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Language: en
the following is a conversation with Ray
Dalio he's the founder co-chairman and
Co chief investment officer of
Bridgewater associates one of the
world's largest and most successful
investment firms that is famous for the
principles of radical truth and
transparency that underlies culture Ray
is one of the wealthiest people in the
world with ideas that extend far beyond
the specifics of how he made that wealth
his ideas that are applicable to
everyone are brilliantly summarized in
his book principles there are also even
further condensed on several other
platforms including YouTube where for
example the 30 minute video titled how
the economic machine works is one of the
best educational videos I personally
have ever seen on YouTube once again you
may have noticed that the people I've
been speaking with are not just computer
scientists but philosophers
mathematicians writers psychologists
physicists economists investors and soon
much more to me AI is much bigger than
deep learning bigger than computing it
is our civilizations journey into
understanding the human mind and
creating echoes of it in the machine
that journey includes the mechanisms of
our economy of our politics and the
leaders that shape the future of both
this is the artificial intelligence
podcast if you enjoy it subscribe on
YouTube give it five stars on Apple
podcast support on patreon or simply
connect with me on Twitter Alex Friedman
spelled Fri D M a.m.
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better world and now here's my
conversation with Ray Dalio
truth or more precisely an accurate
understanding of reality is the
essential foundation of any good outcome
I believe you've said that let me ask an
absurd sounding question at the - South
Col level so what is truth when you're
trying to do something different than
everybody else is doing and perhaps
something that has not been done before
how do you accurately analyze the
situation how do you accurately discover
the truth the nature of things almost
the way you're asking the question
implies that truth and newness have
nothing or almost at odds and I just
want to say that I don't think that
that's true right so what I mean by
truth truth is you know was a reality
how does the reality work and so if
you're doing something new that has
never been done before which is exciting
and I like to do the way that you would
start with that is experimenting on what
are the realities and the premises that
you're using on that and how to stress
test those types of things I think what
you're talking about is instead the fact
of how do you deal with something that's
never been done before and deal with the
Associated probabilities and so I I
think in that don't let something that's
never been done before stand in the way
of you doing that particular thing you
have a because almost the only way that
you understand what truth is is through
experimentation and so when you go out
and experiment you're going to learn a
lot more about what truth is but the
essence of what I'm saying is that when
you take a look at that use truth that
find out what the realities are as a
foundation do the independent thinking
do the experimentation to find out
what's true and change and keep going
after that so I think that the way that
when you're thinking about it the way
you're thinking about it that almost
implies that you're you're letting
people almost say that they're reliant
on what's been discovered before to find
out what's true and what's been
discovered before is often not true
right conventional view of what what is
true is very often wrong it'll go in ups
and downs and you know I mean there are
fads and okay this thing it goes this
way and that way and so definitions of
truths that are conventional are not the
thing to go by how do you know the thing
that has been done before it might
succeed its to do you whatever homework
that you have in order to try to get a
foundation and then to go into worlds of
not knowing and you go into the world of
not knowing but not stupidly not naively
you know you go into that world of not
knowing and then you do experimenting
and you learn what truth is and what's
possible through that process I describe
it as a five step process the first step
is you go after your goals the second
step is you identify the problems that
stand in the way of you getting to your
goals the third step is you diagnose
those to get at the root cause of those
then the fourth step is then now that
you know the exact truth calls you get
you design a way to get around those and
then you follow through and do the
designs you set out to do and it's the
experimentation I think that what
happens to people mostly is that they
try to decide whether they're going to
be successful or not
ahead of doing it and they don't know
how to do the process well because the
nature of your questions are along those
lines like how do you know well you
don't know but a practical person who is
also used to making dreams happen knows
how to do that process I've given
personality tests to shapers so the
person what I mean by a shaper is a
person who can take something from
visual as visualization they have an
audacious goal and then they go from
visualization to actualization building
it out that includes Elon Musk I gave
him the personality tests I'm giving it
to Bill Gates and give it to many many
such shapers and they know that process
that I'm talking about they experience
it which is a process essentially of
knowing how to go from an audacious
but not in a ridiculous way not a dream
and then to do that learning along the
way that allows them in a very practical
way to learn very rapidly as they're
moving toward that goal so the the call
to adventure the adventure starts not
trying to analyze the probabilities of
the situation but using what instinct
how do you dive in so let's talk what it
is it is being a it's simultaneously
being a dreamer and a realist it's to
know how to do that well the pole comes
from a pole to adventure for whatever
