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Hey, it s Tony Robbins.
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Welcome back to the Tony Robbins podcast.
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Today, I have a unique privilege and pleasure, and that is to bring you a conversation with a personal hero to me, as well as millions of people around the world.
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This is a man who s very humbly started as a golf caddy, if you can imagine, and became the most successful hedge fund manager in history.
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billion dollars in returns, but he s also an unbelievable entrepreneur and so many of your other entrepreneurs, one of the most successful companies in history started Bridgewater in a two-bedroom apartment at the age of 26 and he s grown that organization to manage almost 235 billion dollars in business.
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He s also an incredible student of history.
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He s had a ticket history.
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He s been a part of that at this stage of his life.
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But he has a unique vantage point of looking at things differently than most people.
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Some of you are familiar with the first book that he came out with.
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I don t know if it was the first, but the first major book for the general population was called Principles.
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And we ve shared that with most of you, showing how important it is.
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And so today we re going to talk about his new book, and it s called Principles for Dealing with the Changing World Order.
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It s actually really the understanding of how countries rise and fall, and how they succeed and fail, and where we are today.
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This is the book.
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I want to make sure you all pick it up for sure.
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And Ray, I just wanted to thank you, first of all, for joining me again.
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It s great to see you.
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It s so great to see you, too, Tony.
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You look great, and you also had a glimpse at your family.
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And so that brings me a lot of joy.
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So good to be here.
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Thank you.
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I really appreciate it.
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Listen, this book is
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you go through 500 years of history to recognize patterns.
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And I think before we start, if I may, I ll take a minute just to set this up for everybody.
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Because most people that have followed me know that my belief is that power comes to those that can do three things.
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One, recognize patterns.
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I don t care if it s in music or it s entertainment or it s in business or it s financial stocks, the financial world.
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If you can recognize patterns, you can take things that look like chaos and turn it
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is something that you can predict and begin to perhaps anticipate.
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If there s one power in life and in business, it s the power to anticipate.
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You know, leaders anticipate, people that lose tend to react.
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And so we want to see if in this conversation, we can give you a broader picture of where the world is and where America is, and more importantly, the why we are here.
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Because if you understand the causes, the driving forces that make something happen, you re able to recognize those patterns, but also do the second thing, start to utilize those patterns.
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I need to protect or to grow or to expand.
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And the greatest masters in certain areas actually develop a third skill, which is the ability to create patterns, new ways to make things happen, to turn things around, to make a change.
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And Ray, you ve done this your entire life.
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And the patterns that reoccur over and over, we often call cycles.
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And you re a student of cycles.
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And one of the things you ve done is built principles, these tools that help you recognize these patterns and show you how to really maximize or utilize them.
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would you be willing to start out maybe at the 30,000 foot level even before the book and tell us a little bit about your journey from the beginning days as a caddy to beginning to recognize patterns and some of the places that you missed along the way and why misses were so valuable.
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I know you know you shared with me I think it was in the early 80s where after building your company you were so successful and it looked like you lost almost everything you had to start over so
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I think it d be really important for you to understand before we talk about just the world and the country, the understanding of these patterns and how they can give you the ability to create a greater quality of life for yourself, for your family, for your company, et cetera.
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When I was a kid, as you point out, I caddied, I delivered newspapers.
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I did a bunch of jobs when I was a kid.
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At age 12, I bought my first stock.
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I was caddying.
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The stock market was hot at the time.
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People I caddied for were talking about it.
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The first stock I bought
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was a stock by the name of Northeast Airlines.
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The only criteria I had was that it was selling for less than $5 a share.
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I figured I could buy more shares.
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And if it went up, I d go with more money.
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That was done.
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But the company was about to go bankrupt.
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Another company acquired it.
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It tripled in value.
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And I was hooked on the markets.
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So I was hooked on the markets.
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at the beginning of 12, and that s my game.
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Okay, now fast forward.
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That s 12.
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At 22, 10 years later, so 1971, I was following the markets and between graduating from college and going to graduate school, I was clerking on the floor of the New York Stock Exchange.
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And in that intervening period, there was a lot of aspirations, a lot of desire to go to the moon, to eliminate poverty, to make equality in the United States and so on.
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So in that early era when there was Kennedy and that made me an optimism, but during that 10 years, the fact is that there was a lot of borrowing of money, a lot of deficits.
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Back then, gold was money.
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And money, as we know it, was like checks in the checkbook that would go get you the gold.
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You can turn in your paper money for gold.
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But gold was the real money.
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And because the United States had borrowed a lot more money than it had, it wrote a lot more checks than it had gold in the bank.
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And so on August 15, 1971, when I was clerking on the floor of the New York Stock Exchange,
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I watched on television as President Nixon
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defaulted on the obligation to pay gold for the cash.
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He went on and he said, you won t get the gold.
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Of course, he didn t say it that way.
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He said it in a way where it sounded like there were speculators and so on, and he had to do it, but he didn t get the gold.
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On the floor of the New York Stock Exchange, I walked on the floor of the New York Stock Exchange, and I thought the market was going to go down a lot because after all, this is a big crisis and the money as we know it ends,
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And I couldn t have been more wrong.
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It went up a lot.
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And what happened was I never went through a currency devaluation before, because in my lifetime, there was no currency devaluation.
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So that s the first time it happened.
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So I went back, and I looked at history, and I found the exact same thing happened on March 5, 1933, except rather than the television and Nixon, it was the radio and Roosevelt.
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And he made the exact same announcement and had the exact same effect.
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At that time, I learned two things, two big things.
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I learned that first, that many things that never happened in my lifetime seemed surprising at the time, and that I needed to study things that happened before my lifetime to understand them.
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When certain things are happening, like right now, there are certain things that have never happened in our lifetime before,
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but happened many times in history.
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In order to understand them, just as you said in the beginning, I need to understand the patterns and even more than the patterns, the cause and effect relationships behind the patterns.
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That mistake taught me that I needed to understand history.
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Each of the mistakes has taught me.
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I made a big mistake in 1982.
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I won t take you through it because it just probably take too long.
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But in other words, a big mistake in 1982 when I calculated that American banks had lent more to foreign countries than those countries where they would pay back.
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There was a big debt crisis.
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I anticipated this debt crisis, Mexico defaulting.
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Great.
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Okay.
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But what happened is the economy, and I expected there would be a terrible economic situation.
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And you know what happened?
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The Federal Reserve printed a lot of money, and it had the same effect.
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You learn the lessons.
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Those lessons that I learned let me study the 1929 to 1932 period, which allowed me to anticipate the 2008 financial crisis.
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and make a lot of money there when most people lost money.
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And right now, what s happening now has led Bridgewater and us to make a lot of money while the markets are behaving badly now, because the same thing happened in the past.
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So yes, studying history, learning the lessons, writing them down, modeling them.
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There s a template of what is happening.
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There s a story.
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Would you mind taking us through the big cycle of the rise and decline of an empire?
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I know that sounds like a big thing, ladies and gentlemen, but think of it this way.
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Human beings have stages of development, right?
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a toddler, you become a teenager, and each quality, each stage has certain qualities, opportunities, strengths, and weaknesses.
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Teenagers, if you let them drive your car, they re going to go 100 miles an hour.
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They re overconfident.
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You might get to a stage where you re at a peak, where you re prime.
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Then people start to age, and if they don t rejuvenate themselves, that age can increase and decline until their death.
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Companies go through these cycles, but also countries, and more importantly, empires, or maybe before you even give us the big rise and fall of empires, maybe a description of what do you mean in this title by a world order?
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I m going to do that very quickly and in a nutshell, and I also want to say that you don t have to read the book.
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I did an animated video which is on YouTube called The Changing World Order, and it s an animated entertaining video that s about 40 minutes long, and it ll tell you the whole thing better than I can squeeze in now, but let me tell you.
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Okay, what s an order?
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Okay,
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An order is the system that s operating.
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How do you operate?
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So, for example, there is a domestic order.
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We have a constitution and democracy, and that s a system that operates, and that continues on until there s a war, and then there s another system that comes and replaces.
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Our system has lasted for a long time.
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There s also a world order.
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In other words, a world system, and that world system of operating comes after a war.
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Why does a war happen?
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Because conflicting parties of about equal power have a fight, and the dominant power wins, and then they get to set the rules.
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The last time that happened was in 1945 because of the end of World War II.
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At the end of World War II, the United States had 80 percent of the world s money, gold was money then,
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It had half the world s economy.
