Valuetainment - Episode 410： Billionaire Ray Dalio Predicts The Next Big Market Crash

00:00:00.000 I'm Patrick Bedevi, your host of Value Tim, and today I'm going to talk to somebody that's

00:00:25.620 worth $19 billion. He is known as one of the greatest hedge fund managers in the world,

00:00:31.420 none other than Ray Dalio. Ray, thank you for making the time. Thank you for making the time. Yes,

00:00:36.240 and we kind of wanted to create a romantic setting. This is like a notebook-esque for you.

00:00:40.480 Maybe you're going to open up and tell us some of your insight even deeper than principles.

00:00:44.100 Well, I don't know about your comment about romantic, but in any case,

00:00:47.580 it is a pretty setting. It is a great setting, yes. So, Ray, for some people who don't know,

00:00:53.300 obviously one of the things you and I talk about on the phone, I come from the Morgan Stanley

00:00:56.300 background. That's kind of how I got into the financial industry. How did you get into the

00:01:00.260 business yourself? In the 1960s, I was caddying at a golf course, and the stock market was hot at the

00:01:09.260 time. So, I was 12 years old, and I was talking about stocks with the people that I was caddying

00:01:16.240 with, and I took my caddying money, and I decided I would invest. I didn't know what I was doing.

00:01:22.380 The first stock I bought was a company which was the only company I ever heard of that was selling

00:01:28.400 for less than $5 a share. That was my criteria, because I figured I could buy more shares, and

00:01:35.000 that meant if it went up, I would make more money. Obviously, stupid. But I got lucky. The first

00:01:42.060 company I bought was a company that was about to go broke, but somebody acquired it, and it tripled,

00:01:47.660 and I thought this game is easy. So, I got hooked. How instant was that? What was the timeline of you

00:01:53.740 investing to a triple ink? I don't remember exactly, but I would say it was probably maybe a little

00:01:59.500 less than a year, a year, something like that. That's pretty quick to triple. I mean, that can really

00:02:02.820 hook you. That can really pull you in. Yeah, when an acquisition comes along. So, and then I got hooked

00:02:08.800 on the game. I know your dad was a musician, jazz, but how did you get into even being interested in

00:02:16.100 that? Was it listening to what they were talking about, the guys that were golfing when you were

00:02:19.240 caddying, or? At the time, everybody played a little bit around. You know, in other words, they were

00:02:24.060 taking the stock market. It was very hot. So, I'd walk around, and we'd be chatting. You know, I'd be

00:02:30.560 asking them questions, and they would think it was a little odd that I was asking them questions, and they

00:02:34.420 were nice to a young kid. And so, we would talk about it. And I'd say, what's the stock? And so, that's

00:02:40.860 how it happened. And at that time, if I'm 12 years old, and I'm your friend, how was Ray Dalio? What was

00:02:46.140 your personality like? Were you shy? Were you curious? Were you confident? What was your personality like?

00:02:51.660 Well, the first word that you mentioned that comes is curious. I'm very curious. I'm not shy, but I'm

00:02:58.660 polite. You know, I don't want to, if they're playing golf, I want to do what they want me to do. But if you

00:03:04.020 get a nice person, and I'm curious, and we'll get into an interesting conversation that they're

00:03:09.320 interested in, it's great. Now, you caddy for some interesting people. I know one of them being

00:03:13.420 President Nixon. Was he a president when you were caddying, or not yet? No, not yet. He wasn't yet.

00:03:17.940 No. He had lost the election, you know, his first, and then he, it was post that. Got it. Then the Duke

00:03:25.680 of Windsor and some other people. That's a nice list. Well, and then there was a Wall Street crowd,

00:03:31.100 you know, and that led to my being able to clerk on the floor of the New York Stock Exchange. Because

00:03:38.440 one of those guys, we were talking about the markets and so on, and he had a specialist firm,

00:03:44.240 in other words, a floor brokerage firm on the floor. And so he said, hey, why don't you, in your summer job,

00:03:51.860 come down and clerk. So between college and my summer job, my going to business school,

00:03:58.740 I got to clerk on the floor of the Stock Exchange. But along the way, you know, those guys made a big

00:04:04.400 difference in my life. I bet. Do you remember any dialogue with Richard Nixon, or no? Was there any

00:04:08.780 specific that stuck till today, or not? No, he was, there wasn't, he wasn't chatty. Okay. That's,

00:04:14.380 it's funny, I asked Clint Hill. I don't know if you know Clint Hill. No. Clint Hill was the

00:04:18.700 Secret Service agent when JFK got shot. He's the first guy that jumped on the top of the car.

00:04:23.080 Ooh. And he was a Secret Service for Richard Nixon. I says he wouldn't talk too much. He was

00:04:27.540 always kind of to himself and quiet. It seems it's the same thing with you as well. So now you go to

00:04:31.820 high school. Who were you in high school? Same, curious. Were you playing sports? Were you a 4.0 GPA kid?

00:04:37.560 Who were you in high school? No, I was the opposite of a 4.0 GPA kid. Like, I didn't like high school.

00:04:44.640 I did like playing with my pals and, you know, having a good time. You know, there was so much of

00:04:52.080 learn this, remember this. And I think, first of all, I think I have a very bad rope memory. What I

00:04:58.880 mean rope memory is if something doesn't have a reason for being what it is within its context,

00:05:05.880 like, let's say, phone numbers or names and so on, it's challenging for me to remember it. But also,

00:05:11.440 I didn't understand the purpose of it. I didn't get it hooked in. It wasn't curiosity-based. It

00:05:19.220 wasn't interesting. And so I was a lousy high school student. I barely got in on probation to

00:05:28.980 CW Post College, which is no Ivy League college. But I'm very, very curious at the time for lots of

00:05:36.320 different things. What topics? People would say everything from politics to, you know, markets

00:05:42.700 and how things work, you know, not mechanical things, but how the system- Exceptional or-

00:05:48.920 I was involved with politics quite a bit. Why politics?

00:05:52.340 Well, I was young enough at the time that I remember Eisenhower going to Nixon, the debate,

00:05:59.820 in Kennedy. And I was inspired by John Kennedy and that era. And so all along then, it was

00:06:11.800 interesting. And so when Bobby Kennedy was running for the Senate, it was in New York. I got very

00:06:20.880 actively involved. I was just, I was in high school. And so that part of it was interesting

00:06:25.220 to me. So anyway, politics, markets. Did you play any games? Were you a card guy,

00:06:30.280 backgammon, chess? Like, did you have any of those games? I played backgammon. You played

00:06:34.340 backgammon. Yeah, played backgammon. I played, I liked chess. I played some chess, but no, it

00:06:39.280 was mostly my game was the markets because the two things went together. Wow. Okay. The two

00:06:44.960 things went together. What was going on in the world, politics and so on, and what was going

00:06:51.080 on in the markets. And to me, it was an ability to bet on what was going on in the markets,

00:06:58.260 right? In other words, or bet on what's going on in the world, because what was going on in

00:07:02.680 the world would affect what was going on in the markets. So to me, that enthralled me because

00:07:08.640 it wasn't just theoretical. Like if you read a newspaper and everybody talks politics and

00:07:14.280 they say, what's going to happen? Oh yeah, bet on it. Make your bet. And the markets gives you

00:07:21.100 an objective scoring of how well you are at betting on these macro, global macro, economic,

00:07:28.320 political things. Is that a pretty common threat amongst everybody in your world? When I say your

00:07:33.260 world, I'm talking you, Buffett. I'm talking people that are investors that pay very close

00:07:37.880 attention to politics because so does Buffett. He's a guy that was coming up paying attention to that.

00:07:42.380 Is that very common or not really? Not really. Not really. In terms of, let's say, global macro

00:07:48.120 investor, most people find a particular niche. Let's say, I would say even in Warren Buffett's

00:07:55.560 case, he will focus a lot particularly on the cash flows. You're exchanging one cash flow for

00:08:01.420 another cash flow. That has to do with value investing and such things. More math. Well, investing

00:08:07.440 is an exchange of a lump sum payment for a future cash flow, right? So it's maybe the cash you have

00:08:17.180 or even the cash you can borrow. But you can take a certain amount of cash and you buy something.

00:08:23.240 And what you're getting is a cash flow, like your investment in that. And they all compare.

00:08:28.660 So when you can take a certain amount of cash that, let's say, you could borrow it at 3% and I can

00:08:36.300 invest it at 6%, then I'm going to make a 3% spread. And it's the constant calculation of what

00:08:43.860 that would be, let's say, Warren Buffett's type of approach. And that would be most important.

00:08:49.640 That's more value investing. Then you do with how the world is changing and what the world is going

00:08:55.740 to be like. And that's a little bit different. Or you go to niches. You know, a niche might be you

00:09:02.520 follow a particular industry. And what will the new AI technologies be, for example, and how do I bet

00:09:08.800 on that? Or it may end up being that you look at certain distressed debt. But quite often, it's a much

00:09:15.620 more narrow specialist type of thing. So it's a little bit like doctors. You know, a doctor might be a

00:09:22.000 specialist in this. There are a lot of specialists. And then the idea of global macro brings me to a

00:09:27.980 different world than most of the men.

00:09:29.780 Is that you as well? Because you're more diversified. When I look at the way you set up

00:09:33.640 your portfolio, it's not as niche as that...

00:09:35.800 No, no, I'm big on diversification.