reason I can't tell you how much of its
genetics and how much its environment
but there's a early on it's exciting
that notion is exciting being creative
is exciting and so one feels that then
one gets in the habit of doing that okay
how do I know how do I learn very well
and then how do I imagine and then how
do I experiment to go from that
imagination so it's that process that
one and then one more one does it the
one more the better one becomes that you
mentioned shapers you know musk Bill
Gates what who are the shapers do you
find yourself thinking about when you're
constructing these ideas the ones that
define the archetype of a shaper for you
well as I say a shaper for me is
somebody who comes up with a great
visualization usually a really unique
visualization and then actually builds
it out and makes the world different
changes the world in that kind of a way
so when I look at it Marc Benioff with
Salesforce Chris Anderson with Ted
Mohamed Younis with social enterprise in
philanthropy Canada and Harlem
Children's Zone there are all domains
have shapers who have the ability to
visualize and make extraordinary things
happen what are the commonalities in
some of them the commonalities
our first of all the excitement of
something new that call to adventure and
and again that practicality the capacity
to learn it and the capacity then
they're they're able to be in many ways
full rage that means they're able to go
from the big big picture down to the
detail so let's say for example Elon
Musk he describes he gets a lot of money
from selling PayPal his interest in
PayPal he said why isn't anybody going
to Mars or out of space what we're gonna
do if the planet goes to hell and how do
i how do we going to get that and
nobody's paying attention to that he
doesn't know much about it he then reads
and learns and so on says I'm gonna take
ok half of my money and I'm gonna put it
in there and I'm gonna do this thing and
he learns a blood level about and he's
got creative okay that's one dimension
and so he and gave me the keys to his
car was one just early days into and
Tesla and he then points out the details
okay if you push this button here it's
this the detail death
so he's simultaneously talking about the
big the big big big picture okay windows
humanity going to abandon the panic but
he will then be able to take it down
into the detail so he can go let's call
it helicoptering he can go up he can go
down and see things at those types of
perspective and they're using it with
the other shapers and that's a common
thing that they can do that another
important difference that they have in
mind is how they deal with people i mean
meaning there's nothing more important
than achieving the mission and so what
they have in common is that there's a
test that I give these personality tests
because they're very helpful for
understanding people and so I gave it to
all these shapers and one of the things
in workplace inventory test is this test
and it has a category called concern for
others whatever it's a they were all
having concern for others this includes
Mohan
Yunis who invented microfinance social
enterprise impact investing is Muhammad
Yunus received the Nobel Peace Prize for
this Congressional Medal of Honor one of
the Fortune determined one of the 10
greatest entrepreneurs of our time he's
built all sorts of businesses to give
back money and social enterprise a
remarkable man he has nobody that I know
practically could have more concern for
others I'm he lives a life of a saint I
mean very modest lifestyle and he puts
all his money into trying to help others
and he tests low on the courts called
concern for others because what it
really those the questions under that
are questions about conflict to get at
the mission so they all Geoffrey Canada
change Harlem Children's Zone and
developed that to take children in
Harlem and get them well taken care of
not only just in their education but
their whole lives harmless in also
concern for others what they mean is
that they can see whether though
individuals are performing at a level
that an extremely high level that's
necessary to make those dreams happen so
when you think of let's say Steve Jobs
was famous for being you know difficult
with people and so on and I don't know
Steve Jobs so I can't speak personally
to that but he's comments on Dae players
and if you have 80 players if you put in
B players pretty soon you'll have C
players and so on that is a common
element of them holding people to high
standards and not letting anybody stand
in the way of the the mission what do
you think about that kind of idea is
sorry to pause on that for a second that
the a B and C players and the importance
of so when you have a mission to really
only have a players and be sort of
aggressively filtering for that yes but
I think that there are all different
ways of being a players and I think in
what a great a great team you have to
appreciate all the differences in ways
of being a players ok yes that's the
first thing and then you always have to
be super excellent
to my opinion you always have to be
really excellent people with people to
help them understand each other
themselves and get in sync with them
about what's true about them and their
circumstances now they're doing so that
they're having a fabulous personal
development experience at the same time
as you're dealing with them so when I
say that they're all different ways this
is one of the than qualities you asked
me the one of the qualities so one of
the third qualities that I would say is
to know how to deal well with your not
knowing and to be able to get the best
expertise so that you're a great
Orchestrator of different ways so that
the people who are really really
successful unlike most people believe
that they're successful because of what
they know they're at even more
successful by being able to effectively
learn from others and tapping into the
skills of people who see things
different from them brilliant so how do
you when they're that personality being
first of all open to the fact that
