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Hello and welcome to another episode of the Odd Lots podcast.

I'm Joe Wisenthal and I'm Tracy Alloway.

So Tracy, since we've been doing the podcast for ten years, you know, trying to talk to some of the big thinkers, right, some of the people who have a little bit of a perspective on how the world's changed.

We say, how the world's changed in ten years, but it's a little bit arbitrary how the world's changed and what the next ten years or fifty years are going to be.

Like big thinkers, thinking big thoughts.

Zooming out a little bit.

And I think everyone sort of is these days.

I mean, it happens to be that we're sort of celebrating our anniversary or birthday or whatever it is.

But I think it's just in the air, you know, like everyone.

I guess people are always trying to think big.

But there's something in the air right now where everyone is trying to grapple with pretty evident change that is afoot.

Well, here's the thing.

The big story in markets is AI, sure, right, and whether or not it's in a bubble, and AI is a story that is not just about finance and markets.

Is a story that touches multiple things.

So you have it's a cultural, social, and political story.

So you have people talking literally about how AI is going to change the world.

It's going to change art, it's going to change music, movies, people as well.

Right, so some people are going to lose their jobs, some people are going to get rich.

People talk about it in this existential way, both for countries and companies.

To your point, and if you don't win in the AI race, then you are literally dead right.

Part of the permanent underclass or whatever people say.

And then I think beyond AI, even if we didn't have this boom that really started in late twenty twenty two, even if that weren't going on, there'd be all these other big questions related to technological competition, because we already talked about that particularly.

Yeah we were Shauna.

There would be all the concerns about the size of the debt.

There'd be all the concerns about demographics and so forth, and the perhaps strain that changes in demographics are going to put on the existing labor force.

So yes, you have all of these things going on, big picture questions then layer into the AI question.

And I just feel like people right now is we all feel it.

We're consumed by these like sort of forward uncertainty questions about the integrity of elections and democracy and all of these things.

Is sort of we're at this clearing of the woods where we don't know which.

Direction we're going to go.

You know who's very good at synthesizing major forces going on in the world.

Well, we do, indeed have the perfect guest, someone who many people turn to and who obviously is an incredible track record of talking about things both in the big picture and shorter cycles.

We are going to be speaking with Ray Dalio, the founder of Bridgewater.

He ran it for fifty years.

That's kind of unbelievable.

You know, we've seen many market cycles.

Proud of ten years of doing a podcast, fifty years of running what became the world's biggest hedge fund is an orders of magnitude more impressive accomplishment.

So Ray, thrilled that you're in here in studio with us, Thrilled that you're taking the time to chat with us once again, appreciate you coming back on odd lots.

Thank you, Yeah, congratulations on ten years ago starting this thing.

I think of how the world has changed in those ten years.

And you want to talk macro.

Listen, I think you're.

You've heard, you've heard a thing or two about it.

Yeah, I am Global mac grobal mac and AI is just a part of that.

It's a small thing in relationship to the whole global Macro.

I know we'll get into all this thing, but again, like it feels like something we're patting ourselves on the back of ten years podcast, fifty years of running a hedge fund.

Like I say, it doesn't even seem real that that could even be possible.

I mean, I know it sounds crazy, but yeah, what a joy.

Oh it's fantastic.

Yeah, you know I do.

You have any tips on longevity because we're like, well, we want to be doing this again in ten years and maybe again.

No one's asking us about in forty years.

Yeahh So.

Meaningful work and meaningful relationships, in other words, do you have is it your passion to make it as great as it can be and a shared passion?

And are you doing it with people that you care about?

And you have meaningful relationships?

And if you've got that, you know you've got the energy to keep evolving and you know that's what it's about.

I think that's for me what it's about.

How would you characterize this moment, not just in markets, but in global macro as you point out, in terms of your experience, your career, how does it stack up to previous decades.

It's part of a long term evolution that I'd like to take you through.

I love a brief macro perspective of that evolution, and I'd like to start, if I could, with a little story of what change me.

Okay, when I was twelve, I caddied and I earned a little bit of money, and I put my money in the stock market because everybody was in the stock market at the time, and the people I caddied for would tell me about the stock market, and I bought a company.

It's the only company I ever heard of that was selling for less than five dollars a share.

Did you just choose it randomly?

It was the only company that was less than five dollars a share that I heard of, and I figured if I could buy more share, so if it went up, I'd make more money.

That was my logic.

Okay, you know there.

Are many people today in the market anyway, keep going.

But the silliest lot.

The number of people.

Out there who I believe like have come to think similar logic, particularly in other areas like crypto.

Anyway, I didn't know anything about what I was doing on It was obviously stupid.

But what happened was it was company that was about to go bro another company acquired it, and when tripled in value, I thought I was smart and it is an easy game, and I got hooked on the game.

Okay, fast forward.

Graduated college in nineteen seventy one, clerking on the floor of the New York Stock Exchange before I went to graduate school.

In the summer August fifteenth, nineteen seventy one, President Nixon gets on the television and says, you're not going to get the gold.

Gold was money then, and you had paper money and it depreciated in value, so you're not going to get the gold.