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It had a dominant military power.
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And for that reason, because it was a dominant power, New York is where the United Nations is.
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Washington DC is where the IMF and World Bank, they put it there because it was the American world order.
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the dollar was the world s reserve currency, and that always happens.
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Before that, at the end of World War I, there was the Treaty of Versailles, and the winners of the Treaty of Versailles determined how the system was going to work after that.
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And if you go back in history, repeatedly, there is always a world order, and it always happens this way, and it continues.
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Okay, so how does it work?
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you end up with that world order, and then you come through a period of peace and prosperity because nobody wants to fight the dominant world power, so there s peace.
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Then in that period of time, wars are great equalizers if they reduce wealth differences, wealth gaps, and so on, and then there s a rebuilding process.
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and that produces prosperity and peace.
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Also, nobody wants to go back into the war.
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Everybody remembers how horrible they are.
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Before that, these cycles typically can take 100 years, let s say they can take a lifetime, and then people forget because they weren t the same people, they forget how terrible wars are.
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Afterwards, people remember how terrible wars are, and they want peace.
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All of those reasons produces peace and prosperity, and there s also a financial reorganization.
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But then that peace and prosperity leads naturally to the country that has that having the world s reserve currency.
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A reserve currency means it s the currency that s accepted.
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So naturally, the dollar is the world s reserve currency.
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Before that, it was the British Pound or the British Empire.
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Before that, it was the Dutch Gilder.
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It s the same pattern.
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And there s peace and prosperity with the world s reserve currency.
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Now, when you have the world s reserve currency, the rest of the world wants to save, and they save in that currency, and that leads the country who has the world s reserve currency to borrow.
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It gives them what s called the exorbitant privilege of being able to borrow and print the world s currency.
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Boy, that s a good thing to have.
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And then what they do, of course, is as prosperity continues and asset prices go up, like stocks go up and everything does really well, it encourages more borrowing and spending and betting on prosperity.
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and that begins to have a rise in levels of indebtedness, so you see debt levels rise.
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The third thing it does is it creates greater wealth and values gaps that become greater naturally.
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The wealth that s built up is distributed unevenly, and those who make a lot of money then begin to have a larger wealth gap, and that creates also an opportunity gap.
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If we re lucky enough to have the money, we can educate our children well, and so on.
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That gives them an unfair advantage as in relationship to others.
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This wealth gap increases at the same time as levels of indebtedness increase.
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Then, of course, what happens is the competition increases.
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the competition increases because when you win and you have the other Germany or Japan or other countries destroyed after the war and there are no other competitors, then it s a dominant position.
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But over with time, others learn and begin to build up like China particularly has increased its per capita income and its competitiveness.
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China is a competitor
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with the United States.
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But all through that time, it was like the British were competitors with the Dutch and so on.
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So we see that pattern happen over and over.
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As that power gap narrows, then conflicts about how things should go increase.
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And internally, there is a conflict over wealth and wealth gaps
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And then there s a higher level of indebtedness, which makes for a worse set of circumstances.
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And that combination of circumstances leads to more conflict and more problems.
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So traditionally, you see that if you have a lot of levels of debt, the classic way that you see this is, what does a government do when it doesn t have enough money?
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It s not like they go into the coffers.
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The coffers are empty.
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They have no gold.
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They have not that money.
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So where do they get the money?
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They have to take the money from somebody else.
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That s either through taxes or what they do more, people get angry when they re taking it away, and there s a big fight over it.
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So what they usually do is they print money.
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Because, and through the Roman times, back in Roman times, they had gold coins, they put less gold in the coins, they put other metals in the coins, and inevitably, they print money when they want to spend more.
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And that, of course, produces the inflation, it devalues the value of money, and you lose buying power.
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And when that happens at the same time as there s a large wealth gap and opportunity gap, that produces a lot of internal conflict of the sort that we re seeing now.
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You always see populists of the left and populists of the right.
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What s a populist?
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A populist is a person who will fight for their side.
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They are not compromisers, OK?
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So you see that you get to the point where there may not be compromise.
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For example, January 6.
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is right out of the populist playbook, in other words, fighting for power.
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It s entirely possible that we will see that neither side in the upcoming elections would accept losing, and there s a conflict.
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You have that populist and that greater extreme of the left and the right, you have more internal conflict.
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Then as you have the rising power challenging the existing power,
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you have the world conflict, and then normally that produces a resolution, which happens through wars, because there s no world court that you bring your case to, and then there s a jury who makes a decision.
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It s typically through conflict.
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You have the next war, and you do the same thing over and over again.
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So that, by and large, is the pattern.
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If you think of it simply, there s a set of rising elements.
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After the war, there s this new birth of a new power.
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There s usually some strong leadership, as I noted.
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the book, you talked about in a way for that leadership to continue because the life cycle of a country or an empire anyway, I think, I want to remember, I think you said it averaged like 250 years, but it s like saying the average lifespan in America is 72.
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Some people die at 60, some people make it to 120, the oldest humans
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but it helps you to understand a little bit where we are, but more of the causes you re talking about.
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So in those early days, you talk about these eight factors that help you to measure the health.
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I thought about the health of a 60 year old, that person could be breaking down, be overweight, have lots of cholesterol, or they could do something with their body now, start to turn around, re-energize themselves and become younger.
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But there s certain things to measure.
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What are the things, the eight factors that you measure that take us through that rise, then topping out,
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and then declining of an empire that ends with, again, just like you said, another war and then a new world order restarted over again.
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As you showed over and over again, all these examples, but I love the examples of the Dutch, where you showed how they rose, how they created this creativity, they had great education, they had great innovation, great competitiveness, they
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And he sent people around the world to either go create wealth or take wealth.
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This is, I think, the way you languaged it, and bring it back.
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But eventually they get knocked off because they get richer and richer.
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People want to work for less.
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And all of a sudden the British come along and say, let s hire the Dutch builders and let s do it with our people, which is cheaper.
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We re going to build more ships and we re going to do more.
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So this cycle goes on and on.
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But would you describe the eight factors that allow you to kind of have the pulse
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to measure where we are in a cycle as an empire or as a world power.
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And there s eight.
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And then in the book, I measured 18.
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So that way, you couldn t watch the objective numbers.
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They re all measurable, just like, you know, if you have a blood test and urine analysis and all of that other measure.
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you have measures.
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And the reason I needed objectivity to be accurate, but also by being able to measure those things, you can see whether you re improving or not.
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So it s a type of biofeedback.
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But yes, you re right.
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What it starts with, for example, is good broad-based education.
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It starts with education.
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Educated people are more valuable, and there s two types of education.
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There s education of what you know and what skills you develop, but there s also learning civility.
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learning how to behave with each other.
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How do you behave with others to make a productive society?
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Related to that, as we think about that, think about parenting, think about the importance.
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Really, what I had was just going back to the basics.
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What I had was parents who loved me and were good guidance.
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I went to a public education,
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and it was public school and it was a good public school.
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And I came out to a world of equal opportunity in which there was an opportunity to make decisions and make things happen and then live the American dream.
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And really, those are the most important fundamentals.
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Like if you can get good guidance in your life,
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and you can have good education, and you have a system that provides you good and equal opportunity.
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I mean, that s basically it.
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Capitalism, it gives you the opportunity.
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People who say, ah, that s a good idea, give you money to build it out.
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And so it s important to do that broadly for the population, because you don t know where the talent s going to come from.
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If you look at the best innovators, if you look at anybody who s been successful over a period of time, the Forbes 400 or something, and you look at those, many of those people came from the simplest, you never would have guessed where they would come from.
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And so having a broad-based population not only produces a higher level of productivity, which raises income and raises power, it also means that the individuals themselves have a fairer society and they believe that the society is fairer.
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So these are fundamentals.
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And when you start to see that, then you have it s reflected in other things.
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It s reflected in inventions and invention.
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So we measure how many innovations, technology innovations, what share of world trade the country has, a number of the statistics.
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And you can see you can see that.
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And when the United States was dominant,
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or the British that were dominant, they have a high percentage of world trade.
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And as a result of that, they have the world s reserve currency.
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So you see it reflected in the currency statistics.
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In other words, whose transaction?
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They have the world s financial center.
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In the Dutch Empire, it was Amsterdam.
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In the British Empire, it was London.
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In the American Empire, it was New York as the world s financial center.
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And so you see it reflected in all of those measures of power.
