Ray Dalio: The principles that made me a billionaire

0:00 You wanna be successful, here's the mantra for investing. I got my most fundamental question is how do I have the upside without having the downside? That approach was the basis of Bridgewater going from having to borrow four thousand dollars from my dad to the largest hedge fund, most successful hedge fund in the world. I created personality Test. I gave it to Elon Musk, I gave it to Bill Gates, I gave it to Rick Hastings. Maybe I should probably not tell stories, but um no no. That's what we do here. You don't have to make it to the top to be happy. What's the time? There's no correlation between the level of happiness in your life and the amount of money that you make. So you have to have a purpose. What do you want to do with the money? That is so important. You better answer that question. I feel like I can rule the world, I know I can be what I want to

0:48 I'll put my law in it like my day's all on the road, let's travel to the street. You were in some regard a little bit of a late bloomer in terms of like traditional metrics of success. Oh yeah. I think you were thirty four, thirty five. You had like Two kids, I think. You had just laid off the five employees that you had had. And you're like look

1:06 Dad, I've lost it all. Can you like close your eyes and like remember that conversation? So I started Bridgewater in nineteen Seventy five and In nineteen eight. Eighty one and eighty two.

1:20 Interest rates were not the uh emerging countries had a lot of debt. And I calculated that those countries were not going to be able to pay their debts. And they were gonna have to do it. B. that crisis.

1:31 And that was a very controversial point of view, and then Mexico defaulted in August of nineteen eighty two. So I was asked to testify to Congress about what this is all about and ha and uh what might happen to the economy. I thought uh the economy was going to be a disaster. I couldn't have been more wrong. Okay. So I lost money for me, I lost money for my clients.

1:53 And I had to lay you off. Everybody. I was so broke I had to borrow four thousand dollars from my dad. So then my choice was am I going to You know, put on a suit and tie. Go in, commute, and work for somebody.

2:08 In that capacity. And I knew that I wasn't Very Good at working for people. Now That was painful.

2:15 That changed everything in my life. That created the bottom of Bridgewater and then it just kept going up because of what I learned. I learned two things. First of all, I l I learned Humility.

2:27 To balance my audacity. Okay. I didn't have much humility. I'd say I'm riding, I'm gonna be riding and all that. And then I learned how to diversify My bets. And substantially reduce my risk without reducing my returns.

2:44 Because I didn't want to have Reduce the upside. I I knew that I well had to reduce the downside. And so um I really learned and

2:54 Taught myself really. My mantra. Okay, here's the mantra for investing. You want to be successful. Th this will um this is the uh holy grail of investing. Find Fifteen.

3:07 Good. Uncorrelated return streams. W how did you come up with fifteen? Well I just looked at the math of it. Okay. So in other words

3:16 What are the marginal benefits of diversification? Give them the different levels of correlation. And I Have that on a chart that keeps reminding me.

3:29 Okay. If you can get out to fifteen, you can get Down to about you reduce about eighty percent of your risk. without reducing your return.

3:40 That means that you increase your return to risk ratio By something like a factor of five. Okay. In other words, wow. So that means you can get the upside. Without having the downside.

3:54 Okay. And then humility, you know. I wanted people to Kick the shit out of the Whatever I thought, you know, to try to do that.

4:02 And then have that. And that change in that Proge. was the basis of Bridgewater going from You know, be m having to borrow four thousand dollars from my dad. to the largest edge fund, the most successful hedge fund in the world. If we wanted to be better investors.

4:17 What do you think the most common mistake Smart guys can make. When it comes to investing. They don't have a game plan. So what's a good game plan look like? How do you know if you have a good game plan?

4:27 Well, the way that I did it was um Um every time I would make a decision But this is the building of all principles I did, but particularly in the markets. Every time I would be it make a decision. I would go back and study if I made that decision under these circumstances, how would it have worked in the past?

4:47 And I would know the track record of that decision. And it that would give me also greater understanding of how things work. And so Then I would have a decision rule.

4:59 And then I would program it into the market, uh into the computer. And when this thing come along Then I started to realize Okay, now I've got criteria. So rather than just

5:10 The one that I would see. I would say in the computer Dumped in all of them and where do they exist anywhere in the world? And what what will so give me give me one good decision rule that wherever it happens in the r world that I have a track record of knowing how those work.

5:28 And wherever it is in the world, you bring me that. And then make a collection of those kinds of things. and make them uncorrelated so it provides your dis your um the diversification. And so now you're executing A game plan. So like I've rules that it should be timeless and universal.

5:46 'Cause if it didn't work in a long period in time, I would need to understand why it didn't work then. And would work now. So That's how I would build you know, that's how I I did build uh game plans and execute the game plans. Did Birdwater have any revenue coming in? Um nothing. And so you're waking up in the morning and you're like, I gotta figure this out.

6:05 It was like um I'm on The edge of A jungle. I could go stay out of the jungle. And I can go to safety.

6:17 And have a safe Life, employed. Regular job, great. Okay. Or I could go into the jungle

6:27 And try to work across get through the jungle, have all the things that can kill me. And I made a choice of what I wanted in life. I mean like I have to have This

6:40 great upside. I can't not Do that. If I'm going in the jungle I wanna go with people um who wanna go in the jungle with me, who see things differently than I do. So it's like going through this jungle with

6:55 These uh animals are something that can kill you, but if you're in it together Then you are you can sort of see the animals that'll kill you. And then I loved being in the jungle so much I didn't want to get out of the jungle even after I've achieved success. Yeah, almost. Yeah. To to play off that analogy, I think that like I think a lot of successful people And I think you've even said this where you're like, As long as I could like do what I want during the day and what I love, then I'll be happy. But I have to imagine that when you're like thirty three or thirty four or something like that, and you have young kids and you are like you got a little bit of a tiger in you, you're like, I wanna provide, I wanna win, I wanna be the best. No, it wasn't like that at all.

7:34 For me it was like two levels, just very simple. Like I don't need a big house, I don't need a big anything. My kids can go to a good public school. They have great balls. I counted what I started to do was I started to count. How many Months Then And and then years.

7:54 Oh Living that way. Could I afford if it shut down? But you said two levels, so that was level one. It's freedom money.