And I walked on the floor of the stock Exchange the next morning, and I thought, this is a big crisis.

Money as we know it is ending.

We're going to have a problem.

And it went up more than it had gone up in decades.

And I didn't that's because I didn't know what a devaluation was.

So I studied history, and I found the exact same thing happened in March of nineteen thirty three with Roosevelt getting on the radio and making the exact same move.

Because they didn't have enough real money back then it was gold was real money.

They didn't have it.

And that led me to realize for the first time that I needed to understand things that happened before my lifetime, not just my experiences.

So I studied the thirties, and because I studied the thirties, I was able to anticipate the two thousand and eight financial crisis because it was the thing that was playing over and over again.

And there are those things that are going on now.

Okay, we'll get into those.

But it led me study history.

So about six or seven years ago, I studied last five hundred years of history to think what causes the rise and decline of reserve currencies in the empires?

And I said, the last five hundred years, and that brings me to the five big forces.

Okay, the five big forces are and they each have a mechanic to them, a dynamic.

The first is how money, debt, markets, and economics works.

Okay, and we'll get into that the second.

By the way, there's a big cycle there is, and we can call it a monetary order, and there's a monetary order that always happens and breaks down, and it's part of an arc that has to do with limitations on debt and money.

And we'll get into that.

Like a leverage cycle.

Right, how much debt can you take on?

And what is the value of money?

Money's supposed to have a storehold of wealth?

Is debt a storehold of wealth?

And what is our money?

That's a question that we have to deal with today.

Right, what is the money that you can be an effective storehold of wealth?

Okay?

And are we at the end of our debt cycle?

Okay?

That's number one.

Number two related to this money and who has money and wealth differences and so on.

A part of the cycle is that capitalism creates great opportunities for inventiveness, to be productive and so on, and it raises living standards and it raises wealth, but it raises wealth in an unequal way, and there are big wealth differences that naturally come as a part of the cycle, and those wealth and then values differences get to a point where there are irreconcilable differences So throughout history there's the left and there's the right.

There's the rich and there's the poor, and there are those who are liberals and those who are conservatives, and throughout history they have a conflict, particularly if you have an economic problem.

So that's the second force, right.

The third force is the changing world order, the international geopolitical order, and that has a cycle to it too.

You started last time, you start in nineteen forty five, the end of the war.

The war determines who has power.

The powerful determine what the new world order is like.

And then you have the rising power challenging the existing power, and then you change the dynamic of the world order.

The world order always changes.

The monetary order changes, the domestic political order changes, the world order changes, and there is that arc.

Number fourth force is acts of nature.

Throughout history, drought, floods, and pandemics have killed more people and toppled more orders than the first three that I mentioned.

And number five throughout history is man's inventiveness, particularly of new technologies.

Okay, and here we are with AI, and all of those are connected.

There each relate.

What happens with AI affects productivity, effects who gets the money oh, what happens in geopolitical You have to spend money to have a military and the conflicts and then there are trade wars, and it all transpires pretty much in the same way.

Over those five hundred years.

You can see these cycles in that pattern.

It is pretty incredible listening to this and thinking, you know what, it's not just our imagination.

We are in a time of extraordinary change.

We had a global pandemic that disrupted life for everyone on Earth in varying ways, at least to some extent.

We do have this unbelievable technology that everyone is trying to wrap their heads around with AI.

We did have, even starting you know, arguably ten years ago, the emergence of serious trade tensions with China.

We do see the emergence of their military clearly getting much more strong.

Like, you know, you see all these things like, it's not we're I guess we're not hallucinating.

Some big stuff is going on these days.

Well, yes, And the thing that I would like to focus on is the mechanics of how that happens, the interdep relationships between where are we in the debt cycle, where are we in wealth.

We'll talk about these things.

I hope, what does that mean geopolitical and so on?

And if for me it's like watching the movie over and over again.

There is connections and there's a cyclicality to this, a big cycle dynamic, so that we can step back.

I think there's too much intent.

Everybody looks at the news item of the day and they don't step back and see the big arc and the cause effect relationships.

So that's why I'm hoping we can get into that.

Okay, well, let me try to thread the needle between the news item of the day and the big arc.

But when you look at something like AI, how does that fit into your five forces framework?

Draw the lines for us as we well.

Next, I mean, first of all, it has tremendous effect on the economics of it.

Right, it looks to me very very similar to all the times in history that there was great inventions and great changes, such as the twenties late twenties.

So a real productive show.

It's a change and maybe the greatest ever.

But right up there, but imagine, let me take you into the twenties.

Imagine we need to get like a time warp soundtrack on it, back in time.

But first time electricity is going into houses and you can have washing machines and refrigerators.

First time we have the car.

Okay, first time that we have airplanes, First time we have movies that you can go at ten, First time you have radio.

You used to have silence in your house, and so on.

The first invention of television and so on.

Can you imagine it would be much more immediate and exciting.

You see the revolutions in those things.

And so there's a mechanic to a mechanism of which how does wealth get created?

And what's the difference of wealth, and how does a bu come and how does a bubble go?

In other words, to distinguish it.

And that's, by the way, many of those bubbles.