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And military, as you try to protect your world power and other world trade routes, they tend to grow the largest military as well, because that s another form of power.
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Exactly.
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I forgot to mention that.
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Of course, you re traveling around the world, just as you said, you have the trade routes, you re operating in your currency, you need a military.
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The United States, for example, has bases in 70 countries now, 70 countries.
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You have to be a military power as a result, and all of these powers support each other.
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As you gain one, you get them all, so you have to be a total power.
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The Soviet Union was never a total power.
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China is a total power.
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Soviet Union was never a total power because it was never an economic power.
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We had a military that was comparable in nuclear weapons, but it lost because it was never an economic power.
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So we have that kind of a situation.
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China now is a comparable economic power.
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So when we look at these measures, the United States in some ways is a little bit ahead in some and a little bit behind, but there s comparability.
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So as we go through that rise, we start to top out basically when we become so prosperous, it costs more to do things here, someone else can do it cheaper, they copy or create new innovation that starts to give them advantages.
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We, our financial system, since everybody in the world wants stability, they say, I ll save my money in US dollars.
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So they loan it to us.
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We just keep printing it more and more until we ve abused it so badly that now there s a giant bust.
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And now that bust brings us down to, I guess, to debt and through conflict.
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And so this is where the three things you started to come in, in the decline, the three things that are happening today that have not happened so much in your lifetime, the overspending.
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Maybe we can touch on those three now to help people really understand just those three principles that are probably most practical for people to notice right now.
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The three are creations of a lot of debt and the printing of money by the central bank to pay for it, a lot.
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Okay, that s number one.
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And you re seeing- You re spending more than you earn is the bottom line, right?
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But you can t spend more than you earn.
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You got it.
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You re saying so well.
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Just a basic law of economics, you can t keep spending more than you earn.
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Okay, because then what do you do that?
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You create it on debt.
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And debt has to be paid back at one man s assets or another man s liability.
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So if you ve got debt, somebody is holding that expecting a real return.
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And when you don t give them a real return, like we re not giving them the real return now, then they sell the debt and interest rates go up.
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And then the central bank is in a bind because they have to print more money or they have to curtail it because the day of paying back comes.
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The only question is whether you pay it back in hard money or deflated money.
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So think about it.
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It s like borrowing.
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When you borrow, it s like borrowing stuff.
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We think of it, it s a certain number of dollars that you borrow.
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But think of it, you re borrowing stuff.
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And when you borrow and spend, then you can spend more than you earn, because you borrow.
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That makes the difference.
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So you spend more than you earn.
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And that means at some point in the future, to pay back, you have to spend less than you earn.
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Okay.
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And what, and that means quite a change in your spending is quite a change.
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Now, if you do that or you become more productive, but right now people need to understand the difference between productive debt and unproductive debt, right?
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If I m borrowing money so that I can buy something from my farm so I can farm more and produce more results, that s a great investment.
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Absolutely right.
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Absolutely right.
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I love this partnership in our conversation of describing it because you got it so well.
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And that s right.
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So debt isn t bad.
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Debt is not bad if it gets you the resources to produce more than the cost of that debt.
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Right?
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So think of it as this way.
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If you borrow to have a party, you borrow to go to vacation, you borrow for consumption,
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there s not going to be an income earning asset.
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The day will come back and you re going to have to pay that back, and that s not good.
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If you borrow to invest in something that s going to produce more than it costs, and you re going to have that productivity, that was a good move.
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But you will see it because if debt rises relative to incomes,
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then you know you re not doing that.
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If incomes rise more than the debt, okay, that s a good thing.
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Those are fundamentals, and that s how the cycle works.
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The three things that we just touched on, number one,
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Number two is the internal conflict thing.
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When there s a large wealth gap and values gap, it s not just wealth, but it s values gap, how should we approach our circumstances, but there s wealth gaps, then there become the disenfranchised, those who feel you re not taking care of me.
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And that was very classic with the 2000 election of Donald Trump.
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Why did Donald Trump get elected?
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Because there was a population in the United States, a significant population, that said, this system isn t working for me, and I want a fighter.
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Okay, they don t want to compromise it.
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They want a fighter.
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And so you get populists of the right and populists of the left who are fighters and not compromisers.
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And that s an issue for a democracy, because a democracy is based on following the rules and compromising.
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But these are win at all costs people.
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And so that begins to build up.
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That s why January 6 wasn t a surprising event.
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It was right out of the populist playbook, because it is win at all costs.
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and we re in a situation where in the future, we can see neither party accepting losing, and we could see, for example, the not following rules.
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For example, the Supreme Court decisions.
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You can see that states and towns might say, we are not following that decision, come make me.
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In other words, you see power begin to operate.
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That kind of internal conflict is very normal at those types,
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those circumstances.
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It s very important to understand how that works.
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In the 1930s, four democracies chose to become dictatorships because there were conflicts between the left and the right.
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What is fascism?
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What is communism?
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That was the same right-left conflict.
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Then as a result, it produced enough disorder that literally the parliaments chose autocratic leaders.
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And what do those autocratic leaders do?
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They fought internally, but they got control.
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And then they re inclined to fight externally, because these people are fighters.
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And so that s why there s a tendency to produce a war.
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So that s number two, that internal conflict.
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This is all measurable.
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So in other words, I m describing it in words, but in the book or even in the video, you can see the lines and the charts that can show you where you are.
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And the third, so internally, that s the conflict.
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And number three is externally the conflict, when you have two great powers coming in and you can measure the types of wars.
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There are five types of wars.
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There is a trade war.
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There s a technology war.
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There s a geopolitical influence war.
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There is a capital and an economic war, which is commonly called sanctions.
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OK, that exists.
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And there s a military war.
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And usually, they progress in that order until when you see big sanctions happening.
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We will hurt you economically.
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That s sort of a signal that you re at the edge of what could be a military war.
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Like in Japan, what we did is Japan had this expansion.
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The United States got in a conflict.
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It froze Japanese assets in much the same way as we re frozing central bank assets in Russia.
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that kind of a move, and it limited their oil imports.
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And so that put them in a corner, and then that led to Pearl Harbor.
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So these types of patterns repeat in that same way.
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So the three are-
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the large internal fighting between the left and the right populace, usually over wealth and values, and external conflict over many things, trade, technology, competition, and so on, that could lead up to a war power.
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When those three things happen together, that s a lot of pressure.
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That s a lot of risk.
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And so what I saw those three things happening together, and I remember back, you know, I have to study history.
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If I didn t see many cases of it, I need to study.
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So I needed to go back to see many of these cycles.
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I need to go back 500 years.
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And I studied giant dynasties in China since the year 600 to see these cycles happening.
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And they all happened in the same way.
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So I know where we are.
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You studied them in Rome as well.
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So the big empires all across history, you ve seen the exact same pattern.
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Now, some are longer, some are shorter, just like a human lifespan.
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What has been, what is the average, if I remember it said 250 years.
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It s about 150 years, give or take about a hundred years.
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A real good long one is 250 years.
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A short one is about 50 years.
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They re typically, let s say about 150, but it ll vary a lot just like the life cycle as you gave the example of.
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What we re talking about is having the checkup from the neck up, if you will.
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This is the medical
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we are in terms of the length of the life of this particular world power called America and this cycle.
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But more importantly is we can measure the causes and the sources.
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And these three are the primary ones.
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And it s not just, I just want to clarify and make sure I m getting this correctly.
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It s not just printing more money.
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It s spending way more than you earn is the fundamental that cannot be sustained.
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It s abusing basically reserve currency.
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And then it s because of the wealth gap that s expanded.
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There s a difference in what people expect.
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They expect people to get wealthier.
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They don t want to work as much.
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And it s not just wealthy people.
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Everyone is wealthier, comparatively, where they were.
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And so now there s competition that starts to be created.
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And because there s conflict, and you re weak financially, you re weak fighting each other,
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Now an external power that s on the rise can begin to despise you and usually will be resolved, as you said, in a war.
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So those are the elements that we re on right now.
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And I really appreciate you walking through the different wars and the fact that they tend to have a sequence as well, ending with a real physical war, since there s no court to go resolve this.
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And we can talk about the UN, but not everybody abides by whatever the UN is going to say.
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But war basically flattens that.
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So tell me this.
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What made you at this stage decide to do this level of study?
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Because you ve always been a student of history.
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Just seeing these three patterns, is that why it happened?
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Tell us a little bit about your methodology.
