Ray Dalio: The principles that made me a billionaire

Key Takeaway

The "Holy Grail" of investing isn't finding the next big thing—it's diversification. Find 15 good, uncorrelated return streams and you can reduce 80% of your risk without reducing returns. This means increasing your return-to-risk ratio by a factor of five. The goal: capture upside without the downside. This simple framework transformed Bridgewater from borrowing $4,000 to becoming the world's largest hedge fund.

Episode Overview

Ray Dalio shares the principles that transformed his life after losing everything at age 34—from learning humility and developing systematic decision-making to building Bridgewater into the world's most successful hedge fund. He explores the importance of knowing your nature, working with people who think differently, and turning painful failures into growth through reflection.

Full Transcript

Transcript of Ray Dalio: The principles that made me a billionaire from My First Million. Auto-generated from episode audio; may contain minor errors.

You want to be successful? Here's the mantra for investing. I got my pen. The most fundamental question is how do I have the upside without having the downside? That approach was the basis of Bridgewwater going from having to borrow $4,000 from my dad to the largest hedge fund, most successful hedge fund in the world. I created personality tests. 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, no.

That's what we do here. You don't have to make it to the top to be happy. be happy. be happy. What's the top? 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. You were in some regard a little bit of a late bloomer in terms of like traditional metrics of success. Oh, yeah.

Oh, yeah. Oh, yeah. I think you were 34, 35. you had like two kids. I think you had just laid off the five employees that you had had and you're like, "Look, Dad, I've lost it all." Can you like close your eyes and like remember that conversation? So I started Bridgewater in 1975 and in 1981 and 82 interest rates were not the emerging countries had a lot of debt and I calculated that those countries were not going to be able to pay their debts and and they were going to have big debt crisis and that was a very controversial point of view and then Mexico defaulted in August of 1982.

So, I was asked to testify to Congress about what this is all about and and what might happen to the economy. I thought 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 and I had to lay off everybody. I was so broke I had to borrow $4,000 for 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 in that capacity.

And I knew that I wasn't very good at working for people. Now, that was painful. That changed everything in my life. That created the bottom at Bridgewater. And then it just kept going up because of what I learned. I learned two things. First of all, I I learned humility to balance my audacity. Okay, I didn't have much humility. I'd say I'm right. I'm going to be right and all that. And then I learned how to diversify my bets and substantially reduce my risk without reducing my returns because I didn't want to have reduce the upside.

I I knew that I had to reduce the downside. And so um I really learned and 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 15 good uncorrelated return streams. return streams. return streams. How did you come up with 15? Well, I just looked at the math of it. Okay. So in other words, what are the marginal benefits of diversification given the different levels of correlation? And I I have that on a chart that keeps reminding me.

Okay, if you can get out to 15, you can get down to about reduce about 80% of your risk without reducing your return. 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. Okay? And then humility, you know, I wanted people to kick the out of whatever I thought, you know, to try to do that and then have that. And that change in that approach was the basis of Bridgewater going from, you know, be having to borrow $4,000 from my dad to the largest hedge fund, most successful hedge fund in the world.

If we wanted to be better investors, what do you think the most common mistake smart guys can make when it comes to investing? They don't have a game plan. game plan. game plan. So, what's a good game plan look like? How do you know if you have a good game plan? plan? plan? 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 make a decision, I would go back and study if I made that decision in these circumstances, how would it have worked in the past?

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 and then I would program it into the market into the computer and when this thing come along then I started to realize okay now I've got criteria. So rather than just the one that I would see, I would say in the computer dump 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 world that I have a track record of knowing how those work 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 uh diversification and so now you're executing a game plan. So like I have rules that it should be timeless and universal because 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 game plans and execute the game plans. Did Bridgewater have any revenue coming in? in? in? Um nothing. And so you're waking up in the morning and you're like, I got to figure this out.

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 and have a safe life employed regular job. Great. Okay. or I could go into the jungle and try to work across get through the jungle that 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 great upside. I can't not do that. And also part of it was if I'm going in the jungle, I want to go with people um who want to go in the jungle with me who see things differently than I do.