8:03 Basically. You money. I I don't remember what the number was, but it you know, it wasn't It wasn't mu it was an easy to achieve number. Like a million dollars. But oh no.

8:15 Less. Oh, much less. At that time. Was there ever a grand vision? Where or was it always like, Well, what's the next level? Let's see if we can do that. No, no, no, no, no. It was I could imagine great Things I'll tell you a personality test. Um

8:29 When I decided that I wanted to pass uh leadership of Bridgewater along to others. I want to be investor, let them run the business and I wanna Uh do that'cause I'm Hooked on the markets. I created personality tests.

8:43 I started with Myers Briggs. And then I went to di various kinds of personality tests. And I Then gave the personality tests. to people like Elon Musk, I gave it to Bill Gates, I gave it to Reed Hastings, I gave it to Mohammed Yunus, I gave it to other people.

9:03 To see the elements of what they are are like. I put it online. For free I could do the We took it like you took it. Okay. Well there's a type of there's a type of person

9:15 That represents um a very small percentage of the population. And Elon Musk is it, then Bill Gates and and um Re That I would call a shaper. And they are people who love to

9:30 Go from visualization to actualization. And to be on that mission. And so what. And that's my personality type. I have a certain type personality type. And they have to do certain things. And I'm uh remember um Elon Um and he's that personality type. Okay, making money is not a big deal to him.

9:49 Uh should probably not tell stories, but um No, no, no. That's what we do here. We tell stories. We can all take it out later. The excitement You know, the compulsive Thrill. Of climbing.

10:03 that and and aspiring to that was my personality. And he doesn't need to He doesn't need a house, he doesn't need security. He doesn't need anything. I mean, he didn't even need my level of needing. It sounded like you had a story of him. Where that's an example of the thing.

10:22 Hey everyone, pausing really quick because I know that you are probably scrambling to write down all the stuff that Ray's talking about. Well the good news Is that we did it for you. So we made a guide. The link is in the description on YouTube. And this guy breaks down the five frameworks behind one of the greatest investing track records of all time. So you can actually use them and also spend time listening versus taking all the notes that you're probably taking right now. So you can get it for free right now. You can click the link below in the description, or you can scan the QR code right here. All right. Back to the episode. Okay.

10:53 When he first started Tesla he had Maybe Something like um a hundred and eighty million dollars from PayPal. And he decided that he was gonna take half of that money And he was gonna go to the mo um the Mars.

11:07 And he had no experience in terms of going to Mars. And so we had this vision. And um You know, and I said to him, um I suggest that you put aside a little bit of money

11:18 Take a piece of that. And just so that way you it you know, things don't work out, you've got that. No I don't no need And he had that. Um strong compulsive.

11:29 Need But there is I think everybody has a certain nature. Okay. Whether you're born in your environment, you have a nature.

11:38 And it that's why I created these personality tests. For any of your listeners. Principle's view is what it is. It's it's free. It's online. Take it. You'll understand more about your nature. And there's a feature in there where you can uh have somebody else that you have a relationship with take it.

11:55 And then they'll tell you about the relationship. So we took it last night, uh based on on your after we talked the other day. So Sam tells me She's like, I'm a shaper. And you had told me you're a shaper, Elon And so I was like I was like wow, okay, I hope I get shaper. I think I want to be in that club. So I'm taking it, I'm answering as honestly as I can. Happy but sort of foolish. So I got explorer. And I was like that was not what I expected at all. Um did it characterize you? Yeah I mean

12:29 It called it it very much called like I'm driven very much by curiosity seeking inf seeking new new knowledge, new experiences. Learning, getting being very like Objective and truthful about What I'm experiencing and almost taking pleasure

12:43 Even when You have a bad result because it means you got to learn. And so there was just so true for me. I get the most fun doing that. So I guess it really was true. And I think why I may not have been a shaper. A lot of the questions would ask about part of the visualization to acquisition and I I think I do it a lot of that. But I'm not very detail oriented. I don't care about the details. I overlook details. I'm I'm not a perfectionist. I don't care

13:06 Like I'm I'm mu much less than Sam. Sam really wants everything to be great. Okay. One of the elements of a shaper Yeah. Um By the way, that's where you're seeing your nature and you know what your satisfaction is and what you're likely to be most successful. It is that. Yes.

13:23 What the issue of um uh uh A shaper. is um they g want to go from visualization to actualization. And then they go from like this very big picture So I remember E Elon gave me

13:38 The key to his car. And and that you know, it had a little button. And he showed the screen and he got into the details a lot. And we're talking about how he wants to put A ru uh a watering can.

13:53 With a plan to On rocket to send it to Mars. to say first life on Mars. to inspire things and so on so ten thousand foot level and the ten centimeter level. Right. That that liking and then taking that and going. Okay.

14:09 Um so yeah, the we all have our person and so the success in life, the joy really is knowing your nature and finding the right path for your nature.'Cause you can't fight against your nature, right? So look, Ray, we've only known each other for thirty minutes, but I'm gonna I'm gonna show you something that might s might gross you up, but when I was young and drunk, I gave myself a tattoo. And the tattoo that I gave myself is on my feet. And it says Act now.

14:39 So tell me, you you were at the tattoo parlor. Have you ever heard of the phrase stick and poke? No. Okay, so Basically, if you're in jail, this is kinda like where it comes out of, but like a lot of like punk rock people do it. You get a sewing needle and you uh Dip it in ink and then you just make lots of little dots on your skin. And that's a tattoo.

14:57 And so when I was like I was actually maybe I pr sometimes I say nineteen, in reality I was probably twenty two. I just don't want to be that mature when I say I did it. Uh I was like angry that I wasn't moving fast enough in life and I was like I'm so So of you know, angsty and at the time I was uh I partied a lot and so I was drunk and I was like I'm gonna tattoo act now on my feet so when I wake up, that's the first thing that I see is I gotta take action.