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I studied history going back to about 1900, but that wasn t good enough.
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The 1900 allowed me to anticipate the 2008 financial crisis and so on, but actually to think about
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the rises and declines of reserve currencies and empires because these cycles take so long.
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I had to go back 500 years, which one thinks of as long, but it s not, because in those cycles, even there, there s a limited number of cycles.
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Like you say, if a typical life cycle is 72 years old or whatever the number is along those lines, and you want to study a few of them, you want to study as many cases as you can,
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you need to then go back and see those number of cases.
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But in that 500-year period, I studied the 10 top empires, and I saw they all had that cycle.
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Then I also studied, like you say, Rome and others, and I saw they all have it.
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It s like a movie that happens over and over again.
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It s almost as though the same story happens over and over again, and the only things that change are the clothes that people wear and the technologies they use.
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I have a parallel of that in my own life looking at human beings.
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I began to realize early on, that s why I m going to help so many peoples.
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There are not unlimited personalities.
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And there are not unlimited values.
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But there s complexity.
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It s not infinite complexity.
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And there s a limited number of them.
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And there are certain patterns that occur most often.
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You can take most people s problems and chunk them into 13 different types.
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And then you re going to have a million solutions for them if you can t anticipate.
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And the power that you brought, and what I hope people are listening to, they may not be excited hearing.
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A lot of people start to read the book or I mentioned to them, they go, oh, this is depressing.
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I said, no.
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That s like saying it s depressing to know if someone is aging too fast or have a disease or cancer.
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If you know you ve got diabetes, you can do something about it.
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And you may not control your life to live for everything because everything changes.
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No one wants to hear this.
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And everything ends.
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But something new begins.
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You know, after the night, there is the day always.
4
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After the worst winter, there is a springtime.
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And when you re in the middle of winter, when things are going good, people think it s going to go good forever.
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When things are going bad, they think it s going to go bad forever.
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You know, no pandemic has lasted forever, including the one we just went through.
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No war has lasted forever.
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And I want people to understand, though, if you don t know, if you stick your head in the ground,
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you re going to pay a much bigger price.
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You have done incredibly well in helping organizations, individuals, and countries even to produce great returns because you ve been studying the past to understand the future and the present and the future.
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What made you do this though now?
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What was your methodology just a little bit more like different than a historian?
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I m like, you know, you even sent it to me.
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You haven t sent to so many people in different walks of life to give you feedback.
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You don t just decide, I see something.
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I want people to understand how you challenge your own thoughts to come to this.
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This, I m practical.
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I have to bet today on what s happening today.
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I have to bet tomorrow on what s happening tomorrow.
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I m not a historian who just likes to read the stories of history.
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I m a practical guy who s got a place to bet.
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My performance is measured to three decimal points.
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I have to do, you know, this is practical stuff.
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And it s just like you said,
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You have to accept reality, just like you said.
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If you have a condition, diabetes or whatever that is, you have to accept that reality.
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I m 72 years old.
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I ve got to accept that reality.
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I ve got to deal with that reality.
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That means that I m less likely to have the next 50 years than somebody who s 12 years old.
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I know those realities.
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I m just building up what you said because we agree.
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So what I m trying to do is accurately show those realities with measures so that people could judge those themselves.
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Then I have a principle which is, if you worry, you don t have to worry.
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If you don t worry, you need to worry.
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Because if you worry about the things that is likely to take place, you can prevent it.
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You know this, as you tell people with health or wherever it is, there are things that you can do to make your life better if you worry about them and then take action to deal with them.
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So I view this as a helpful book.
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OK, this is not destiny.
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Let me be clear.
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Even it s there s collective and then there s the individual.
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I think I can help the collective and I think I can help the individual.
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But on the collective,
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It s all about how we are with each other.
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That s all it comes down to.
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Think about it.
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We have more wealth in the world than we ever had.
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And we have longer longevity.
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We put more output per person.
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We have more wealth and we also have the fabulous inventiveness of technologies that help us to think and invent in a faster way, artificial intelligence and the like.
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We ve never been better and we re probably going to keep getting and improving at a faster way if we don t damage each other.
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So there are certain things that we can do.
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We can, if you work well together and invest, for example, invest in those things that produce productivity, that actually raise our incomes and raise our living standards and deal with dealing with the debt better.
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So for example, education, spending and education.
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As you know, my wife, and particularly me too, as I tag along, is dealing with the educational disparities in the state of Connecticut, which are terrible.
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I m just going to touch on that for a minute.
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Connecticut is one of the richest states in the country.
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22% of the high school students are either disengaged or disconnected.
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Disengaged means
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Their absentee rate is greater than 25 percent in their failing classes.
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Disengaged means they don t go to school, so they don t know where they are.
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One in every five, the education system isn t working.
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As a result, what happens?
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Who is their community and what is their job?
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Their community is the gangs, literally gangs with shootings, and the incomes come from crime.
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And that produces problems for the society.
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And it also produces high incarceration rates and so on.
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So there s no better investment than a terrific investment in education or infrastructure.
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We ve let our infrastructure collapse.
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I think it s my generation.
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Unfortunately, it s my generation, maybe to some extent your generation.
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When my parents existed, they went through the depression and war and they came out and they were called the greatest generation by Tom Brokaw.
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In my generation, it s leaving them with big debts and a broken down infrastructure and a substantially suboptimal education system.
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Do you know that today, average education for Americans and testing scores put us in the bottom third of all developed countries?
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And that social mobility rate is one of the worst in the developed world.
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We always thought that there was opportunity and you could change.
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So those things have got to be fixed.
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They can be fixed.
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But the worst thing is, let s not fight with each other.
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Let s not.
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And so in a combination.
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Yes, it s a combination of taxes, and it s a combination.
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But the key is not where you get the money.
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The key is what you do to invest in the future to create a better, more productive result of people working well together.
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So for me, I believe that we need a very strong middle.
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You need very strong bipartisanship.
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I think that we have a problem because the two political parties have among them more also extremists.
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In order to get elected in either party, you ve got to be fairly extremist.
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What you need is a strong middle in order to be able to have a mandate and follow that through.
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SPEAKER_00
But in any case, how we are with each other is going to be the biggest thing.
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That s not only domestically, it s internationally.
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Let s not go to war.
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OK, but you re right.
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Wars typically last a few years.
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Let s let s even be clear about that, because that s a very, very scary thought.
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And it could be, you know, modern warfare will be much more advanced than the last time we had a world war.
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The capacity of humans to destroy each other has never been greater.
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But at the same time, if we don t go to that warfare and you work through, then there s a heck of a competition.
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and then the systems will compete, and from that competition will come productivity and all those things.
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So it all comes down to how we are with each other.
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We are at a juncture.
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So that s the collective.
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For the individual in the book, I talk about how to protect oneself in investing.
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How do you have resources?
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How do you have enough resources?
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And not only with that enough resources, how do you
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make sure that you re protected well and all of that.
5
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So the book is... I want to touch base with you on that as well.
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I want to ask one question though before.
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You ve been quoted talking about we could be the closest to a civil war we ve ever been before.
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And people don t see that as a possibility.
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A lot of people don t.
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Other people just overreact.
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You know, it d be great for people to understand for two seconds the history of the Soviet Union and what happened, the history in China, what happened, that these civil wars are sometimes one of the things that occurs.
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SPEAKER_01
And why do they occur?
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Let s touch on that.
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And then let s talk about inflation for a second, if we can, where we are, Ukraine, and then maybe wrap up with the individual and what they can do financially as well as personally.
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and on the relationship side of things like you ve just talked about the collective.
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So could you touch on, you know, perhaps a little bit of what s happened with civil wars in the past?
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Why have you said this in the past?
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And again, I think you ve given us the solution.
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We have to find the middle of some strong leaders in the middle.
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I remember I went work with president Clinton and I crossed the street on the same day and went to work with the speaker of the house Gingrich on the same day today, that would be totally impossible.
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And they both knew I was doing it, because I was working to help each one do something well, so that they were doing something together.
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They d fight like hell, and they d go have a beer together.
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But today, the talking to the side is like radioactive.
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So tell us a little about what creates that, not to create fear, but to understand that it has happened historically.
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It s another way things occur, why we want to treat each other better.
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And then let s talk a little bit about where we are right now with Ukraine and Russia, since you re talking about war and sanctions, and where inflation is.
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OK.