00:09:37.380 You're very big on diversification.

00:09:39.240 Knowing how to diversify well is more important than almost anything. People don't understand this.

00:09:45.780 Is that an evergreen principle, you think?

00:09:47.220 Yes. That's an evergreen principle. And the reason I'm saying that, the way it is, it's

00:09:52.240 almost like a casino making its money.

00:09:54.900 Okay.

00:09:55.360 Okay. The way that you do it is you get an edge. So now when you have to make a bet, I've

00:10:01.280 got to bet against the whole world. The world has a view on something is reflected in the

00:10:06.100 price. So when I think something is attractive or unattractive, that means I have to bet against

00:10:12.780 the whole world and whether that's right or not. That's difficult. I get it right.

00:10:16.900 You know, more often than I get it wrong, but I'm going to get it wrong sometimes. And

00:10:21.880 so when you can take a lot of different bets, what you can do is, like the casino, you'll

00:10:29.640 get your average that your bet would be, but you'll reduce your risk of one of those tables

00:10:35.480 not being the table that's paying off. And so that margin that... So I can reduce my risk

00:10:42.120 without reducing my return by knowing how to diversify. And I'd say that's particularly

00:10:47.700 true, important for the people who are listening, they're investors. Because what they've got

00:10:52.980 to...

00:10:53.120 Reduce risk without reducing return.

00:10:55.400 That's right.

00:10:55.920 That's the specialty.

00:10:56.980 That's right.

00:10:57.780 Elaborate a little bit more if you don't mind on that. So reducing risk without reducing

00:11:00.900 the return, because a lot of times if I'm reducing the risk, it means my return's also going

00:11:06.080 lower. But you're saying no.

00:11:06.900 We're reducing it without even reducing the return.

00:11:09.020 Right.

00:11:09.500 I mean, that's a high-paying skill set to have.

00:11:12.700 It's the most important thing that you could start off doing. If you have a number of equally

00:11:20.160 good likely bets, but they're uncorrelated, like the casino. You know, one table is going

00:11:28.340 to get me a margin like this, but take another table and it makes me a margin like this. But

00:11:34.880 I might have volatility about those. Let me take all those investments that I think will

00:11:40.980 make 10 percent. So that's my return. But they're uncorrelated with each other. That

00:11:47.200 means I'll still get the 10. I don't lower my 10. But my diversification means I lower

00:11:54.480 by risk. So I improve my return to risk ratio.

00:11:59.240 Ah.

00:11:59.820 Is that an art that you can teach?

00:12:01.340 Oh, yeah. Yeah. I wrote about it in, there's what I call a section in this book, the holy

00:12:06.980 grail of investing. It's three pages long. And it explains basically this important thing.

00:12:14.220 Because when that epiphany happened to me and how I would do it, it changed everything by

00:12:19.120 being able to do that.

00:12:20.200 Because I can improve through diversification. I can improve my return to risk ratio by a

00:12:28.420 factor of five. So by diversifying, okay, the return relative to the risk, I can keep

00:12:37.600 my returns the same and reduce my risk to one fifth if I know how to diversify well. And that's

00:12:45.720 why I'm explaining it. It's not all that complicated. It's simply explained in the book. But in any

00:12:50.380 case, that is the holy grail of investing. Okay? That's a big thing. If you start to know that that's

00:12:58.180 what you're going for, it changes everything. And it's so important for the average person who's

00:13:04.080 listening. And let me explain why that is. Because the average person who's listening, too many people

00:13:09.480 think that they can go into this very difficult zero-sum game of betting against the consensus

00:13:17.240 and be right. You know what I mean? In other words, investor says, I'm going to go in the markets,

00:13:22.800 I'm going to make money.

00:13:23.880 Betting against the consensus and be right.

00:13:26.140 Right. Because the consensus is built into the price.

00:13:29.360 Okay.

00:13:29.600 Okay? That's what's a... So think of it as like going to a horse race, and there's handicaps. Okay?

00:13:36.320 You're not going to pick the best horse, and you're not going to pick the best company. A terrible

00:13:41.620 company can be a better investment than a terrific company. A terrible company can be a better

00:13:48.440 investment, just like the terrible horse can be a better...

00:13:51.600 In what way?

00:13:52.200 Because the odds that are changing, like you go into that, and that becomes the long shot.

00:13:58.420 But because the long shot is going to pay off 25 to 1, right? If he comes in, that you could just

00:14:08.580 as likely bet on the long shot as the leader, and it's going to be equally likely that you're

00:14:14.740 going to make money, right? Otherwise, the market would be doing the opposite. Well, the market is

00:14:20.120 like that, right? In other words, if everybody believes that something's going to be terrific,

00:14:25.220 okay, then everybody's betting on it, and its price is high. So it's not what's best, necessarily.

00:14:33.540 It's what's best relative to what's in the price, what's discounting.

00:14:37.860 So let me ask you. Say I have your formula. Let's just say I have your formula. You got around,

00:14:41.240 what, 1,500 employees with Bridgewater? Is the number right? About 1,500 employees?

00:14:44.940 So if I have the formula that you have, what other, what edge do you have that somebody else

00:14:52.200 has to have as a character, as an individual quality, discipline, patience? What else do

00:14:56.340 you need for somebody to say, guess what? I'm going to go build the next Bridgewater.

00:14:59.000 Okay, before I go to that, I want to complete my thought on this notion of you as an average

00:15:06.640 investor and why diversification is so important. In order for you to win in the game like you're

00:15:16.120 going to go in and pick what's a good investment, you are playing against others. You have to

00:15:23.260 realize that because it's all in the odds. It's like when you go to the track, you're going

00:15:28.420 to have to play against the handicappers, okay? So it is very difficult for you to beat me or to

00:15:36.800 beat others who are putting 1,500 people and hundreds of millions of dollars into how to win

00:15:42.300 in that game, right? And there's a lot of people. And I find it challenging. I find it difficult.

00:15:47.380 So it's difficult to win in that game. It's difficult to win in that game individually by placing

00:15:54.080 the bets. It's difficult to win in that game. It's more difficult to succeed in the markets

00:16:00.380 than it is to succeed in the Olympics, okay? But people don't realize that. They think,

00:16:06.420 I'm going to go have an opinion, okay? Sure.

00:16:08.780 But there are more people trying to do it in the markets than they're trying to do it

00:16:11.860 in the Olympics. And so nobody would say, I'm going to run and compete in the Olympics.

00:16:16.220 When you realize how difficult that is, okay, but you can diversify well. Anybody could diversify

00:16:23.680 well? So if we look at what the world will be like in five years or three years or one year,

00:16:29.640 okay, like we're coming in the presidential election, we have all these things going on,

00:16:34.780 okay, you want to bet on it? Okay, wise guy, give it a shot. Is that easy?

00:16:39.840 That's what you're doing.

00:16:40.420 Okay, well, the only way I can do it is I need to diversify my bets well. I wouldn't want to

00:16:45.900 concentrate on any one of those.

00:16:47.400 So you're not.

00:16:47.820 And I try to, I'll take, like the casino, I will take, I'll take that bet and I'll take

00:16:53.360 this bet and I'll take a bunch of those bets. But for you as the average investor, you're

00:16:58.180 probably not going to even be able to pick which horse has got the edge relative to the

00:17:04.320 handicappers. Okay. And so diversification, that is the thing that I would say, particularly

00:17:11.120 for anybody, it is the most important thing. It's if you know how to do that well. So that's

00:17:16.540 why I'm saying, you know, that page, those couple of pages here was something I wanted

00:17:20.680 to pass along to people.

00:17:21.680 You'll see a lot of people will say that's a boring formula or it's an outdated, you know,

00:17:25.200 you'll be in the industry and say, oh, this whole diversification is a boring formula.

00:17:29.180 It's outdated, et cetera, et cetera.

00:17:30.800 I'm just trying to say, I went from nothing. You asked me. Okay. My dad's a jazz musician,

00:17:37.500 middle class or low middle class family. I had nothing other than parents who cared for me and I could

00:17:43.480 go to a good public school. And that was the only thing I had. And if I took that and I say,

00:17:48.880 okay, here I am with the things that zapping over the markets and making money and building a

00:17:55.480 business and so on, there are a limited number of principles that I want to pass along to people

00:18:01.380 because I think if they can get those principles, that that would be extremely valuable. And this

00:18:07.320 is not boring. So when I come back and you say, okay, that arc in life was not boring. That was a

00:18:13.080 very successful and exciting arc in life. And this is one of those principles. So if you take

00:18:18.860 diversifying well, how to diversify well, please go understand that principle. It's only a couple of

00:18:25.220 pages. Please go understand that principle because when you have savings and you think how much money

00:18:31.180 do I need for my kid's education or my retirement or whatever it is and so on. And if you don't know

00:18:37.340 how to do this well, you're risking a lot. And if you do it well and so on, it produces an enormous

00:18:43.120 amount of opportunity.

00:18:44.120 So you have 1,500 employees here. How many of them do research for you specifically tied to

00:18:51.600 politics, election, what's going to happen? How much are you spending time studying that part of it

00:18:56.540 since you're saying two things intrigued you in high school, politics and economy and how it's tied

00:19:00.920 to each other. Are you guys focused heavily on studying what's happened in politics as well,

00:19:04.960 regulation, laws, all that or not really? Well, we need to. We need to more so today

00:19:11.300 than we have ever had to. Why do you say that? Well, because we're in a period of time which

00:19:18.280 is very much like the late 1930s. There are three main things that exist today and are the biggest

00:19:26.360 forces in what is happening that did not exist before in our lifetimes, but existed in the 1930s.