So, it's like going through this jungle with these uh animals or 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 achieved achieved You didn't want to go to the success. You'd rather be in the jungle than the zoo. zoo. zoo. 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 33 or 34 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 want to provide. I want to win. I want to be the best. No, it wasn't like that at all. For me, it was like two levels. Just very simple. Uh can I pay for the basics? Like I don't need a big house. I don't need a bigg. My kids can go to a good public school.

They have great public. Did you have like a number you're like, man, if I can make 100 grand a year? I counted what I started to do was I started to count how many months then and and then years of living that way could I afford if it shut down? But you said two levels. That was level one. one. one. It's freedom money. Basically, you money. money. money. What was that number for you? I don't remember what the number was, but it, you know, it wasn't it wasn't m it was an easy to achieve number like a million dollars, but but Oh, no.

less. less. less. Oh, much less at that time. Was there ever a grand vision or 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, 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 want to uh do that cuz I'm hooked on the markets.

I created personality tests. I started with MyersBriggs and then I went to 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 Muhammad Eunis. I gave it to other people to see the elements of what they are are like. I put it online for free. I created it. We took it like you took it. Okay. Well, there's a type of person that represents um a very small percentage of the population and Elon Musk is it then Bill Gates and and U Reed number of these people are this that I would call a shaper and they are people who love to go from visualization to actualization and to be on that mission and so on and that's my personality type.

I have a certain type personality type. Then 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 for him. I should probably not tell stories, but um but um but um No, no, no. That's what we do here. We tell stories. We can all take it later. it later. it later. The excitement, you know, the compulsive thrill of climbing that and and aspiring to that was my personality type. 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 sound like you had a story of him where that's an example of Well, yeah. Well, yeah. Well, yeah. 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. when he first started Tesla, he had made something like um $180 million from PayPal and he decided that he was going to take half of that money and he was going to go to the mo um to Mars 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 take a piece of that and just so that way you know things don't work out you've got that no I don't no need to do that and he had that strong compulsive need but there is I think everybody has a certain nature okay whether you're born in your environment you have a nature and it that's why I created these personality tests for any of your listeners.

Principles U 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 have somebody else that you have a relationship with take it and then they'll tell you about the relationship. So, we took it last night based on on your after we talked the other day. So, Sam tells me he'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. Is degenerate an option. Degenerate. Degenerate. Degenerate. Happy but sort of foolish. New new type. You a Is that what So, so I got explorer and I was like that was not what I expected at all. Um did it characterize you? Yeah. I mean it called it it very much called like I'm driven very much by curiosity seeking in seeking new new knowledge new experiences learning getting being very like objective and truthful about what I'm experiencing and almost taking pleasure even when you have a bad result because it means you got to learn and so there was which is 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 think I do 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 like I'm I'm much less than Sam. Sam really wants everything to be great. Okay. One of the elements of a shaper is um and 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 is that. Yes. What the issue of um a a a shaper is um they want to go from visualization to actualization and then they go from like this very big picture down to what are those details?

So, I remember El Elon gave me the key to his car and and that, you know, 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 a watering can with a plant on a rocket to send it to Mars to say first life on Mars to aspire things and so on. So, it's a 10,000 foot level and 10 cm level, level, level, right? that that liking and then taking that and going.

Okay. Um so yeah that we all have our p and so the success in life the joy really is knowing your nature and finding the right path for your nature because you can't fight against your nature. Right. So look Ray, we've only known each other for 30 minutes but I'm gonna I'm gonna show you something that might might gross you out. 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." Oh, good.

Oh, good. Oh, good. So, tell me, you you were at the tattoo parlor. parlor. parlor. Have you ever heard of the phrase stick and poke? and poke? and poke? No. No. No. Okay. So, basically, if you're in jail, this is kind of like where it comes out of, but like a lot of like punk rock people do it. 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. And so when I was like I was actually maybe I sometimes I say 19 in reality I was probably 22.

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 I'm so you know angsty and at the time I was I partied a lot and so I was drunk and I was like I'm going to tattoo act now my feet so when I wake up that's the first thing that I see is I got to take action and has that worked for you? Yeah, I tend to need to tone it down uh where I'm like I need to think and plan because I 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 bowl in a China 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 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. 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, you know, if we tried. So this let's pause and and reflect on that very important point for success that people who think differently from you who you ordinarily can get annoyed at are your paths to success that if you can understand it was very interesting when I did this in Bridgewater I did the personality tests and and then they start saying oh you're a ESTP and I'm a 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. And so success comes from that. Success comes from failure, right? And learning from it. Okay. And success comes from working together. 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 going to 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?