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Yeah, what happens is, and you can see it in the French Revolution, they call them revolution, but they re civil wars, the French Revolution, the Russian Revolution, the Chinese Civil War, the Cuban Civil War, the, you know, many, many, many, many, many, many cases, Hitler, Europe, and fascism, and communism, and all of those types of things.
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All of those happen when you get to the stage where there s populism and you lose the middle.
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In other words, you get those on each side when the causes that they are behind is more important to them than the system.
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The system is in jeopardy.
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when they become fighters.
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And so that is not a means.
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They don t get together.
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They don t say, now, how do we make this work for both of us?
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How do we compromise?
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The middle is perceived as weak.
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And everybody has to choose.
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And like in the French Revolution, there was a middle.
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A lot of people said, we need change, and we need to bring those about in the middle.
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They were, you know, guillotined and so on.
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You have to get on one side or the other, and you re forced to.
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Otherwise, you re perceived as weak.
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And so self-reinforcing.
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You know that in certain relationships, you can get beyond talking.
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You can get to the fact that, no, I m going to hurt you, like the Supreme Court decisions could be.
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In other words, I will not obey.
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And when you say, I will not obey, you re in a power, make me kind of situation.
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And that s a dangerous situation.
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Now it could be, I think we re seeing the movement to different
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states along those lines because of the I want to be with more the people I want to be with have similar values and also will deal with me economically, the way I want each makes those choices that causes to some extent a hollowing out when you go from a let s say a New York or California to a
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to a Florida or to a Texas, then you could lose the tax base.
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And then the polarity at the border, it s more difficult.
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And that process has always taken place.
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And that s what it looks like.
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And that s what we re operating with now.
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How do we, if you look at our own civil war, which could have been that for us, we could have been pulled apart.
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That also weakens you for a rising power.
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How do we survive that period of time?
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And the other question I have is, do you think we re really there?
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Because when I travel the country, again, it s completely anecdotal, but a lot of people, I find those exchanges you re talking about, but I see them in the media a lot more than I see them in real life.
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More people are in the middle than I think you would have any understanding of if you watch the news.
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I m curious what your experiences of that, and then how do we make it?
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I know this sounds like a giant question, but what was different at the time of the Civil War that allowed us to get through this and come back together?
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Well, of course, at the Civil War, there was a dominant power that militarily beat the other power.
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And like all of those things, then they
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were in control and they created a new world order, a new domestic order, a new domestic order that was, you know, with the various rules of commerce and slavery and such things.
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It was because they won the power and it was
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on a per capita basis, the worst war we ve had.
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It was a terrible thing, and that s how that happens.
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It s been a while since we ve had one of those, but we did.
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Regarding your second point, I think that nobody knows exactly how they go.
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I do agree with you that the middle is bigger.
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If you look at
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If you look at, but the extremes are more in control because we have two political parties.
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So what we have is, roughly speaking, about 30% of the population and 25-30% is fairly extreme right.
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by measures, almost violently so.
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In other words, would be in favor of overturning the elections and so on.
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I don t know.
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Maybe not following the rule of law and such things.
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About 15% of the population, maybe it s 10%, 15% is rather extreme left.
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And there s no party for the middle.
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So in that you re getting a creating of who wins the primaries and so on tends to be fairly extremist because 30% of the population represents the majority of the Republican Party, right, even though there are a lot of moderates.
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And so what I would hope to is that the majority of Americans, if you use my estimates, somewhere in the vicinity of 35% to 45% of the population might be more extreme, but let s call it 35%.
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And 65% is in the middle, but they don t have a platform, they don t have
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a leader, they don t have everything, and so you continue to get that polarity.
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And now how it moves, it is moving very quickly in a bad way, I mean a conflict way.
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So measures like what percentage of the population of each of those parties think that it would be better if members of the other party died,
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OK, one party has 15 percent and the other party has 10 percent.
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What percentage of the party says I would not want my child to marry a member of the other party?
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These are significant percentages.
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So you re seeing this movement in that direction.
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How does it work exactly?
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I can t tell you.
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But it is a fact that, you know, gun rights and the ability to have guns.
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There are many more guns in America than there are people in terms of that.
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And some of those people will say, you know, make me.
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or or could be i m not saying how far it goes i m i don t know anywhere how far it goes i m just trying to say that this is a problem that it is a problem that the middle is not there s not a strong middle and and there s not a strong.
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pulling together.
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I think the President of the United States should be bipartisan.
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I think it would be great if they had a bipartisan cabinet, and they brought the people together, and that those in the middle had that commonality that you talked about, and then those at the extremes were the odd ones out.
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even if there wasn t civil war, in which obviously all of it doesn t get to that level of extreme, and we all can play a role in that by our own decisions, how we interact with each other, as you said, but even if there isn t, it weakens us along with a financial weakness for a rising power.
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So tell us a little bit about what s happening in your view with Ukraine and with Russia, what we re doing there.
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We re supposed to destroy the ruble by our policies.
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It s gone through the roof.
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It s creating a different relationship.
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Tell us what your view is of that, and then how does that relate to what China s looking at?
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Because you ve talked many times about if we were going to war with China, if I m not misquoting you, very often you said Taiwan could be one of those triggers, obviously.
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So, I m just curious what your perspective is on Ukraine and Russia, our policy and approach to this, and, you know, what does that mean for this changing world order?
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Well, like in other conflicts, there are sides.
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There were the Allied and Axis powers.
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And maybe they changed where the geography was.
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But starting in 1900, we had a world that was closest to each other, that you would have a world war.
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World War I, World War II, and that means in Europe and the Pacific and so on.
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And so you have that dynamic now that we re coming quicker together, and there are sides.
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And there are sides based on a common enemy.
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So in terms of this conflict, the United States has a great power, which is declining relative to the other powers.
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There is that emerging conflict.
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So what s happening in Russia and the Ukraine is part of that greater story in terms of that.
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China is outside of it.
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And now, because no one knows how a war is going to transpire, one really learns from the actual war.
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There are always surprises.
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This is a very interesting observation now.
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and China and others are learning, how is this transpiring?
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And we re learning three big things.
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We re in the process of learning these three big things.
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The first is they ve kept it to a conventional war.
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They have intentionally not gone to make it a nuclear or cyber or chemical war.
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That s in a sense good, though there s the risk that it could be.
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So the first question that we have is, is Putin going to win or lose, or what would a compromise look like?
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Okay, Putin winning and Russia winning consists of a few things.
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First, get control of the eastern part of the Ukraine.
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Second, have the Russian economy not collapse.
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But in other words, if it had a contraction of 10% or 15% of GDP, that s a tolerable contraction.
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And in his view, and much of you, worth it for getting the east part of the UK.
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Number three is that he remains in power.
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And number four is that he remains on the world stage, such as go to a G20 meeting.
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and now things go on pretty much as well.
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If that happens, he wins and the West lose in terms of that game.
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Now that s a problem because these things always resolve who s the winner and who s the loser.
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If he doesn t attain that,
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He will add those things he probably would escalate that s a scary situation, how would he escalate and so on, so we it s almost difficult to say is it better that he wins or loses well what I think and we re going to find out the answer to those questions before the end of the summer, I think.
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My own guess is that because they can t make it look like anybody wins or loses, that they have an armistice or what I mean a ceasefire the way they had in Korea, and they just go to the border lines and they say that that s just a temporary ceasefire and maybe it sticks.
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Who knows?
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I don t know.
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First question, does he win or lose, and how does that work?
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Second question is, what are the powers and cost of American sanctions?
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the power is, in other words, can you really shut down the Russian economy?
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Can you shut things down so that you have enough of an effect so that you change the outcomes?
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Everybody s looking at that.
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The Chinese are looking at that.
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Everybody s looking about what are the powers.
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The costs are significant too, because what we re doing is
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You re politicizing or weaponizing the financial and economic systems.
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So when you politicize it and freeze a country s assets, many other countries today are wondering, should they hold those bonds in the United States if they get sanctioned?
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so many countries are neutral or against, they could get sanctioned, and that s a risk, and that could affect the capital markets.
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It also produces great inefficiencies, which are economically costly, because you think, okay, where are the supply lines?
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Look at what s happened, and the efficiencies are not there, and so these sanctions and all of that are very, very costly.
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We re in the process of seeing that.
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You know, so far, the sanctions are not shutting down the Russian economy and so on, and they re not having a change in policy.
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And it is a very important question because sanctions are the United States s only unique power now, because the military power and the economic power has become more comparable than it was before.