15:19 And has that work for you? Yeah, I t I tend to need to tone it down. uh where I'm like I y I need to think and plan.'Cause you know, I've had a little bit of success in my career and I think occasionally you need to like be a little more strategic. But yeah, I'm usually like a ball in a china fan. And the thing about it is that you have to find the people who are different from you who compliment you. Well, like on my on the leadership test, you don't just say the personality that you are, it's also where you're very weak. So it was like

15:45 On mine it was like Connecting, supporting kind of the a lot of the like social side. So my business partner, Ben Who's the guy who emailed 77 times to you and your team to get you to be on this podcast. He's for I think for four years has been emailing trying to make this happen because he's an amazing connector. He's an amazing supporter. He wanted this moment to happen even though he's not at the table. And to him that's a win. To him connecting is the win.

16:09 And so he's my he's been my business partner. We've had this unbelievable success as a partnership, even though we couldn't be More more different. Yeah, if we tried. Pause and and reflect on that. Very important point. For success.

16:25 But people who think differently from you who you ordinarily can get annoyed at. Or your paths to suк. That if you can understand that it was very interesting when I did this in Bridgewater, I did the personality test. And and then they start saying Oh, you're a

16:42 E S T P and I may whatever it is. And then they started to understand And they understood how they would work together rather than get annoyed by the other person. Yeah, that that was Big deal, you know. So success

17:00 comes from that. Success comes from failure. Right. And learning from it. Okay, and success comes from working together.

17:08 I would say meaningful work and meaningful relationships. If you're on a mission to do something great, okay, go to Mars or whatever it is that you're gonna go do together. And you have meaningful relationships. and you have radical transparency and you know your nature and you know how to work with others That's the formula for success, right?

17:28 Yeah, a another example is Doctor Dalio is when when Sean came in. The notes were already printed off. There you go. I I'm late. I don't have it printed. But you know, so we have a very different dynamic, but for six years we've built one of the biggest business podcasts in the world, despite being completely different in our age. I hope your audience hears this. Right.

17:48 Yeah. It's pause and reflect. Like'cause okay, what are we here for? We're here for pretty much the same reason, just a little bit different settings. I'm seventy six, I want to pass along whatever I had to help people in that way, right? That's my goal. Okay. Your goal also is to You're obviously not only your goal, but your effectiveness. In being able to help people otherwise they wouldn't be listening. Okay. So I just wanted to pause on that.

18:14 Formula. Okay. If once you get that formula. Pain plus reflection equals progress. And how do you work together and all that? Wow, and follow your nature.

18:24 Can you can you guide us on the reflection part?'Cause I think everybody understands the word, but I bet we don't really talk a lot about how each individual person does it. And so Are you is writing your reflection do you talk to Do you have two or three people you call who tend to give you high signal like feedback or advice like what is your process to actually do the reflection. Pain part comes

18:43 Involuntarily. That that hits you. When the pain comes Um eventually the pain will go away. But you can skip the people can skip the reflection and they can be hung up in their pain. So you first have to make this transition.

18:57 Now meditation has helped me a lot. I d I've done meditation, transcendental meditation since nineteen Sixty nine. Explain what that even is. I've I've only heard you and Jerry Seinfeld swear by transcendental meditation what is it? Transcendental meditation is a very simple exercise. Of um you sit there calmly. And you repeat a sound.

19:20 That is a word that is called a mantra. That doesn't have any meaning. And so, um, let me an example might be on Okay. So you're sitting there and you repeat all them in your head.

19:33 And when you re do that You can't have thoughts because when your thoughts are in home your thoughts are in home and the other's thoughts can't come in. And then eventually when you get this habit down. Then the own goes away. And you go into pretty much a subconscious state.

19:51 Yeah, very relaxing, very uh calm. And so it's a real calming exercise. And it brings you into your subconscious mind. Okay. Your subconscious mind Is really controlling you a lot almost. Right. There's a conscious mind, a logical conscious mind that you hope is logical and you're aware of.

20:11 And then subconscious means below your awareness. There are all the things in your mind. That influence you, your emotions, your subliminal stuff. And it goes into that subliminal stuff. And it calms you down and it's also where creativity comes from. It's like

20:29 If you take a hot shower and these ideas come to you But you try to muscle ideas, you can't make people you can't make them come. But that hot shower, that relaxation and so on. I found that very helpful. You know, I know I've I've developed uh uh an instinct. Habit is a very uh important tool.

20:48 Like if you know how to develop the right habit. So the habit means that you have an instinctual positive reaction to something. So I have a uh a reaction which is Okay. That is that that's a lesson in reality. In other words Hey.

21:06 Okay. So It sound like a puzzle for me. Okay. The puzzle is

21:12 How does reality work? It'll Tell me something about how reality works. And I have to deal with reality.

21:21 It's successful. And so what is my principal for dealing with my that reality. To deal with it in the best possible way. Okay.

21:32 That's my now instinct. So now when you've got that instinct. It's a whole different thing, right? Because you you start to say, Okay, there's pain and you have your curiosity. Okay, now you take your curiosity. And you say what does that tell me about

21:47 How reality works. And how I should deal with reality. Okay, and if you solve that puzzle Then you will get a gem. And that gem is a principle.

21:59 That you can carry with you to be better. Right. And so if you start to recognize it as that. And then I do write. So what's that what does that mean? Do you journal every morning, every night? No. I it's just when thoughts come to me or circumstances come to me, and or I'm also making decisions. I'm I'm reflecting

22:19 And then what has happened to me is I found that um all those reflections are cause effect relationships. Because principles are If this happens, what do you do? And that kind of thing. And then I put those in computer code.

22:34 Okay, that's how I built Bridgewater. I built okay, if this happens you do that. Okay, and you put it in computer code and I made them this all computerized S decision making systems for markets. And almost uh Everything.

22:49 And because I've done this, you know, for thirty five years or something on almost everything. I've got thousands of these principles. That I've written down. And they are, you know, the ways of Achieving success in whatever kind of decision.

23:06 If you know, if the Fed does this or if somebody you love dies, or whatever it is Okay, how do you reflect on them? What does that mean? I would recommend I I put out a journal. that people can do so that they can journal their own principles and they have the reflections. And so on. If they if they start to think that way, pain plus reflection equals that and you reflect well. Then what happens in the meditation.

