Ray Dalio: The principles that made me a billionaire

0:00You 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 Bridgewater 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... No, no, no. That's what we do here. You don't have to make it to the top to be happy.

0:30What's the top? There's no correlation between the level of happiness in your life and the amount of money that you made. So you have to have a purpose. What do you want to do with the money that is so important? You better answer that question. I feel like I can rule the world. I know I could be what I want to. I put my all in it like no day's off. On the road, let's travel. You were, in some regard, a little bit of a late bloomer in terms of traditional metrics of success. Oh, yeah. I think you were 34, 35. You had, like, two kids, I think.

1:01You 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 went up. 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 they were going to have a big debt crisis. And that was a very controversial point of view.

1:34And then Mexico defaulted in August of 1982. So I was asked to testify to Congress about what this is all about 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 from my dad. So then my choice was, am I going to, you know, put on a suit and tie, go in, commute, and work for somebody in that capacity?

2:09And 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 of Bridgewater, and then it just kept going up because of what I learned. I learned two things. First of all, I learned humility to balance my audacity. Okay. I didn't have much humility. I'd say, I'm riding, I'm going to be riding and all that. And then I learned how to diversify my bets and substantially reduce my risk without reducing my returns.

2:44Because I didn't want to have reduced the upside. I knew that I had to reduce the downside. And so I really learned and taught myself, really, my mantra. Okay. Here's the mantra for investing. You want to be successful? This will, this is the holy grail of investing. Find 15 good uncorrelated return streams. How did you come up with 15? Well, I just looked at the math of it.

3:14Okay. So in other words, what are the marginal benefits of diversification given the different levels of correlation? And 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.

3:47Okay. 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 shit 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, 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?

4:23They don't have a game plan. So what's a good game plan look like? How do you know if you have a good game plan? Well, the way that I did it was every time I would make a decision, this is the building of all principles I did, but particularly in the markets. Every time I would 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 that would give me also greater understanding of how things work.

4:54And 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 so give me one good decision rule, that wherever it happens in the world, that I have a track record of knowing how those work, and wherever it is in the world, you bring me that.

5:31And then make a collection of those kinds of things, and make them uncorrelated, so it provides your diversification. And so now you're executing a game plan. And so, like, I have rules that it should be timeless and universal, because if it didn't work in a long period of 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 did build game plans and execute the game plans. Did Bridgewater have any revenue coming in?

6:02Nothing. And so you're waking up in the morning, and you're like, I've got to figure this out. It was like 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, have all the things that can kill me, and I made a choice of what I wanted in life.

6:36I mean, like, I have to have this great upside. I cannot do that. And also part of it was, if I'm going in the jungle, I want to go with people 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 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 success.

7:09You didn't want to go to the zoo. You'd rather be in the jungle than the zoo. Yeah, almost. Yeah. 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, if 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. Like, I don't need a big house. I don't need a big anything.

7:40My kids can go to a good public school. They have great public schools. But did you have, like, a number where 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 and then years of living that way could I afford if it shut down. But you said two levels, so that was level one. It's freedom money. Basically, f*** you money. What was that number for you? I don't remember what the number was, but, you know, it wasn't, it wasn't, it was an easy to achieve number.

8:12Like a million dollars? But, oh, no. Less. Oh, much less. At that time. Was there ever a grand vision 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. When I decided that I wanted to pass leadership of Bridgewater along to others, I want to be investor, let them run the business, and I want to do that because I'm hooked on the markets. I created personality tests.

8:43I started with Myers-Briggs, 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 Yunus. I gave it to other people to see the elements of what they are like. I put it online for free. I created it. We took it. Okay, you took it. Okay. Well, there's a type of person that represents a very small percentage of the population, and me, Elon Musk is it, and Bill Gates, and Reed, a number of these people are this, that I would call a shaper.

9:27And 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 personality type, and they have to do certain things. And I remember Elon, and he's that personality type. Okay, making money is not a big deal for him. I should probably not tell stories, but— No, no, no. That's what we do here. We tell stories. We can all tell you that later. The excitement, you know, the compulsive thrill of climbing that and aspiring to that was my personality type.

10:06And he doesn't need a house. He doesn't need security. He doesn't need anything. I mean, he didn't even need my level of needing. It sounded like you had a story of him where that's an example of— 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.