there's other people see things
differently than you and at the same
time have supreme confidence in your
vision is there just a psychology of
that do you see attention there between
the confidence and the open-mindedness
and now it's funny because I think we
grow up thinking that there's a tension
there right that there's a confidence
and and the more confidence that you
have there's attention with the
open-mindedness and not being sure okay
confident and accurate are almost
negatively correlated many people
they're extremely confident and they're
often inaccurate and so I think one of
the greatest tragedies of people is not
realizing how those things two go
together because instead it's really
that by saying I know a lot and how do I
know I'm still not wrong and how do I
take that the best thinking of all
available to me and then raise my
probability of learning all these people
think for them
selves okay I mean meaning they're smart
but they take in like vacuum cleaners
they take in ideas of others they stress
test their ideas with others they assess
what comes back to them in the form of
other thinking and they also know what
they're not good at and what other
people who are good at the things that
they're not good at they know how to get
those people and be successful all
around because nobody has enough
knowledge in their heads and that I
think is one of the great differences
Sutton the reason my company has been
successful in terms of this is because
of an idea meritocratic decision-making
a process by which you can get the best
ideas you know what's an idea
meritocracy an idea meritocracy is to
get the best ideas that are available
out there and to work together with
other people and the team to achieve
that it's an incredible process that you
describe in several places to arrive at
the truth but apologize from
romanticizing the notion blaming linger
on it just having enough self belief you
don't think there's a self delusion
there that's necessary especially in the
beginning you talk about in the journey
maybe the trials or the abyss do you
think there is value to deluding
yourself I think what you're calling
delusion is a bad word yes for
uncertainty okay so I mean in other
words because we keep going back to the
question how would you know and all of
these things know I think that delusion
is not going to help you that you have
to find out truth okay to deal with
uncertainty not saying aunt listen I
have this dream and I don't know how I'm
going to get that dream I mentioned in
my book principles and describe the
process in a more complete way than
we're gonna be able to go here but what
happens is I say you form your dreams
first and you can't judge whether you're
going to achieve those dreams because
you haven't learned the things that
you're going to learn on the way toward
those dreams okay so
if that isn't delusion I wouldn't use
delusion I think you're over emphasizing
the importance of knowing whether you're
going to succeed or not get rid of that
okay if you can get rid of that and say
okay no I can have that dream but I'm so
realistic in the notion of finding out
I'm curious I'm a great learner I'm a
great experimenter along the way you'll
do those experiments which will teach
you more truths and more learning about
the reality so that you can get your
dreams because if you still live in that
world of delusion okay and you think
your lusion is helpful no the delusion
isn't don't confuse delusion with not
knowing yes
but nevertheless so if we look at the
abyss we can look at your own that you
describe it's difficult psychologically
for people so in many people quit many
people choose a path that is more
comfortable and I mean that the the
heartbreak of that you know breaks
people so if you have the dream and then
there's this cycle of learning setting a
goal and so on what's your value for the
psychology of just being broken by these
difficult moments well that's that
that's classically the defining moment
it's almost like evolution taking care
of okay now you're you crash you're in
the abyss oh my god that's bad and then
the question is what do you do and it
sorts people okay and that's what that's
some people get off the field and they
say oh I don't like this and so on and
some people learn and they have decay
and they have a metamorphosis and it
changes their approach to learning it
the number one thing it should give them
is uncertainty you should take an
audacious dreaming guy who wants to
change the world crash okay and then
come out of that crashing and saying
okay I can be audacious and scared that
I'm going to be wrong at the same time
and then how do I do that because that's
the key when you don't lose your
audaciousness and you
going after your big goal and at the
same time you say hey I'm worried that
I'm gonna be wrong you gain your radical
open-mindedness that allows you to take
in the things that allows you to go to
the next level of being successful so
your own process I mean you've talked
about it before but it'll be great if
you can describe it because our darkest
moments are perhaps the most interesting
so your own and what the prediction of
the another Depression economic
depression highest apologize economic
depression can you talk to what you were
feeling thinking planning and
strategizing in those moments yeah that
was that was my biggest moment okay
building my little company this is in
1981-82 I had calculated that American
banks had given a lot more money to lent
a lot more money to Latin American
countries than those countries were
going to pay back and that they would
have a debt crisis and that this had
said the economy tumbling and that was
an extremely controversial point of view
then it started to happen and it
happened in Mexico default that in
August 1982 I thought that there was
going to be a an economic collapse that
was going to follow because there was a
series of the other countries it was
just playing out it as I had imagined
and that well it couldn't have been more
wrong that was the exact bottom in the
stock market because central bank sees