23:30 is it connects your subliminal self to your conscious. I I'm on board with all that. I think that if I put myself in your shoes Between the ages of like thirty five to fifty two, you went from like nothing to like the largest headphone in the world, which we I wanna hear all that.

23:45 But when you're like thirty four, thirty five, thirty six in the first three years of starting your business anew. Yeah, I would have to think like most all small business owners you're like, I just gotta pay the bills. I could always find the way to pay the bills. The question is what was it?

23:59 And I think by the way, along those lines That's where your priorities get tested. You know, you think about what do you really want. And how do you weigh one thing against another thing? Okay.

24:12 I mean Like I want I want survival and opportunity and I want to play the game and I want Okay. And I don't really care. I I don't care much about convention. I don't care about Much about how I look.

24:26 Yeah. A things that can inhibit maybe that choice. I think people also uh get stuck. Um They get stuck'cause they don't realize there are multiple possibilities.

24:41 And so some people say to me, uh, you know, but you don't understand I'm in this job, I don't like the job. I think my boss is a jerk. And this isn't where I want to go. Okay. And and but they feel

24:55 I have to be there. Okay. And the reality is If you're clever and you figure it out and whatever and you try There are many ways to have a really happy life.

25:06 And and by the way, n a lot of money is not a important thing. Sometimes we get hung up on this like it's gotta be this conventional life which is I you know, okay, I've got to do the the okay. Is that really what it is? Even experiment with it. Listen to this quote, Sean, that uh he had he said, that having an intense life filled with accomplishments is better than having a relaxed life with savoring. Though I can say that being strong is better than being weak and that struggling gives one strength. So that was pretty cool. That's true.

25:36 Yeah, I guess like you don't have to make it to the top to be happy and I think that's been like our biggest. What's the top? You work your ass off. To get a lot of money. Okay. Just think about that.

25:49 Is that it? What's the money for? Money doesn't have any intrinsic value, right? So you have to have a purpose. Why are you getting the money? What do you want to do with the money that is so important? You better answer that question. Right. What is that gonna get you? Okay. Does that get you better friends? Okay. Does it catch a better marriage, a better

26:09 What is your definition of success? Success is You knowing your nature. And then finding the best path. Through that nature so that you look back on that and you say, Ah, that was the life I wanted to have.

26:25 Do you think that you could answer that for yourself? Uh, I tried to do it. I'll read what I wrote. So when I was twenty seven years old I wrote I tried to write this out because I was like I think I had actually read your principal's PDF around the same time. And it made me start asking these questions'cause one of your core principles like figure out what you want.

26:42 And then understand the rules of nature, study cause and effect to understand what patterns of behavior and actions might lead to the thing you want. So here's what I wrote. You can you can judge it. I said, What I want out of life. I said I wanna have the ability to shape my own life. I wanna be my own biggest fan. I wanna make adversity part of the recipe. I wanna treat other people well and I wanna reread this every year, every morning, so I never forget what each day is for. I wanna rewrite the list every year so I see myself evolving. I want to focus on what matters. Number one, my loved ones,'cause they love me even if I don't do anything on this list.

27:12 Number two, my health, because without it I can't do anything on the list. Number three, my work because it makes life fun. Number four, being somebody who lights up the room because it feels good to make others feel good. And number five, learning because it's the master key that unlocks all doors. And I I keep going a little bit. And then I say some of the things that I'm I'm weak at. I said I wanna be somebody who doesn't just want things who makes them happen. I need my execution to catch up with my ideas. I want to be the most optimistic person you know. Um and I want to win, not but not just win, I want to win on my terms.

27:37 Uh because that's the most satisfac uh satisfying way to do it. Congratulations. That's fantastic. And this ten years ago. And then you w you reflect and you modify. Okay. And then so now you know what you want. Do you change your goals every year or no? No, I'm fine. It's like my nature.

27:54 My nature really doesn't change. My phase of life changes. Okay. So I'm at a different phase of life. Like right now I'm really feel compelled to uh pass along everything that I have that uh is a value to other people.

28:08 Right. And so'cause I'm late and I'm approaching my end. So uh that hole is Uh my joy. We have different joys. We have different circumstances in the middle part of our lives. There's work life balance and your kids and your whatever. And so these l arcs of life, there's an arc of life. Almost like a script. I mean you know exactly

28:31 You know, at this age I graduate and at each phase you know what it's like. And so you have that arc. But your nature doesn't change, I don't think. Hey, let's take a quick break. You know that feeling when strategy is done, the brief is written, everyone's aligned, and you realize someone still has to sit down and actually create all the content? That someone is usually you and it's due tomorrow.

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29:10 I was listening to uh a podcast about you and there was this funny story. I think this was when you were selling research, you said Uh, that you hired a guy, I forget his name, but I think he was a door to door Bible salesman. Yeah. And you're did he know anything about research or finances? Uh not much, but he was curious. And he was Yeah, you know, like I say, th there are three things.

29:31 Um Their skills Abilities and values. And most people look at Skills.

29:39 And they look at the resume to determine what skills they have. In my opinion, it's the opposite order is what's the most important. First values. What are the person's values like? Then what are their abilities?

29:54 Because if you have abilities, you can change what your skills are. We're we're in a world now that maybe programmers are no longer going to be the most important people and maybe but you know, all of a sudden you were growing up with okay, man, you need to program because you're doing this and then all of a sudden, man, that's a lousy show. Because you know, something comes along, right? So how do you adapt What are you going after? And then the least em so the least important is the skills. And so in thinking about that. What's our relationship gonna be like? When d but how do we pursue a dream? Is he bright, is he

30:27 Uh what is his abilities? What can we do? What how do you discover? I mean most of like your curiosity, most of everything is in the discovery. Okay. It's not in the you know remember these rules and and so on. The future is in the discovery. So so that's what I'm uh you know, I'm looking for, right? I mean That that's what even talent identification is. Because talent Is

30:52 More important than money. Okay. But the money people are trying to find those people. Okay. So if you look at okay, what did Elon Musk have? He didn't have money. And how did people make money? They invested in Elon Musk. They found him and they invested in Elon Musk. Human capital versus financial capital, right? That's right. Let's talk about you when you were younger. Uh what would people have seen in the talent identification at that phase? I think it would have been tough. I was um

31:19 You know, C student I didn't like a high school education. I liked markets. I had a passion for markets. I got into um CW post college with L you on probation. But I had a passion. So t tell the story, if you can, of how you got that passion. How you started you said, I love markets. I mean, most teenagers don't know they love markets.