00:19:34.740 Okay. And if you look at history, they repeat themselves. And the first is that there's a very

00:19:40.740 large gap between the rich and the poor. And as a result, a big gap in politics between the left and

00:19:49.980 the right. Okay. It's become more extreme. And in this coming election, it will be more extreme and

00:19:56.960 around the world, it's more extreme. That's why we see the rise in populism. Okay. That has very big

00:20:02.960 implications on how the economy will work and how taxes will happen. Let me give an example.

00:20:08.960 The corporate tax cut, which happened, was a big boost for stocks. Because you own a stock and they

00:20:18.060 pay less taxes, the stock is worth more, the company's worth more. If there's a, let's say, a Democrat

00:20:24.880 elected, there's a high probability, almost certainty, that that would be rolled back.

00:20:29.880 Sure. Sure. So one of those or another matters. And it matters in a lot of different ways, more than it

00:20:35.940 ever mattered before. So item number one, the wealth gap and the political gap. The second factor,

00:20:42.880 interest rates are close to zero and the printing of money to buy assets is not as effective. In the old

00:20:49.320 days, in the normal days, if the economy didn't do so well, you'd hit it with a little joke of stimulation.

00:20:56.320 You'd lower the interest rate and put some cash out there. You'd give it a hype and then it goes. Okay.

00:21:02.320 When you get to zero or close to zero, you can't lower those interest rates. So we're close to that level

00:21:09.320 in the United States. We're at those levels, negative interest rates in Europe, negative interest rates in Japan.

00:21:16.320 That baby ain't going to work anymore. When you try to lower that in terms of that won't happen. Okay.

00:21:21.320 That's limited. And then what they do is they go out and they print money and they buy financial assets.

00:21:27.320 And that is not working as well because what happens is when you buy the financial assets, it goes into the

00:21:33.320 hands of who own financial assets, investors. And what they do is they put it into more investments.

00:21:41.320 That notion of putting it into more investments makes those investments go up in price, which is great for the

00:21:47.320 people who have the investments, but not so great for the people who don't have the investments.

00:21:51.320 It widens the wealth gap and it's its own challenge. And it's not going to be stimulative and you'll see it.

00:21:57.320 So item number two that didn't exist in our lifetimes before, but did exist in the late thirties was, is that.

00:22:05.320 Item number three that exists is that there's a rise of a power to challenging an existing world power.

00:22:15.320 China. China rising to challenge the United States. And if you look at through history, when there's existing world powers and there's rising of a challenging power,

00:22:26.320 there is a conflict, there are conflicts. And they've led to wars. In the last 500 years, that's happened 16 times.

00:22:36.320 In 12 of those times, there were wars. There were four types of wars that happened simultaneously.

00:22:43.320 We always think shooting each other and sending people and bodies into wars and that kind of war.

00:22:49.320 But they all have four types of wars. They have a trade war. They often start with a trade war, 1930s, Smoot-Harley tariffs.

00:22:59.320 There is a technology war. There is a geopolitical war, like is happening with China. What will it mean for Asia, Asian countries?

00:23:11.320 And there's a capital war. Capital war in all of these cases. So for example, just recently, the Trump administration said that they're considering shutting off capital to China,

00:23:25.320 a certain flow of capital to China. Well, that's not happened before. You have to go back to World War II.

00:23:31.320 And in World War II, and in a number of wars that other countries have had, they have a capital war, which means that they could say,

00:23:43.320 the Trump administration could say to the Chinese, you know those trillion dollars of bonds that you own?

00:23:49.320 Well, we're not going to pay you. Or we're going to do this or that. These types of wars. And how does money flow between countries?

00:23:55.320 Who needs who more though, Ray? Who needs who more? I'll digress into that.

00:24:00.320 But I just wanted to make clear that at number three, so these are factors.

00:24:06.320 Sure. One, wealth and political gap, extreme. Number two, monetary policy can't.

00:24:14.320 So if we have a downturn and they're at each other's throats, serious. Number three, the conflict with China.

00:24:22.320 These things have played out. Now when you ask how do you play the game in China, U.S., that's a conversation.

00:24:29.320 But I just wanted to clarify the nature of the dynamic. No, that's powerful.

00:24:33.320 So now when you look at why is politics more important today than it was?

00:24:38.320 Because that will determine in the markets what will happen in the markets and the economy, right?

00:24:45.320 And number one, that wealth gap. Who you elect will have a big economic and market impact. Tremendous.

00:24:51.320 Number two, the absence of monetary policy will have a big market impact as to what will be done.

00:24:59.320 And number three, this geopolitical war, which involves those four things, technology and so on, will have a big impact.

00:25:07.320 So that's why it's more important than ever.

00:25:09.320 So question for you with U.S., China. Who needs who more? Because China was communism.

00:25:14.320 You write about it in your paper, why and how capitalism needs to be reformed, which we're going to put the link below.

00:25:18.320 If you haven't read it, you've got to read this paper.

00:25:20.320 So who needs who more? They're communism. They look at what's going on in the world.

00:25:24.320 They notice U.S. is doing good. This whole book about Karl Marx's Communist Manifesto flopped.

00:25:28.320 It impacted. A lot of people were killed. It didn't work. My family, half of them were communists.

00:25:33.320 They look around Russia and say, hey, Reagan comes. Maybe you've got to consider capitalism.

00:25:38.320 Russia kind of starts doing it now. China's looking at it.

00:25:40.320 They keep communism at the power, at the top, where there's not really freedom of press.

00:25:44.320 But economy, maybe let's test capitalism. Now they're coming up.

00:25:47.320 Isn't the leader still U.S., where they rely on U.S., even though if they want to compete against them?

00:25:52.320 Because I know this whole plan they have with Made in China 2025 with IP and all these things they're taking with the whole plan.

00:25:59.320 I'm sure you've read about it. But my question for you is simple. Who needs who more?

00:26:03.320 I spend a lot of time in China. And I know leaders. And I see both perspectives.

00:26:08.320 And I want to try to be as accurate as I possibly can in painting those perspectives, okay?

00:26:16.320 There is a hierarchy. And in most large companies in the United States, you would not have a vote and an election as to who's operating it.

00:26:25.320 And so it's a top-down kind of management in which the government is working in the coordination of its private sector and its public sector.

00:26:38.320 Extremely involved.

00:26:39.320 Right. Exactly. And they would say, it seems so crazy not to be.

00:26:45.320 I mean, so a leader of China described it as follows, okay?

00:26:49.320 He said, and this will help you understand the Chinese mentality.

00:26:55.320 And because you know Iran and you know the United States, if one needs to suspend biases in order to try to hear the other's perspective.

00:27:07.320 And so what a leader in China described to me said, the essence of the difference between the United States and China is what is the unit that matters.

00:27:20.320 In the United States, it is the individual. It is individualism. And it is the individual. And everything is bottom-up.

00:27:30.320 You know, it's the entrepreneur. You elect your government from bottom-up. And so on. So it's a bottom-up type of process.

00:27:38.320 Companies are put together by people who all want to make money together. They find it and they come together and they make it bottom-up. But it's bottom-up.

00:27:45.320 If you want to build a highway, okay? Individual property rights will matter a lot more in the United States.

00:27:52.320 So an individual can almost stand in the way of that highway being. If you have a mission to get something done, individuals can stand in the way or facilitate it.

00:28:01.320 So that's bottom-up. And he said, in China, the unit is the family.

00:28:08.320 And if you understand Confucianism, Confucianism is, for China, what Judeo-Christian roots is for the United States.

00:28:18.320 And that starts with the family. And it says, if you know how to run your family well, and there are rules for running your family well, according to Confucian,

00:28:28.320 and then you know how to interact with your family, interacting with the greater society, you have order.

00:28:34.320 But it's very paternal. Paternal means, okay, your responsibility, it's top-down.

00:28:40.320 So when they, so there's, when they're running the government, it would be very similar to maybe running a big company here.

00:28:46.320 That they would say, okay, well, there's top-down.

00:28:49.320 Which produces better results.

00:28:51.320 I'm not going to get, that, that we can ask.

00:28:54.320 I get, but I understand the philosophy of where you're going with this.

00:28:57.320 Okay, so it's top-down. So it's a complicated question, right?

00:29:00.320 The important thing, so I'll give you what my thoughts are on that.

00:29:05.320 In their experience, when I first started going there, which was in 1984.

00:29:14.320 Since 1984, they have increased their incomes by an average of 26 times.

00:29:23.320 They've gone from 2% of GDP to 22% of GDP.

00:29:29.320 They had a poverty rate, which was 88%.

00:29:33.320 It's now gone to less than 1%.

00:29:36.320 They have lengthened the life expectancy by 10 years.

00:29:42.320 Now, I'm not saying which has gone better or not.

00:29:46.320 But I'm saying they believe, and when you look at it, that that process is a logical process and it works well.

00:29:53.320 And so that is the one that they're operating by.

00:29:57.320 I grew up in America, which was a land of opportunity for me.

00:30:02.320 And this goes back to what I'm saying in terms, it's got to be a land of opportunity.

00:30:07.320 But I grew up and all I had were two parents who loved me and I went to a public school.