So I can go back in history and give you many examples, but that would be a good example.

So what makes it go up?

And what is the difference between wealth and money?

So you get into the mechanics.

Wealth is not money, okay.

So and this becomes very relevant to us now because what you do, what say, okay, but let me give you an example.

Yeah, okay, you come up with a great idea, you want to create a unicorn.

You sell fifty million dollars of the sock and you value it a billion dollars.

Okay, now you're a billionaire, and now that company is worth a billion dollars.

But what happens is it really worth a billion?

Child or teenagers at some point had this idea, Right, I'm going to start a company and then Tracy, I'm going to sell her a dollar's worth of share.

But it's just this friend and suddenly, oh, I'm.

A billionaires and wealth is being created.

Suddenly, Like I think everyone has this scheme at some point in their life.

Okay, But the importance thing to realize is wealth is different from money.

Okay, wealth you can't you can't spend wealth.

You have to sell wealth in order to get money to go buy things.

Okay.

And so how do the bubbles happen?

Okay, The bubbles happen in the way that you create these needs for money, and then the wealth rises and then there's a need to sell it.

For example, let's imagine that we put in wealth taxes.

Okay, Okay, what's going to happen?

Those are going to need to sell some of that stock to be able to get up the cash to be able to pay taxes.

Right, whether for whatever reason, the need for cash happens, and you want to make a conversion from wealth to money to be able to come up with the money, and all the bubbles it's worked this way.

There's not enough cash, and there's the desire for that cash, and then you sell it and the dynamic begins to work in reverse.

So that's all I'm talking about is mechanics.

So when you ask me the question, and I look at today today, it looks like another one of those Okay, who's got the wealth?

And then where is the vulnerability that can Is this real wealth or is it accounting wealth?

And then and people make the mistake of thinking will it produce an income over its time in order to justify that valuation.

That's not what make bubbles okay, because the answer to that question did not change between nineteen twenty eight and nineteen thirty one.

It's not like they found out the answer and then they say, Okay, that's okay.

It's this dynamic between wealth and money okay.

So there's a mechanics to the way this happens, right, And if you understand those, and it goes back a long time.

If you go back to the Old Testament, the year of you believe.

Okay, how do you deal with debt and you have to pay back the debt because debt is a need for money.

I have to pay deliver money on my debt.

So it's important to understand those mechanics.

One of the things that you hear a lot when people characterize the economy today of twenty twenty five is that a lot of it is writing on people's wealth.

People talk about, you know, the K shaped recovery.

They talk about how people in the higher income or wealth quintiles are really driving consumption, et cetera.

Then we look at these large obligations that we have, whether national debt or just the obligations to care for seniors, et cetera.

Is this sort of where it comes together that at some point, maybe we don't call it a well text, et cetera, but where the political entity feels compelled to go after the quote wealth, the wealth that exists on paper.

Yes, and it's happened over and over and over again for basically the same reasons.

Okay, if you look at the thirties for example, or it's the same you need the money, Okay, so just watch what's happening right there's a small group between one and ten percent of the population that this is going unbelievably great for right, And then there's the bottom sixty percent.

The bottom sixty percent are having problems being productive and being affected.

Sixty percent of Americans have the lowest sixth grade reading level.

Okay, the stock ownership of the top ten percent, they own about ninety percent of the stocks.

The bottom sixty percent own about five percent of the stocks.

So we're seeing this wealth, and who are you going to get the money from the way you used to get the money was that you would borrow the money, would the debt would continue to rise relative to d GDP or relative to your incomes, and then you'd spend.

Well, we're close to not being able to have that happen for mechanical reasons that are worth understanding.

One man's that's or another man's assets.

And if you're holding a lot of bonds, a lot of government bonds, that's a lot of debt.

Is that a good storehold of wealth?

And then when you have the political or geopolitical problems that are going on, conflicts, then the foreign ownership owners of those who own about a third of the bonds may not want to hold those bonds because they think it may not be a good store old of wealth, either because it's being depreciated or because they may have sanctions.

So if you go back, like into the thirties before, there's always the economic war, including the financial war, in which entities are cut off sanction we call them now.

Okay, So there is this dynamic in which and it's not just an American dynamic, it's a UK dynamic, it's a France dynamic, it's a Chinese dynamic in which we're at a point where it's not easy to keep doing it the way we were doing it, by selling more and more of those bonds in that way, and so then we'll look at it.

You can't raise, you can't borrow like you used to.

Number two.

I went to Washington, speaking leaders on both sides.

I said, we got to get the budget down to three percent of GDP, and you can do with that if you take it for this, a little bit of this and that, and you can do that.

The answer I get is, and it's the same in the UK, it's the same in France, same role around the world.

You have to understand that I can't I have to make one of two pledges or both.

I will not raise your taxes and I will not cut your benefits.

Okay, so now we talk ball.

It's not that much.

You can't borrow, you can't keep it up as it was.

You can't raise the taxes politics, okay, you can't cut the spending.

Okay.

So there we are.

It's different.

The world is very different from I was thinking about your tenth year anniversary.

Okay, twenty fifteen.

Yeah, okay, so think about how different the world is as a function of these five forces.