monetary policy blah blah blah and I
couldn't have been more wrong and I was
very publicly wrong and all of that and
I lost money for me and I lost money for
my clients and I was I only had a small
company then but I had these were close
people I had to let them go I was down
to me as the last person that I I was so
broke I had to borrow $4,000 from my dad
to help to pay for my family bills very
painful and at the same time I would say
it definitely was one of the best things
that ever happened to me maybe the best
thing for him happened to me because it
changed my approach to decision making
it's what I'm saying in other words I
kept saying okay
how do I know whether I'm right how do I
know what I'm not wrong it gave me that
and now and it didn't give up by
audaciousness because I was in a
position what am I going to do am I
gonna go down back put on a tie go to
Wall Street and D and just do those
things no I can't bring myself to do
that so I'm in a juncture how do I deal
with my risk and how do I deal with that
and it tells me how to deal with my
uncertainties and that taught me for
example a number of techniques first to
find the smartest people I could find
who disagreed with me and to have
quality disagreement I learned the art
of thoughtful disagreement I learned how
to produce diversification I learned how
to do a number of things that's is what
led me to create an idea meritocracy in
other words person by person I hired
them and I wanted the smartest people
who would be independent thinkers who
would disagree with each other and me
well so that we could be independent
thinkers to go off to produce those
audacious dreams because you have to be
an independent thinker to do that and to
do that not independently of the
consensus independently of each other
and then work ourselves through that
because who know whether you're gonna
have the right answer and by doing that
then that was the key to our success
and the things that I want to pass along
to people the reason I'm doing this
podcast with you is you know I'm 70
years old and that is a magical way of a
achieving success if you can create an
idea meritocracy it's it's so much
better in terms of achieving success and
also quality relationships with people
but that's what that experience gave me
so if we can look around a little bit
longer
the idea of an idea meritocracy it's
fascinating but especially because it
seems to be rare not just in companies
but in society so there's a lot of
people on Twitter and public discourse
and politics and so on that are really
stuck in certain sets of ideas whatever
they are so when you're confronted with
it with an idea that said that's
different than your own about a
particular topic what kind of process do
you go through mental
are you arguing through the idea with
the person sort of present is almost
like a debate or do you sit on it and
consider the world sort of
empathetically if this is true then what
is that war look like does that world
make sense and so on so what's the
process of considering those conflicting
ideas I'm gonna answer that question but
after saying first imposed implicit in
your question is it's not common okay
what's common produces only common
results okay so don't judge yes anything
that is good based on whether it's
common because you're on its only going
to give you common results if you want
unique you have a unique approach yes
okay and so that art of thoughtful
disagreement is the is the capacity to
hold two things in your mind at the same
time the G I think this makes sense and
then saying I'm not sure it makes sense
and then try to say why does it make
sense and then to triangulate with
others so if I'm having a discussion
like that and I work myself through and
I'm not sure then I have to do that in a
good way so I always give attention for
example what let's start off what does
the other person know relative to what I
know so if a person has a higher
expertise or things I'm much more
inclined to ask questions I'm always
asking questions if you want to learn
you're asking questions you're not
arguing okay you're taking in your
assessing when it comes in to you does
that make sense so you're learning
something are you getting epiphanies and
so on and I try to then do that if the
conversation it as we're trying to
decide what is true and we're trying to
do that together and we see truth
different then I might even call in
another really smart capable person and
try to say what is true and how do we
explore that together and you go through
that same thing so I would I said I
describe it as having open mindedness
and assertiveness at the same time that
you can simultaneous
be open-minded and taken with that
curiosity and then also be assertive and
say but that doesn't make sense why
would this be the case and you do that
back and forth and when you're doing
that kind of back and forth on the topic
like the economy which you have to me or
have some naive but it seems both
incredible and incredibly complex the
economy the trading the transactions
that these transactions between two
individuals somehow add up to this giant
mechanism you've put out a thirty minute
video you have a lot of incredible
videos online that people should
definitely watch on YouTube but you've
put out this thirty minute video titled
how the economic machine works that is
probably one of the best if not the best
video I've seen that the internet in
terms of educational videos so people
should definitely watch it especially
because it's not that the individual
components of the video are somehow
revolutionary but the simplicity and the
clarity of the different components just
makes you there's a few light bulb
moments there about what how the economy
works as a machine so as you described
there's three main forces that drive the
economy productivity growth short term
debt cycle long-term debt cycle the the
former productivity growth is how
valuable things how much value people
create valuable things people create the
latter is people borrowing from the
their future selves to hopefully create