00:30:14.320 And I believe in this opportunity and that element of those types of freedoms to create that opportunity.

00:30:22.320 Right now in the United States, we have a problem in the public education system in terms of the quality.

00:30:28.320 Certain areas which can't receive basic funding for basic things, the most basic things because money doesn't get to them.

00:30:37.320 They would say, well, that would be intolerable.

00:30:40.320 How do we deal with it?

00:30:41.320 We have our own problems.

00:30:43.320 So that each has elements of pros and cons.

00:30:47.320 They could say, listen, having my companies work with my government, let's say on research.

00:30:53.320 If I was to take AI research or if we take Huawei or companies like that, and you would say, well, in earlier years, in earlier decades, there was funding for original research.

00:31:06.320 If it's just the exact profit motive before you make it, it may not be that the best results are necessarily always dealt with, particularly the profit moment.

00:31:17.320 So they might say, listen, we'll put money into development.

00:31:20.320 Now, we would say in a, I think, a maybe too black and white way that putting money into the development by the government making some of those moves would not be our way of doing it from profit down.

00:31:34.320 And so if you look, but if you look at, let's say, what DARPA has come up with in terms of where the Internet came from and where GPS came from.

00:31:42.320 So there are issues.

00:31:44.320 My main point is, let's step back from that.

00:31:47.320 The question you're asking me is irrelevant.

00:31:49.320 Which would I like?

00:31:51.320 It doesn't matter.

00:31:52.320 I mean, you know, because of the pros and cons.

00:31:54.320 Because the issue really is, will they have the right to do it their way?

00:31:59.320 Oh, you're right.

00:32:00.320 There is no question about the right, though.

00:32:02.320 Let me just finish.

00:32:03.320 Will they have the right to do it that way?

00:32:05.320 Sure.

00:32:06.320 Or no, there is a question around the right, because will they do it that way?

00:32:10.320 And will we do it our way?

00:32:12.320 And then you have the real conflict.

00:32:14.320 OK, because the real conflict, when you get down to the nitty gritty of that conflict, is they say the team I'm going to put on is going to be a government company partnership type of thing.

00:32:28.320 OK, and we will choose not to have as much of a government partnership.

00:32:33.320 And then we argue about what the rules of the game are.

00:32:36.320 And that's where the hardball starts to come in.

00:32:39.320 Right.

00:32:40.320 Because what are the rules of the game?

00:32:41.320 I don't know if I, whatever way you want to run your family, you run your family.

00:32:46.320 It's not my business.

00:32:47.320 No, but what I'm saying to you is China wants to run it with those rules.

00:32:50.320 Go be at it.

00:32:51.320 No, but you're not understanding what I'm trying to.

00:32:53.320 It's more force versus influence.

00:32:54.320 No, no, no.

00:32:55.320 I'm trying to make clear when you're when there's a question of an intersection.

00:33:01.320 What are the rules of the game?

00:33:03.320 The United States and China would disagree.

00:33:07.320 Well, that's where the nubs, the rubs come.

00:33:10.320 In other words, if Huawei is a company which has a tremendous lead in 5G technology.

00:33:19.320 And what an American perspective in the rules would be that China pumping money into Huawei is not the way the rules should be.

00:33:29.320 Okay.

00:33:30.320 China would say, well, that's for you to say.

00:33:33.320 And then, and so they'll argue over this top down versus bottom up.

00:33:39.320 I get that.

00:33:40.320 But if you're trying to do business with me and my community, you got to play by my rules, not your rules, right?

00:33:47.320 Yeah, but it's not so clear cut.

00:33:48.320 That's the point.

00:33:49.320 But if the whole thing with the CFO and the whole, you know, Iran and side deal with another company.

00:33:54.320 No, but I'm.

00:33:55.320 You get what I'm asking you.

00:33:56.320 No, but I'm saying.

00:33:57.320 If you're trying to do business with U.S. and the community, wouldn't it have to be by the rules that U.S. has?

00:34:01.320 Of course.

00:34:02.320 Okay.

00:34:03.320 Each can operate by its rules within its domain.

00:34:06.320 Sure.

00:34:07.320 However, it doesn't work that way.

00:34:09.320 Okay.

00:34:10.320 Because of how intertwined they are.

00:34:12.320 Okay.

00:34:13.320 Because of how intertwined one technology is for another.

00:34:19.320 If I was to recount what goes into our technologies or their technologies, and the world that we've gone through has been intertwined.

00:34:30.320 The globalization has meant that companies get this piece from the other and that piece from the other, and there are trade routes.

00:34:38.320 And now we're having to go through a division of those because it would be easy to say when you're in my domain.

00:34:45.320 But the world doesn't work like the domain is cut and isolated and you're just within it because the products are not just within it.

00:34:54.320 If you take an Apple phone, if you take Apple devices, if you take a lot of things that we're using or vice versa, they are intertwined.

00:35:03.320 And that is where the rub is.

00:35:05.320 I'm very familiar with that.

00:35:06.320 I'm very familiar with how many iPhones are in China and how much business they allowed U.S. to go in and how much, you know, 5G is playing the influence with Huawei.

00:35:15.320 And they were getting to the systems, even though they weren't selling a lot of phones yet.

00:35:18.320 I understand that part with the race for Huawei, how big of a race for 5G is today.

00:35:22.320 The only thing I'm asking is principle wise.

00:35:25.320 Power, force, control, no free press.

00:35:28.320 No one really knows what their unemployment is.

00:35:30.320 They'll say 3.8, but no one really knows.

00:35:32.320 It's a competition.

00:35:33.320 And with that competition, whatever it is, they will have our bottom up.

00:35:37.320 They'll have their top down.

00:35:38.320 They'll be control and will be this and so on.

00:35:41.320 And that's how it'll work.

00:35:42.320 And so let's look at that both objectively and then just also understand what they're doing and what their perspective is.

00:35:49.320 Because if you don't understand their perspective and you just paint it as, you know, a good evil thing, whatever it is, or I don't want it.

00:35:57.320 I don't think it's a good evil thing.

00:35:58.320 That's not what I'm asking.

00:35:59.320 I'm saying if America doesn't take a stand for what made them great and they start compromising their beliefs and principles to make other empires happy, we are getting weaker.

00:36:12.320 We don't become the leaders.

00:36:13.320 That is all I'm saying to you.

00:36:14.320 No, but I couldn't agree.

00:36:15.320 Then we wouldn't have any disagreement if that's all you're saying.

00:36:18.320 Okay.

00:36:19.320 Because I couldn't agree with that statement more.

00:36:20.320 No, no, no.

00:36:21.320 Because sometimes I hear analysts say, well, you know, it's okay if China is doing this.

00:36:24.320 We have to understand their way of living.

00:36:26.320 We understand their way of living.

00:36:27.320 I just don't know if I want to compromise my, like the other day I asked a question from somebody.

00:36:32.320 I said, would I rather have my government control me or a corporation control me?

00:36:38.320 Meaning, they have a spy on me.

00:36:40.320 Would I rather have the U.S. government spy on me or have a corporation spy on me?

00:36:44.320 Well, I'd rather have the corporation spy on me.

00:36:46.320 Why?

00:36:47.320 Because their motive is really going to be what?

00:36:48.320 Profit.

00:36:49.320 But if the government is, maybe they're trying to get data.

00:36:51.320 Would I have control from another country having access over me?

00:36:54.320 I don't know.

00:36:55.320 So, this is all things that I analyze myself to.

00:36:58.320 That's fine.

00:36:59.320 All we're really doing, I think, is saying there are two teams that are coming on the field.

00:37:04.320 And there are two different approaches to those.

00:37:07.320 Okay?

00:37:08.320 And now let's look at each one.

00:37:10.320 I would say the biggest issue in the United States is, how do we be as great as we can

00:37:16.320 be?

00:37:17.320 And that's where my greater worry is.

00:37:19.320 Because at the end of the day, what's going to happen is, if we are as strong and capable

00:37:25.320 as we can be, and as great as we can be, we will be good for ourselves and we will be

00:37:31.320 good for the world and best in the event of any conflict.

00:37:34.320 I agree with that.

00:37:35.320 Okay?

00:37:36.320 And that my worry is more about that, okay, than anything else.

00:37:42.320 Perfect.

00:37:43.320 Do you mind if we go into this article?

00:37:44.320 Yeah, sure.

00:37:45.320 Incredibly written.

00:37:46.320 I loved it.

00:37:47.320 I enjoyed it.

00:37:48.320 I highlighted, made some notes, and I brought some boards, if anything you wanted to show

00:37:52.320 to kind of highlight the points.

00:37:53.320 So when I read this, I wrote three things down here on the side, quotes on what you

00:37:57.320 said in here.

00:37:58.320 One, you said, most capitalists don't know how to divide the economic pie well, and most

00:38:04.320 socialists don't know how to grow it as well.

00:38:06.320 Okay?

00:38:07.320 Then you said, meaning, capitalists kind of maybe are like, hey, let me go compete.

00:38:11.320 I want it all.

00:38:12.320 And socialists are like, well, I don't really know how to grow my $1,000, $10,000.

00:38:16.320 Fair.

00:38:17.320 Two, one's income growth results from one's productivity growth, which results from one's personal

00:38:22.320 development.

00:38:23.320 This leads me to one of the points you'll make about education, which I want to cover.

00:38:27.320 And the last one I caught here was, I believe that all good things take into an extreme,

00:38:31.320 become self-destructive, and everything must evolve or die.