Right, that's what it looks like.

Right, absolutely, So can we talk about this in a US context specifically since you brought up DC, but it feels like US especially has changed in ten years, so rising inequality, the deficit is higher than ever, and we also have an administration which seems to be redefining America's place in the world.

How does that fit into again your five forces framework?

And I guess I should bring up the debasement trade as well, because this was a big theme earlier in the year, that the idea that you know, people don't want to be in the dollar because they don't know what's going to happen with the debt, or because they're worried about sanctions and limits on currencies.

It's all the same, isn't it.

And it's all interrelated, right, I mean, okay, and it's all understandable, right, it's all.

You have a financial limitation, you have large wealth gaps, You reach the point that you don't want to negotiate your sick and tired.

The electorate is sick and tired of hearing these excuses.

They want populism.

So populism arises from this, and populism of the left and populism of the right.

So they've greater polarity, and they say, I don't want to compromise my things.

I want it delivered.

So win for me, okay, win for me my values, my way of operating.

And therefore you have irreconcilable differences.

And so if you look at history, the people who arise or of the same character, have you produce populists because of that set of circumstances.

While the world is changing.

Okay, so what is the place in the world we can't sustain what we were doing before.

Think of the relationship, let's say between the United States and China by way of example.

Okay, the dynamic of Chinese will sell inexpensive their goods cost effectively.

Americans buy it, send them the money.

The Chinese take the money and they put it into bonds.

That dynamic can't exist anymore.

First of all, they don't trust each other.

Everybody's worried, Okay.

The United States will worry, can I can't be dependent on imports from China?

The Chinese worry that I can't be dependent that you're going to give me.

I'm a creditor.

Am I going to get my money?

If you study history, maybe because of conflict, I can be a problem.

You lose the middle class because they are the manufacturers.

You ship manufacturing to China, and so you don't have the man and you say we have to bring back manufacturing.

We need self sufficiency.

Okay, So now self sufficiency means you cannot continue that dynamic anymore.

Right, And then what do you do when there's the challenge the wars that are not the military wars, the trade war, the technology war, the geopolitical influence war.

It's not like you can go to what was imagined in the world post World War two period that the United States said we're going to have a multilateral world order we're going to have a United Nations and we're going to go vote, and we're going to have a World Bank, and we're going to have all these world organ a World Trade Organization and so on.

We're going to have those types of things.

Well, that's that's naive.

We're past that.

So we switch from a multilateral world order to a unilateral world order where power matters.

Right, that's what's going on.

Right.

So, Joe, I'm kind of laughing here because I'm thinking back to both of us studied international relations right in college.

I'm thinking how much time I spent studying international institutions like the World Trade Organization and then un Yeah, totally irrelevant.

Now, can I ask you a personal question?

Not that personal, but we had you on the podcast in March and you were talking about the scale of the US debt and so forth, and it was, you know, this was on the eve of when the big tax cut negotiations were happening.

It was clear that the White House wanted to push a tax cut, and as you mentioned, you went to DC and you know, you were say, fine, there are ways to get the budget deficit within three percent of GDP.

This is not an insurmountable task.

But you know, right now there does not seem to be any meaningful change in the spending or deficit trajectory.

Did you find that personally demoralizing?

You were concerned in March.

Now here we are talking on November fourteenth, you know, the last eight months have your you got more concern earn?

Did that experience have any effect on you.

I've been in the markets for a very very long time.

I'm a hyper realist.

I view everything as a learning experience, and so when I don't get demoralized, I find it interesting and informative.

So I was disappointed.

I mean, it would have been better for everybody if we could work together and we can also find even if we couldn't agree on how to do it, just do it proportionately across things to make those changes to try to bring that in order.

But it was a good reminder of where we are in the political cycle to understand the nature of that.

And so that's what it is.

You can't be idealistic, Yeah, you have to be realistic.

I consider myself to be someone who every new experience is a learning environment and that's why I love the job that I have and everything is new and interesting.

But occasionally things that.

The news get to me a bit more than I wish they would.

There's a there's a feeling in the stomachyah.

Yeah, and it's like this is not just an intellectual exercise.

This actually stakes.

For but for me.

Listen, I've been doing markets fifty years.

Yeah okay, And a lot of motion can get in to the to the way of how is it the meditation.

Meditation has a big effect.

Oh yeh, yeah, you no, no, you're touching on something, right.

Is this like a key element of separating the emotion from the learning.

That's right.

The ability this meditation, I would say, would be maybe the single most important reason for whatever success I've had.

I mean meaning, it has given me an equanimity to step back, to see the arc, to accept there's a life cycle.

Okay, I'm seventy six years old.

I know where it is.

People.

You know, there's all sorts of things that we all go through and so on.

To the ability to step back align the subliminal, the subconscious mind, which has an effect and the intellectual mind to be able to do that while still feeling the emotions but being able to look down on how does reality work and almost even things we don't wish were true.

It's like the tooth Fairy or Santa Claus.

Okay, we wish that we exist, but we can accept the fact that they don't exist.

Don't have our preconception, and just learn here's reality and how to deal with reality.

Meditation has helped me a lot to do that, But I think that's the right approach.

