Ray Dalio: Principles, the Economic Machine, Artificial Intelligence & the Arc of Life

Ray Dalio is 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 underlie its 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, applicable to everyone, are brilliantly summarized in his book Principles. This conversation is part of the Artificial Intelligence podcast. If you would like to get more information about this podcast go to https://lexfridman.com/ai or connect with @lexfridman on Twitter https://twitter.com/lexfridman, LinkedIn https://www.linkedin.com/in/lexfridman/, Facebook https://www.facebook.com/lexfridman, Medium https://medium.com/@lexfridman, or YouTube https://www.youtube.com/lexfridman where you can watch the video versions of these conversations. If you enjoy the podcast, please rate it 5 stars on Apple Podcasts https://podcasts.apple.com/us/podcast/artificial-intelligence/id1434243584 or support it on Patreon https://www.patreon.com/lexfridman. This episode is presented by Cash App. Download it (App Store https://apps.apple.com/us/app/cash-app/id711923939, Google Play https://play.google.com/store/apps/details?id=com.squareup.cash&hl=en_US), use code “LexPodcast”. Here’s the outline of the episode. On some podcast players you should be able to click the timestamp to jump to that time. 00:00 – Introduction 02:56 – Doing something that’s never been done before 08:39 – Shapers 13:28 – A Players 15:09 – Confidence and disagreement 17:10 – Don’t confuse dilusion with not knowing 24:38 – Idea meritocracy 27:39 – Is credit good for society? 32:59 – What is money? 37:13 – Bitcoin and digital currency 41:01 – The economic machine is amazing 46:24 – Principle for using AI 58:55 – Human irrationality 1:01:31 – Call for adventure at the edge of principles 1:03:26 – The line between madness and genius 1:04:30 – Automation 1:07:28 – American dream 1:14:02 – Can money buy happiness? 1:19:48 – Work-life balance and the arc of life 1:28:01 – Meaning of life

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Lex Fridman?

  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. They're also even further condensed on several other platforms, including YouTube, where, for example, the 30-minute video titled "How the Economic Machine Works"

• 0:40Lex Fridman?

  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 civilization's 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 Podcasts, support

• 1:25Lex Fridman?

  it on Patreon, or simply connect with me on Twitter at Lex Fridman, spelled F-R-I-D-M-A-N. This show is presented by Cash App, the number one finance app in the App Store. I personally use Cash App to send money to friends, but you can also use it to buy, sell, and deposit Bitcoin. Most Bitcoin exchanges take days for a bank transfer to become investable. Through Cash App, it takes seconds. Cash App also has a new investing feature. You can buy fractions of a stock, which to me is a really interesting concept. So you can buy $1's worth, no matter what the stock price is. Brokerage services are provided by Cash App Investing, subsidiary of Square and

• 2:07Lex Fridman?

  member SIPC. I'm excited to be working with Cash App to support one of my favorite organizations that many of you may know and have benefited from called FIRST, best known for their FIRST Robotics and LEGO competitions. They educate and inspire hundreds of thousands of students in over 110 countries and have a perfect rating on Charity Navigator, which means that donated money is used to maximum effectiveness. When you get Cash App from the App Store or Google Play and use code LEGSPODCAST, you'll get $10 and Cash App will also donate $10 to FIRST, which again, is an organization that I've personally seen inspire girls and

• 2:49Lex Fridman?

  boys to dream of engineering a better world. And now here's my conversation with Ray Dalio.

• 3:13Lex Fridman?

  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 high philosophical 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?

• 3:44Speaker 01

  Almost the way you're asking the question implies that truth and newness have nothing, are 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, what's 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? Yeah. And deal with the associated probabilities.

• 4:28Speaker 01

  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, 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

• 5:12Speaker 01

  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 hasn't been done before that it might succeed? It's to do whatever homework that you have in order to try to get a foundation.

• 5:57Speaker 01

  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 root cause, 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.

• 6:40Speaker 01

  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 is visualization, they have an audacious goal, and then they go from visualization to actualization, building it out.

• 7:23Speaker 01

  That includes Elon Musk, I gave him the personality test, I've given it to Bill Gates, and I've given 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 goal, 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.

• 7:54Lex Fridman?

  So 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 about-

• 8:07Speaker 01

  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 pull comes from a pull to adventure. For whatever reason, I can't tell you how much of it's genetics and how much it's 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?

• 8:47Speaker 01

  So it's that process that one, and then one, the more one does it, the one more, the better one becomes at.

• 8:57Lex Fridman?

  You mentioned shapers, Elon Musk, Bill Gates. What, who are the shapers that you find yourself thinking about when you're constructing these ideas? The ones that define the archetype of a shaper for you?

• 9:10Speaker 01

  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 Yunus with Social Enterprise and Philanthropy, Jeffrey Canada and Harlem Children's Zone. There are, all domains have shapers who have the ability to visualize and make extraordinary things happen.

• 9:49Lex Fridman?

  What are the commonalities between some of them?

• 9:51Speaker 01

  The commonalities are, first of all, the excitement of something new, that call to a venture, and then again, that practicality, the capacity to learn. The capacity then, 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 outer space? What are we going to do if the planet goes to hell? And how do I, how are we going to get that? And nobody's paying attention to that.

• 10:36Speaker 01

  He doesn't know much about it. He then reads and learns and so on. Says, I'm going to take, okay, half of my money and I'm going to put it in there and I'm going to do this thing. And he learns and blah, blah, blah, blah, blah, and he's got creative. Okay, that's one dimension. And so he gave me the keys to his car, which was just early days in Tesla. And he then points out the details. Okay, if you push this button here, it's this, the detail that... So he's simultaneously talking about the big, the big, big, big picture. Okay, when does humanity going to abandon the planet? But he will then be able to take it down into the detail.

• 11:20Speaker 01

  So he can go, let's call it helicoptering. He can go up, he can go down and see things at those types of perspectives.

• 11:26Lex Fridman?

  And then you've seen that with the other shapers as well?

• 11:28Speaker 01

  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. What it... They're all having concern for others. This includes Mohamed Yunus, who invented microfinance, social enterprise, impact investing

• 12:12Speaker 01

  is Mohamed 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 in social enterprise, a remarkable man. He has, nobody that I know practically could have more concern for others. 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 what's called concern for others because what it really, those questions under that are questions about conflict to get at the mission.