00:38:35.320 And that these principles now apply to capitalism.

00:38:38.320 Do you believe the basic fundamentals of capitalism is an evergreen philosophy?

00:38:43.320 I'm a professional capitalist.

00:38:47.320 Capitalism has made my life what it is, and I love capitalism.

00:38:52.320 When you use the word evergreen, I'm, as I said there, I think everything needs to look,

00:38:59.320 evolve.

00:39:00.320 Everything needs to look at its problems and say, what are its problems, and change.

00:39:06.320 And if it doesn't look at its problems and change, it is in danger of dying.

00:39:12.320 And so when I look at capitalism now, and I go into this, I hope anybody who's in this

00:39:19.320 interview will take the time to read this, so that they don't make a stereotypical view.

00:39:24.320 I highly recommend you read the article, highly.

00:39:26.320 Thank you.

00:39:27.320 But there are certain outcomes, and those outcomes are things like, is this a country that I,

00:39:36.320 of the things I grew up with, is this a country of equal opportunity?

00:39:42.320 Can we share the notion, what is our overarching principle?

00:39:46.320 Can we share it, just like you described when you came from Iran?

00:39:50.320 I think this is a country in which it was fabulous in being able to bring people without prejudice

00:39:58.320 from anywhere in the world, and they can really be citizens here in a way where, based on their

00:40:05.320 opportunity and their good behavior.

00:40:07.320 But in addition, the thing that I grew up with, and I always believed was most important,

00:40:14.320 was equal opportunity.

00:40:16.320 So if I would say, what is America?

00:40:18.320 It's a notion, it's a country of equal opportunity.

00:40:21.320 And circumstances have changed, this was not because of evilness of anybody, but circumstances

00:40:27.320 have changed, having to do with combination things, having to do with technologies, replacing

00:40:35.320 jobs in certain types of jobs, having to do with going global and the workforce being a global

00:40:42.320 workforce, where others will, in those jobs, produce it outside the United States and bring

00:40:46.320 it in.

00:40:47.320 Having to do with monetary policy, which means that the central banks buy financial assets,

00:40:54.320 which benefits those who have financial assets relative to those.

00:40:58.320 Having to do the way the Constitution is even written as, regarding who is responsible for education.

00:41:05.320 State or federal?

00:41:06.320 It's a state issue by the Constitution, and it is.

00:41:11.320 And so then you would say, as I examined in this, I just wanted to see the differences.

00:41:18.320 So I carved it away.

00:41:20.320 I want to look at what the bottom 60 percent of the population, what their lives are like,

00:41:26.320 and separated it from the top 40 percent, because the averages are misleading.

00:41:31.320 And really that's almost like an 80-20 thing.

00:41:33.320 In other words, the bottom 80 percent relative to the top 20, because that other group is

00:41:38.320 not, is basically similar to the bottom.

00:41:42.320 And it's not an environment in which we can say that we are striving well for equal opportunity.

00:41:52.320 Okay.

00:41:53.320 Opportunity.

00:41:54.320 Because in that top 40 percent, the average per capita amount of money spent on a child's

00:42:02.320 education is five times that in the lower 60 percent.

00:42:06.320 And so if you look at the outcomes, not, put the outcomes of income aside for a bit, but

00:42:13.320 just even deal with productivity and usefulness.

00:42:16.320 And you look at the tragedy of not being able to get adequate number of books in places or

00:42:22.320 adequate teachers.

00:42:23.320 And then you say, is that productive and is it fair?

00:42:27.320 It's not productive because you're losing an education of a large percentage of the population,

00:42:33.320 the proper education, the proper care.

00:42:36.320 We also have family issues.

00:42:37.320 Families are breaking apart.

00:42:38.320 In other words, like I said, I had the benefit of two parents who loved me and took care of

00:42:43.320 that.

00:42:44.320 In some of these cases that you have a problem of that there's not good family guidance and

00:42:51.320 that's a whole social issue, but it becomes a spiral.

00:42:55.320 And so I think the question is, are we going to look at that well and how do we deal with

00:43:01.320 it in a non-partisan, non-ideological way, right?

00:43:08.320 Okay.

00:43:09.320 So the whole part, we're talking about kids being raised without married parents.

00:43:13.320 I think 1960, 73 percent were.

00:43:16.320 Today's 38 percent that don't have both.

00:43:19.320 And the number is obviously higher than it's ever been today.

00:43:22.320 And I'm not just saying married.

00:43:24.320 Maybe you live unmarried or maybe there are different kinds of forms of households, but

00:43:28.320 I am saying the guidance in somewhere of a loving person at least or two better for the

00:43:37.320 care of those children is an important determinant.

00:43:41.320 That and basic education, these are important determinants.

00:43:44.320 You think a lot of the references you make here goes to 30s and referencing how, you know,

00:43:51.320 the top 1% in the 30s versus today, you know, you show this that the top 1% in the 30s versus

00:43:57.320 today, you know, top 1% income share has the same amount as the bottom 90%.

00:44:03.320 And the last time it was like that in the 30s.

00:44:05.320 Are you kind of suggesting that we may be facing what happened in the 30s here soon?

00:44:10.320 Or no?

00:44:11.320 Yes.

00:44:12.320 I'm saying there are three major divisions, okay?

00:44:16.320 Three major forces.

00:44:18.320 And that force, which I think I emphasize the opportunity gap, not just the wealth gap, but

00:44:26.320 they both matter, if you look at history across countries, across timeframes, and you say

00:44:33.320 when there's a large income and wealth gap and you have an economic downturn, you have

00:44:40.320 a dangerous fight on your hands.

00:44:42.320 You have a dangerous set of circumstances.

00:44:44.320 History has taught us that.

00:44:46.320 You said in April, income inequality is the biggest crisis we have in America in 60 Minutes.

00:44:51.320 And I think in recent, a couple months ago, you said wealth inequality.

00:44:55.320 Those are the two main things that we ought to be concerned about.

00:44:57.320 And I think even more fundamental, those are the outcomes, and even more fundamental,

00:45:03.320 is opportunity inequality and production inequality.

00:45:08.320 Because at the end of the day, just like you said, we have to find how to make this thing

00:45:13.320 work well.

00:45:14.320 And you quoted me as saying correctly, that I think that the capitalists know how to make

00:45:20.320 it better, and the socialists know how to maybe divide it, okay?

00:45:24.320 What they've got to do is they've got to get in there.

00:45:26.320 There are things that we could do that will make our country more equal opportunity and

00:45:32.320 more productive.

00:45:33.320 Such as?

00:45:34.320 Okay?

00:45:35.320 Such as what?

00:45:36.320 Is this where you went into the education part?

00:45:37.320 There's so many different things.

00:45:39.320 But certainly, equality in education.

00:45:42.320 If you go back to the most basic…

00:45:43.320 How do you do that, though?

00:45:45.320 Okay.

00:45:46.320 First, you have to start with the following beliefs.

00:45:50.320 Number one, that we must deal with the issue, okay?

00:45:55.320 That you treat that risky situation, that economic and political division that exists like this,

00:46:03.320 as a national crisis that we better get on looking at, okay?

00:46:08.320 Isn't that what a lot of different countries try to do where they force the prayer theory

00:46:11.320 to change?

00:46:12.320 You're not letting me answer your question, because I'm sorry, my answers are too long.

00:46:16.320 But if you…

00:46:17.320 I have to…

00:46:18.320 Okay.

00:46:19.320 You've got to do it.

00:46:20.320 You've got to do it together.

00:46:21.320 Okay.

00:46:22.320 You've got to, first of all, treat it as an emergency.

00:46:23.320 I'm adjusting to your interview style.

00:46:25.320 Your answers are long-winded, and I got immediate…

00:46:27.320 I'm sorry.

00:46:28.320 I'm going to make notes.

00:46:29.320 No, you go.

00:46:30.320 I'm going to make notes, and I'll come back and visit it.

00:46:31.320 Please, continue.

00:46:32.320 Okay.

00:46:33.320 Yeah, I am long-winded.

00:46:35.320 No, it's good.

00:46:36.320 The content is good, but you're getting me to ask a question from certain things you're

00:46:40.320 saying, because I'm curious…

00:46:41.320 I know, and I feel that I can't answer, complete the answer.

00:46:45.320 That's my dilemma when I'm…

00:46:47.320 You know, so I don't know.

00:46:48.320 You tell me, because it's your interview, so you tell me how to do it.

00:46:52.320 I think we, as a country, have got to come together and realize that we share a common

00:46:58.440 problem of this polarity, and that it should be first declared as a national emergency,

00:47:05.320 okay?

00:47:06.320 And that it should be done in a knowledgeable and bipartisan way.

00:47:13.320 I don't think it's going to happen, but I think it's necessary to happen, because otherwise

00:47:18.080 you'll have a fight, and that fight will itself be very damaging.

00:47:22.960 And that you have to then engineer it so that you both increase productivity and you

00:47:30.420 increase a fair system.

00:47:32.260 And you could do that, I gave an example.

00:47:34.340 You could do it by education, you could do it by a number of things, I won't.

00:47:38.440 That's where it led into your question.

00:47:40.420 Your question was then, how would you do that in education?

00:47:44.360 That was your follow-up to that, in my example.

00:47:48.000 And I would say, if you start with the will and the necessity, and you did the engineering

00:47:55.520 with the knowledgeable partners in various ways, you can get there.