those valuable things faster so this is
an incredible system to me
maybe we can linger on in a little bit
but you've also said well most people
think about as money is actually credit
total amount of credit in the u.s. is 50
trillion dollars total amount of money
is three trillion dollars that's just
crazy to me
maybe maybe I'm silly maybe you can
educate me but that seems crazy
it gives me just pause that the human
civilization has been able to create a
system that has so much credit so that's
a long way to ask
do you think credit is good or bad for
society that system of that's so
fundamentally based on credit I think
credit is great even though people often
overdo it the credit is that somebody
has earned money yeah and you know and
what happens is they lend it to somebody
else who's got better ideas and they cut
a deal and then that person with the
better ideas is gonna pay it back and if
it works well it helps resource
allocations go well providing people
luck like the entrepreneurs and all of
those they need capital
they don't have capital themselves and
so somebody's gonna give them capital
and they'll give them credit and along
those lines then what happens is it's
not managed well in a variety of ways so
I did a another book on principles
principles of big debt crisis that go
into that and it's free by the way I met
put it free online on as a PDF so if you
go online and you look principles for
big debt crisis is under my name you can
download it in a PDF or you can buy a
print book of it and it goes through
that particular process and so you
always have it over done in always the
same way everything by the way almost
everything happens over and over again
for the same reasons okay so these debt
crisis has all happen over and over
again for the same reasons they get it
over done in the book it explains how
you identify whether it's overdone or
not they get it overdone and then you go
through the process of making the
adjustments according that and then and
it explains how they can use the levers
and so on if you didn't have credit then
you would be sort of everybody sort of
be stuck so credit is a good thing but
it can easily be overdone so now we get
into the quote what is money what is
credit okay you get into money and
credit so if you're holding credit and
you think that's worthwhile keep in mind
that the central bank let's say it can
print the money what is that problem
they you have an IOU
the IOU says you're going to get a
certain number of dollars let's say or
yet nor euros and that is what the IOU
is and so the question is will you get
that money and and what will it be worth
and then also you have a government
which is a participant in that process
because they want they are on the hook
they old money and then will they print
the money to make it easy for everybody
to pay so you have to pay attention to
those two I would suggest like you you
recommend to other people just take that
30 minutes and it in it and it comes
across pretty clearly but my conclusion
is that of course you want it and even
if you understand it and the cycles well
you can benefit from those cycles rather
than to be hurt by those cycles because
I don't know the way the cycle works if
somebody gets over indebted they have to
sell an asset okay then I don't know me
that's when assets become cheaper how do
you acquire the asset it's a whole
process so again maybe another another
dumb question but there are no such
things as dumb questions okay there you
go
but what is money so you've mentioned
you know credit and money it's another
thing that if I just zoom out from an
alien perspective and look at human
civilization it's incredible that we've
created a thing that's not that only
works because currency because we all
agree it has value so I guess my
question is how do you think about money
as this emergent phenomenon and what do
you think is the future of money you've
come into that Bitcoin other forms what
do you think is its history and future
how do you think about money there are
two things that money is for it's a
medium of exchange and it's a store hold
of wealth yes that's that that some
money you know the so you could say
something's a medium of exchange
and then you could say is it a store
hold of wealth okay so those and money
is that vehicle that is those things and
can be used to pay off your debt so when
you have a debt and you provide it it
pays off your debt so that that's that
process and it's a I apologize to
interrupt but it only can be a medium of
exchange or store wealth when everybody
recognizes it to be a value that's right
right and so you see in the history and
you around the world and you go to
places I was in an island and the
Pacific in which they had as money these
big stones and literally they were
taking a boat this this big carved stone
and they were taking it from one of the
islands to the other and it sank the the
the piece of this big stone piece of
money that they had and it went to the
bottom and they still perceived it as
having value so that it was even though
it's in the bottom and it's this big
hunk of rock the fact that somebody
owned it they would say oh I'll loan it
for this and that I've seen beads in
different places shells converted to
this and mediums of exchange and when we
look at what we've got you're exactly
right it is the notion that if I give it
to you
I can then take it and I can buy
something with it and that's so it's a
matter of perception okay and then we go
through then the history of money and
the vulnerabilities of money and what we
have is there's through history there's
been two types of money those that are
claims on something of value like the
connection of to gold or something that
that would be an or they just are money
without any connection which and then we
have a system now which is a Fiat
monetary system so that's what money is
then it will last as long as its captive
value and it works the
way so let's say central banks when they
get in the position of like they owe a
lot of money like we have the in the
case it's increasingly the case and they