• 12:53Speaker 01

  So they all, Jeffrey Canada, who changed 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, Harlem, him also, concern for others. What they mean is that they can see whether the 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 didn't know Steve Jobs, so I can't speak personally to that, but his comments on, do you have A players, and if you have A players, if you put in B players, pretty soon you'll have C players and so on.

• 13:36Speaker 01

  That is a common element of them, holding people to high standards and not letting anybody stand in the way of the, the mission.

• 13:44Lex Fridman?

  What do you think about that kind of idea, 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?

• 14:01Speaker 01

  Yes, but I think that there are all different ways of being A players.

• 14:06Lex Fridman?

  Ah, okay.

• 14:07Speaker 01

  And I think, and what a great, a great team, you have to appreciate all the differences in ways of being A players, okay?

• 14:15Lex Fridman?

  Yes.

• 14:16Speaker 01

  That's the first thing. And then you always have to be super excellent, in my opinion, you always have to be really excellent with people, to help them understand each other, themselves, and get in sync with them about what's true about them and their circumstances, how they're doing, so that they're having a fabulous personal development experience at the same time as you're dealing with them. So, and when I say that there are all different ways, this is one of the, then, qualities, you asked me, what are the qualities? So one of the third qualities that I would say is to... Know how to deal well with your not knowing

• 14:58Speaker 01

  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 even more successful by being able to effectively learn from others and tap into the skills of people who see things different from them.

• 15:25Lex Fridman?

  Brilliant. So how do you, when 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 a tension there between the confidence and the open-mindedness?

• 15:45Speaker 01

  No, it's funny because I think we grow up thinking that there's a tension there, right? That there's a confidence and the more confidence that you have, there's a tension with the open-mindedness and not being sure, okay? Confident and accurate are almost negatively correlated in 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 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 best thinking available to me

• 16:30Speaker 01

  and then raise my probability of learning?" All these people think for themselves, 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. So the reason my company has been successful in terms of this is because of an idea meritocratic

• 17:13Speaker 01

  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 in the team to achieve that.

• 17:27Lex Fridman?

  That's an incredible process that you describe in several places to arrive at the truth. Apologies if I'm romanticizing the notion, but let me 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?

• 17:57Speaker 01

  I think what you're calling delusion is a bad word.

• 18:02Lex Fridman?

  Yes.

• 18:03Speaker 01

  For uncertainty. Okay? So, I mean, in other words, because we keep going back to the question, how would you know? And all of those things. No. I think that delusion is not going to help you, that you have to find out truth. Okay? To deal with uncertainty, not saying, 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 described the process in a more complete way than we're going to 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?

• 18:48Speaker 01

  So that isn't delusion. I wouldn't use delusion. I think you're overemphasizing 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 delusion's helpful. No, the delusion isn't. Don't confuse delusion with not knowing.

• 19:31Lex Fridman?

  Yes, but nevertheless, so if we look at the abyss, we can look at your own that you described. It's difficult psychologically for people. So many people quit, many people choose a path that is more comfortable than I mean that. The the heartbreak of that, you know, breaks people. So if you have the dream and 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?

• 20:02Speaker 01

  Well, that's that's classically the defining moment. It's almost like evolution taking care of, okay, now you're you 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 like. Some people get off the field and they say, oh, I don't like this and so on. Yeah, and some people learn and they have the and they have a metamorphosis. And it changes their approach to learning. The number one thing it should give them is uncertainty. You should take an audacious, dreamier guy who wants to change the world. Crash, okay.

• 20:45Speaker 01

  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 keep going after your big goal. And at the same time, you say, hey, I'm worried that I'm going to 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.

• 21:16Lex Fridman?

  So your own process, I mean, you've talked about it before, but it would be great if you can describe it because our darkest moments are perhaps the most interesting. So your own with the prediction of the of another depression.

• 21:30Speaker 01

  Economic depression.

• 21:30Lex Fridman?

  Economic, yes, I apologize, economic depression. Can you talk to what you were feeling, thinking?

• 21:39Lex Fridman?

  Planning, strategizing at those moments?

• 21:41Speaker 01

  Yeah, that was, that was, that was my biggest moment, okay? Building my little company. This is in nineteen eighty-one, eighty-two. I had calculated that American banks had given a lot more money to, uh, 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 sent the economy tumbling. And that was an extremely controversial point of view. Uh, then it started to happen, and it happened in Mexico defaulted in August nineteen eighty-two. I thought that there was going to be a, um, an economic collapse that was going to follow because there was a series of the other countries, it was just playing out as I had imagined.

• 22:25Speaker 01

  And that, well, couldn't have been more wrong. That was the exact bottom in the stock market because central banks, he's monetary policy, blah, blah, blah. And I couldn't have been more wrong, and I was very publicly wrong, and all, and all of that, and I lost money for me, and I lost money for my clients. And I was, uh, I only had a small company then, but I, um, I had, these were close people, I had to let them go. I was down to me as the, uh, last person, I didn't have, I, I was so broke, I had to borrow four thousand dollars from my dad to help to pay for my family bills, very painful. And at the same time, I would say it definitely was, uh, one of the best things that ever happened to me, maybe the best thing for him happened to me, because it changed my

• 23:10Speaker 01

  approach to decision-making. It's what I'm saying. In, in other words, I kept saying, okay, how do I know whether I'm right? How do I know I'm not wrong? It gave me that. And, uh, and it didn't give up by audaciousness because it, it, I was in a position, what am I going to do? Am I going to go down, back, put on a tie, go to Wall Street and be, and just do those things? No, I can't bring myself to do that, so I'm at a juncture. How do I deal with my risk and how do I deal with that? And it told me how to deal with my uncertainties. And that taught me, for example, a number of techniques. First, to find the, uh, smartest people I could find who disagreed with me and to have quality disagreement. I learned the art of thoughtful disagreement.

• 23:54Speaker 01

  I learned how to produce diversification. I learned how to do a number of things. That 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 going to 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,

• 24:37Speaker 01

  is, you know, I'm 70 years old, and that is a magical way of achieving success. If you can create an idea meritocracy, it's so much better in terms of achieving success and also quality relationships with people. But that's what that experience gave me.