00:48:01.160 The capacity of the individual.

00:48:03.520 So does that mean, for example, you might carry it forward in the following way.

00:48:08.260 You would say, not just raise taxes, but say, what are our needs that we have to meet?

00:48:16.420 And how much money is it going to take to meet those needs?

00:48:20.180 And you start with not just a redistribute the money.

00:48:23.940 Okay, we have to redistribute the money.

00:48:26.300 But you start with the critical necessity, like, we need to approach equal education, or

00:48:32.660 something approaching equal education.

00:48:34.880 So you put that in.

00:48:35.940 And you'd say, how?

00:48:37.620 And how do I build that out?

00:48:39.440 And I could tell you lots of ways.

00:48:41.020 I encounter it all the time in education.

00:48:43.360 My wife and I are very active in terms of dealing with that on a nitty-gritty basis.

00:48:48.960 And I could tell you that money put into education in a certain way can have a catalytic, enormous

00:48:56.320 benefit that will change, that will have an economic benefit as a social benefit.

00:49:01.940 Because if you look at, for example, what it takes to take a child through high school

00:49:06.580 education, okay, it doesn't take – there are programs that we're working on.

00:49:11.600 My wife is leading in Connecticut.

00:49:15.120 The $100 million.

00:49:16.460 I saw that.

00:49:17.460 But also, it comes from a nitty-gritty, on-the-ground, doing-this-for-10-year kind of perspective, that

00:49:24.120 to get a child to go – to make it through high school or not, and into a job, doesn't

00:49:30.460 cost that much, okay?

00:49:32.900 Now you compare that with the cost of not doing that.

00:49:36.740 What that has in terms of the differences in the crime rates, the differences in the

00:49:40.800 incarceration rates, do you know that to incarcerate a person costs between $80,000 and $120,000

00:49:48.200 a year?

00:49:49.200 Okay?

00:49:50.200 We've got a $50 billion cost right there per year right now.

00:49:52.840 So you can change cost-effectively.

00:49:56.500 You can give better opportunity.

00:49:59.040 And you can make it more advantageous because you'll create more productive people rather

00:50:04.260 than less productive people.

00:50:06.780 So the discussion of how to engineer that is not taking place.

00:50:12.180 So I'm telling you –

00:50:13.180 You don't think this discussion is taking place?

00:50:14.500 No.

00:50:15.500 No.

00:50:16.500 I'm saying the thing –

00:50:17.500 You don't think people would want to be able to help the bottom?

00:50:19.500 No, I'm saying it's – you're asking me, is it taking place?

00:50:21.960 You're saying it's not taking place.

00:50:22.960 No, what I'm saying is not taking place.

00:50:24.620 So hear what I'm saying.

00:50:25.620 Is it declared as a national emergency?

00:50:28.280 No.

00:50:29.280 No, absolutely not.

00:50:30.280 Is – are people with the real perspectives or both perspectives operating in a nonpartisan

00:50:37.660 or bipartisan way to deal with that problem?

00:50:40.280 No.

00:50:41.280 Okay?

00:50:42.280 Is progress being made to deal with that problem?

00:50:44.940 No.

00:50:45.940 Are they dealing with the cost-effectiveness of that dollar to produce a better dollar of

00:50:50.320 outcome?

00:50:51.320 Well, you asked me examples.

00:50:52.320 I could give you many, many, many examples in which there are cost-effective ways to make

00:51:00.320 more people productive and make the system fair.

00:51:03.420 And I'm saying it's not going to happen.

00:51:05.380 And it's not – it's tragically not going to happen because you have these two sides.

00:51:11.060 So you have the, let's say, the socialist undermining entrepreneurship or the American dream.

00:51:21.380 Okay?

00:51:22.380 In many ways in terms of changing things.

00:51:25.540 Or you have the capitalist who is essentially not recognizing what the dilemma is for that

00:51:33.220 other percentage of the population.

00:51:35.300 That's how it looks to me.

00:51:36.480 Is it fair to say that in order for this to also improve, we have to leave the freedom

00:51:43.980 to fail up to the populace as well or else we're going to other regimes that are controlling

00:51:49.260 their people?

00:51:50.260 Let me explain what I mean by this.

00:51:51.740 If I'm trying to make any influence in the country, like for myself, I grew up in a family

00:51:55.440 welfare.

00:51:56.440 My mom and dad.

00:51:57.440 My mom was on welfare.

00:51:58.440 She ran out of money.

00:51:59.440 She went back to Iran.

00:52:00.440 I stayed here.

00:52:01.440 I joined the army.

00:52:02.440 Went for two and a half years.

00:52:03.440 I had a 1.8 GPA in high school.

00:52:04.440 I'm a calculus kid.

00:52:05.440 I did good in calculus.

00:52:06.440 Everything else I wasn't good at.

00:52:08.040 So I go to the army.

00:52:09.040 I get out.

00:52:10.040 A kid calls me, a friend of mine, says, I think you can do better out of the army.

00:52:12.580 I'm about to re-enlist to go to Special Forces, Sears, Rangers.

00:52:16.200 I got all the orders.

00:52:17.200 I'm going to go to DLI, speak five languages that were going to use me.

00:52:20.400 This is going to be a great guy to keep for 20 years.

00:52:22.400 I'd be a great soldier in the military.

00:52:24.660 He calls me, says, I think you can do good in the free market.

00:52:27.300 So what do you mean?

00:52:28.300 He says, you should get out.

00:52:29.300 So I get out.

00:52:30.300 Then a man, my first boss or my sister recommend me to pick up a book and I start reading.

00:52:35.340 Then I get inspired.

00:52:37.520 Then I get failed miserably.

00:52:39.400 And then I make a few hundred million dollars in my thirties.

00:52:42.520 That happened because someone said, hey, what do you want to do with this?

00:52:46.160 But the same person that offered me a book offered 50 other people to read a book.

00:52:50.180 You understand this.

00:52:51.520 This is it, right?

00:52:52.620 That's the American dream.

00:52:53.960 What I'm trying to say is, but the point I'm trying to say that for you, your background,

00:52:59.180 you shouldn't be worth $18.7 billion today based on stats.

00:53:03.940 Your dad's last name is not Vanderbilt or Kennedy or it's Dahlia.

00:53:07.300 And you made Dahlia relevant to the world where the world knows this.

00:53:10.300 Let me finish my statement.

00:53:11.300 And I'm also going to be a little bit long winded here.

00:53:13.180 Please don't.

00:53:14.180 But I'm going to turn the wind back over to you.

00:53:15.520 I promise you.

00:53:17.240 I think sometimes when we try to encourage the populace to do something, if we go the

00:53:25.100 route of more entitlement, entitlement, entitlement, but the kid is coming home to the wrong mindset,

00:53:30.800 nothing is changing.

00:53:32.680 So how much is this to work on the parents of the eight-year-old PBD or the 12-year-old

00:53:38.180 Ray Dahlia?

00:53:39.180 How much of it is on the parents to want to also do something about it and want to pick

00:53:43.640 up a book, want to develop themselves as it is on the kid?

00:53:46.400 Because I think we're forgetting the influence of who the kid is going home to.

00:53:49.840 Oh, I'm not forgetting that.

00:53:51.520 Okay.

00:53:52.520 So how do you work with that?

00:53:54.520 How do we work with them?

00:53:58.680 How do we influence them?

00:53:59.680 Well, I think you've just said, I want to emphasize the things that you said because

00:54:05.300 that's the American dream, okay?

00:54:08.660 The American dream is made up of the fact that you own it.

00:54:14.640 You acquired early on the good guidance from adults and ideally your parents, and you had

00:54:21.920 an education system that was a fair education system that you can get through, and there

00:54:27.140 you went.

00:54:28.360 And then you had you and your self-discovery process and your character that allowed you

00:54:33.880 to do that.

00:54:34.880 And in the process of doing that, not only did you take care of yourself, you produced

00:54:39.800 such great outcomes and the results that the consequence, you were a real net contributor.

00:54:45.620 And so when we look at, we have to make these people net contributors unless somebody's

00:54:51.100 handicapped.

00:54:52.100 If somebody can't, for whatever their inability, and that's a social program, you have to give

00:54:58.480 those other people essentially the opportunity to struggle well, to be able to struggle well,

00:55:05.600 and to develop the character and the capabilities that come from struggling well.

00:55:10.720 That's the formula.

00:55:11.980 So we agree on that formula.

00:55:14.180 And so if we have a situation where we're failing because you can go to school districts,

00:55:19.500 and I know the school districts, in which they can't afford each kid to have a book,

00:55:26.260 enough books, or in some places, not enough to have pencils, each kid having adequate pencils.

00:55:34.140 So they break them in half and sharpen them from both directions so that they can get by

00:55:38.480 and do that.

00:55:39.480 And you have that.

00:55:40.480 And we look at it, and we just don't look in the mirror and say, what can we give them

00:55:45.300 to have that equal opportunity?

00:55:47.580 We have a problem.

00:55:48.660 Because the way it's now laid out to me, it looks like, is that there is one political

00:55:54.000 party or one view that becomes extremely one way that in terms of saying, okay, how do you

00:56:03.000 create that, that desire, that opportunity, that need to be productive and do, don't give

00:56:08.240 just the money, give the means by which you're going to operate.