also another a bind and they have the
printing press to print the money and
get out of that and you have a lot of
people might be in that position then
you can print it and then it could be
devalued in there and so history is show
and forget about today history has shown
that no currency has laughs every
currency has either ended as being a
currency been or devalued as the
currency over periods of time long
periods of time so it evolved and it
changes but everybody needs that medium
of exchange and everybody needs that
store hold of wealth so it keeps
changing what is money over a period of
time but so much is being digitized
today and there's this ideas that based
on the blockchain of Bitcoin and so on
so if all currencies like all empires
come to an end what do you think well do
you think something like Bitcoin might
emerge as as a common store value store
of wealth and a medium of exchange
the problem with Bitcoin is that it's
not a fact the medium exchange like it's
not easy for me to go in there and buy
things with it and then it's not an
effective store hold of value because it
has a volatility that's based on
speculation and the like so yeah it's
not a very effective saving that's very
different from Facebook's prop of a
stable value currency which would be
effective as both a medium of exchange
and a store hold of wealth because if
you were to hold it and in the way it's
linked to number of things that it's
linked to would mean that it could be a
very effective store hold of wealth then
you have a digital currency that could
be a very effective medium exchange and
store hold of wealth that so in my
opinion some digital currencies are
likely to succeed more or
based on that ability to do it then the
question is what happens okay what
happens is two central banks allow that
to happen
I really do believe it's possible to get
a better form of money that central
banks don't control okay a better force
of money that the central banks don't
control but then that's not yet happened
and we also have to and so they've got
to go through that evolutionary process
in order to go through that evolutionary
process first of all governments have
got to allow that to happen which is to
some extent a threat to them
in terms of their power and and that's
an issue and and then you have to also
build the confidence and all of the
components of it to say okay that's
going to be effective because I won't
get in I won't have problems owning it
so I think that digital currencies have
a have some element of potential but
there's a lot of hurdles that are going
to have to be gotten over I think that
it'll be a very long time possibly never
but anyway a very long time before we
have that let's say get into a position
that would be you know effective means
relative to gold let's say if you were
think of that because gold has a track
record you know of thousands of years
okay Unum all across countries and it
has its mobility it has the ability to
put it down and has certain abilities
it's got disadvantages relative to
digital currencies but but central banks
will hold it like their central banks
that worry about others you know the
other country central banks might worry
about whether the US dollar is going to
print or not in that and so the thing
they're going to go to is not going to
be the digital currency thing they're
going to go to is is gold or something
else some other currency they got a
ticket and so I think it's a long way to
go well you think it's possible then one
day we don't even have a central bank
because of the
a currency that doesn't that's cannot be
controlled by the central bank is the
primary currency or is that some very it
would be very remote possibility or very
long in the future got it again may be a
dumb question but romanticize one when
you sit back and you look you describe
these transactions between individuals
somehow creating short term debt cycles
long-term debt cycles this productivity
growth does it amaze you that this whole
thing works that that there's however
many millions and millions of people in
the United States globally over seven
billion people that this thing between
individual transactions it just it works
yeah it amazes me like I go I go back
and forth between being in it and then I
think like how does a credit card that
is that really possible
I'm still used to I look up credit card
and I put it on the guy doesn't know me
yeah it'll streamlines okay we're making
the digital entries is that really
secure enough and that that kind of
thing and then it goes back and it goes
this and it clears and it all happens
and it what I marvel at that and those
types of things is because of the the
capacity of the human mind to create
abstractions that are true you know it's
imagination and then the ability to go
from one level and then if these things
are true then you go to the next level
and if those things are true then you go
to the next level and all those miracles
that we almost become common it's like
it when I'm flying in a plane or what
I'm looking at all of the things that
happen when I get communications in the
middle of I don't know Africa or
Antarctica and we're communicating in
the ways where I see the face on my iPad
of somebody my grandkid in someplace
else and I look at
and I say wow yes it all amazes me
so while being amazing do you have a
sense the principles you describe that
the whole thing is stable somehow also
or is this I was just lucky so the the
principles that you describe are those
describing a system that is stable
robust and will remain so or is it a
lucky accident of our early history my
area of expertise is economics and
market so I get down to it like a real
nitty-gritty yes I can tell you whether
the plane is going to fall out of the
sky yes because of its particular
fundamentals I don't know enough about
that but it happens over and over again
and so on it gives me faith ok so
without me knowing it in the markets and
the economy I know those things quote
well enough in a sense to say that by
and large that structure is right what
we're seeing is right now whether there