Well, okay, so if you meditate and you recognize the arc of history, what do you actually do with that information, especially if you're trading or investing, Because I think part of the problem when we have these conversations is we talk about like, oh, the debt keeps going up, and there's political polarization, and it just seems like there aren't many solutions to those problems and there's not much we can do with that recognition.

Well, I just disagree.

I think that what I think you'll ask yourself, how does it work mechanistically?

What effect can I have on how it's handled, How any difficult situation is handled, like being in dead and having these conflicts and so on, how do you handle it well for the for the greater good and whatever?

And then or maybe you can't change the world.

But you can deal with it yourself and what do I do to take care of myself, my family and so on?

And you can you can deal with that by first understanding how does it work mechanistically.

That's that's why I wrote these books.

The last book is How Countries Go Broke.

I'm not it's it's the mechanics of it.

And so you could see it as indicators and you can do the calculation and you can line it up with what's happening, and you know where you are.

You know how you can store your money, how do you what's a storehold of wealth?

So you can have a skill and you can understand what's going on, and you can understand how to position yourself, and you can maybe bring it to Washington and or other places you can.

You can bring it to Washington.

But it's the mechanics.

The podcast, it is not an ideology, Okay, to separate yourself from There are different views and different preferences.

And there's the left and the right.

And I can't tell you whether the left or the right, that's a different question.

But whether you're of the left or you're of the right, they're dealing with the same mechanics, and if you understand those mechanics, then you as a policy maker can do it.

And now we're in a situation.

Of course that policy politics is part of that mechanics.

Okay, now we have to accept the politics, and then we have to say where are we going and how do we best deal with that?

You can do all of that.

You know, Sometimes our truths that we don't want to exist and maybe we try to turn our face or we imagine the truth.

And they think that's bad.

Well yeah, right, and so I don't want no, No, it's just reality.

You know.

There's one of the phrases that the CCP has over in China seeking truth from facts, And it sounds very obvious, but it is very hard to do it.

It can be hard to just look at facts and actually observe the world as it is rather than.

As I think part of it is a habit.

I mean, I think that if we're if we're taught the emotional like what is real?

Reality is interesting, Reality is beautiful in a sense.

If you take evolution and things die and and and things happen, they may not.

It's like if you recognize that and you think that way and it's all part of that evolution and you and you can get that in your mindset.

That's so much better than being a than saying I don't know, dying is bad.

I mean to give that as an example, or this thing is bad, and when we approach it that this thing is bad and so on, then it's that fault of that thing, rather than Okay, how does the system work?

And then how do I then deal with the system to get the best outcome?

Because we could deal with the system, For example, the mechanics today has a lot to do with how people deal with each other.

Right.

In other words, if we were collectively being able to solve these problems and put the collective well being ahead, we would have a lot less wars, we'd have a lot better solving of problems, not the ideological and I have to fight for that kind of thing.

So it's an approach.

That approach could be taken on and taught.

This is the idea that you can't control the world, but you can control your reactions.

You can influence the world.

People together, world leaders if they were to try to say what is the common good and how do we work it out mechanistically so that Okay, somebody's going to give here and somebody is going to give there, and then we but that'll produce a better outcome than if we go to war.

You know, there's there are better approaches that leaders of countries.

Yes, there's leaders countries can do this, and also individuals can do this in terms of what they're going to be with others.

Have you ever considered going into politics or policy?

Is that something that not?

Since I smart enough, because you know what, I think it's I have great admiration, great appreciation for the people who take on that life that we have a challenge in terms of even how the system works because there are so many people right now who have opinions want to fight for those opinions.

They determine the votes, then they create people who are acting out.

It's not an effective I do think it's very difficult to be successful.

I do think though, I am worried how often you counterintelligent people, thoughtful people, et cetera.

And when you ask them if they ever consider elected office, immediately like it's it's actually a little bit.

It is disturbing how quickly basically anyone saying would have that anyone who's saying of course I would never go into elected office or never pursue elected office because you look around the environment's miserable.

But then you think, well, what kind of filter does that have on the actual leaders that we end up do.

Get it is a reality, no, I know.

But when you think about that filter and you think about, okay, you want quality leadership, et cetera, Well, look think about anyone who seems like normally saying immediately says, of course I would never go into elected.

Right, So let's just look at that for a minute and take it through the perspective that I'm u trying to convey.

We look at that and how it's different from ten or twenty years ago, and how the people are.

So the first thing we should do is besides saying that's terrible, we should look at why is that?

Okay?

Does that make sense?

Yes?

Why we can answer that it makes sense.

There's the clash that the party alignment be analytical okay, and then say, okay, what do we do?

Okay?

So maybe you're contributing it to good things in your way, and you know, but you have to be practical.

If you're going to have an effect, you have to have an effect on the people who have their hands on the levers of power.

They affect things, not us chatting away here, okay, and the voters maybe, But what can you do to help to bring about it?

Or what do you need to do yourself in order to do that?

So you have to be analytical and mechanical about what the cause effect relationships, because it comes back to the mechanics cause effect relationship.

If you understand the cause effect relationships, like how politics works, how the populations work, you can be analytical in doing that.