• 24:55Lex Fridman?

  So if we can linger on 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 is 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 an idea that's different than your own about a particular topic, what kind of process do you go through mentally? Are you arguing through the idea with a person? Sort of present as almost like a debate? Or do you sit on it and consider the world sort of empathetically? If this is true?

• 25:42Lex Fridman?

  Then what does that world look like? Does that world make sense and so on? So what's the process of considering those conflicting ideas for you?

• 25:49Speaker 01

  I'm going to answer that question. But after saying first, almost implicit in your question is it's not common. Okay. What's common produces only common results. Okay. So don't judge anything that is good based on whether it's common. Because it's only going to give you common results. If you want unique, you have a unique approach.

• 26:12Lex Fridman?

  Yes.

• 26:13Speaker 01

  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 gee, 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, let's start off, what does the other person know relative to what I know?

• 26:53Speaker 01

  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, you're assessing when it comes into you. Does that make sense? Or you're learning something? Are you getting epiphanies and so on? And I try to then do that. If the conversation, 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.

• 27:34Speaker 01

  So I would, I said, I describe it as having open mindedness and assertiveness at the same time. That you can simultaneously be open minded and take in 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.

• 27:56Lex Fridman?

  And when you're doing that kind of back and forth on a topic like the economy, which you have, to me, perhaps I'm 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 30-minute video. You have a lot of incredible videos online that people should definitely watch on YouTube, but you've put out this 30-minute video titled "How the Economic Machine Works." That is probably one of the best, if not the best, video I've seen on the internet in terms of educational

• 28:38Lex Fridman?

  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 lightbulb 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 former productivity growth is how valuable things, how much value people create, valuable things people create. The latter is people borrowing from their future selves to hopefully create those valuable things faster. So this is an incredible system

• 29:23Lex Fridman?

  to me. Maybe we can linger on it a little bit, but you've also said what most people think about as money is actually credit. Total amount of credit in the US is $50 trillion. Total amount of money is $3 trillion. 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?

• 30:05Speaker 01

  I think credit is great, even though people often overdo it. Credit is that somebody has earned money.

• 30:15Lex Fridman?

  Yeah.

• 30:15Speaker 01

  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 going to pay it back. And if it works well, it helps resource allocations go well, providing people like the entrepreneurs and all of those, they need capital, they don't have capital themselves, and so somebody's going to 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 another book on principles, Principles of Big Debt Crises that go into that. And it's free, by the way, I put it free online on as a PDF.

• 31:00Speaker 01

  So if you go online and you look Principles for Big Debt Crises 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 overdone in always the same way. Everything, by the way, almost everything happens over and over again for the same reasons. Okay. So these debt crises all happen over and over again for the same reasons. They get it overdone. 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.

• 31:42Speaker 01

  If you didn't have credit, then you would be sort of, everybody would sort of be stuck. So credit is a good thing, but it can easily be overdone. So now we get into the question, what is money? What is credit?

• 31:57Lex Fridman?

  Yeah.

• 31:57Speaker 01

  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 you have an IOU. And the IOU says you're going to get a certain number of dollars, let's say, or yen or 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 owe 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.

• 32:40Speaker 01

  I would suggest like you you recommend to other people. Just take that thirty minutes. And it and 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 is somebody gets over indebted. They have to sell an asset. Okay, then I don't know. That's when assets become cheaper. How do you acquire the asset? It's a whole process.

• 33:16Lex Fridman?

  So again, maybe another dumb question, but.

• 33:20Speaker 01

  There are no such things as dumb questions to me.

• 33:22Lex Fridman?

  There you go. But what is money?

• 33:26Lex Fridman?

  So you've mentioned, you know, credit and money. It 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 commented on Bitcoin, other forms. What do you think is its history and future? How do you think about money?

• 34:08Speaker 01

  There are two things that money is for.

• 34:12Speaker 01

  It's a medium of exchange and it's a store hold of wealth.

• 34:16Lex Fridman?

  Yes.

• 34:17Speaker 01

  That's that that so 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.

• 34:45Lex Fridman?

  And it's, I apologize to interrupt, but it only can be a medium of exchange or store of wealth when everybody recognizes it to be of value.

• 34:54Speaker 01

  That's right.

• 34:55Lex Fridman?

  Right.

• 34:55Speaker 01

  And so you see in the history and you around the world and you go to places. Um, I was in um, an island in the Pacific in which they had as money, these big stones. And literally they were taking a boat, this 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 was in the bottom and it's this big hunk of rock. The fact that somebody owned it, they would say, oh, I'll I'll own it for this and that.

• 35:38Speaker 01

  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 um, 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.

• 36:18Lex Fridman?

  That's right.

• 36:18Speaker 01

  Um, that that would be and 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 it's kept of value and it works that way.

• 36:36Speaker 01

  So let's say central banks, when they get in the position of like they owe a lot of money, like we have in the case, it's increasingly the case. And they also are 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 has shown, forget about today. History has shown that no currency has, every currency has either ended as being a currency or devalued as a currency over periods of time, long periods of time.

• 37:18Speaker 01

  So it evolves 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.

• 37:29Lex Fridman?

  But so much is being digitized today. And there's this ideas that are 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 a common store of value, a store of wealth and a medium of exchange?

• 37:54Speaker 01

  The problem with Bitcoin is that it's not an effective medium of 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 it's not a very effective saving. That's very different from Facebook's 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 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.

• 38:37Speaker 01

  Then you have a digital currency that could be a very effective medium of exchange and store hold of wealth. So in my opinion, some digital currencies are likely to succeed more or less based on that ability to do it. Then the question is, what happens? Okay, what happens is, do 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 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.

• 39:20Speaker 01

  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 that's an issue. And then you have to also build the confidence in all of the components of it. To say, okay, that's going to be effective because I won't get, 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.

• 40:03Speaker 01

  Before we have that, let's say, get into a position that would be in a effective means relative to gold, let's say, if you were to think of that. Because gold has a track record, you know, of thousands of years.

• 40:17Lex Fridman?

  Right.