are disruptions and it has effects that
can come not because that structure is
right I believe that's right
but whether it can be hurt by let's say
connectivity or journal entries they
could take from all the money away from
you through your digital entries there's
all sorts of things that can happen in
various ways that means that that money
is worthless or the system Falls but
from what I see in terms of its basic
structure and those complexities that
still take my breath away I would say
knowing them enough about the mechanics
of them that doesn't worry me
have you seen disruptions in your
lifetime that really surprised you most
all the time this is one of the great
lessons of my life is that there many
times I've seen things that I was very
surprised about and that I realized
almost all of those I was surprised
about because they just they were just
the first time it happened to me they
didn't happen in my lifetime before but
when I researched them they happened in
other places or other people
lifetimes so for example I remember 1971
the dollar there was no such thing as a
devaluation of a currency didn't
experience it and with the dollar was
connected to gold and I was watching
events happen and then you get on and
and he's that definition of money all of
a sudden went out the window because it
was not tied to gold
and then you have this devaluation and
so and then or the first oil shock or
the second oil shot or so many of these
things and when I but almost always I
realized that they when I looked in
history they happened before they just
happened in other people's lifetimes
which led me to realize that I needed to
study history and what happened in other
people's lifetimes and what happened in
other countries and places so that I
would have timeless and universal
principles for dealing with that thing
so I oh yeah I've been some you know the
implausible happening but it's like a
one in a hundred year storm right okay
or it's or they've happened before yeah
nothing just not to you let me talk
about if we could about AI a little bit
so if Bridgewater associates manage
about a hundred sixty billion dollars in
assets and our artificial intelligence
systems algorithms are pretty good with
data what role in the future DC AI play
in analysis and decision making in this
kind of data rich an impactful area of
investment I'm gonna answer that not
only an investment but I give them more
all encompassing rule for AI as I think
you know for the last 25 years we have
taken our thinking and put them in
algorithms and so we make decisions that
the computer takes those
criteria algorithms and they put them
and they're in there and it takes data
and they operate as an independent
decision-maker power in parallel with
our decision-making so for me it's like
there's a chess game playing and on
person with my chess game and I'm saying
it made that move and I'm making the
move and how do I compare those two
moves so so we've done a lot but let me
give you an if the future can be
different from the past and you don't
have deep understanding you should not
rely on AI okay those two things deep
understanding of the cause-effect
relationships that are leading you to
place that bet in anything okay anything
important let's say if it was do
surgeries and you would say how do I do
surgeries I think it's totally fine to
watch all the doctors do the surgeries
you can put it on I take a a digital
camera and do that convert that into AI
algorithms that go to robots and have
them do surgeries and I'd be comfortable
with that because if it'll do that if
the keeps doing the same thing over and
over again and you have enough of that
that would be fine even though you may
not understand the algorithms because
you're if the things happening over and
over again and you're not asking the
future would be the same that
appendicitis or whatever it is will be
handled the same way the surgery that's
fine however what happens with AI is for
the most part is it takes a lot of data
and it with a high enough sample size
and then it puts together its own
algorithms okay there are two ways you
can come up with algorithms you can
either take your thinking and express
them in algorithms or you can say let
put the data in and say what is the
algorithm when you that's machine
learning yeah and when you have machine
learning it'll give you equations which
quite often are not
understandable you would try to say okay
now describe what it's telling you it's
very difficult to describe and so they
can escape understanding and so it's
very good for doing those things that
could be done over and over again if
you're watching and you're not taking
that but if the future is different from
the past and you have that then you're
at the future is different from the past
and you don't have deep understanding
you're going to get in trouble
and so that's the main thing as far as
AI is concerned ai and I'd say computer
replications of thinking in very ways I
think it's particularly good for
processing but but the the notion of
what you want to do is better most of
the time determined by the human mind
that what are the principles like okay
how should I raise my children it's
gonna be a long time before AI you're
going to say it has a good enough
judgment to do that who should I marry
on all of those things maybe you can get
the computer to help you but if you just
took data and do machine learning it's
not going to find it if you were to then
take one of my criteria for any of those
questions and then say put them into an
algorithm and you'd be a lot better off
than if you took AI to do it but by and
large the mind should be do used for
inventing and those creative things and
then the computer should be used for
processing because it could process a
lot more information a lot faster a lot
more accurately and a lot less
emotionally so any notion of thinking in
the form of processing type thinking
should be done by a computer and
anything that is in the notion of doing
that other type of thinking should be
operating with with the brain in