Yeah. Another example is Dr. 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. For six years, we've built one of the biggest business podcasts in the world despite being completely different in our So, I hope your audience hears this, right? right? right? Yeah. Yeah. Yeah. It's pause and reflect like cuz Okay, what are we here for? We're here for pretty much the same reason just a little bit different settings.

I'm 76. 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 I wouldn't be listening okay so I just wanted to pause on that formula okay that 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 can you can you guide us on the reflection part because 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 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 now meditation has helped me a lot I I've done meditation transcend al meditation since 1969.

Explain what that even is. I' 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 that is a word that is called a mantra that doesn't have any meaning. And so um let me an example might be okay so you're sitting there and you repeat m in your head and when you do that you can't have thoughts because when your thoughts are in m and the in your thoughts are in m and the thoughts can't come in and then eventually when you get this habit down then the m goes away and you go into pretty much a subconscious state you know 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. 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 if you take a hot shower and these ideas come to you, but you try to muscle ideas, you can't make the m 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 a an instinct. Habit is a very uh important tool 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, pain. Okay. So it's now like a puzzle for me. Okay. The puzzle is how does reality work? It'll tell me something about how reality works and I have to deal with reality to make it successful.

And so what is my principle for dealing with my that reality to deal with it in the best possible way? Okay, 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 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 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? You journal every morning, every night? No, no, no, no, 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 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 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 then this all computerized computerized computerized decisionmaking systems for markets and almost uh everything and because I've done this you know for 35 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 if you know if the Fed does this or if somebody you love dies eyes 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. What happens in the meditation is it connects your subliminal self to your conscious. I'm I'm on board with all that. I think that if I put myself in your shoes between the ages of like 35 to 52, you went from like nothing to like the largest hedge fund in the world, which we I want to hear all that.

But when you're like 34, 35, 36 in the first 3 years of starting your business a new I would have to think like most all small business owners, you're like I just got to pay the bills. I could always find the way to pay the bills. The question is what was it? 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.

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 to the outside world. I don't care about things that can inhibit maybe that choice. I think people also uh get stuck um they get stuck because they don't realize there are multiple possibilities. 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 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 and and by the way a lot of money is not an important thing. Sometimes we get hung up on this like it's got to be this conventional life which is you know okay I've got to do this okay is that really what it is even experiment with it.

Listen to this quote Sean that uh he had. He said, "I cannot say 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." Though that was pretty cool. That's true. That's true. That's true. 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. 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. What is that going to get you? Okay. Does that get you better friends? Okay. Does it get you a better marriage, a better relationship with your kids? your kids? your kids? 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 him to have." Do you think that you could answer that for yourself? for yourself? for yourself? Uh, I tried to do it. I'll read what I wrote. So when I was 27 years old, I wrote I tried to write this out cuz I was like I think I had actually read your principles PDF around the same time and it made me start asking these questions cuz one of your core principles like figure out what you want 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 want to have the ability to shape my own life. I want to be my own biggest fan. I want to make adversity part of the recipe. I want to treat other people well. And I want to reread this every year, every morning, so I never forget what each day is for.

I want to rewrite the list every year so I see myself evolving. I want to focus on what matters. Number one, my loved ones, cuz they love me, even if I don't do anything on this list. 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 I say some of the things I'm weak at. I said, I want to 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. Uh because that's the most satis satisfying way to do it. Congratulations. That's fantastic. And this was 10 years ago.