• 40:18Speaker 01

  All across countries. It has its mobility, it has the ability to put it down, it has certain abilities. It's got disadvantages relative to digital currencies. But central banks will hold it, like, there's central banks that worry about others. You know, the other countries, central banks might worry about whether the US dollar is going to print 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 gold or something else, some other currency, they got to pick it. And so I think it's a long way to go.

• 40:52Lex Fridman?

  But you think it's possible that 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 seem very unlikely?

• 41:09Speaker 01

  It would be very remote possibility or very long in the future.

• 41:17Lex Fridman?

  Got it. Again, maybe a dumb question, but romanticized 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 there's however many million, hundreds of millions of people in the United States, globally over seven billion people, that this thing between individual transactions,

• 41:51Lex Fridman?

  it just, it works?

• 41:53Speaker 01

  Yeah. It amazes me. Like, I go, I go back and forth between being in it and then I think, like, how did a credit card, how is that really possible? I'm still used, like, look, a credit card, I put it on, the guy doesn't know me.

• 42:10Lex Fridman?

  Yeah.

• 42:11Speaker 01

  It signs, 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 what I marvel at that and those types of things is because of 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 when I'm flying in a plane or when I'm

• 42:54Speaker 01

  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 this and I say, wow, yes, it all amazes me.

• 43:15Lex Fridman?

  So while being amazing, do you have a sense, the principles you described, that the whole thing is stable somehow also? Or is this, are we just lucky? So the principles that you described, are those describing a system that is stable, robust, and will remain so? Or is it a lucky accident of our early history?

• 43:39Speaker 01

  My area of expertise is economics and markets, so I get down to like a real nitty gritty.

• 43:45Lex Fridman?

  Yes.

• 43:46Speaker 01

  I can't tell you whether the plane is going to fall out of the sky.

• 43:48Lex Fridman?

  Yes.

• 43:49Speaker 01

  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, okay? So without me knowing it. In the markets and the economy, I know those things 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, and I believe it's right, but whether it can be hurt by, let's say, connectivity, or journal entries. They could take all the money away from you through your digital entries.

• 44:32Speaker 01

  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 enough about the mechanics of them, that doesn't worry me.

• 44:51Lex Fridman?

  Have you seen disruptions in your lifetime that really surprised you?

• 44:55Speaker 01

  Oh, all the time. This is one of the great lessons of my life, is that 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 fir- 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's lifetimes. So for example, I remember nineteen seventy one, the dollar, there was no such thing as a devaluation of a currency. Didn't experience it. And with the dollar was connected

• 45:37Speaker 01

  to gold, and I was watching events happen, and then you get on and any that definition of money, all of a sudden went out the 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 shock, or so many of these things. And what I but almost always, I realized that they um when I looked in history, they happened before.

• 46:06Lex Fridman?

  Okay.

• 46:07Speaker 01

  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.

• 46:34Lex Fridman?

  Right.

• 46:35Speaker 01

  Okay. Or it's or um.

• 46:37Lex Fridman?

  They've happened before.

• 46:39Speaker 01

  Yeah, they happen.

• 46:40Lex Fridman?

  Just not to you. Let me talk about if we could about AI a little bit. So we've a Bridgewater Associates manage about one hundred and sixty billion dollars in assets. And our artificial intelligence systems algorithms are pretty good with data. What role in the future do you see AI play in analysis and decision making in this kind of data rich and impactful?

• 47:11Speaker 01

  Area of investment. I'm going to answer that not only in investment, but I give a 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. 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 in parallel with our decision making. So for me, it's like, there's a chess game playing, and I'm a person with my chess game,

• 47:55Speaker 01

  and I'm saying, it made that move, and I'm making the move, and how do I compare those two moves? So we've done a lot, but let me give you a rule. If the future can be different from the past, and you don't have deep understanding, you should not rely on AI. Okay?

• 48:19Speaker 01

  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, take 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, if it 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,

• 49:03Speaker 01

  because you're, if the thing's 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.

• 49:16Speaker 01

  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, put the data in and say, what is the algorithm? When you, that's machine learning.

• 49:44Lex Fridman?

  Yeah.

• 49:44Speaker 01

  And when you have machine learning, it'll give you equations which quite often are not understandable. If 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, if the future's different from the past and you don't have deep understanding, you're gonna get in trouble. And so that's the main thing. As far as AI is concerned, AI, and let's say, computer replications of thinking in various ways, I think it's particularly good for processing.

• 50:29Speaker 01

  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? All of those things. Maybe you can get the computer to help you, but if you just took data and you have machine learning, it's not gonna find it. If you were to then take, what are 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.

• 51:10Speaker 01

  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, operating in a way where... You know, you can say, ah, that makes sense.

• 51:49Lex Fridman?

  You know, the process of reducing your understanding down to principles is kind of like the process, the first one you mentioned, type of AI algorithm where you're encoding your expertise, you're trying to program, write a program, the human is trying to write a program. How do you think that's attainable? The process of reducing principles to a computer program? Or when you say, when you write about, when you think about principles, is there still a human element that's not reducible to an algorithm?

• 52:29Speaker 01

  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, you can, whoo, 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, at what age, what school?

• 53:08Speaker 01

  And the way to do that, that was 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 principles down on paper. I created an app, online call, it's right now just on the iPhone, it'll be on Android.

• 53:40Lex Fridman?

  I tried getting it on Android. Come on, now.

• 53:42Speaker 01

  It'll be.

• 53:43Lex Fridman?

  Get it on Android.

• 53:44Speaker 01

  It'll be, in a few months, it'll be on Android.

• 53:45Lex Fridman?

  Awesome.

• 53:46Speaker 01

  But it has an app in there that helps people write down their own principles.

• 53:51Lex Fridman?

  Yes.

• 53:52Speaker 01

  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...

• 54:14Speaker 01

  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 when 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.

• 54:58Speaker 01

  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.

• 55:15Lex Fridman?

  So you're almost making an argument against an earlier statement you've made. You're convincing me, at first you said, there's no way a computer could raise a child essentially. But now you've described, making me think of it, if you have that kind of idea, meritocracy, you have this rigorous approach that Bridgewater takes on investment and apply it to raising a child. It feels like through the process you just described, we could, as a society, arrive at a set of principles for raising a child and encode it into a computer.

• 55:50Speaker 01

  That originality will not come from machine learning.

• 55:56Lex Fridman?