But also the cause you can get ahead of the game because the causes happened before the effects.

And if you know the cause effect relationship and you could see the causes and imagine the effects, you can be ahead of the game.

Is there anything in your very long career experience that didn't match up with previous examples or cycles in history?

All the time?

I mean, I mean object nineteen seventy one.

In other words, I had a preconception.

I walk on the floor of the stock exchange and I realized, wow, Okay, now I go to the thirties and I learned something.

About a bridgewater.

An interesting time.

I can get.

But what I've learned is that whatever success in life I've had is also more because I know how to deal with what I don't know than anything I know.

Okay, I learned that.

Okay, I know some things, but what I don't know about what the future is, and so it's still very large.

So I learned how to diversify.

I learned how through financial engineering, in terms of controlling I could, through diversification, improve my return to risk ratio by a factor of five by keeping the return the same and diversifying well, that will reduce the risk without reducing the returns.

That's mechanics that came from my knowing that I don't know that I can't be sure.

Okay, So when you're analytical that way and you view these things as a puzzle, then there are all these puzzles and you have to solve the puzzles.

But if you can do it calmly and analytically and so on, you can engineer the mechanics or how you're dealing with it.

That's what I mean by principles for dealing with reality and.

What about it?

Bridgewater was there ever, and like, oh yes.

Allthing all the time.

You know, I knew what I wanted.

Okay, that was that's an advantage if you start a company, you can make it what you want, what the culture should be, and you know in one sentence, I wanted meaningful work and meaningful relationships through radical truthfulness and radical transparency.

Okay, So I really believe that if you can have meaningful work, in other words, something you're in to the mission and you have great relationships with people or in that mission, maybe it's you two with odd lots Okay, I don't know what it is.

But if you're on that mission and you have a great relationship and so on, that's magical.

But you also need to have radical truthfulness.

In other words, if you don't think he's doing a good job and he or vice versa or something, it's like a team.

You've got to put together a team.

I'm not picking on you.

We're pretty honestly.

Let me finish answer this question, okay, because I haven't gotten to the challenges.

Okay, I want that.

I believe in that truthfulness and so on.

So then there are trade offs.

Not everybody likes that, okay, not everybody.

You know, there's an aversion to looking at mistakes.

There's an aversion to looking at weaknesses.

How do you get over that?

I have to face these questions and deal with it.

That's what to my first book, Principles of Life and Work.

But in other words, when we recognize that knowing our weakness is is a great thing, it's a great power.

So how do you objectively get to the notion of knowing your strengths and weaknesses?

And I created personality profile tests for your listeners.

Go to it's a free test.

Principles you you can go online and learn about your nature and what your nature is and how you deal with things.

So there's the constant encountering reality what your goals are and what your aspirations are.

And so I encounter that.

I thought, that's your question, and I encounter that, and then you realize you encounter obstacles, and then you view those obstacles as puzzles as you that you have to solve in order to get better, because you have choices, and if you make better choices, you get better outcomes.

So that I'm giving that as an example.

So recognizing that it's not the best place for some people, and that other people couldn't possibly work anywhere else because they can't get them meaningful work and bringing relationship or the truthfulness you know, the truthfulness the politics, politics that goes on in companies and so on.

These people, a lot of them could can't work anywhere else because they can't get that truthfulness and that spirit.

So yes, it's constantly finding these things out through discovering of interacting with reality and then solving puzzles and developing principles.

It occurs to me when you're talking about this, like it's become very popular, maybe in the last ten years, but probably a little bit longer.

People love to talk about corporate culture.

This place is a good corporate culture, this place is a bad corporate culture.

What is the corporate culture of Silicon Valley?

What is the corporate culture of the big banks, et cetera.

I mean, you clearly were One thing you're clearly very ahead of the curve is just thinking about this term corporate culture.

You know, there's a term, and it's just like what do you want to do?

How do you want to behave with each other?

I mean, we don't have to even use the word corporate culture in any relationship.

If you have a marriage, if you have friendships, if you have partnerships, it's you have to face the question of how you'd want to be with each other.

Yeah, well, how do you actually shape the culture?

Then?

Well, two ways.

I know what I believe is best whatever, but I'm not actually sure.

And then I go through the question and answer.

I believe I should have an idea meritocracy that's a different from values.

Different people can live their lifestyles, different kinds of lifestyles, freedom of choice to operate that way.

But I kind of know what I believe is best and what I want, and then I have openness to debate is that right?

Is that the best?

Because if you have an idea of meritocracy where you can have anybody debate anything, you know, anybody at Bridgewater at any time could could challenge me on anything.

And I felt the obligation for everybody to hear that exchange of why I think this is best and not and then let people make decisions or enlighten me when it comes to that trade off, because otherwise they wouldn't be invested in it, you know.

To take it on a practical level, how do you deal with in an environment in which people are encouraged to be transparent and to be critical even senior people or junior people.

How do you avoid the pitfall.

Of bullying in mobs?

Because I think this is actually very relevant when you think about politics, we think about social media, et cetera.

How do you prevent an environment of openness from turning into mob psychology?

None of them is perfect.