31:39 I used to do uh jobs as a kid. More lawns. Shovel. And then Caddy. And so I uh I would caddy. I

31:47 Uh Uh walk around. I'm got six dollars a bag. When I would get up to fifty dollars and I would talk to people about The people I'm counting with. About the markets.

31:59 'Cause everybody talked about the markets then. This was a time where if you got a haircut, your barber's talking about what stocks to buy. So then naturally. I I took my gatting money and I put it in the markets. Um and the uh First stock I

32:16 Bor Was the only company I heard of That was selling for less than five dollars a share. And I

32:24 Stupidly believed. That if I bought more shares I could make more money if it went up. Okay. And so I uh I did. The company was about to go bankrupt.

32:36 Another company acquired it. It tripled in Price. And I said, I like this game. You know, and I thought that this game must be probably an easy game because Like in the newspapers, the Wall Street Journal and the News they had all these thousands of Names of

32:51 Stocks. You know, on all of those things that I just figure I have to Pick one or two that go up. I mean there's big selection, I should be able to do that. And then I started in the game. And then I realized the game is not easy.

33:04 I still know the game isn't easy, but then I got hooked on the game. Did you have any peers at the time or were you an oddity? No, I there were no So books or w where were you getting smarter? How did you start that? Fortune had The Fortune five hundred.

33:20 And they had in the when they had the Fortune five hundred, they would have uh little tear sheets And you could say which annual report you would want, you would check it off and mail it in. And I checked off all of them. And then uh you know log these to the house and then I m and it became my little library and I would talk and then I Fiddle around and

33:42 That's how I did. Whenever I was reading Snowball uh Warren Buffett and now I'm hearing you talk about it. I think like the lucky thing that I don't know, I don't know what it is that you found something that you liked at such a young age. For a lot of people I know that are like that. Bill Gage was like that. A lot of people are like that. They'd found something. And then the also learning is different. Learning prior to puberty is different or at around twelve or thirteen.

34:07 It's like learn a language, learn something, learn a sport. And so on when you learn it prior to that, it almost goes into your You know, And for you. Um so

34:18 Yeah, that was part of it. Were you uh Hustler. Because uh you know Now we see you as a

34:25 This guy who's very wise, he's sharing all his knowledge. And uh when I studied Buffett, it was kind of the same. Buffett is this charming, wise, patient uh sort of guy. But if you read about him as a kid, he was at the horse tracks, he was studying bedding, he was finding slips on the ground and cashing them in that others hadn't overlooked. He was setting up pinball machines and barbershops and fishing golf balls out of the pond or reselling them. Oh he was a hustler. Were you a hustler of his w of his husband? No, I in the golf course that I had I was at Uh they would hit uh they would hit'em into the uh pond. And I could walk around in the pond and feel them. Yeah. And then I would pick up the golf balls themselves. That's funny, I didn't know he did that.

35:05 Sam called you a late bloomer and I find that term interesting. You don't know this about Sam, but he was Really wanted to be successful. He studied a bunch of successful people. He had a spreadsheet he shared with you. We met when he was we were twenty four years old, maybe. He shared this thing of when did our heroes

35:19 Make it. And he showed that like he had a timeline for Bezos, for Jack Dorsey, for all the kind of tech entrepreneurs that we were admiring. When did they start? How many years did it take for them to actually win? And he had mapped them all the way down into their apprenticeship. So like to learn and then starting their first

35:37 Yeah. And he reverse engineered and almost hit it exactly. He's like by thirty, I'm gonna have this many millions in the bank because and I know I'm today I'm here, but I will be here and that's like almost the median. But but uh Okay, two things. First of all, uh I think you should publish that. Okay. Um

35:53 And I suspect it has a big range around it. Okay. Like I was thinking uh Ray Crock McDonalds. He was like two fifty five or something. Okay. So it's a big range. But they s certainly are driven. Yeah, I basically when I was younger I met someone Who's actually my partner now, and he was uh successful at a very young age and he was probably fifteen years older than me and I was like I didn't grow up a lot of money and I was like

36:17 I I want to Be free. I wanna feel you know, I wanna I wouldn't I don't know, I want to feel free and I was like, What's the number I need? And he said, Twenty million dollars. So I said, Uh

36:26 All right, that's the number. I have to make twenty million dollars by the age of thirty. And it was Definitely m I was money oriented. And it worked, I I got I basically uh thirty one. But

36:37 It was so I felt it was so easy to like have a goal and then like reverse engineer and back into it'cause then all I had to think was like step one, step two, step three. Great. And and that was smart. Because twenty million. Right.

36:50 We'll do it. Okay, and do it. And you also thought um Being free. Yeah. And then you can go for it. That was what I was trying to tell Elon.

37:02 And he said no, I don't need it. You don't need the safety net. 'Cause if I'm s if I'm listening to this, I'm hearing you say, like, I just need a nice bed to sleep in, I want my freedom, I like to Well my kids to be going to good public school, all of that at the same time. You made like twenty billion dollars. Right. So the so somebody listening can say, Well, at some point did he did he just way overshoot his his his needs? I wasn't tuned for that. Yeah, it's it's I I played a game that I love that pays well if you play it well. Right.

37:28 I'm very passionate with personal finances and particularly amongst the average Joe of like don't buy shit you don't need, which people don't tend to follow. Um Or spend less than you make, which people don't tend to follow. Do you still do anything in your life that is a pretty frugal thing? Oh yeah, I I'm I instinctively Can't waste.

37:49 I'm reluctant to fly a private plane. Uh I'm I don't like expensive watches. I heard someone make a joke that most of your suits are from Banana Republic or something like that. It's something like that. Wh where do you spend well, right? So like spending is also a skill. I spend money on the things that I enjoy.