10:40So 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 $180 million from PayPal. And he decided that he was going to take half of that money and he was going to go to Mars. And he had no experience in terms of going to Mars.

11:10And so he had this vision. And, you know, when I said to him, 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 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 that's why I created these personality tests.

11:41For any of your listeners, PrinciplesU is what it is. 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 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.

12:11So I'm taking it. I'm answering as honestly as I can. Is degenerate an option? Did you get degenerate? Happy, but sort of foolish.

12:19New type. You a moron, is that one? So I got Explorer, and I was like, that was not what I expected at all. Did it characterize you? Yeah, I mean, it called, it very much called like, I'm driven very much by curiosity, seeking new knowledge, new experiences, learning, 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.

12:50So 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 accusation. 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 not a perfectionist. I don't care. Like I'm much less than Sam. Sam really wants everything to be great. Okay. And 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.

13:21It is that. Yes. What the issue of, um, uh, uh, 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 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, uh, a watering can with a plant on a rocket

13:55to send it to Mars, to say first life on Mars, to inspire things and so on. So 10,000 foot level and 10 centimeter level. Right. That, that liking and then taking that and going. Okay. Um, so yeah, we all have our person. And so the success in life, the joy really is knowing your nature and finding the right path for your nature because you can't fight against your nature. Right. So look, Ray, we've only known each other for 30 minutes, but I'm going to, I'm going to show you something that might, might gross you out.

14:27But 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.

14:38So tell me, you, you were at the tattoo parlor. Have you ever heard of the phrase stick and poke? No. Okay. So basically if you're in jail, this is kind of like where it comes out of, but like a lot of like punk rock people do it. You get a sewing needle and you, uh, dip it in ink and then you just make lots of little dots on your skin. And that's a tattoo. And so when I was like, I was actually maybe, I probably, 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.

15:11And at the time I was, uh, I partied a lot. And so I was drunk and I was like, I'm going to tattoo act now on my feet. So when I wake up, that's the first thing that I see is I got to take action. And does that work for you? Yeah. I tend to need to tone it down, uh, where I'm like, I, 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 bull in a china shop. 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.

15:43It'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

16:16if we tried. So this, let's pause 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 that, it was very interesting when I did this in Bridgewater, I did the personality test and, and then they start saying, Oh, you're a ESTP and I'm a, whatever it is.

16:46And then they started to understand and they understood how they would work together rather than get annoyed by the other person. And 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

17:16going 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, but for six years, we've built one of the biggest business podcasts in the world, despite being completely different. So I hope your audience hears this, right?

17:48Yeah. It's pause and reflect like, cause, okay, what are we here for? We're here for pretty much the same reason, just a little bit different settings. I'm 76. I want to pass along whatever I add 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.

18:20And how do you work together and all that? Wow. And follow your nature. Can you, can you guide us on the reflection part? Cause I think everybody understands the word, but I bet we don't really talk a lot about how each individual person does it. And so are you, is writing your reflection? Do you talk to, do you have two or three people you call who tend to give you high signal, like feedback or advice? Like what is your process to actually do the reflection? Pain part comes involuntarily. That, that hits you. When the pain comes, um, eventually the pain will go away, but you can skip the, people

18:52can 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've, I've done meditation, transcendental meditation since 1969. Explain what that even is. I've, I've only heard you and Jerry Seinfeld swear by transcendental meditation. What is it? Transcendental meditation is a very simple exercise of, um, you sit there calmly and you repeat a sound that is a word that is called a mantra that doesn't have any meaning.

19:25And so, um, let me, an example might be om, okay? So you're sitting there and you repeat om in your head. And when you do that, you can't have thoughts because when your thoughts are in om, your thoughts are in om and the other thoughts can't come in. And then eventually when you get this habit down, then the om goes away and you go into pretty much a subconscious state, you know, very relaxing, very calm. And so it's a real calming exercise and it brings you into your subconscious mind.

19:59Okay. 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,

20:34you 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 developed an instinct. Habit is a very 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 reaction, which is, okay, that is, that's a lesson in reality. In other words, pay.

21:05Okay. 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 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?

21:38Because you, you start to say, okay, there's pain and you have your curiosity. Okay. Now you take your curiosity and you said, 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?

22:09Do you journal every morning, every night? No, 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.