Yeah, okay, okay, But first of all, first you go and you paint the picture of how it should be, okay, And you know that not anyone's view is objective, okay, is your point of view and your point of view may be different, and highlight that.

So if you go to ted Talks, there's a Ted talk I gave, and it shows how we I created a tool called a dot collector, which everybody has put as we're having meetings, putting their thoughts in and so on and their reactions so we feel free to give your thoughts bring it up, including critical thoughts and not.

Then you get to what I call believability decision waited decision making.

How do you get about whether this person is a better decision maker?

What the strengths and weaknesses of a person, of each person is so that they can play their role well, if you if you set that out as your aspiration.

You'll find ways of doing that.

Like there may be tests, there may be you know, how do you pick your doctor.

You know you have.

One who has an appointment open, Yeah, that's pretty much it.

You know what to get three smart people, the three best or the two best, get a second opinion, and you want to make sure.

So it's the same thing in picking people there and how do you do that?

You want that and then you have to let people know that that's good for them and it's good for the organization, that it's fair.

Okay, that the process is fair.

It's not one person making a pronouncement of what another person is like that.

You go through the cases and you say, oh, that case happened that way, and it happened again.

What do you think and so on?

You work your way.

Once you have the notion that the system is fair and you're just trying to get at what's true and what are people's strengths and weaknesses and so on, you're making great leaps toward that.

As this thing from most companies in which they don't talk about that and you know, or they're behind the scenes, Like I had a rule if you talk behind somebody's back three times or more critically, you're out, okay if but you're always free to bring it up and deal with it, because let's deal with it.

Let's try to find out what the problem is and deal with it that way.

So on the bullying, they can tell the bully, Okay, you can tell the book why why did you do that?

Why is that that way?

But in any case, that was my path, whether you choose it different path, I think you have to agree that getting a truthfulness teams sports teams have to do this right, So how do you select I'm sorry, you're not doing a good job at that thing.

You have to deal with it and you have to make the team great.

It's like that.

Well, so now I have to ask what do you think about multi strats and the pod shops because the culture that you're laying out where everyone is sort of talking to each other and challenging each other, seems very very different to the multi strat model that seems to be much more predicated on, you know, little teams that are sort of often doing their own thing.

There's different ways to play the game.

That's a totally valid way to play the game, and maybe related maybe it's just a totally utilitarian way.

In that way, is it effective in making the investment decision?

Can be very effective for lots of reasons.

I can digress into uncorrelated return streams, many operations blah blah blah blah blah that could be very effective may not be effective of creating the meaningful relationships and those types of things.

Therefore, you're going to have a continuity and a competitiveness problem.

In other words, people will go.

For, you know, which is what we've seen a little bit.

More, a little bit more money, a little bit more.

They're not in it together.

They're not cheering their lives, they're not cheering their mission together, and so on.

So maybe it's a fun, totally fine way for the investment management, but it's not a fine way for building a fifty year old I did this, I built a fifty year old organization, while others.

It has raised a question like in those environments, like what is the franchise value?

Because what happened?

Right, what seems to be this model which has produced extraordinary returns for some investors.

You do get the situation in which everyone is sort of a mercenary.

I've never and then and everyone you know, you dangle these big paychecks and bonuses and you're.

An independent contract basically.

Yeah, it's hard to imagine that environment building a fifty year franchise.

I think I think it's I think it's not going to last, and it's particularly in the area of an aire sire.

I think that you're going to have and I'm going to try to help it.

AI enabled ability to be an independent investment manager okay, like Uber.

Okay, Uber's got a technology that they take the individual, they plug them into that that technology and whatever, and everybody can do that.

In a sense, I think we're going to be moving more into that direction.

So what is it that's a path that we can go down and that's a whole other path.

Well, you said you're going to try to help it.

What does that mean.

Are you working on something?

Well, I might.

I'm building my own ability and I want to share how people can do certain things.

That's it.

But you don't think this model this because it's been very hot.

Again, talk about things that have changed ten years.

Ten years ago, we were not talking about multi strategy, talk about fund to fund.

Yeah, fund of finds much more back then.

You're it sounds that you're skeptical that this model will endure much will endure?

Well, I think in everybody.

I'm just looking at mechanisms.

Yah, yeah, yeah, talk about okay, So what creates cohesiveness?

You have to have the need for cohesiveness.

Okay, what is the cohesiveness?

What is the commitment?

Okay?

I think when we help each other.

I believe in how people can help each other.

Okay, are they helping each other?

Can they be better?

And that's the question, isn't it?

Okay?

So when we're thinking multistrap, if everybody's there and you put it together, that that could be done technologically very easily.

Right, So is that going to stick it together?

Okay?

What is a relationship like?

Okay, to be on the mission together and to have relationships and so on is invaluable not only in terms of effectiveness in terms of doing job because different people have different skills and you do that together, but it is also psychologically rewarding.

The greatest source of happiness Okay, this is I think an important thing.

Studies of happiness all around the world and so on shows that income past a certain level does not bring a higher level of happiness.

Once you get the basics taken care of that.

The greatest source of happiness is community.

Yeah, do I have a sense of community?

Okay?