  The first time you do, so that the original, yes.

• 55:59Speaker 01

  That's what I'm referring to.

• 56:00Lex Fridman?

  But eventually, as we together develop it and then we can automate it.

• 56:04Speaker 01

  That's why I'm saying the processing

• 56:06Lex Fridman?

  Yes.

• 56:07Speaker 01

  can be done by the computer. So we're saying the same thing. We're not inconsistent. We're saying the same thing, that the processing of that information and 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?

• 56:30Lex Fridman?

  And you're saying you'd be surprised.

• 56:33Speaker 01

  Yes, you can do that. 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's stuck in their heads,

• 57:18Speaker 01

  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 mu- 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 going to go to this thing and get that same information or just automatically have it input in that. And it's going to tell you, okay, here's what you should go do. And it's going to be much better than your local doctor.

• 58:01Speaker 01

  And that, the converting of information into intelligence, okay? Intelligence is the thing. We're coming out with, um, again, I'm seventy and I want to pass all these things along. So, um, all these tools that I've found need to develop all over these periods of time. All those things, I want to make them available. And what's going to happen as you, they're, 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 do I work well with, under what circumstance?

• 58:46Speaker 01

  Personalized. Intelligence. We're going to go from what are called systems of record, which are a lot of, okay, information organized in the right way, to intelligence. And we're gonna, that'll be the next big move, in my opinion, and so you will get intelligence back.

• 59:06Lex Fridman?

  And that intelligence comes from reducing things down to principles and to...

• 59:11Speaker 01

  That's how it happens.

• 59:12Lex Fridman?

  So what's your intuition, if we look at future societies, do you think we'll be able to reduce a lot of the details of our lives down to principles that would be further and further automated?

• 59:27Speaker 01

  I think the real question hinges on people's emotional emotions and irrational behaviors. I think that there's subliminal things that we want, okay? And then there's cerebral, you know, conscious logic, and the two often are at odds. So there's almost like two yous in you, right? And so, let's say, what do you want? Your mind will answer one thing, your emotions will answer something else. So when I think about it, I think emotions are, I want inspiration, I want, love is

• 1:00:08Speaker 01

  a good thing, being able to have a good impact, but it is in the reconciliation of your subliminal wants and your intellectual wants, so that you really say they're aligned. And so to do that in a way to get what you want. So irrationality is a bad thing if it means that it doesn't make sense in getting you what you want, but you better decide which you you're satisfying. Is it the lower level you, emotional, subliminal one, or is it the other? But if you can align them. So what I find is that by going from my, you experience the decision, do this thing,

• 1:00:50Speaker 01

  subliminally, and that's the thing I want, it comes to the surface. I find that if I can align that with what my logical me wants and do the double check between them, and I get the same sort of thing, that that helps me a lot. I find, for example, meditation is one of the things that helps to achieve that alignment. It's fantastic for achieving that alignment. And often then, I also wanna not just do it in my head. I wanna say, does that make sense? Help you, and so I do it with other people. And I say, okay, well, let's say I want this thing and whatever. Does that make sense? And when you do that kind of triangulation, your two U's, and you do that with also the other way,

• 1:01:34Speaker 01

  then you certainly wanna be rational, right? But rationality has to be defined by those things.

• 1:01:42Lex Fridman?

  And then you discover sort of new ideas that, that drive your future. So it's always, you're always at the edge of the set of principles you've developed. You're doing new things always. That's where the intellect is needed.

• 1:01:55Speaker 01

  Well, and the inspiration. The inspiration is needed to do that, right? Like, what are you doing it for? It's the excitement.

• 1:02:03Lex Fridman?

  What is that thing?

• 1:02:04Speaker 01

  The adventure, the curiosity, the hunger.

• 1:02:06Lex Fridman?

  What's, if you can be Freud for a second, what's in that subconscious? What's the thing that drives us?

• 1:02:13Speaker 01

  I think you can't generalize of us. I think different people are driven by different things. There's not a common one, right? So, like, if you would take the Shapers, I think it is a combination of, subliminally, it's a combination of excitement, curiosity.

• 1:02:35Lex Fridman?

  Is there a dark element there? Is there, is there demons? There's their fears? Is there, in your sense, something dark that drives them?

• 1:02:42Speaker 01

  Most of the ones that I'm dealing with, I have not seen that. I, I see the, what I really see is, whoo, if I can do that, that would be the most dream. And then the act of creativity. And you say, ooh. So excitement is one of the things. Curiosity is a big pull, okay? And then tenacity, you know, okay, to do those things. But definitely, emotions are entering into it. Then there's an intellectual component of it too, okay? It may be empathy. It may, can I have an impact? Can I have an impact? The desire to have an impact, that's an emotional thrill. And, but it also has empathy.

• 1:03:27Speaker 01

  And then you start to see spirituality. By spirituality, I mean the connectedness to the whole. You start to see people operate those things. Those tend to be the things that you see the most of.

• 1:03:39Lex Fridman?

  And I think you're gonna shut down this idea completely, but there's a notion that some of these shapers really walk the line between madness and genius. Do you think madness has a role in any of this? Or do you still see Steve Jobs and Elon Musk as fundamentally rational?

• 1:03:58Speaker 01

  Yeah, there's a continuum there. And what comes to my mind is that genius is often at the edge, in some cases, imaginary genius is at the edge of insanity. And it's almost like a radio that I think, okay, if I can tune it just right, it's playing right, but if I go a little bit too far, it goes off. Okay, and so you can see this. Kay Jamison was studying bipolar. What it shows is that that's definitely the case, because when you're going out

• 1:04:39Speaker 01

  there, that imagination, whatever, is at the, can be near the edge sometimes. It doesn't have to always be.

• 1:04:47Lex Fridman?

  So let me ask you about automation. That's been a part of public discourse recently. What's your view on the impact of automation? Of whether we're talking about AI or more basic forms of automation on the economy in the short term and the long term? Do you have concerns about it as some do? Or do you think it's overblown?

• 1:05:11Speaker 01

  It's not overblown. I mean, it's a giant thing. It'll come at us in a very big way in the future. We're right at the edge of even really accelerating it. It's had a big impact and it will have a big impact. And it's a two-edged sword because it'll have tremendous benefits. And at the same time, it has profound benefits in employment and distributions of wealth.