38:09 I love boats. Uh have a house on the water. I don't have yacht. But I have a ocean exploration ship. that I'm I'm very excited about that I give to scientists and I'll tag along.

38:21 I could not Do a normal yacht. Okay. But Jacques I don't know if that don't make. When I was uh growing up, uh I watched

38:30 Um him dive and do exploration. And then my my son, I have a son who Um I took my son's diving and they learned how to dive. And he then went to work at National Geographic. as a filmmaker and so on. And then we have this common passion of ocean exploration.

38:47 So to create a ship that's a laboratory that they do research and so on and so forth, that's a great joy. But I couldn't be I'm listen, I'm not against anybody doing any of these things. I just want to be clear. It's not Like I think whatever brings you joy, it's okay. It's kind of like that, right? And we're uncomfortable. My members of my family, my wife would not be comfortable with

39:12 much jewelry. You know, or anything that would be fancy jewelry or s something. That's just happening to how we grew up. And you know, I mean oh So and the kids are the same thing. My kids have grown up. And I would say Whatever you enjoy is like if you enjoy The

39:29 You know, the threads and the beauty or the m uh the watch and you really are enjoying it, that's fantastic. Yeah I know you're into the ocean. Do you believe in aliens and have you y do you have access and any cool uh insight into uh things like that? I have no knowledge of alien. What do you believe? What do I believe? I have no beliefs. That are just beliefs. So people h I've heard

39:54 Different people uh saying things. And and here's what I believe and which is there's the enormity, you know. of our galaxy. There are something like a hundred billion

40:09 Solar systems. Okay. And in The universe there is something Like

40:16 Uh a hundred billion galaxies. And so there are a lot of combinations out there. So um I would have to believe That the probabilities of um there being life in other forms and so on are great. Okay, out there.

40:32 However I've also heard scientists say that there is that that's much smaller Then one would think about those things. But I haven't gotten into the subject.

40:44 All I'm giving you is, you know, like what I heard about those things and you know, like it's not a subject that I've spent much time with. Right. Yeah, I think you had a phrase like uh probability weighted beliefs or something like that. Right. It's like Not all beliefs are are obviously equal. Some you have high conviction in it, some you have much lower based on Yeah. And an analysis or an assessment. It's just my way, you know, and also markets teach you this way. Right. What is the expected value? How to go? Ha humility. Okay.

41:12 If you have an opinion, what's the opinion worth? Hey, how much time like we've spent almost all of this time talking about like frameworks for thinking and and um And very little of it was about business or finances, how much time of your day do you spend thinking about some of this? high level stuff versus like actually

41:30 Picking up Or deciding making a decision on a trade. They're connected to me. Okay, I'm a global macro investor. Okay. Which is, by the way, I think it's the best kind of investing'cause it brings you into

41:43 Okay, global, that's cool. You deal with the whole world. Macro, that means big stuff. Okay. And then how do you place your bets? And and so it's connected to all of this stuff. You know, it's connected to um The the politics and the geopolitics and all of that and it's connected to history. I did a study

42:04 Um last five hundred years. Of how things are working only. Because I learned in my life. That if I haven't seen something before, am I That didn't happen to me in my lifetime.

42:16 I should see whether it happened before my lifetime and so on. And then when I did that 'Cause there are these big cycles. Uh um Like there's um there are orders, right? We'll call there's a monetary order. There is a political order.

42:33 Okay. Political and social order. There is a geo political order. In other words, systems of how they work? They all break down. Okay. There's

42:42 Throughout history. You read history. But they happen like you know, in these big sort of cycles and they break down kinda. For the same reasons all the time. They break down for the same reasons. So as a global macro investor in a sense, I'm connected to that. So the book that I ended up writing, you know, which is The Changing World Order. I plot things and so you see them on graph.

43:03 And you could see these things happening simple measures of financial health. And how does that all work and what are the consequences when you see that. So Yeah, I'm into that'cause so it's connected. When you said don't I see the big stuff Okay. Yeah, the big stuff matters.

43:20 A lot, right? But you see it in these You you realize that um a lot of people are looking at the news. The news lasts a minute. Okay. Can you put the news

43:32 In the context of what's happening, watch what's happening. I mean, just let let's take a look at those things. You want to take a minute on that? Yeah, yeah. Okay. Okay. So one of the things that I learned about is that there are Five big forces.

43:47 that interact o over a period of time to determine that. And that is the debt money. Economic Force.

43:57 Okay. And there is a big debt. Okay. So it's and it's a very simple thing. Um it uh if you

44:05 Acquire more debt. Then you and then your earning over that. Oh okay. So they grow. is like in your circulatory system, that's like plaque being built up in your circulatory system. And when that happens and it becomes painful

44:25 You have a debt restructuring and also one man's debts are another man's assets. So if you're producing a lot of debt, uh let's say government's running a large budget deficit That means it has to sell bonds. And then who are the buyers of the bots and how does that work? So it has a mechanical part of it. That's one of the forces. The other forces is

44:46 Wealth and values differences. So there's the political Four. Which has uh wealth gaps, values gaps. As they become greater, that's a greater threat to democracy.

44:58 That's a greater threat to in other words, when you get to do you have irreconcilable differences, so you're not gonna compromise and you're not going to even follow the system. That's a risk. Okay, that's a risk now. Okay. We have the first risk, we have the second risk. Check, check. Okay. Third risk is um Uh the geopolitical risk. So there's orders, right? The way the order works is who's in control. What are the rules of the game

45:26 To the world. And um so the way it works is Yeah, but The winner of the award sets the rules. And that we call that the order, nineteen forty five. We ended the war.

45:37 America sets the rules. And so on, and we created what uh was a multi lateral type of system. You know, almost representative the United Nations, the world Health organization, the world trade organization, so all those world organizations are out the picture. We no longer have a multilateral world order. Okay, so how do you resolve differences? You fight, okay, you're going to have conflict. How how do you get past the disagreement? There's no court you go to, you can't do it that way. Okay. So now you have

46:08 Those three things. Okay, that's hap that's happening. Number four um four always through nature. Uh his nature um in in particular Droughts, floods, and pandemics historically have killed more people than wars. And they are a big force.