People who are there for me and I can help and I work for that.

That's a powerful force and it's very rewarding.

Okay, those are my thoughts.

I have one more question, since we're being very retrospective here and nostalgic in some ways, do you think if you were setting out today, do you think you would have been able to create a bridgewater in the current environment?

Yep, how would you say?

I think, I think, and I think that everybody can.

And that on entrepreneurship is so clearly an example that it is the greatest power.

Money is not the greatest power.

Money will seek out the people, the entrepreneur, the person who has the talent have enabled people, and then money will go to them to make them.

That's what investors do.

We try to find those people are going to make these new things.

Wonderful things happen.

So the talent of an individual to attract money, to attract the resources that are necessary for success.

Okay, we can do that.

Now.

The question is how are you?

Are you the next one of those who's got the ideas and can put that together and make the case for your supports that I need this and the other thing and grow and become better.

Yes, I believe that we're in a period of time that that's very very good.

You need different resources than you did.

You know.

The way I did it is I played.

I was a kid.

I played the markets.

I like the markets.

Then on one day I make a pitch to somebody.

I did my thing, and then the World Bank gave me a five million dollar count.

Okay, World Bank gives me a five million dollar account because we were just talking about markets, and they gave me a five million dollar count.

And that's started me in the institutional asset management business.

Then the next one gives me the account.

Then I get to build a track record.

Then I get to build the things I need.

I mean right now, if you're running an operation, it can be expensive because you need compliance department, you have to deal with the regulatory things.

You have a lot of those things expense, but you can find your way.

Ray Dalli on Underbridgewater, thank you so much for coming on back on the podcast.

So good to be back in Congratulations again for your ten years.

Keep it up, Thank you so much.

Well looking forward to our fifty aeth year.

That'll be see if we can pull that up there, Yeah, we'll see.

That was fantastic.

Thank you so much for Tracy.

Fifty years is insane.

I mean, that's insane, like in any field.

Media, it actually is.

But when I like when I said that a lot of and when he said he ran that almost seems too hard to wrap my head around that you could run something for fifty a hedge fund that it could survive, Like that's an incredible track record.

Yeah, well he said he was seventy six years old, so yeah, no, he must have started it very very young.

Yeah, twenty six.

Yeah, I don't know, I've I'm kind of in I'm in a strange mood now.

I'm very like introspective and retrospective and thinking about the future.

But I do think, you know, it is true he pioneered a lot of stuff like culture, and we hear a lot of stuff about Bridgewaters very special culture in some distinct culture.

Distinct culture.

Yeah, you know, I'll say a couple of things is that, you know, I feel like as a as a middle aged man, you know, you.

Start to like change your view on the world and you're.

Like, wait, does everything seem a little crazy objectively or is it just my state in life and.

What I am I losing touch?

No, I think it's important, and I actually would like the answer in some way to be that I'm losing touch, Like everything's totally fine.

I'm just sort of like aging, sort of out of touch these days.

And so I don't know whether I find it like reassuring or not.

That No, Like, these are really big things that are going on, and all of these things, these big historical forces, we've got a bunch of them, all sort of converging at once.

Well, they are big things going on.

But I think one comforting thing, and this is why I think people tend to read history in times of change, because you feel very unsettled, you feel very insecure, and so you look back at history and just start seeing these patterns to raise point and then you're like, oh, okay, maybe things will be all right.

But also you can read certain history books and think, oh god, things are going to be terrible.

Yeah, I know it's all about the books, and I suppose it's about the time frame.

I mean the other thing, and Ray mentioned is in terms of legacy, I do associate Bridgewater specifically with teaching lots of people about the sort of specific ways that you can achieve great returns through leverage plus diversity care right, which is sort of like the magic that they brought to it, which is we're going to diversify.

And you typically associate diversification with I'm going to sleep better at night, but I'm a sacrifice return.

Right, And that's fine.

But the idea is like, well maybe you can like sort of you know, achieve both through leverage, and of course it worked really well and yeah, the results speak for This is also interesting comments about Mac.

I'm glad you as multi, Yeah, multi, because that was very interesting.

Well, this idea that relationships are like personal camaraderie is the glue that's sort of holds the whole thing together.

I think if you talk to people in that in that world, like the money can be great obviously, but I never ever sounds like a particularly satisfying life in terms of, you know, everyone is aware that they're on a short leash, et cetera.

There's not really much of a team, et cetera.

It seems very mercenary and so forth.

Someone else are leaving all the time, all the time.

Yeah, and so it is interesting to think, you know, there have been some implosions, not really blow ups per se, but implosions.

It does sort you do sort of wonder whether the balance of power or whether the how sustainable this model is.

It's been a while since we've done a multi stride episode, so I should revisit it because there have been some developments.

Yeah, all right, shall we leave it there.

Let's leave it there.

This has been another episode of the All Thoughts podcast.

I'm Tracy Alloway.

You can follow me at Tracy Alloway.

And I'm Joe Wisenthal.

You can follow me at the Stalwart.

Follow our producers Carmen Rodriguez at Carman armand Deesh Hall Been at a Dashbop Kilbrooks at Kilbrooks.

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