00:56:12.620 And you have another political party who was saying, I will not deal with restructuring

00:56:17.360 it so that we produce the outcomes that are necessary to create that education and create

00:56:23.480 that equal opportunity.

00:56:25.220 So when I look at each one of them, it's a scary choice because I don't think that either

00:56:29.820 of them is creating that process.

00:56:33.140 And unless we come to do it and we'd stop talking like corporations are bad or billionaires

00:56:41.420 are bad.

00:56:42.420 That's the language to do.

00:56:44.580 Most billionaires became, I'm an accidental billionaire, and most people became billionaires

00:56:50.700 because what they did is they produced something of value that people wanted.

00:56:54.700 Whether it's millionaires, forget million, or just earning a good job, you're producing

00:57:00.060 something that someone wants.

00:57:02.220 And in producing something that someone wants, they pay you for it.

00:57:06.060 And the more you produce that somebody wants, the more they pay you.

00:57:09.320 And that's the way the system is.

00:57:11.220 And that entrepreneurship and all of that is a very important thing.

00:57:14.980 That's why equal opportunity.

00:57:16.880 People from all over the world came to the United States for that.

00:57:20.300 Okay?

00:57:21.300 So now if we can agree on that, and how do we do that, deal with it in a way where together

00:57:28.420 we're working on that rather than just trying to kill the other and then undermining that,

00:57:34.860 we won't fix ourselves.

00:57:36.400 And we need to fix ourselves.

00:57:38.120 Because if you're looking at the world and you're saying, okay, now you're competing with

00:57:41.100 the world and you're competing with China, one way or another we've got to make our system

00:57:45.180 work well.

00:57:46.180 And the follow-up question for you would be in this area is, I read a book a few years

00:57:49.260 ago by Lawrence Miller titled, Barbarians to Bureaucrats.

00:57:53.100 Never sold a lot of copies.

00:57:54.740 Great book.

00:57:55.740 I called him one time.

00:57:56.740 I said, Lawrence, how do more people not know about your books?

00:57:58.240 I'm not a good marketer.

00:57:59.240 I just wrote the book.

00:58:00.400 And he says how there's a prophet first, the visionary first, and then there's the barbarians.

00:58:06.340 I'll go out there and make it happen.

00:58:07.840 Sometimes a prophet is also the barbarian, like maybe a Steve Jobs.

00:58:10.220 So prophet, barbarian, builder, explorer, administrator, bureaucrat, aristocrat.

00:58:15.180 Okay, so America's kind of getting at this face of bureaucrat, aristocrat.

00:58:18.260 That's right.

00:58:19.260 That's what we are, right?

00:58:20.260 That's right.

00:58:21.260 But then he says that during these times is when you can give birth to a synergist, right?

00:58:26.660 That brings it together.

00:58:28.220 Where does the synergist come to bring the left and the right together?

00:58:31.980 Because you know the media is not playing the synergist.

00:58:33.780 The media is kind of dividing a little bit.

00:58:35.180 That's right.

00:58:36.180 Okay.

00:58:37.180 But I think he's created what is a beautiful description, and I will ask, having read history

00:58:45.180 and watched dynasties rise and decline and empires rise and decline, I have never seen

00:58:51.140 the synergist.

00:58:52.140 You've never seen the synergist?

00:58:53.700 I've never seen the synergist.

00:58:55.840 So I want an example of the synergist.

00:58:59.040 What I have seen happen over and over again is this decline.

00:59:03.540 He's describing that notion, also one generation to another, that what happens is it's the person

00:59:11.360 who doesn't have anything, works hard, accomplishes something, has it, and so on.

00:59:16.480 The synergist, I've never seen the synergist.

00:59:19.500 All I've seen in history is these people deteriorating, that leadership deteriorating, and those people

00:59:27.600 fighting.

00:59:29.060 That's what I've seen repeatedly in history.

00:59:31.280 That's what I'm saying it happened in the 1930s, but it happened, I've studied this going

00:59:35.500 back, literally I had to study, I wanted to study the last 500 years to understand the

00:59:41.600 rises and declining of empires.

00:59:44.000 And if I go to, I've studied before this the British Empire, before that the Dutch Empire,

00:59:50.280 I studied the Spanish Empire, I studied the dynasties in China, and they all have the

00:59:56.400 same paths.

00:59:58.320 They all basically have the same paths.

01:00:00.960 And those paths are-

01:00:02.860 It's not an optimistic-

01:00:03.860 It's the same thing as even companies.

01:00:06.740 It's a company path, or think of a multi-generational family.

01:00:11.040 You know, the first generation makes it, they work hard.

01:00:13.580 The second generation, and that's why they go from the same, from shirt sleeves to shirt

01:00:17.960 sleeves in three generations, okay?

01:00:20.500 If you think about the company, the corporation, the corporation starts with an entrepreneur,

01:00:26.400 and then it goes to the cycle he's describing, and then you get to the bureaucrat, okay?

01:00:32.600 And then somebody who's the entrepreneur and scrappy, like you, or whatever those people,

01:00:38.620 come up and they're the revolutionaries, and they tear it down because they come up with

01:00:43.080 better ways of doing it.

01:00:44.740 And those are what the patterns look like.

01:00:46.420 You said in an interview, you're not competitive, but you're driven.

01:00:49.920 I'm sorry?

01:00:50.920 You said in an interview-

01:00:51.920 I'm not competitive.

01:00:52.920 You're not competitive, but you're very driven.

01:00:53.920 Use the word driven.

01:00:54.920 I'm passionate.

01:00:55.920 Okay.

01:00:56.920 I'm curious, and I'm passionate.

01:00:57.920 How involved are you in encouraging this conversation and dialogue to take place?

01:01:03.780 If you think income inequality, and wealth inequality, and opportunity inequality, if you think those

01:01:09.920 three are a national crisis, how come you're not leading that charge to bring and unify

01:01:18.420 the groups together?

01:01:19.420 Because you have credibility, and you have a resume for people to say-

01:01:21.420 No, no, no.

01:01:22.420 My ability-

01:01:23.420 Look, power comes with the extent of the role.

01:01:26.420 I'm at a state-

01:01:27.420 So I'll step back, and I'll describe what my perspective is.

01:01:29.420 Sure.

01:01:30.420 You know what I'm asking, though.

01:01:31.420 Sure, sure.

01:01:32.420 Yeah.

01:01:33.420 And I'm trying to answer it.

01:01:34.420 And like any of my answers, you'll have to bear with me because they take a couple of

01:01:38.420 minutes.

01:01:39.420 Okay.

01:01:40.420 The first is where I am in my life.

01:01:43.920 I think there are three phases in one's life.

01:01:47.000 First phase is you're dependent on others and you're learning.

01:01:50.140 Then you go out in the world, and increasingly, others become dependent on you when you're working,

01:01:57.660 and you're trying to be successful.

01:01:59.800 And you approach the third phase where I'm in a phase where I'm going to my third phase.

01:02:06.080 And in that third phase, my goal is to have other people be successful without me.

01:02:11.820 And that's like extends to your kids, extends to other things.

01:02:14.860 So the reason I'm passing along these things is because I hope that they're helpful.

01:02:20.240 The reason we're doing this interview, I'm not doing it for money.

01:02:23.240 Okay.

01:02:24.240 I'm not doing it for any other reason that I hope it's helpful.

01:02:26.760 And so I'm passing that along.

01:02:29.160 It's so much dependent on other people to make their choices.

01:02:32.720 One crusader is going to come in there.

01:02:35.440 I'm not running for president.

01:02:39.000 I'm not going to be in that position of control.

01:02:42.000 That is not where I am.

01:02:43.720 I'm just hoping that I can pass along my thoughts for people to take it or leave it, and leave

01:02:47.780 it up to them, right?

01:02:49.280 So do I want to build what?

01:02:52.000 Do I want to run for government or anything?

01:02:55.520 We're in a situation, if you don't have your hands on the levers of power, it doesn't matter.

01:03:02.280 Okay?

01:03:03.280 Because...

01:03:04.280 I agree.

01:03:05.280 Because you can only have to convince the people who have their hands on the lever of power.

01:03:09.620 So the only thing I could do is give my best thoughts for people to take it or leave it,

01:03:14.120 and that's where I am.

01:03:14.840 So do you think there's any room today for a media company to come out that is Walter

01:03:20.120 Cronkite-esque, you know, a platform that's not Fox, that's not CNN, MSNBC, Time, whoever

01:03:26.840 it is, Washington Post, that's in the middle, where somebody can go to and say, you know

01:03:31.400 what, he's, I don't know if I, I'm a Democrat, but I don't know if I agree, but it makes sense,

01:03:36.780 I'm a Republican, that's kind of make, do you think we need something there where people

01:03:41.520 to go to to say, these guys are pretty independently thinking and they're stating the facts?

01:03:46.160 Absolutely.

01:03:48.360 Do I think it will happen?

01:03:51.640 Probably not.

01:03:52.640 Why do you say that?

01:03:53.640 History has shown me, and also I study psychology and neuroscience as to how the brain works.

01:04:01.340 and how habit and community decision-making in a psychological, neurological way is very

01:04:11.500 much that you start with your conclusion and you, and one filters consistent with the conclusion

01:04:19.740 and there's affinity groups and so on.

01:04:22.140 And so I think that just the notion of that population deviating from that and also the mechanics

01:04:31.300 of sensationalism in terms of what sells, that it produces a dynamic in which the media itself

01:04:41.460 is not going for that and the economics itself of the media is such that it doesn't sell, it doesn't support itself.