22:39Okay. And you put it in computer code and I made them this all computerized decision-making 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 or whatever it is, okay, how do

23:12you reflect on them? What does that mean? I would recommend, I put out a journal that people can do so that they can journal their own principles and they have the reflections and so on. If they, if they start to think that way, pain plus reflection equals that and you reflect well, then what happens in the meditation is it connects your subliminal self to your conscious. I'm, I'm on board with all that. But 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

23:45all that. But when you're like 34, 35, 36, and the first three years of starting your business anew, 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. And, 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.

24:19And I don't really care. 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 get stuck. They get stuck because they don't realize there are multiple possibilities. And so some people say to me, 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.

24:52Okay. 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 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 he had.

25:23He 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.

25:38Yeah. I guess like you don't have to make it to the top to be happy. And I think that's been like. 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. Right. What is that going to get you? Okay. Does that get you better friends? Okay. Does it get you better marriage, a better relationship with your kids?

26:11What is your definition of success? Success is you knowing your nature and then finding the best path through that nature so that you look back on that and you say, ah, that was the life I wanted to have. Do you think that you could answer that for yourself? I tried to do it. I'll read what I wrote. So when I was 27 years old, I tried to write this out because I was like, I think I had actually read your principal's PDF around the same time. And it made me start asking these questions because one of your core principles is like, figure out what you want and then understand the rules of nature.

26:43Study 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 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, because 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.

27:15Number 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 keep going a little bit. And then I say some of the things that 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. And I want to win, but not just win. I want to win on my terms, because that's the most satisfying way to do it. Congratulations. That's fantastic. And this was 10 years ago. And then you reflect and you modify.

27:46Okay. And then, so now you know what you want. Do you change your goals every year or anything? No, it's like my nature. My nature really doesn't change. My phase of life changes. Okay. So I'm in a different phase of life. Like right now, I really feel compelled to pass along everything that I have that is of value to other people. Right. And so, because I'm late and I'm approaching my end. So that whole is my joy. We have different joys. We have different circumstances.

28:17In 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. Hey, let's take a quick break. You know that feeling when strategy is done, the brief is written, everyone's aligned, and you realize someone still has to sit down and actually create all the content?

28:49That someone is usually you, and it's due tomorrow. Well, the Breeze Assistant from HubSpot can help. It works right inside HubSpot. You can draft a campaign copy, blog posts, emails, all in your brand voice, all using your actual customer data. So you don't create just content. You create content that converts. Check out HubSpot.com, the agentic customer platform for growing businesses.

29:09I was listening to a podcast about you, and there was this funny story. I think this was when you were selling research. You said that you hired a guy, I forget his name, but I think he was a door-to-door Bible salesman. Yeah, Rob Freese. Did he know anything about research or finances? Not much, but he was curious, and he was, you know, like I say, there are three things.

29:32There'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 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 in a world now that maybe programmers are no longer going to be the most important people,

30:03and 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 job 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? How do we pursue a dream? Is he bright? Is he, what is his abilities? What can we do? How do you discover? I mean, most of, like, your curiosity, most of everything is in the discovery, okay?

30:37It's not in the, you know, remember these rules and so on. The future is in the discovery. So that's what I'm, you know, I'm looking for, right? I mean, that's what even talent identification is, because talent is more important than money, okay? The money people are trying to find those people, okay? So if you look at, okay, what did Elon Musk have? He didn't have money. And how did people make money? They invested in Elon Musk. They found him and they invested in Elon Musk.

31:07Human capital versus financial capital, right? That's right. Let's talk about you when you were younger. What would people have seen in the talent identification at that phase? I think it would have been tough. I was, you know, a C student. I didn't like high school education. I liked markets. I had a passion for markets. I got into CW Post College, which is LIU, 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 love markets. I mean, most teenagers don't know they love markets.

31:38I used to do odd jobs as a kid, mow lawns, shovel driveways, and then caddy. And so I would caddy. I would walk around. I got $6 a bag. And when I would get up to $50, and I would talk to people about the people I was caddying with about the markets. Because 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 took my caddy money and I put it in the markets.

32:12And the 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. And so I did. The company was about to go bankrupt. Another company acquired it. It tripled in price. And I said, I like this game. And I thought that this game must be probably an easy game.