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And so it s the unique thing.
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So that s important.
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And the third thing we ll see, and we are seeing, is how the sides align.
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And basically into the Allied powers and the Axis powers in Europe and in Asia.
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And we re seeing that.
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Who will support Russia?
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Who will deal with Russia?
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So when you look around, you can see, for example,
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which ones are neutral, India, Brazil, Indonesia, Mexico, Middle Eastern countries, and so on and so forth, are still dealing with Russia in ways and have not
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And so you ll see which country s on which side, which country s on the other side.
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All countries are increasingly being forced to pick a side and go into Asia in those countries.
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And I speak to leaders.
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I speak to most leaders.
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and they re saying, you know, which side do I pick, because I m increasingly picked to pick a side.
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When you see the president fly around the country, or you see representatives, excuse me, fly around the world, and you see others flying around the world, that s basically, you know, pick a side and hear the consequences.
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So that s what we re seeing now.
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And I think that before the end of the summer, those questions will become clearer for the next stage.
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The China situation is very concerning because, as I say, Russia is not a comparable power.
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It s relatively economically, it s a minor power.
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and you need all of the powers.
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But China is a different story.
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And so we have that now.
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I know both American and Chinese leaders, and I think that they would say that it s very, very
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important to know where the red lines are.
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and not to cross the red lines to go into that kind of a conflict.
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And well, as you point out, Taiwan could be one of those situations.
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At some point, it will find some form of resolution.
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But I would say still the odds are that they won t cross the line for the military, but our risks of it are great.
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It s like two giants
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wrestling with each other six feet from the edge of a cliff.
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You can say, OK, but if you know, you could go over that edge of the cliff too easily.
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So that s what it looks like to me.
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And the lack of effectiveness of these sanctions seen by China also, when they look at what they might do or not do, what kind of consequences are available, they might start, if this doesn t work, and what you ve mentioned historically has happened with these types of sanctions, it certainly encourages some other forms of conflict to occur because there s
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at the end here because I think it s so important.
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And maybe touch on it now, but let s talk about inflation.
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From the 1990s to 2008, I think you described it as globalizing, digitizing and booming by using debt.
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And now we re in a different world.
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We re in a beginning of a different winter.
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We ve gone beyond what that experience is.
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And when you and I talked previously, you talked about the fact that we d already hit this problem with our financial system in 2019 before COVID.
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But then when COVID came in, all of a sudden, these emergency powers were used, and we printed five times the amount of money we actually needed to do to cover things.
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And that s where this inflation is coming from.
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Can you describe where the inflation is coming from?
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And then what should individuals do during a time of inflation?
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Do you see this as continuing?
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You know, right now, the Fed, as you know, is late to the party.
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They re trying to raise rates.
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I mean, yesterday, they raised them by three quarters of a point.
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The most they ve done in 28 years in a single time.
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But can they really raise it enough to stop inflation or without having a massive recession?
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Give us your view of what got us here and where do you think we re going and what can people do to protect?
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SPEAKER_00
What got us here is the injection of a lot of debt and money.
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It s a hype.
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In other words, you can hype it up.
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Think of it as you ve got somebody who s weak and whatever it is, and you give them the shot.
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and then that shot of buying power.
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And if the amount of spending increases by more than the amount of production, then prices, by definition, go up.
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And so there was a massive amount of giving away checks and money.
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And people seem surprised that they get inflation.
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SPEAKER_00
Well, they re going to spend that.
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Not going to increase very much in terms of the production,
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And so what is going to happen, the prices are going to go up when people spend more.
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OK.
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And you put on top of that the issue of where we are geopolitically.
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We ve changed the world in how resources are allocated.
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It used to be primarily that they were allocated on economic and profit basis.
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In other words, if some place was cheaper to produce something, then capital would go there, motivated by a profit.
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and it would produce it and raise living standards in those places, but it would move that profit, that production from places that would have a hollowing out like the United States and so on in some types of jobs.
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And we re now in an environment in which resources are allocated by political and ideological concerns or issues.
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In other words, we re not going to produce it wherever it s cheapest.
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And also because of worries that we might be in war or that you could be in a war.
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Every country wants self-sufficiency and every country s worried or every company is also worried.
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that they might be in a place where they are affected by politics.
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So if I think about it, the Nikes that you re buying, the apples that you re buying, 22% of all manufactured goods imports come from China.
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And just imagine if the world said, we re against companies that are producing and operating in China, like Russia, let s say, if that was the case.
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That has an enormous economic effect.
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And companies today are considering, OK, where do I produce it?
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And it s not always produce it in the most
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cost-effective place.
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That adds to inflation, too.
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And that s our new reality, even like who gets the money in the system.
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In 2008, when they had the financial system, what the Federal Reserve did is it went in and it bought bonds.
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SPEAKER_00
And when it buys bonds, it s buying bonds from those who sell bonds.
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And the bonds go up, and then those who are investors then take that money, and they buy other financial assets.
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SPEAKER_00
It does not trickle down to the population.
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SPEAKER_00
It won t get the check to the person that needs to get the check.
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SPEAKER_00
But in this last time, what they did is the government determined who s going to get the checks.
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SPEAKER_00
So, because the federal government can determine that.
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SPEAKER_00
So, the Federal Reserve buys the debt of that, but the checks go where it s directed.
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So, the ideological and non-economic forces, in a sense, but those that are being managed for a greater purpose get moved that way.
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And that s, by the way, also very trippy.
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typical of wars in all countries, they become a command economy.
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In other words, if I just left it to the profit system and people buying what they want to buy, it s not going to get the resource allocation a country needs in war.
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SPEAKER_00
And so you re seeing both of those dynamics taking place and producing inflation.
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SPEAKER_00
So what does that mean?
7
SPEAKER_00
There s a paradigm shift.
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SPEAKER_00
A paradigm shift is about a one in 10 year shift in the perception of what s likely and what the world is.
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SPEAKER_00
There was a paradigm that was created by a combination of low inflation and also central banks producing free money.
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SPEAKER_00
In other words, free money like almost zero interest rate or zero interest rates.
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SPEAKER_00
That means you never had to pay, if you borrow the money, you don t have an interest payment.
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SPEAKER_00
And that in many cases, you had interest only loans, and you didn t even have to pay back the principal practically, and also with low covenants.
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SPEAKER_00
And the world recalibrated to that kind of an environment.
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SPEAKER_00
A paradigm shift is when that changes.
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SPEAKER_00
And so Americans thought
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SPEAKER_00
And many people, there was a 40-year bull market in bonds, and they think cash is safe and bonds are safe.
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SPEAKER_00
That s what they bought it for.
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SPEAKER_00
And they did not realize, essentially, what they re now realizing.
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SPEAKER_00
What they re realizing is that you can t judge safety in the number of dollars you have.
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SPEAKER_00
You have to judge it in the amount of buying power you have.
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SPEAKER_00
And so if you lose money to buying power, lose buying power because of inflation, you need a compensating return.
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SPEAKER_00
So for example, with an 8% inflation and a near zero interest rate, you just lost 8% of your buying power or almost that amount.
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SPEAKER_00
So then that changes behaviors.
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As that changes behaviors, people do not want to keep their money in there.
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SPEAKER_00
I would not keep my money in there.
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SPEAKER_00
As long as interest rates are low in relationship to the inflation rate and the likely inflation rate, you re going to lose buying power.
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SPEAKER_00
So that s why you see money moving.
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SPEAKER_00
It s better to borrow than to lend.
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SPEAKER_00
And moving out of that, what that does is it creates a difficulty for the Federal Reserve, because not only the amount of bonds that have to be sold are no longer the amount of the deficit, the trade, how many bonds do you have to sell?
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SPEAKER_00
It s the amount of our deficit, we have to sell bonds for that.
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SPEAKER_00
If there s other selling of bonds, because they re not good returns, then there has to be more and more selling.
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SPEAKER_00
Then you have the Federal Reserve choosing to sell, that they re going to sell $1.1 trillion of bonds.
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SPEAKER_00
Who s going to buy all these bonds?
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SPEAKER_00
When you look at that, that means that there s a big tightening of credit.
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SPEAKER_00
Now, everybody says, okay, we need to fight inflation, and therefore, it s good that they re catching up, they were behind it.
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SPEAKER_00
It s almost like there s no cost or inflation is the only thing that people are thinking about.
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The way you fight inflation is taking away buying power from people.