01:04:52.740 I don't think there's a large enough market and I think it's being exemplified by the power of extremism or illogical emotional behavior.

01:05:02.900 So it almost needs to be somebody that wants to contribute rather than wanting to profit from it.

01:05:06.740 But I don't even know how big the market is.

01:05:09.060 Would you buy it?

01:05:10.060 Would you subscribe to it?

01:05:11.060 Wouldn't we?

01:05:12.060 Well, of course.

01:05:13.060 One of my sons came up with a media platform, but what he would do was, it was an online, so I'll pass the idea along, I thought it was a terrific idea.

01:05:24.900 Just a social site that on, oh, he called it The Issue, that was the name of the company, and it's an on-site, and on that issue, whenever there was a controversial point of view, all he would do was find the smartest people who held different points of view on that, and he would put together two or three of those, which had then the opposite point of view on that.

01:05:49.900 And you would look at that, and so you could say, I'm interested in the issue, and seeing both, and by the way, anybody can do this, so I'll pass it on to the world, and you could just, I hope somebody gets inspired to do that, so you could then say, I can get informed on both sides of the perspective of that issue.

01:06:10.360 I was supporting a major correspondent type of person, to bring on two, to have, the name of the show was going to be In Pursuit of Truth, and they would find opposing points of view on any issue, and have the thoughtful debate about those issues.

01:06:30.220 The first one, we did actually a pilot for it, and it was called, I picked the most controversial point of view, God, reality, or delusion.

01:06:40.700 I picked that, you could take this thing or that, whatever the rule, pick the most controversial things, and have a civil conversation about those types of things, in terms of seeing both sides of the issue.

01:06:55.520 It's a real big thing for me.

01:06:57.260 I think Dennis Prager did a little bit of that with Thomas Sowell.

01:07:01.040 When I was in L.A., we'd go to Wayne Hughes' house, and he would bring all these guys from both sides, like Obama's campaign manager versus Bush's campaign manager, and they'd go at it, and it was beautiful.

01:07:11.100 It's like you're sitting in a classroom, taking notes.

01:07:14.100 Beautiful.

01:07:14.380 I've got one question, and I speak right now.

01:07:15.620 And then you realize issues are more complicated than they can be made.

01:07:19.440 Exactly.

01:07:19.940 And then you see similarities.

01:07:21.740 I know.

01:07:22.760 Similarities.

01:07:23.280 We're like, wow, these guys have more in common than you thought, and they walk away liking each other.

01:07:27.140 Yeah.

01:07:27.920 And these are smaller settings.

01:07:29.480 Yeah, and let's book our agreements.

01:07:32.660 Let's get the agreements stuff done.

01:07:34.120 Yes, knock that out of the way.

01:07:34.460 So could we agree that education, better education is an important thing, could we agree on those problems and then work together for that?

01:07:41.520 Man, that's where we need to go.

01:07:43.440 That would be fascinating, yes.

01:07:43.780 Last question, and then I'll do a speed round, and then we're done.

01:07:46.540 Process of replacing yourself as a CEO.

01:07:49.460 I know you've spoken about it, but now it's a little bit deeper because it's different than you wrote in the book, than even articles you've written in the last two years.

01:07:55.440 I'm curious where you are right now.

01:07:57.420 If you had to go over again to replace yourself and bring another CEO, and you're the founder, so emotionally you're attached.

01:08:02.820 It's your culture, your principles.

01:08:04.800 How do you process and what are you thinking about to get somebody to bring in, and what are you looking for?

01:08:09.700 Is it internal, external?

01:08:11.460 Are you comfortable external being a CEO?

01:08:13.620 How do you process replacement of a CEO for you?

01:08:15.140 Let me again start with the big particular picture.

01:08:18.940 It is stupid to be attached to the ways that should be done or attached to, one, doing the job of being a CEO.

01:08:30.120 That is a stupid thing because there's a certain life arc, and we evolve.

01:08:34.220 And as I say, to go to the third phase and let them go to the second, and that's why helping others be successful without you is the higher objective.

01:08:43.040 So first you have to start, and you say that, because it's like your children.

01:08:47.660 Let's say you have adult children.

01:08:49.560 You know, your parents, the best thing that could happen is they smile and they look at you and they see how you've evolved along those ways.

01:08:57.540 So you have to want that.

01:08:59.120 That becomes your arc.

01:09:00.920 The second thing is that you have to realize that, like anything, if you haven't done something, I have a principle.

01:09:07.780 If you haven't done something three times before successfully, don't assume you know how to do it.

01:09:14.440 So along those lines, as you start off, you have to allow enough time for mistakes and learning that's going to come along the way in order to be able to make that transition successfully.

01:09:26.420 And I learned that over there.

01:09:29.000 You know, it was a process.

01:09:30.820 First time around, it didn't work.

01:09:32.460 Second time around.

01:09:33.160 But we all learn, because all these experiences are learning.

01:09:36.760 That's the purpose of them all.

01:09:38.420 So it's okay to fail a few of these times and then to get there as long as you eventually get there.

01:09:44.140 And then you have to, you know, help them.

01:09:47.700 So, you know, enable them.

01:09:50.400 Enablement is the word.

01:09:51.900 Not control.

01:09:53.040 Enable.

01:09:53.520 Be a mentor.

01:09:54.280 How hard is it for a personality like you to do?

01:09:55.480 Oh, it's so great.

01:09:56.680 It's all partnership.

01:09:57.700 If the first thing I first sentences in this book that I wrote, first of all, understand that I'm a dumb shit and anything that I have, I haven't done shit.

01:10:11.580 You're saying like you have to know how I'm a dumb shit or you're a dumb shit.

01:10:14.460 In other words, that what I mean is that any success I've had in my life has been more due to my knowing how to deal with what I don't know than due to anything I know.

01:10:30.740 Okay?

01:10:30.980 Once you start to realize that and the power does not just list bottled up in your own head, okay, and you can draw upon the best, then you change your approach to life.

01:10:43.700 And I'd say it's the opposite.

01:10:44.880 The greatest tragedy of mankind or the greatest tragedy of individuals who together make up mankind in their dealing with each other is they have bottled up in their heads wrong opinions that they don't know how to stress test.

01:11:02.720 Because they think if it's in their heads, it's right if they have an opinion.

01:11:07.260 And it's so easy to get around that if you can think about how do I go beyond that.

01:11:12.080 So the reason I'm saying that is I love partnerships in which there's a back and forth and you knock things around and you get to the right answer where there's open-mindedness and learning at the same time as there's the assertiveness as you're trying to figure things out together.

01:11:31.000 Very cool.

01:11:31.760 Last thing is speed round.

01:11:33.280 I give a name, you just give me a word that comes to your mind.

01:11:35.900 Okay.

01:11:36.260 I'll give a name, you give me one word.

01:11:37.680 Buffett.

01:11:38.620 A wise.

01:11:39.180 Lawrence Kulp, when he was a CEO of Danaher.

01:11:42.820 Metrics.

01:11:43.800 Interesting.

01:11:44.700 Boris Johnson.

01:11:45.860 Loose cannon.

01:11:46.860 Okay.

01:11:47.760 1994, Newt Gingrich.

01:11:50.460 Accomplishment.

01:11:51.360 Joe Biden.

01:11:52.300 Who knows?

01:11:53.200 Milton Friedman.

01:11:54.360 Naive.

01:11:55.200 Naive.

01:11:56.420 Wow.

01:11:57.380 Michael Bloomberg.

01:11:58.440 Well balanced and capable.

01:12:00.320 Jeff Bezos.

01:12:01.380 Interesting.

01:12:02.220 Peter Thiel.

01:12:03.000 Don't know enough.

01:12:03.780 Okay.

01:12:04.300 Very cool.

01:12:05.100 So I appreciate you going through that.

01:12:06.780 That was fascinating.

01:12:07.640 Valuetainers, before I wrap this up, a couple things.

01:12:11.300 Number one, highly, highly recommend the first thing you do, go download his app, Principles.

01:12:18.260 After you download the app, you want to get the book, Principles.

01:12:21.560 I've read this multiple times.

01:12:23.080 I had every single one of my executives read it and write a paper on it.

01:12:26.420 I had every single one of my sales leaders read it and write a paper on it because it's

01:12:30.800 that effective of a book.

01:12:32.040 If you haven't read it, you got to read it.

01:12:34.200 Having said that, Ray, thank you so much for your time.

01:12:36.260 I'm looking forward to doing this again in the future.

01:12:38.400 I look forward to it too.

01:12:39.420 Thank you.

01:12:39.900 Thanks, everybody, for listening.

01:12:41.500 And by the way, if you haven't already subscribed to Valuetainment on iTunes, please do so.

01:12:46.060 Give us a five-star.

01:12:47.340 Write a review if you haven't already.

01:12:48.960 And if you have any questions for me that you may have, you can always find me on Snapchat,

01:12:52.940 Instagram, Facebook, or YouTube.

01:12:54.900 Just search my name, PatrickBitDavid.

01:12:56.660 And I actually do respond back when they snap me or send me a message on Instagram.

01:13:01.660 With that being said, have a great day today.

01:13:03.460 Take care, everybody.

01:13:04.220 Bye-bye.

Valuetainment - January 03, 2020

Episode 410： Billionaire Ray Dalio Predicts The Next Big Market Crash

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