that they believe they're doing what is right you're not going to convince them to do it the american way any more than they're going to be able to convince us to do it the chinese way and i found that insight very compelling because you go into this ideological battle when you think oh we can convince them we can win when you think that you can draw them over to your side that's one thing but if you can't then it becomes a very different game of

okay how do we negotiate this relationship if i'm not going to be able to convince them and so in the book you bring up another idea which is the idea of dialecticals two opposing forces coming together and and in the friction is the superior answer so i know that china looks at themselves that way and they use dialectics i think that the us given the the conflict between the left and the right has to start doing the same thing of saying hey we actually need to value this friction that it's not i'm not trying to

convince somebody on the other side to think like i think i'm trying not to even think of myself as having a side if i'm completely honest but i understand that they're personality types they see the world differently they're never going to persuade each other but hopefully we can let go of some of that the the warfare mentality and bring people back to a table of compromise am i understanding that the dialectical nature of those two opposing forces correctly and do you think that that is a useful way to instead of trying to get the other

side to agree to to find the the strength in that push-pull yes and in that yes totally unequivocally and in addition to understand the cost of lose lose and additionally the issue of sovereignty um you know uh the the invention of countries which came in the uh late 17th century after the 30 years war was one of the great inventions they were not countries there were no borders amazing thing there were no countries there were no borders um the way it worked is most countries were run by families because they were royal families and there

was a constant fighting like i want to go take more or they would take more and there was constant fighting and they had a war 30 years war they called it and at the end of this 30 years war they were so sick of war that they came up with this idea of countries so countries that had a border and that you would determine those inside those countries would determine what went on in those countries back then they fought whether it should be catholicism or protestantism or whether it was the pope or whether it was

they fought about a lot of things but when they had that they said okay that's what we're going to do is we're going to do it within borders so i think that's interesting so the idea is that by and large if you have a domain and it's in your border that you have control of that that that's one element then there's win-win uh relationships versus lose-lose relationships and the things that you were talking about the dialectic uh wrecking forces one to recognize the pros and the cons and to try to get into an equilibrium level

i think that that all of that is right none of these things works perfectly so the question of um you know what is it can anything go on within those borders and it's okay maybe there are common rules that the system as a whole agrees can or can't or something but those kinds of rules um i think are important so as we go down the checklist um you know kind of um live and let live uh win win is better than lose lose understand each other where they're coming from so that you could do good

trades and don't misunderstand you know lose lose-lose wars are are you know are terrible types of things they're that doesn't mean there are not things worth fighting for but if you operate within the parameters of borders and then it's largely your own business and and then we come to ourselves and the most important thing he whether there's international or domestic issues is be strong like if it's like be healthy if you're strong and healthy you don't have to worry domestically and you don't have to worry internationally and it's just basic things of what's strong and

healthy you earn more than you spend you're good with each other you know you educate your population you're productive those are basics be that take responsibility for yourself doing that the united states should take responsibility for itself doing that like every other country can and if it does that it will be strong and it'll be healthy and it'll be fine yeah yeah right i um i really want to be in a positive place about where all this is going i'm such an optimistic person by nature but there's something about watching that breakdown that you did

of the last 500 years i think i told you this when we were doing the pre-call i couldn't i couldn't listen to the book first thing in the morning because it it was like putting me in this really um almost stressed out state of like man we're good i uh but i have a please if you worry you don't have to worry and if you don't worry you need to worry because if you the thing that i could give you is this worry about realistic things that you can worry about that's what i want to

give the people uh that's why i did the video by the way the video you you could skip the whole book the video is an animated video 10 million people have watched it in no time it's something that's very digestible and it carries the picture um if um because if you worry then you'll do something to prevent those worries if you worry about going to world war ii if you worry about those and if we could get enough people who believe in these things then we will have a different choice right there'll be less likelihood

of us fighting with each other and doing us doing each other harm and instead doing more good things that'll raise ourselves and raise our living standards because we have the resources to be doing those things so um yeah the the greatest danger for most people is failing to look at um the things that could be harmful to them because they don't like to look at them it's like some people would rather not know that they have a serious disease or something okay look at it deal with it and then you're most likely to be able

to deal with it effectively and minimize problems or take advantage of opportunities there's a lot of potential here for us to do amazing things technologies the ability to think i mean we've seen amazingly wonderful things the capacity for you have a pandemic and we come up with vaccines the capacity to get around the fact that we can't get out of our houses um all of that could all raise living standards if we could all work well together yeah at the end of the book you said something that was really interesting along these lines of you