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SPEAKER_00
I mean, that s how you do it, right?
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SPEAKER_00
You said, OK, now you re going to borrow less, there s going to be less liquidity, and so on, at the time that there s more inflation.
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SPEAKER_00
So it s not like fighting inflation is one of those things.
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SPEAKER_00
Ah, we fight inflation, and that s a good thing, and we ll get on with it.
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SPEAKER_00
It means taking away buying power, and that causes markets to go down, and that causes economies to go down.
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SPEAKER_00
So that s why we ve entered a period of stagflation.
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SPEAKER_00
That s why we re in a period of stagflation.
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SPEAKER_00
Central Bank is going to try to find a middle ground, but there s a lot of debt, and somebody s got to be paid back.
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SPEAKER_00
And you re either going to get paid back in real money, or you re going to get paid back in deflated money.
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And because they want to deal with both of those things and try to have a middle course, it ll produce stagflation.
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So what that means really for investors is, in my opinion, don t hold money in those assets that have those kind of low returns.
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And then many of the bubble assets, always at the end of a paradigm,
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People who extrapolate what happened over the last 10 years, and they re sure it s going to happen in the future, like tech, tech stocks.
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Okay, well, okay, no.
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I went through this many times, the nifty-fifty or the dot-com bubble and so on.
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That doesn t mean that technology companies won t do well or something.
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It s just like.com companies in terms of that, but there s a big crash in those things.
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A company, when it gets very expensive, it can still provide a terrible return.
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Some of the best companies can provide the worst returns because they get too expensive.
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We re going through that kind of a dynamic, which again, emphasizes to me, have a balanced portfolio.
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and with a skew toward inflation hedge assets, although there will be in the medium, in the near term, over the next probably
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year or maybe less, but anyway, let s call a year or so, there ll be a tightening.
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That tightening causes the corrections and downward moves in most assets, because cash becomes a problem.
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Then you have that correction, and then you ll have the Federal Reserve come back in, I believe,
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and then print a lot of money and buy more because that s going to be the problem.
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We re in that part of the cycle.
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You could either maintain a balanced portfolio through that, in which case, if you re having something like the all-weather portfolio or something, or the all-seasons portfolio that you have, that s a type of time when you have the correction, but you maintain that type of balanced portfolio because you re also seeing that the inflation hedge asset part of that,
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part of that portfolio does very well, although it doesn t compensate for the whole and you ride through it or you make the tactical moves that navigate it.
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So I would say that that s important.
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And I think international diversification is also important.
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Now that becomes more complicated and would get me into a longer answer than you probably have time for, but that s kind of it in a nutshell.
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You do talk about the holy grail of investing.
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Everybody knows here s the idea of diversification, but that this idea that if you can have X number of assets, I ve heard you talk about eight and 13, but can you give us that formula?
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Yeah.
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If you have uncorrelated assets and you easily can, because
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When the economic policies, when economic conditions shift, it shifts returns from one type of asset to another kind of asset.
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So when you have uncorrelated or low correlated assets, you can dramatically reduce your risk without reducing your return.
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So I mean, just to give that as an example, the holy grail of investing, and you don t have to do it
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It could be five, it could be 10, it could be 15, but you will cut your risk in half.
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Or if you get out at 10 or 15, you will cut it by 80% without reducing your returns.
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And so it s more important to know how to diversify well than it is even know how to pick the best things.
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And one of the problems of the world
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is that everybody wants up.
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They want up in the stock market.
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They want up in the real estate market.
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They want up in the economy.
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And central banks can produce up by giving it this shot of money and credit.
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They can always produce that up.
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But that up over a period of time has a consequence.
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And that consequence is that there s a lot of debt, and that has to be paid back.
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That will be paid back in depreciated money.
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So you don t want to be in that position of like, if your portfolio is going down a lot in this, that s not good.
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To give you an idea, if you lose half your money,
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It takes 100% return to get back.
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You lose 50%, you need 100% to get back.
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There are people who are in some of these tech funds and they re down 70%.
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This can t be part of the game plan.
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Okay, that s not part of the game plan.
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So the issue of being able to reduce risk through diversification, which doesn t reduce return, and in my view, never be put yourself in a position that you could lose more than 25%.
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In like your worst case situation, 25% in a game plan, that can be acceptable.
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But if you go into that, and if you look at any single asset in buying power, there s no single asset in buying power that hasn t lost 75% or 80%, so you need diversification.
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In your lifetime, that wasn t the principles you shared before, because people tend to
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or they got into stocks, and they, you know, at 12 years old, they re pulled in, they don t have their sophistication, and they go up and up and up until they don t, and they lose 50 or 75%, and that s the piece I like people to know.
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For those watching, by the way, when you talk about a balanced portfolio, Ray designed one, which is in Money Master the Game for you if you want to see what that is structured like as well.
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The last couple, two questions.
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Tell me, so China is rising.
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China s obviously a much larger population, four times the size of our population.
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They certainly are building a war machine.
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but is their dominance, you know, they were in a dominant country worldwide and over centuries, many, many, many centuries, is theirs based on size and so forth and their technology.
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I mean, they grew using capitalism, clearly.
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I mean, that s what made them grow, even though they re a communist country.
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Are they guaranteed to be the final winner in this race?
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Because also you see, they spend more money on internal security than they do external security, even though they re spending more than we are on the war machine.
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more to control their own population.
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You see what s happened in Shanghai with 25 million people locked down for five or six weeks, separated from their kids, their animals being
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killed.
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I mean, is that an environment that can be sustained in your mind?
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And are they guaranteed to win?
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And what do we do to compete more effectively?
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You ve addressed this a little bit, but I d love to hear your view on China, because I know
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you know, Chinese culture very well.
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You might even share the cat metaphor, black cat, white cat metaphor of the psychology of the difference of systems.
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But I think it d be helpful for people to see your view of China, both its strengths and its weaknesses.
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And is it inevitable that America drops to China or are there options?
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First of all, I think for the for the next number of years,
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I don t know whether that s five or 10 years, they re going to be more a comparable power than a dominant power.
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And how that period of coexistence goes will be very, very important.
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In other words, avoiding that.
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And at the end of the day,
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The strongest will win out.
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And the most important thing is that the United States becomes the strongest.
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And we talked about that.
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In other words, how to work together and how to be productive and have education and all of those things that will determine the biggest outcome.
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But you have to recognize the power of China.
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As you say, the number of people is more than four times our size.
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So if on average it had a per capita income of half of ours,
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then its economy would be twice the size of ours.
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And if it s twice the size, that means twice the size of buying power on anything you want to buy, whether that s technology or military or something.
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That s a reality.
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And since I started to go to China in 1984, and I have gone there repeatedly, and I love the place, and I have a lot of respect for the place and the people in various ways, and I ve gotten to know it very well.
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And I love America, let me be clear, I ve lived the American dream, but I m making the point that I ve known it and I ve watched it.
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Since I started going there in 1984, its per capita income has increased by 27 times.
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It s life expectancy has increased by 10 years.
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So this is a very viable competitor.
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And where we will be 20 years from now is going to be mostly dependent
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on first of all are we going to have a war with each other or are we going to then be able to compete our systems competing and then can we compete effectively.
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I think that the desire to have avoid a war that s of paramount importance then it makes it less important whether they re richer or we re richer or more powerful because there are many people in many countries that are not the most powerful that are having
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happy, productive lives in their own ways.
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And so I think that s the war thing is the most important thing.
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Otherwise, we can and then we ll be responsible for ourselves and our outcomes.
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So I think it s that that s most important.
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And their economy currently in their aging population and their internal strife, these issues as well for China as they are for the U.S.
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Certainly there are.
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I think it s something like 275 million people who are over, I forgot whether it s 60 or 65, and because of their one-child policy, it used to be that the young would take care of the old.
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But now you have a very difficult burden because you have two old parents who are now in that situation and even the medical system and so on.
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That s a great burden.
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That s a great burden.
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And and then they have, you know, a lot of a lot of issues, a lot of everything from weather issues and so on.
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So they have a lot of problems.
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We have a lot of problems.
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They have, you know, a large poor population.
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and underdeveloped.
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Now that s both potential and problems.
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And so it goes back to, you know, how do we each deal with our problems very well?
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And that ll really be it.
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Tell me, just to finish up then, if I was going to summarize the most simple terms,
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things that kind of guarantee that decline, spending less than you earn, instead of spending more than you earn at an individual level, certainly as well as a collective level is critical, bringing ourselves together and connecting and creating those deeper relationships with people, different belief systems.