• 1:05:38Speaker 01

  Because the way I think about it is, there are certain things human beings can do. And over time, we've evolved to go to almost higher and higher levels. And now we're almost like, we're at this level, you know? It used to be your labor and you would then do your labor. And okay, we can get past the labor. We got tractors and things and you go up, up, up, up, up. And we're up over here and to the point in our minds where, okay, anything related to mental processing, the computer can probably do better and we can find that. And so, other than almost inventing, you're at a point where the machines and the automation

• 1:06:24Speaker 01

  will probably do it better. And that's accelerating and that's a force. And that's a force for the good. And at the same time, what it does is it displaces people in terms of employment and changes and it produces wealth gaps and all of that. So I think the real issue is that that has to be viewed as a national emergency. In other words, I think the wealth, the wealth gap, the income gap, the opportunity gap, all of those things, that force is creating the problems that we're having today. A lot of the problems, the great polarity, the disenfranchised, not equal,

• 1:07:08Speaker 01

  not anything approaching equality of education. All of these problems, a lot of problems are coming as a result of that. And so there, it needs to be viewed really as an emergency situation in which there's a good work, good plan worked out for how to deal with that effectively. So that it's dealt with effectively. So because it's, it's, you know, it's good for the average, it's good for the impact, but it's not good for everyone and it creates that polarity. So it's gotta be dealt with.

• 1:07:44Lex Fridman?

  Yeah, and you've talked about the American dream and that that's something that all people should have an opportunity for. And that we need to reform capitalism to give that opportunity for everyone. Let me ask on a One of the ideas in terms of safety nets that support that kind of opportunity, there's been a lot of discussion of universal basic income amongst people. So there's Andrew Yang, who's running on that, he's a political candidate running for president, on the idea of the universal basic income. What do you think about that, giving a thousand dollars or some amount of money to everybody

• 1:08:22Lex Fridman?

  as a way to give them the padding, the freedom to sort of take leaps, to take the call for adventure, to take the crazy pursuits?

• 1:08:33Speaker 01

  Before I get right into my thoughts on universal basic income, I want to start with the notion that opportunity, education, development, creating equality, so that people say there's equal opportunity, is the most important thing. And then to find out, what is the amount? How are you going to provide that? Where, what, how does, how do you get the money into a public school system? How do you get the teaching? How do you, what do you, the fleshing out that plan to create equal opportunity in all

• 1:09:15Speaker 01

  of its various forms is the most pressing thing to do. And so I'm, you know, that is that.

• 1:09:22Lex Fridman?

  The opportunity, the most important one, you're kind of implying is the earlier the better, sort of like opportunities, education. So in the early development of a human being is when you should have the equal opportunities. That's the most important.

• 1:09:38Speaker 01

  Right. In the first phase of your life, which goes from birth until you're on your own, and you're an adult, and you're now out there, and you deal with early childhood development, okay? And you take the brain, and you say, what's important? The child care, okay, like the, it makes a world of difference, for example, if you have good parents who are trying to think about instilling the stability in a non-traumatic environment to provide them. So I would say the good guidance that normally comes from parents and the good education that they're receiving. Are, you know, the most important things in that person's development.

• 1:10:23Speaker 01

  The ability to be able to be prepared to go out there and then to go into a market that's an equal opportunity job market, to be able to then go into that kind of market, is a system that creates not only fairness, anything else is not fair. And then in addition to that, it also is a more effective economic system because the consequences of not doing that to a society are devastating. If you look at what the difference in outcomes for somebody who completes high school or doesn't complete high school, or does, each one of those states changes.

• 1:11:02Speaker 01

  And you look at what that means in terms of their costs to society, not only themselves, but their cost and incarceration costs and crimes and all of those things. It's economically better for the society and it's fairer if they can get those particular things. Once they have those things, then you move on to other things. But yes, from birth all the way through that process, anything less than that is bad, is a tragedy and so on. So that's what I, that's, yeah, those are the things that I'm estimate. And so my, what I would want above all else is to provide that. So with that in mind, now we'll talk about universal basic income.

• 1:11:47Speaker 01

  Start with that, now we can talk about UBI. Well, right, because you have to have that. Now the question is what's the best way to provide that, okay? So when I look at UBI, I really think is what is going to happen with that thousand dollars, okay? And will that thousand dollars come from another program? Does that come from an early childhood developmental program? Who are you giving the thousand dollars to and what will they do for that thousand dollars? I mean, like my reaction would be, I think it's a great thing that everybody should have almost a thousand dollars in their bank and so on. But when do they get to make decisions or who? Lose the parent. A lot of pit times you can give a thousand dollars to somebody and it could have a negative result.

• 1:12:32Speaker 01

  It can have, you know, they can use that money detrimentally, not just productively. And if that money's coming away from some of those other things that are going to produce the things I want. And you're shifted to, um, let's say to come in and give a check. Doesn't mean its outcomes are going to be good in providing those things that I think are so fundamental important. If it was just everybody can have a thousand dollars and use it. So when the time comes. And use it well, that would be really, really good. Because it's almost like everybody you'd wish everybody could have a thousand dollars worth of wiggle room in their lives. Okay. And I, I, I think that would be great. I, I love that. But I want to make sure that these other things that are taken care of.

• 1:13:16Speaker 01

  So if it comes out of that budget and, um, you know, I don't want it to come out of that budget that's going to be doing those things. And I, you know, so you have to figure it out.

• 1:13:25Lex Fridman?

  And you have a certain skepticism that human nature will use. May not always, in fact, frequently may not use that thousand dollars for the optimal. To support the optimal trajectory.

• 1:13:38Speaker 01

  Some will and some won't. One of the big advantages of universal basic income. Is that, um, if you put it in the hands, let's say, of parents who know how to do the right things and make the right choices. For their children because they're responsible and you say, I'm going to give them a thousand dollars wiggle room. To use for the benefit of their children. Wow, that sounds great. If you put it in the hands of, let's say, um, an alcoholic or drug addicted parent. Who is not making those choices well for their children. And what they do is they take that thousand dollars and they don't use it well. Then that's going to produce more harm than good.

• 1:14:17Lex Fridman?