32:44Because like in the newspapers, the Wall Street Journal and the news, they had all these thousands of names of stocks on all of those things. And I just figure I have to pick one or two that go up. I mean, there's a 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, there were no kids who were doing that. So books? Where were you getting smarter?

33:15How did you start doing that? I remember Fortune had the Fortune 500. And when they had the Fortune 500, they would have little tear sheets. And you could say which annual report you would want. And you would check it off and mail it in. And I checked off all of them. And then, you know, I'm able to log these things to the house. And then it became my little library. And I would talk. And then I'd fiddle around. And, you know, 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 know what it is, that you found something that you liked at such a young age.

33:53For 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 you. So, yeah, that was part of it. Were you a hustler? Because, you know, now we see you as this guy who's very wise.

34:26He's sharing all his knowledge. And 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 betting. He was finding slips on the ground and cashing them in that others had overlooked. He was setting up pinball machines and barbershops and fishing golf balls out of the pond and reselling them. He was a hustler. Were you a hustler of it as well? No. In the golf course that I was at, they would hit him into the pond.

34:57And I could walk around in the pond and feel them. And then I would pick up the golf balls and sell them. That's funny. I didn't know he did that. Sam called you a late bloomer. And I find that term interesting. You don't know this about Sam. But he really wanted to be successful. He studied a bunch of successful people. He had a spreadsheet he shared with me. 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?

35:27How many years did it take for them to actually win? And he had mapped them all out. Interesting. So, their apprenticeship, so like to learn, and then starting their first hit. And he reverse engineered and almost hit it exactly. He's like, by 30, I'm going to have this many millions in the bank. And I know today I'm here, but I will be here. And that's like almost the median. But, okay, two things. First of all, I think you should publish that. Okay. And I suspect it has a big range around it. Okay. Like I was thinking Ray Kroc McDonald's.

36:00He was like 55 or something. Okay. So, it's a big range. But they certainly are driven. Yeah. Basically, when I was younger, I met someone who's actually my partner now. And he was 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 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, all right, that's the number. I have to make $20 million by the age of 30. And it was definitely money.

36:32I was money oriented. And it worked. I got basically 31. But I felt it was so easy to have a goal and then reverse engineer and back into it. Because then all I had to think was step one, step two, step three. Great. And that was smart. Because $20 million, right, we'll do it. Okay. And do it. And you also thought being free. Yeah. And then you can go for it. That was what I was trying to tell Elon.

37:02And he said, no, I don't need it. Okay. Don't need the safety net. Because 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've made like $20 billion. Right. So, somebody listening could say, well, at some point, did he just way overshoot his needs? I wasn't chitting for that. Yeah. It's a byproduct. I played a game that I love that pays well if you play it well. Right. I'm very passionate with personal finances. And particularly amongst the average Joe of like, don't buy shit you don't need, which people don't tend to follow.

37:35Or 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 instinctively can't waste. I'm reluctant to fly a private plane. I don't like expensive watches. I heard someone make a joke that most of your suits are from Banana Republic or something like that. It's something like that. Where do you spend well, right? So, like, spending is also a skill.

38:06I spend money on the things that I enjoy. I love boats. I have a house on the water. I don't have a yacht, but I have an 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 Jacques Cousteau had an effect on me. When I was growing up, I watched him dive and do exploration. And then my son, I have a son who, I took my son's diving and they learned how to dive.

38:39And 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. 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, my family, my wife would not be comfortable with much jewelry, you know, or anything that would be fancy jewelry or something.

39:17That's just, let me, how we grew up. And, you know, I mean, and the kids are the same thing. My kids have grown up. And I would say, whatever you enjoy, like if you enjoy the, you know, the threads and the beauty or the watch and you really are enjoying it, that's fantastic. I know you're into the ocean. Do you believe in aliens? And do you have access and any cool insight into things like that? I have no knowledge of aliens. Oh, come on. What do you believe?

39:47What do I believe? I have no beliefs that are just beliefs. So, people, I've heard different people saying things. And here's what I believe, 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 is something like 100 billion galaxies.

40:18And so, there are a lot of combinations out there. So, I would have to believe that the probabilities of 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.

40:52Yeah, I think you had a phrase like probability-weighted beliefs or something like that, right? It's like not all beliefs 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 does it expect to value? How do you 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 very little of it was about business or finances.