[clears throat] Yeah. And then you you reflect and you modify. Okay. And then so now you know what you want. Do you change your goals every year or No, I'm it's like my nature. 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 pass along everything that I have that is a value to other people. Right. And so cuz I'm late and I'm approaching my end. So uh that hole is 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 arcs of life there's an arc of life almost like a script. I mean you know exactly 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 you uh I was listening to 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 doortodoor Bible salesman. Yeah. salesman. Yeah. salesman. Yeah. And you're Did he know anything about research or finances? Um not much, but he was curious and he was, you know, like I say, there are three things. Um there's skills, abilities, and values. And most people look at skills 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? 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 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 shot because you know something comes along right so how do you adapt what are you going after and then the least so the least important is the skills and so in thinking about that what's our relationship going to be like when how do we pursue a dream is he bride is he 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, you know, I'm looking for, right? I mean, that that's what even talent identification is because talent is more important than money. Okay? The the money people are trying to find those people, right? 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. Musk. Musk. Human capital versus financial capital. Right. Right. Right. That's right. That's 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? phase? phase? I think it would have been tough. I was um you know a 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 LU on probation, but I had a passion.

So tell the story if you can of how you got that passion, how you started. You said I loved markets. I mean most teenagers don't know they love markets. I used to do odd jobs as a kid, mow lawns, shovel driveways, and then caddy. And so I uh I would caddy. I uh would uh walk around. I got $6 a bag when I would get up to $50. And I would talk to people about the people I cing with about the markets cuz 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 catting money and I put in the markets. Um and the uh first stock I bought was the only company I heard of that was selling for less than $5 a share. And I 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.

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 stocks, you know, on all of those things and I just figure I have to pick one or two that go up. I mean, this 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.

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 kid kids who were doing that. doing that. doing that. So books or where were you getting smarter? How did you start? I remember Fortune had the Fortune 500 and they had in the when they had the Fortune 500, they would have 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 the mail would log these things to the house and then I it became my little library and I would talk and then I'd fiddle around and yeah that's how I did it whenever I was reading snowball warren Buffett and now I'm hearing you talk about it. I think like the lucky thing that I don't l I don't know what it is that you found something that you liked at such a young age that for a lot of people I know that are like that Bill Gates was like that a lot of people are like that they found something and then also learning is different learning prior to puberty is different at around 12 or 13 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 into know into know into Um, so yeah, that was part of it.

Were you a hustler? Cuz you know, now we see you as this 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 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 had overlooked. He was setting up pinball machines and barber shops and fishing golf balls out of the pond and reselling them.

He was a hustler. Were you a hustler as well? No, in the golf course that I had I was at uh they would hit them at uh they would hit them 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 and sell them. Now that's funny. I didn't know he did that. Sam called you a late bloomer. I find that term interesting. Uh 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 24 years old maybe. He shared this thing of when did our heroes 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 all their apprenticeship. So like to learn and then starting their first hit and he reverse engineered it and almost hit it exactly.

He's like by 30 I'm going to 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 okay two things. First of all uh I think you should publish that. Okay. Um and I suspect it has a big range around it. Okay. Like I was thinking uh Ray Croc McDonald's he was like 55. Okay. So, it's a big range, but they 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 15 years older than me, and I was like, I didn't grow up with a lot of money.

And I was like, I want to be free. I want to feel, you know, I want to I don't you know, I want to I don't know. I want to feel free. And I was like, what's the number I need? And he said, $20 million. So, I said, uh, all right, that's the number. I have to make $20 million by the age of 30. And it was definitely I was money oriented and it worked. I I got I basically 31. But it was so I felt it was so easy to like have a goal and then like reverse engineer and back into it cuz then all I had to think was like step one, right?

Step two, step three. Great. And and that was smart because 20 million, right? We'll do it. Okay. And do it. And you also thought um being free. free. free. Yeah. and then you can go for it. That was what I was trying to tell Elon and he said, "No, I don't need it. Don't need the safety net." Because if I'm 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 I want my kids to be going to a good public school." All of that.

At the same time, you made like $20 billion, right? So, so somebody listening could say, "Well, at some point, did he did he just way overshoot his his his needs?" I wasn't paying for that. Yeah, it's I I played a game that I love that pays well if you play it well. well. well. Right. Right. Right. I'm very passionate with personal finances and particularly amongst the average Joe of like don't buy 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 I instinctively can't waste. I'm reluctant to fly a private plane. I'm I don't like expensive watches. expensive watches. 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. Where do you spend? Well, right. So, like spending is also a skill. I spend money on the things that I enjoy. I love boats. Uh have a house on the water.