46:23 Yeah, as they come up. And number five, all through history is man's inventiveness, particularly of new technologies. And that raises living standards. And so so if you were to see life expectancy. Um always rises. uh productivity per capita GDP by all measures. As we learn more, we have that.

46:44 And so there's the interaction of those five forces. Those five forces you can measure them and you can measure their interactiveness. And that is what is now happening. So if you know those cause effect relationships, I think they're connected. I've read something that Your family office. I don't know if this is right, you can correct the record.

47:02 Your family office has like seventy percent or seventy f percent in gold ETFs right now. No, no, no. Is that wrong? Totally wrong. Totally wrong. I believe that from an investor's point of view But they should Um Depends what their portfolio is s constructed and.

47:16 They should have between uh five and fifteen percent Uh portfolio on getting that fifteen uncorrelated difference. Uh that They should have something like that and they should have it overweighted if they're tactily doing it.

47:31 tactically means let's say there's a certain time to own it and a certain time not to own it. Certain time to own it is um particularly when there's a debt crisis. And the government is flooding with money. Uh that's that's an ideal time to own it. So there's a timing question. So I believe that one should strat

47:50 Create a strategic asset allocation next. Meaning what is my best balanced portfolio if I have no opinions? What is it's not gonna be cash because cash always is the worst performing over a period of time. People think it's the safest, it's the surest to do poorly over the longest period of time. So high certainty, low performance. The best thing to do is have a well balanced portfolio. of assets because you can lower their risk.

48:18 as by through the diversification'cause if you have one, it goes like this. But if you have another that does the opposite with it, you can have that. So there's a strategic asset allocation mix, and then you make your tactical bets relative to that. And and so on. But here's what I would describe. The mechanics, let's say. Uh there is such a thing as bubbles. Water's a bubble.

48:41 A bubble is not whether the stock will pay off in the long run, because in bubbles, even the most successful companies go down eighty percent or something along those lines. So typically when there's a uh borrowing of money or whatever and there's an increase In wealth. relative to Monique.

48:58 Okay. Wealth and money are two different things. Okay. Wealth is um You can make up wealth. If if you have a fifty billion a fifty million dollar offering on a billion dollar valuation

49:12 Um then all of a sudden you're tech You're called a billionaire. And it it was fifty million dollars. But and and then the the world has a billion dollars in wealth. But what happens is as wealth builds up.

49:25 You can't spend wealth. You have to sell wealth. In order to get money because you o can only spend money. And so when wealth builds up a lot and then there comes the need for money. Now what creates the need for money? The need for money. often is

49:40 uh that they borrowed the money to buy the wealth. Uh to invest in the wealth. Or and then maybe interest rates go up. And then all of a sudden they have to pay their debt back. And so where do they get that money from? They sell the wealth.

49:55 In order to get the money and there's so there's this dynamic that's taking place. And then it has another number of ingredients like it's all the rage to buy it. And everybody buys it. Everybody buys maybe more than they sh should because they don't diversify or uh and what happens is it's all the rage and so Is it logical? And there are these elements that create a bubble.

50:21 Okay. There are right now um on that scale I have a Mobile gauge. I measure measure all these things. And I have this bubble gauge going back across countries to about nineteen hundred. And so I can see where they are. And these, by the way, typically take place uh quite often.

50:40 When there's great new technologies. A reason to be exuberant. The reason to be exuberant and and to bet and And people confuse Um investing

50:50 And They they say, I believe that technology is going to be great and revolutionary. And it is. Okay. But that doesn't mean the stock will be great. Okay, there's a lot of reasons.

51:00 that the stock could be too high and competitors come in and they you know uh there's a Google and there's a Yahoo. So so what's the bubblegage saying right now? So the bubbleg is saying It's about seventy five percent tor. Where it was both in two thousand and nineteen twenty nine. So it's pretty high up there, okay? And Japan.

51:22 In its bubble in nineteen ninety, it got higher even than than those cases. So it's high. People pay too much attention. I could tell you probably with good probability. Um that it won't be good to um for the next I I couldn't tell you whether it's gonna be three years or ten years, but it won't be a good investment. Um but it won't tell you timing.

51:47 Timing you need the pricking of the bubble. Okay. So what causes it to prick the bubble? So if you got a bubble and then you see, okay, here are the things that prick the bubble, then you've got a good combination of things to do your market timing because the timing is going to be on the pricking of the bubble. The perking the bubble typically is the creating the need for the cash. For the w Converting that wealth into cash for one reason or another. Quite often it's the most typical thing is tightening monetary policy. Okay.

52:18 So what you have typically is that when Stocks go up. And bonds go down. Then what you have is uh the future expected return of equities.

52:30 becomes low relative to interest rates. And when interest rates go up, let's say a tighten of monetary policy Yeah, you know, that's that's a classic dynamic. Other things like wealth taxes could do it. So in other words, for example, if you say

52:45 You're gonna have to pay wealth tax. Then whoever has the wealth is gonna convert to someone. sell some of the wealth to get the money in order to be able to pay. So looking out for those things in terms of the timing. is my machine. Take what that for whatever it's worth. I don't want people to trade on that this and so on. But I'm t just trying to answer the question that there are mechanics.

53:07 Okay. Everything that happens ha uh has causes to make it happen. And if so you understand the mechanics of the cause effect relationships, you can see all this and Understand it that way.

53:21 Okay. So you've probably have heard this on the podcast, but if you're running a company, I think that the number one attribute that will determine if you are gonna succeed in business is how fast you can learn from others. Specifically how fast you can learn from other entrepreneurs. But there's a problem with that. I have this problem and in fact you probably have it too. That's one of the reasons why you listened to my first million in the first place. The problem is that finding other successful entrepreneurs to learn from it's a pain in the butt. And so that's why a few years ago I started a company called Hampton. You can check it out at joinham dot com. We have thousands of members and they exist for this exact reason.

53:56 So here's how it works. If you're a founder that does at least three million in revenue and you make it through our incredibly thorough vetting process, we then match you and put you in a group with nine other entrepreneurs. You meet in real life in your city once a month and it becomes your peer group that will frankly change your entire life. It's changed mine. I'm in a group as well. And so if you're a founder that does at least three million a year in revenue, check out joinhampton.com. Again, the URL is joinhampton. com. Is Bridgewater the biggest hedge fund because you were the You had the best performance.