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But what can the individual do?
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And just to summarize, the collective do to stop or slow the decline that clearly, you know, you can measure has occurred.
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First, financially, be financially strong, have a good income and balance sheet, income statement and balance sheet.
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Think about how many months or years that you could live if you didn t have an income.
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The more financial security you have, the more maneuverability you have, both to protect yourself on the downside and to take advantage of opportunities.
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and to know how to achieve a balanced portfolio.
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This is very important, I think, financially.
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And then be with people.
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your community, the source of happiness.
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Psychologists have studied that above a basic level, income is not a source of happiness.
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Community is the highest rank source of happiness.
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So how you work well with others.
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So I think meaningful work and meaningful relationships to be productive and to also have the joy of those relationships, I think is a paramount importance
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And then also to realize what the risks are.
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That s why I wrote them in the book.
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The risks of like, can you, well, there are many kinds of risks.
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And do you understand those risks?
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And where are you and where do you live?
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What are those risks like?
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To recognize that the world is
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domestically and internationally, breaking into different ideologies, and different economic systems, really.
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And that happens state by state, as well as around the world.
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And to understand which are the places that are the best for you and those set of circumstances, to be aware of those risks.
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And, and that then it s just the fundamentals, you know, raise your kids well, and
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I should say that in most of these cases, even the worst case situations, it s okay for most people.
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In most wars, most people don t die.
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Most people don t get injured.
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Most people don t.
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In most depressions, even most people don t get unemployed.
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OK, they are a scary situation.
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But it s not the end of the world for most people and maybe meaning cutbacks and so on.
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But, you know, that s often good because, you know, it s OK to you don t want to get spoiled.
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You want to be self-sufficient and you can get strong sometimes.
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So, those are the things.
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So, most people can get through these things fine, just understand what it s like and, you know, navigate that well.
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In essence, the message is that the future will be different than your past.
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And if you try to judge what you re going to do in the future based on the past alone, you re going to be missing all the understandings of history that can help you anticipate and do well.
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And, you know, Warren Buffett was saying the other day in his
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is to become more productive, that if you re a great doctor, you re a great nurse, you re a great accountant, you re a great anything, and you re really the best at that, it won t matter what happens.
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happens with the currency, you ll still have demand for what you do.
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So constantly improving yourself is the most important thing besides having a productive business that hopefully doesn t have too much
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about as well.
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So I think it s important for people, I really appreciate you saying this at the end, this is not the end of the world.
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And again, after, what does winter do?
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It cleanses out the weakness and opens up new openings and then there s a new springtime.
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But the good news is during the darkest times, as corny as it always sounds, it s darkest before the dawn,
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There s a reason we use these corny phrases for, you know, hundreds of years.
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It s because they re true.
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So I really appreciate you marking out that this is not the end of the world.
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But if you don t anticipate, it s going to be a lot more painful than if you do.
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And that s why this little checkup of where you are, just like looking where our countries are,
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is such an important element.
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I d like to just finish by asking you about the power of meditation as a tool to deal with all these things.
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People get overwhelmed so easily into these days.
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There s so much coming at us, and we let it come at us through technology very often.
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You ve been a lifelong meditator.
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I d love it if you d just tell us how important that s been and what meditation has meant to you, and how could that, as one of many tools, be useful for people during times like this?
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Whatever success I ve had has come more from meditation than any other
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thing, any other influence.
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And you and I know, because you re a meditator, your wife s a meditator, we meditated in your room, your meditation room.
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We know what it is, and I ll explain what it is.
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I ll first explain what it gives you, and then I ll explain how it gives it to you.
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It gives you an equanimity, an ability,
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to almost rise above yourself and to see things in this thoughtful way, almost like a ninja in a ninja movie.
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As things are coming at them, everything seems slower and you approach it and you can deal with it in that way.
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And it gives you a greater level of creativity.
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And it does that by connecting your subconscious to your conscious.
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It achieves that by repeating a mantra.
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So here s how it works.
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There s a sound that doesn t have a meaning.
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It s a sound.
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We could, for example, it could be something like om.
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And mentally, you repeat that over and over again.
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You close your eyes, you get an uncomfortable position, and you repeat that.
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And you ll find that your mind will go
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to that but then it ll go to thoughts and you just say oh it s in thoughts and go back to OM and you get to practice it and what after a while you ll stay in that meditation that mantra and then when you re in that mantra it will then disappear and then you go into a transcendent state in other words you transcend and you re going basically into your subconscious
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and you re in your subconscious, and your subconscious is really what controls you more than your conscious, you know, it s just you re just not conscious of it.
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Because when you re conscious, you know, you think, oh, well, what do I want to do, and so on.
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But your subconscious
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has such an influence of the things you ve learned in your earlier years or your genetics or something, and they re not aware from you.
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And when you go down into that, you get relief, but you also help to make the connection between your subconscious and your conscious.
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And so when they re aligned,
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you re aligning your emotional decisions with your intellectual decisions.
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So I find it s an instinctual thing for me to do.
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What do I feel emotionally?
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What do I feel?
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What do I do think about that intellectually?
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And then how do I approach that in that calm way?
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It doesn t diminish your emotions.
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It just is, you feel them differently.
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And my love is as much as it has ever been, or more maybe, because I feel it differently.
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So I just want to emphasize it doesn t take away your emotions or anything.
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It just puts them in the perspective as though, and you look above yourself and you see yourself within the life s arc.
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You see the strengths and the weaknesses and how to deal with them and you navigate better.
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You don t have the charge that gets in the way of people making better decisions.
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It kind of dissipates the charge that people often have that makes them overreact.
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It s amazing you ve done this.
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And usually, do you have 20 minutes a day, twice a day?
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What is your regimen?
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Yeah, I try to do it twice a day for 20 minutes each time, usually before breakfast and before dinner.
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But I m not perfect.
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I would say probably a third of the time I do it twice a day, a third of the time I do it once a day and a third of the day days I miss it.
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But there s times where I could just feel I just want to go meditate.
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I feel, ah, it ll just make me feel so good.
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And I get that pull so I can.
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It could be any time of the day, almost on any set of circumstances, because it s very refreshing and relaxing.
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It s almost like going on a vacation.
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It s a tool that you use.
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And I love what you just described, too.
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So many people get so rigid, then they start judging themselves about it, and they get in their head, and the meditation becomes about something else.
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So I m really, it s nice of you to share that there s a variety of how this works, and it s really based on what serves and needs.
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But there is a consistency that s allowed you to continually find that balance in your life.
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And the last question is, this segment of your life, these last five or 10 years, you ve given so much.
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You ve built your company, you ve been so successful, and now you re in this stage where you re really mentoring all of us.
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and giving us insights that are, you know, you know, I, I m a big believer.
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I learned by other people s experience.
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I can hopefully, you know, compress decades into days.
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And that s what you try to help us be able to do.
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I know you have one more book in you, as I understand.
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I don t want to want to, what is that book?
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When is it coming?
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And what s next for Ray Dalio is my final question.
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Um, the book will be economic and investment principles.
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Cause that s what I focused most on.
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So it s like a doctor describing those principles.
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So I ll, I ll, I ll do that.
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And then after I do that, I really believe that I will have passed along anything that I have as a value and I m going to go quiet and go to the things I love and enjoy, but less, I won t be active passing things along.
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Well, I can t thank you enough for another beautiful conversation.
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I hope people watching here
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that can help them anticipate.
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And then if they re willing to anticipate, they can have an extraordinary quality of life no matter what the season, winter, spring, or fall, that there are these predictable cycles and that you ve managed in a very short period to bring this to us.
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I m also gonna put the link below.
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I recommend all of you get the book, but I also recommend you watch the video.
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I ve watched it about three times.
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If you re wanting economic cycles, I ve probably watched 30 times, right?
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It s just so clear.
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So if you want more clarity, and I hope you do,
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and you ll be able to understand in more depth, please go to the link and please also make sure you pick up the book.
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Ray, it s a pleasure to always be with you.
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Thank you so much.
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And thank you, Tony, because you help so many people in so many ways and, you know, we ve had a great simpatico and it s really a treat to be able to do this with you.
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So thank you.
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Thank you.
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Blessings to you all.
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The Tony Robbins Podcast is directed by Tony Robbins and produced by the Tony Robbins team.
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Copyright Robbins Research International.