I don't have a yacht, but I have a ocean exploration ship that I'm very excited about that I give to scientists and I'll tag along. I cannot do a normal yacht. Okay. But when I'm but when they're doing this ocean exploration, Jacqu Custoau had an effect on me. When I was growing up, uh I watched um him dive and do exploration. And then 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. 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 much jewelry, you know, or anything that would be fancy jewelry or something.

That's just I mean how we grew up and you know I mean and the kids are the same thing. my kids who have grown up and I would say whatever you enjoy like if you enjoy the, you know, the threads and the beauty or the the watch and you really are enjoying it, that's fantastic. I know you're into the ocean. Do you believe in aliens? And have you do you have access into any cool uh insight into uh things like that? I have no knowledge of aliens and I have no no no What do you believe?

What do I believe? I have no beliefs that are just beliefs. So people who I've heard different people 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 100 billion solar systems okay and in the universe there are something like a 100red 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.

However, I've also heard scientists say that there is that that's much smaller than one would think about those things. But I haven't gotten into the subject. 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 and some you have much lower based on 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 do you go have humility? Okay. 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 um very little of it was about business or finances. How much time of your day do you spend thinking about some of this highle stuff versus like actually picking or deciding making a decision on a trade?

a trade? 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 because it brings you into okay global that's cool you deal with the whole world macro that means big stuff important 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 um of the last 500 years of how things are working only because I learned in my life that if I haven't seen something before in my that didn't happen to me in my lifetime I should see whether it happened before my lifetime and so on and then when I did that cuz there are these big cycles um like there's um there are orders right we'll call there's a monetary order there is a political order okay political and social order there is a geopolitical order in other words systems of how they work.

They all break down. Okay, there's it throughout history. You read history, but they happen like, you know, in these big sort of cycles and they break down kind of 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 a changing world order, I plot things and so you see them on graphs 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 because so it's connected when you said do I see the big stuff okay yeah the big stuff matters 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 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. Okay. Okay. So, one of the things that I learned about is that there are five big forces that interact o over a period of time to determine that and that is the debt money economic force. Okay. And there is a big debt cycle. Okay. So, it's and it's a very simple thing. uh if uh if you acquire more debt than you and then you're earning over that your debt service payments will squeeze out your spending. Uh okay, they grow and that 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 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 bonds and how does that work? So it has a mechanical part of it. That's one of the forces. The other forces is wealth and values differences. So there's the political force which has to wealth gaps, values gaps as they become greater. That's a greater threat to democracy. That's a greater threat to in other words when you get to do you have irreconcilable differences.

So you're not going to 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. Okay. 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 for the world? And um so the way it works is you have a war, the winner of the war sets the rules and that we call that's the order.

1945 we ended the war, America sets the rules and so on and we created what was a multilateral 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. Okay. So, now you have those three things.

Okay, that's h that's happening. Number four, um force always through nature uh is nature um in particular. Droughts, floods, and pandemics historically have killed more people than wars and they are a big force 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 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. Your family office has like 70% or 75% in gold ETFs right now. Is that wrong? Totally wrong. Totally wrong. I believe that from an investor's point of view that they should um it depends what their portfolio is constructed and they should have between uh five and 15% of a portfolio on getting that 15 uncorrelated difference. Uh that's they should have something like that and they should have it overweighted if they're tactically doing it.

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 create a strategic asset allocation mix meaning what is my best balance portfolio if I have no opinions. What is it's not going to be cash because cash always is the worst performing over a period of time.

People think it's the safest. It's the shest to do poorly over the longest period of time. So high certainty, low performance. So what you want to have the best thing to do is have a wellbalanced portfolio of assets because you can lower their risk as by through the diversification because 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. What is a bubble? A bubble is not whether the stock will pay off in the long run because in bubbles even the most successful companies go down 80% or something along those lines. So typically when there's uh borrowing of money or whatever and there's an increase in wealth relative to money. Okay, wealth and money are two different things. Okay, wealth is um you can make up wealth. If if you have a 50 billion a $50 million offering on a billion dollar valuation, valuation, valuation, um then all of a sudden you're tech you're called a billionaire and it was $50 million but and and then the world has a billion dollars in wealth.

But what happens is as wealth builds up, you can't spend wealth. You have to sell wealth in order to get money because you 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 uh that they borrowed the money to buy the wealth uh to invest in the wealth 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 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 should because they don't diversify or and what happens is it's all the rage and so is it logical and there are these elements that create a bubble. Okay, there are right now um on that scale I have a bubble gauge.