  Well put. You're, if I may say so, one of the richest people in the world. So you're a good person to ask, does money buy happiness?

• 1:14:28Speaker 01

  No, it's been shown that um between um, once you get over a basic level of income, so that you can take care of the pain, that you know, you can health and whatever, there's no correlation between the level of happiness that one has and the level of money that one has. But that would thing that has the highest correlation is quality relationships with others, community. If you look at surveys of these things across all surveys and all societies, it's a if um a sense of community and interpersonal relationships. That is not in any way correlated with money.

• 1:15:09Speaker 01

  You can go down to native tribes and you know, very poor places, or you can go in all different communities. And so they have the opportunity to have that. I'm very lucky in that I started with nothing, so I had the full range. I can tell you I I you know, I'm not having money, but but and then having quite a lot of money. And I you know, I did that in the right order.

• 1:15:32Lex Fridman?

  So you start from nothing in Long Island?

• 1:15:34Speaker 01

  Yeah, and my dad was a jazz musician, but I I but I had all really that I needed because I had two parents who loved me and took good care of me. And I went to a public school that was a good public school. And basically, you know, that you you don't need much more than that in order to, that's the equal opportunity part. Anyway, what I'm saying is no, I experienced the range. And and there are many studies on the answer to your question. No, money does not bring happiness. Bring money gives you an ability to make choices.

• 1:16:09Lex Fridman?

  Does it get in the way in any way of forming those deep meaningful relationships?

• 1:16:17Speaker 01

  It can. There are lots of ways that it makes negative. That's one of them. It could stand in the way of that. Yes. Okay. But I could almost list the ways that it could stand. It could be a problem.

• 1:16:29Lex Fridman?

  Yeah. What does it buy? So if you can elaborate, you mentioned a bit of freedom.

• 1:16:36Speaker 01

  At the most fundamental level, it doesn't take a whole lot, but it takes enough that um.

• 1:16:44Speaker 01

  You can take care of your yourself and your family to be able to learn, do the basics of have the relationships, have healthcare, the basics of those types of things, you know, you can cover the patients. And then to have maybe enough security, but maybe not too much security.

• 1:17:09Lex Fridman?

  That's right.

• 1:17:09Speaker 01

  That you essentially are okay. Okay, that is, that's really good. And you don't, that's what, that's what money will get you.

• 1:17:21Lex Fridman?

  And everything else is, could go either way.

• 1:17:23Speaker 01

  Well, no, there's more.

• 1:17:24Lex Fridman?

  There's more.

• 1:17:25Speaker 01

  Okay. Then beyond that, what it then starts to do, that's the most important thing.

• 1:17:31Lex Fridman?

  Yes.

• 1:17:32Speaker 01

  But beyond that, what it tends to, starts to do is to help to make your dreams happen in various ways. Okay, so for example, how I, you know, like in my case, it's, those dreams might not be just my own dreams, they're, they're impact on others' dreams. Okay, so my own dreams might be, I don't know, I can pass along these, at my stage in life, I could pass along these principles to you and I can give those things. Or I can do whatever, I can go on an adventure, I can start a business,

• 1:18:11Speaker 01

  I can do those other things, be productive, I can self-actualize in ways that might be not possible otherwise. And so that's, that's my own belief. And then in a, and I can also help others. I mean, this is, you know, to the extent when you get older and with time and whatever very, you start to feel connected, spiritual, spirituality, that's what I'm referring to. You can start to have an effect on others that's beneficial and so on, gives you the ability. I could tell you that people who are very wealthy, who have that, feel that they don't have enough money. Bill Gates will feel almost broke.

• 1:18:52Speaker 01

  Because relative to the things he'd like to accomplish through the Gates Foundation and things like that, you know, oh my God, he doesn't have enough money to accomplish the things he wishes for. But those things are not, you know, they're not the most fundamental things. So I think that people sometimes think money has value. Money doesn't have value. Money is, like you say, just a medium of exchange at a store all the way. And so what you have to say is, what is it that you're going to buy? Now, there are other people who get their gratification in ways that are different from me, but I think in many cases, let's say, somebody who used money to have a status symbol. What would I say?

• 1:19:37Speaker 01

  Or that's probably unhealthy. But then, I don't know, somebody who says, I love a great gorgeous painting and it's going to cost lots of money. In my priorities, I can't get there. But that doesn't mean, who am I to judge others in terms of, let's say, their element of the freedom to do those things? So it's a little bit complicated. But by and large, that's my view on money and wealth.

• 1:20:05Lex Fridman?

  Let me ask you, in terms of the idea of, so much of your passions in life has been through something you might be able to call work. Alan Watts has this quote. He said that the real key to life, secret to life, is to be completely engaged with what you're doing in the here and now. And instead of calling it work, realize it is play. So I'd like to ask, what is the role of work in your life's journey or in a life's journey? And what do you think about this modern idea of kind of separating work and work-life balance?

• 1:20:45Speaker 01

  I have a principle that I believe in is make your work and your passion the same thing.

• 1:20:50Lex Fridman?

  Okay.

• 1:20:51Speaker 01

  Okay, so that's similar view. Uh, uh, uh, in other words, if you can make your work and your passion, it's just gonna work out great. And then, of course, people have different purposes of work. And I don't wanna be theoretical about that. People have to take care of their families. So money at a certain point is, um, the base is an important component of that work. So you look beyond that, what is the money gonna get you and what are you trying to achieve? But the most important thing, I agree, is meaningful work and meaningful relationships. Like if you can get into the thing that you're, your mission that you're on, and you are excited about that mission that you're on.

• 1:21:32Speaker 01

  And then you can do that with people who you have the meaningful relationships with. You have meaningful work and meaningful relationships. I mean, that is fabulous for most people.

• 1:21:47Lex Fridman?

  And it seems that many people struggle to get there, not out of, um, not necessarily because they're constrained by the fact that they have the financial constraints of having to, provide for their family and so on, but it's, I mean, mo-, you know, this idea is out there that there needs to be a work-life balance, which means that most people, and we're gonna return to the same thing as most, doesn't mean optimal, but most people seem to not be doing their life's passion, not be, not unifying work and passion. Why do you think that is?