54:29 Is it the biggest because you were the best at Marketing is the big why did it become the biggest? It became the biggest hedge fund. Because We the most consistently made Uh

54:41 Excellent returns with A minimal risk. And we were uncorrelated with the stock market or any other market. That that was the main thing. It made I think eleven point eight percent a year. For uh for

54:55 Something like thirty one years when I did it The worst uh down in a year. was two thousand'cause uh of the covet and we didn't know how to de d deal with the covet. Well, that was down through about thirteen. The next two times was down like Two percent.

55:12 Okay. And that was not correlated with anything, you know, the losses you lose fifty percent. You have to have a hundred percent to make m money. And so the compounded effect of that And it was comfortable, so that's that's that's why.

55:29 I think it was like three. Three percent. Three, four, but not not significant. But it does help your your your your media, your work, your I mean you're you're a charming, you're a good leader, like and you've been doing it since you were in your thirties of like But I became the long uh uh Bridgewater became the largest hedge fund. Before Anybody

55:51 Knew me and it was the opposite reaction. Like I was trying to be below the radar. And then two things happened. Uh we became the largest hedge fund in the world. And at the same time. Uh we have this Culture.

56:05 Okay. And the culture Uh was perceived as a cult. And then I put online The principles just so we we have a book of how we're gonna be with each other, the principles And then that

56:17 got around three million copies. Or It was downloaded three million times, people passed it around. Otherwise it was gonna be a problem. Oh, like hiring people and so on that wouldn't understand the culture. Which is the culture is an idea meritocracy in which we

56:33 Uh radical truthfulness and radical transparency. But anyway, so um in answer to your question, it was not my charm had to do with this. I could explain the process. People can they can understand what was our process. And I could show how it was back tested and it worked. Through all of those periods of time. And that was logical. And then there were results. And we helped people learn.

57:00 Meaningful work and meaningful relationships. So I would have ro we would have relationships with them and we would teach them and they would learn and they became better investors. I was walking around New York'cause I this is my first time here in like ten years. And I went to the Rockefeller Center and there's this like kind of this giant stone and it's John D Ro uh Rockefeller Junior And he's just writing these things. I believe

57:20 In the sacredness of a promise that a man's word should be as good as his bond. And it just has each it's there's like just ten of these principles. Etched in stone. Sitting outside the building, you know, it's like I believe that love is the greatest thing in the world and that love alone can and will

57:36 Overcome hate. Right. And we are missing these. Now More than ever.

57:42 Right. The idea of Principles. What are the principles that bind us together? Okay, what are the principles that we

57:53 Follow. Really, what is most important? People are not You know, everybody should write down their principles and then be judged of how they're living by those principles. And are they together?

58:06 Well this is the best part of your book. It's You write the principle. You're not saying these are your principles for everybody. Like these are my principles. If if you take away anything, it should be that you should have y figure out what yours are. That's right. In Europe, most people just don't know what theirs are. Even fewer will ever write them down and then the fewest will be those who act in alignment, who walk their talk. But to get there You have to write it down. You have to look at it.

58:28 You have to have the shit kicked out of it. You have to, you know, and you say, Yes, that's right. Those That are clear. Etched in stone. That bring us to a higher level of how we should be.

58:43 Or so. We are short of those. Just like we're short of heroes, okay? Role models. That you say ah That was a great man.

58:53 Oh, and that's a way to be. Who was yours growing up and maybe do you have a hero now? Like one of them was Paul Volker. Okay. Uh Li Kuan Yu.

59:02 started Singapore and and People who will Sacrifice. for for the things. I believe that Oh we we talk about love.

59:14 Uh karma. Uh okay. Or what I mean is You go across the world and you look at all religions. And there's um something common. Everybody can have differences in their superstitions, their beliefs and so on.

59:29 But there's a commonality which is do unto others as we would have them do unto you. Or karma, what goes around comes around. And it is a reality. That the whole is much better. Then the individual parts.

59:46 Because a little bit of consideration and help for others can make such a world of difference, and if you do that both ways You have a much better world, right? And then people who do that. are role models to me as I as you look at that, okay?

1:00:04 As the sting from Selfishness and fight. In in other words, and what I mean that is Mutually destructive. And and you see that. So I I think it's a question for humanity now.

1:00:16 Can we rise above ourselves? for dealing with, you know. What will certainly be better for everybody if we can get along. I I but I don't know mean that idealistically. This is practical, right? Cause it doesn't cost me a lot to help you.

1:00:34 Doesn't cost you a lot to help me. And but it f but it could make a world of difference. When you have that it's a practical thing. And and then that what is heroism? Contributed.

1:00:46 To that. I think that's Literally what it is. And and we're now operating a lot the opposite way, I think. You know, we've been doing this podcast for for a little while here and we've been talking about lots of different

1:00:58 angle, some about investing, some about life and principles and entrepreneurship. Um I'm curious, like if somebody was listening to this and There's one thing that they were gonna remember. What would be the thing that you hope people remember or take away? What's like what's the what's the one big one?

1:01:15 Know what you want. And understand that it's a It's a journey of having your nature And then running into your mistakes. And learning from those mistakes to get what you want.

1:01:29 And then I would say It's all about meaningful work and meaningful relationships. If you have work that you love And you've got relationships that you love, you're probably gonna have a great life. Well thanks for doing this, man. Yeah, we appreciate it. This was fun for us. I hope it was fun for you. It was fun. Yeah. I feel like I could rule the world and no

1:01:48 But I want to I put my law in it like a day song on the road, less travel, never looking back. All right, let's take a quick break to talk about a podcast. Cause if you're listening to this, you like podcasts. And what's better than one podcast? Another podcast. And let me tell you, another podcast you should check out. It's called Success Story. If you like hearing about different success stories and hearing QA sessions with successful business leaders or hearing keynote presentations or just checking out conversations about sales and business and marketing tactics, is a great podcast for you. So check it out wherever you get your podcasts.

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