I measure measure all these things and I have this bubble gauge going back across countries to about 1900 and so I can see where they are and these by the way typically take place quite often 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 in 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.

There's a lot of reasons 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 bubble gauge saying right now? now? now? So, the bubble gauge is saying it's about 75% about 75% about 75% toward where it was both in 2000 and 1929. So, it's pretty high up there. Okay. in Japan in its bubble in 1990, it got higher even than than those cases. So, it's high. But people pay too much attention.

Let's say if I just do did the bubble gauge, 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 going to be 3 years or 10 years, but it won't be a good investment. Um but it won't tell you timing. Timing you need the prickling 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 pricking of the bubble typically is the creating the need for the cash for the for converting that wealth into cash for one reason or another. Quite often it's the most typical thing is tightening monetary policy. Okay. 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 becomes low relative to interest rates and when interest rates go up let's say a tightening of monetary policy you 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 you're going to have to pay wealth tax, then whoever has the wealth is going to have 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 this and so on. But I'm just trying to answer the question that there are mechanics.

Okay? Everything that happens ha h has causes that 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. Is Bridgewwater the biggest hedge fund because you were the you had the best performance. Is it the biggest because you were the best at marketing? Is it the big why did it become the biggest? It became the biggest hedge fund because we the most consistently made uh excellent returns with uh minimal risk and we were uncorrelated with the stock market or any other market.

That's that was the main thing. It made I think 11.8% a year for uh for something like 31 years when I did it. The worst uh down in a year was 2000 because uh of the COVID and we didn't know how to deal deal with the CO. Well, that was down through about 13. The next two times was down like 2%. Okay. And that was not correlated with anything. You know, the losses you lose 50%. You have to have 100% to make money. And so the compounded effect of that and it was comfortable.

So that's that's that's why out of the 30 years, how many did you lose? lose? lose? I think it was like three three was what% what% what% three four whatever but not not significant. But it does help your your your your media, your work, your I mean you're you're charming, you're a good leader like and you've been doing it since you were in your 30s of like but I became the Bridgewater became the largest hedge fund before anybody 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. 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 going to be with each other the principles and then that got around 3 million copies were it was downloaded 3 million times. People passed it around otherwise it was going to be a problem like hiring people and so on. they wouldn't understand the culture which is the culture is an idea meritocracy in which we radical truthfulness and radical transparency but anyway so in answer to your question it was not my charm had anything to do with this I could explain the process and 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 it was logical and then there were results and we helped people learn meaningful work and meaningful relationships.

So I would have 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 cuz I this is my first time here in like 10 years and I went to the Rockefeller Center and there's this like kind of this giant stone and it's John D. Rockefeller Jr. and he's just writing these things. I believe in the sacredness of a promise that a man's word should be as good as his bond. And he just has each there's like just 10 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 overcome hate. Right? And we are missing these now more than ever. Right? The idea of what are these principles? What are the principles that bind us together? Okay. What are the principles that we 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? 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. You're like these are my principles. If if you take away anything, it should be that you should have figure out what yours are. That's right. That's right. That's right. In Europe, most people 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. their talk. their talk. But to get there, you have to write it down. You have to look at it.

You have to have the kicked out of it. You have to, you know, and you say, "Yes, that's right. that's right. that's right. Those that are clear, etched in stone that bring us to a higher level of how we should be 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 or 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 Vulker okay uh Lee Kuanu started Singapore and and ran that but no there were many many people who will sacrifice for for the things I believe that we we talk about love we 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, 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 than the individual parts 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 as you look at that.

Okay. as the sting from selfishness and fight and 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 can we rise above ourselves for dealing with you know what will certainly be better for everybody if we can get along I I bet I don't mean that idealistically this is practical right cuz it doesn't cost me a lot to help you doesn't cost you a lot to help me and but it 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 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 angles some about investing some about life and principles and entrepreneurship um I'm curious It's like if somebody was listening to this and there's one thing that they were going to 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? 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. And then I would say it's all about meaningful work and meaningful relationships. relationships. relationships. If you have work that you love and you've got relationships that you love, you're probably going to have a great life. life. 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.