• 1:22:24Speaker 01

  Well, the work-life balance, there's a life arc that you go through. Starts at zero and ends somewhere in the vicinity of eighty. And there is a phase, and there's a, and you could look at the different degrees of happiness that happen in those phases. I can go through that if that was interesting, but we don't have time probably for it. But you get in the part of the life. That part of the life which has the lowest level of happiness is age forty-five to fifty-five. And because as you move into this second phase of your life, now the first phase of your life is when

• 1:23:03Speaker 01

  you're learning dependent on others, second phase of your life is when you're working and others are dependent on you and you're trying to be successful. And in that phase of one's life, you encounter the work-life balance challenge because you're trying to be successful at work and successful at parenting and successful and successful and all those things that take your demand. And they get into that and I understand that problem in the work-life balance. The issue is primarily to know how to approach that, okay? So I understand it's stressful, it produces stress and it produces bad results and it produces the lowest level of happiness in one's life.

• 1:23:46Speaker 01

  It's interesting, as you get later in life, the levels of happiness rise and the highest level of happiness is between ages seventy and eighty, which is interesting for other reasons, but in that spot, and the key to work-life balance is to realize and to learn how to get more out of an hour of life. Okay, because an hour of work, what people are thinking is that they have to make a choice between one thing and another, and of course they do, but they don't realize that if they develop the skill to get a lot more out of an hour, it's the equivalent of having many more hours in your life.

• 1:24:31Speaker 01

  And so, you know, that's why in the book Principles I try to go into, okay, now how can you get a lot more out of an hour? That allows you to get more life into your life and it reduces the work-life balance.

• 1:24:44Lex Fridman?

  And that's the primary struggle in that thirty-five to forty-five. If you could linger on that, so what are the ups and downs of life in terms of happiness? In general and perhaps in your own life, when you look back at the moments, the peaks?

• 1:25:04Speaker 01

  It's pretty, pretty much same pattern. Early in one's life is, uh, tends to be a very happy period. All the way up and sixteen is like a really great happy. Uh, you know, I think, uh, like myself, you, you start to get out elements of freedom. You get your driver's license, whatever, but, uh, sixteen is, is there. Um, junior year in high school quite often could be a stressful period to try to get thing about the high school. You go into college, tends to be very hot happiness, generally speaking. Freedom. And then freedom, yeah, friendships, all of that freedom is a big thing. And then you, um, and then twenty, uh, twenty-three is a peak point kind of in, in happiness. That freedom.

• 1:25:48Speaker 01

  Then sequentially, one has a great time, they date, they go out and so on. You, uh, find the love of your life. You begin to develop a family. And then with that, as time happens, you have more of your work-life balance challenges that come in your responsibilities. And then as you get there in that mid part of your life, that is the most, that is the biggest struggle. Chances are you will crash in that period of time. You know, you'll have, you'll, you'll have your series of failures. That's the, that's that, that's when you go into the abyss. You learn, you hopefully, um, learn from those mistakes.

• 1:26:25Speaker 01

  You have the metamorphosis, you come out, you change, you hopefully become better and you take more responsibilities and so on. And then when you get to the later part, as you are starting to approach the transition, uh, in that, uh, late part of the second phase of your life, before you go into the third phase of your life. Second phase is you're working, trying to be successful. Third phase of your life is you want people to be successful without you. Okay.

• 1:26:57Lex Fridman?

  Yes.

• 1:26:57Speaker 01

  You want your kids to be successful without you because when you're at that phase, they're at making their transition from the first phase to the second phase and they're trying to be successful and you want them to be successful without you. And you have, your parents are gone and then you have freedom. And then you have freedom again. And that with that freedom and then you have these, history has shown with this, you have friendships, you have perspective on life, you have different things. And that's one of the reasons that that later part of the life can be real, on average, actually, it's the highest. Very interesting thing. If they, there are surveys and say, how good do you look? And how good do you feel?

• 1:27:41Speaker 01

  And that's the highest survey. The person, now they're not looking the best.

• 1:27:46Lex Fridman?

  Yeah.

• 1:27:47Speaker 01

  And they're not feeling the best, right? Maybe it's 35 that they're actually looking the best and feeling the best. But they rank the highest at that point, survey results of being the highest.

• 1:27:58Lex Fridman?

  That's so fascinating.

• 1:27:58Speaker 01

  In that 70 to 80 period of time, because it has to do with an attitude on life. Then you start to have grandkids, oh, grandkids are great. And you start to experience that transition well. So that's what the arc of life pretty much looks like and, and I'm experiencing it, you know?

• 1:28:17Lex Fridman?

  You've lived it. When you meditate, we're all human, we're all mortal. When you meditate on your own mortality, having achieved a lot of success on whatever dimension, what do you think is the meaning of it all? The meaning of our short existence on earth as human beings?

• 1:28:39Speaker 01

  I think that evolution is the greatest force of the universe and that we're all tiny bits of an evolutionary type of process where it's just matter and machines that go through time. And that we all have a deeply embedded inclination to evolve and contribute to evolution. So I think it's to personally evolve and contribute to evolution.

• 1:29:11Lex Fridman?

  I could have predicted you would answer that way. It's brilliant and exactly right.

• 1:29:16Lex Fridman?

  And I think we've said it before, but I'll say it again. You have a lot of incredible videos out there that people should definitely watch. I don't say this often. I mean, it's literally the best spend of time. And in terms of reading principles and reading basically anything you write on LinkedIn and so on is a really good use of time. It's a lot of light bulb moments, a lot of transformative ideas in there. So Ray, thank you so much. It's been an honor. I really appreciate it.

• 1:29:43Speaker 01

  It's been a pleasure for me, too. I'm happy to hear it's a use to you and others.

• 1:29:49Lex Fridman?

  Thanks for listening to this conversation with Ray Dalio. And thank you to our presenting sponsor, Cash App. Download it, use code LEXPODCAST. You'll get $10 and $10 will go to FIRST, a STEM education nonprofit that inspires hundreds of thousands of young minds to learn and to dream of engineering our future. If you enjoy this podcast, subscribe on YouTube, give it five stars on Apple Podcasts, support it on Patreon, or connect with me on Twitter. Finally, closing words of advice from Ray Dalio. Pain plus reflection equals progress. Thank you for listening and hope to see you next time.