know i build my portfolios from i look at the absolute worst case scenario the thing that just is is i can't let that happen under any circumstance and so i address that and so if you said i even have an end of the world portfolio strategy and that you allocate resources to these different buckets to make sure well if the world completely you know collapsed and i don't know what you deem the end of the world but that's a pretty bold title um but that you look at those things you said you know people assume

that when i look at those that it actually makes me pessimistic but in fact the exact opposite is true it's liberating to know that i have thought through those scenarios i have taken action and i will say that's another thing people may look but if they don't do anything like i really wanted to get you back on the show because when i read your book i was like ray this is i think i was actually nervous coming into this interview i'm like this may be the most consequential interview i've ever done because if people take

away from this that we're really at a tipping point moment and that the way that we all act in these you know coming months and years could determine the world order whether we uh maintain stability or whether we go into a period of such tumultuous chaos that the loss of life is just unimaginable and by looking at that and saying okay that's real and now what do we do about it it's a real possibility 20 years ago i would never have bought into it i'd be like oh he's an alarmist but it really feels real

to me now and so i i can't encourage people to skip the book because i think the book has a lot of additional information the video is phenomenal it's probably the right place to start but then to read the book and to get that information to really grow to understand exactly how these loops repeat we'll give you an understanding of what we need to do to forestall that and the things are simple but they are very difficult to do so our goal is to be healthy and strong so spend less than you make um make

sure that you are presenting yourself well on the world stage and getting along well with each other but that means we have to race back to the middle and that was like i had this sense of like what i always told people was fill your heart with love whenever you're going into it and it feels stupid feels dumb when i say it but when i think about somebody that i disagree with or whatever that it's the dialectic approach of i need to learn from this friction rather than trying to convince them i need to learn

from their friction i need to have respect for them as a human so i need to want to come to a place where we can compromise and them not try to you know drag me over to their side me not try to drag them over to my side or again i try not to have a side but just like what works what are the metrics look at the metrics is this actually working if it's not adjust if it is pour gas on it right so but figuring that out coming back to the middle and actually

taking action on the stuff that you lay out it's incredible i think that um you've done the world a tremendous service by taking these however many years you're going to do it and giving us all these incredible books and talks and videos that outline all the things you've learned so one just thank you and then two where can people engage with this with all the material that you're putting together um well so first uh you're welcome um and i want to emphasize that what i did in the book was to describe like maybe what we

could collectively do but also what individuals can do if we don't collectively do the right thing because either can happen and that's why in a sense quote like what i call the end of the world portfolio is to know [Music] um that if this no matter what happened if there was a civil war or there was anywhere or whatever um that i have my protection in a certain amount and i've taken that off the table and then once that's off the table ah there's relief there's a lot less worry and then you could be more

aggressive doing the things that you'd ordinarily do with the other part of the portfolio even thinking that way creates great relief it's like having an insurance policy and and and so on so um but the uh i think the actions that you described um to get informed one way or another um the book is the best because it's most uh complete and it brings you through it um but the video is is really easily digestible um as i say 10 million people in six weeks and you know it's growing it's it's a hot video many

people um see the video and then they go to the book whatever way that i can pass it along and and yes it's it's my pleasure i met i'm 72 years old and i'm in a phase of my life where the main thing i want to do is to pass along what i have that's going to help others uh particularly beyond me so uh let me thank you for uh being a partner and being able to pass this along to your listeners at any time ray anytime every time has been an extraordinary gift so i

thank you very grateful for what you're doing to help us get back to the middle and and do things well be healthy and strong i appreciate it all right everybody please go watch the video it's absolutely incredible just type in ray dalio changing world order it will pop up on youtube it's incredible it's about 44 minutes it is unbelievable the book is even more incredible so if you like the video definitely go get the book it's extraordinary and then also you're updating things at economicprinciples.org if i'm not mistaken that's right so check that out as

well it's all extraordinary um yeah i cannot recommend ray highly enough and speaking of things that i can't recommend highly enough if you haven't already be sure to subscribe and until next time my friends be legendary take care peace if you want to actually make your dreams come true i'm not telling you not to chase money i'm just saying it's not going to feed you emotionally the way you think it is [Music] so you've got to completely divorce yourself from this notion of outcome and become completely obsessed with the idea