operating in a way where you know you
can say ah that makes sense you know the
process of reducing your understanding
down to principles is kind of like the
process the the first one you mentioned
a type of AI algorithm where you're
encoding your expertise you're trying to
program right
the humanists trying to write a program
how do you think that's attainable the
process of reducing principles to a
computer program or when you when you
say when you write about when you think
of all principles is there still a human
element that's not reducible to an
algorithm my experience has been that
almost all things including those things
that I thought were pretty much
impossible to express I've been able to
express in algorithms but that doesn't
constitute all things so you can come
you can who you can express far more
than you can imagine you'll be able to
express so I use the example of okay
it's not how do you raise your children
okay you will be able to take it one
piece by piece okay how well at what age
what school and the way to do that that
means my experience is to take that and
when you're in the moment
of making a decision or just past making
a decision to take the time and to write
down your criteria for making that
decision in words okay that that way
you'll get your prize your principles
down on paper I created an app online
call it's right now just on the iPhone
it'll be in and try getting an Android
it'll be an Android it'll be in a few
months it'll be on an awesome but it has
an app in there that helps people write
down their own principles because this
is very powerful so when you're in that
moment where you've just you're thinking
about it and you're thinking your
criteria for you know choosing the
school for your child or whatever that
might be and you write down your
criteria or whatever they are those
principles you write down and you you
that will at that moment make you
articulate your principles in a very
valuable
way and if you have the way that we
operate that you have easy access so
then the next time that comes along you
can go to that or you can show those
principles to others to see if they're
the right principles you will get a
clarity of that principle that's really
invaluable in words and that'll help you
a lot then but then you start to think
how do i express that in data and it'll
shock you about how you can do that
you'll you'll form an equation that will
show the relationship between these
particular parts and then the
essentially the variables that are going
to go into that particular equation and
you will be able to do that and you take
that little piece and you put it into
the computer and then take the next
little piece and you put that into the
computer and before you know it you will
have a decision making system that's of
the sort that I'm describing so that
you're almost making an argument against
the past an earlier statement you've
made and you're convinced to me at first
you said there's no way a computer could
raise a child essentially but now you've
described in making me think of it if
you have that kind of idea meritocracy
you have this rigorous approach at
Bridgewater takes an investment and
apply it to raising a child it feels
like through the process each is
described we could as a society arrive
at a set of principles for raising a
child and encoded into a computer that
originality will not come from machine
learning the first time you do so that
the original yes that's what I'm
referring to but eventually as we
together develop it and then we can
automate it that's why I'm saying the
processing yes can be done by the
computer so we're saying the same thing
we're not inconsistent and we're saying
the same thing that the processing of
that information in those algorithms can
be done by the computer in a very very
effective way you don't need to sit
there and process and try to weigh all
those things in your equation and all
those things but that notion of okay how
do I get at that principle and you're
saying you
surprised yes you how much you can
express that's right you can do that so
this is where I think you're going to
see the future and right now we you know
go to our devices and we get information
to a large extent and then we get some
guidance we have our GPS and the like in
my opinion principles principles
principles principles I want to
emphasize that you write them down
you've got those principles they will be
converted into algorithms for
decision-making and they're going to
also have the benefit of collective
decision-making because right now
individuals based on what stuck in their
heads are making their decisions in very
ignorant ways they're not the best
decision makers they're not the best
criteria and they're operating when
those principles are written down and
converted into algorithms it's almost
like you'll look at that and follow the
instructions and it'll give you better
results medic medicine will be much more
like this you can go to your local
doctor and you could ask his point of
view and whatever and he's rushed and he
may not be the best doctor around and
you're gonna go to this thing and get
that same information or just
automatically have it input in that and
it's gonna tell you okay here's what you
should go do and it's going to be much
better than your local doctor and that
that the converting of information into
intelligence okay
intelligence is the thing we're coming
out with again I'm 70 and I want to pass
all these things along so all these
tools that I've found need to develop
all over these periods of time all those
things I want to make an available and
what's going to happen as you there
they're going to see this they're going
to see these tools operating much more
that way the idea of converting data
into intelligence intelligence for
example on what they are like right or
what are your strengths and weaknesses
intelligence on who
why work well with under what
circumstance analyzed intelligence we're
gonna go from what are called systems of
record which are a lot of okay
information organized in the right way
to int