41:24How much time of your day do you spend thinking about some of this high-level stuff versus like actually picking or deciding, making a decision on a trade? They're connected to me, okay? I'm a global macro investor, okay? Which is, by the way, I think it's the best kind of investing because it brings you into it. 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 so it's connected to all of this stuff.

41:54You know, it's connected to the politics and the geopolitics and all of that, and it's connected to history. I did a study 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 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, because there are these big cycles, like there are orders, right?

42:27We'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? 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 can see these things happening.

43:06Simple 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, 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 realize that 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.

43:36I mean, just let's take a look at those things. You want to take a minute on that? Yeah, yeah. Okay, okay. So one of the things that I learned about is that there are five big forces that interact 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? And it's a very simple thing. So if you acquire more debt than you're earning over that, your debt service payments will squeeze out your spending, okay?

44:15They grow. And that is like in your circulatory system. That's like clock 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, 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.

44:48So there's the political force, which has 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 the geopolitical risk.

45:20So 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 so the way it works is you have a war. The winner of the war sets the rules and we call that 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.

45:50So 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 do you get past the disagreement? There's no court you go to. You can't do it that way. Okay, so now you have those three things. Okay, that's happening. Number four force, always through nature, is nature in particular. Droughts, floods, and pandemics historically have killed more people than wars.

46:22And 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 if you were to see life expectancy always rises, 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.

46:52And that is what is now happening. So if you know those cause-effect relationships, I think they're connected. I 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. No, no, no, no. Is that wrong? That headline was wrong? Totally wrong. Totally wrong. I believe that from an investor's point of view, that they should, it depends what their portfolio is constructed in, they should have between 5% and 15% of a portfolio on getting that 15 uncorrelated difference.

47:24That they should have something like that, and 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 particularly when there's a debt crisis and the government is flooding with money. 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 balanced portfolio if I have no opinions?

47:57It'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 surest to do poorly over the longest period of time. High certainty, low performance. So what you want to have, the best thing to do is have a well-balanced portfolio of assets because you can lower their risk 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 so on.

48:34But here's what I would describe, the mechanics, let's say. 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 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 you can make up wealth.

49:05If you have a $50 million offering on a billion-dollar valuation, then all of a sudden you're called a billionaire, and it was $50 million, 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.

49:35Now, what creates the need for money? The need for money often is that they borrowed the money to buy the wealth, 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 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.

50:07Everybody buys maybe more than they should because they don't diversify. 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 on that scale, I have a bubble gauge. I 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.

50:41A reason to be exuberant. The reason to be exuberant and to bet, and people confuse investing in, 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, there's a Google and there's a Yahoo. So what's the bubble gauge saying right now? So the bubble gauge is saying it's about 75% toward where it was both in 2000 and 1929.

51:18So it's pretty high up there, okay? In Japan, in its bubble in 1990, it got higher even than those cases. So it's high. But people pay too much attention. And let's say if I just did the bubble gauge, I could tell you probably with good probability that it won't be good to, for the next, I couldn't tell you whether it's going to be three years or 10 years, but it won't be a good investment. But it won't tell you timing. Timing, you need to prick the bubble.

51:49Okay. So what causes it to prick the bubble? So if you've 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 converting that wealth into cash for one reason or another. Quite often, the most typical thing is tightening monetary policy. So what you have typically is that when stocks go up and bonds go down, then what you have is the future expected return of equities becomes low relative to interest rates.

52:33And when interest rates go up, let's say a tightening of monetary policy, 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 a wealth tax, then whoever has the wealth is going to have to 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 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.

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

53:20Okay. So you probably have heard this on the podcast. But if you're running a company, I think that the number one attribute that will determine if you are going to succeed in business is how fast you can learn from others. Specifically, how fast you can learn from other entrepreneurs. But there's a problem with that. I have this problem. And in fact, you probably have it too. That's one of the reasons why you listened to My First Million in the first place. The problem is that finding other successful entrepreneurs to learn from, it's a pain in the butt. And so that's why a few years ago, I started a company called Hampton. You can check it out at joinhampton.com.

53:52We have thousands of members and they exist for this exact reason. So here's how it works. If you're a founder that does at least $3 million in revenue and you make it through our incredibly thorough vetting process, we then match you and put you in a group with nine other entrepreneurs. You meet in real life in your city once a month and it becomes your peer group that will frankly change your entire life. It's changed mine. I'm in a group as well. And so if you're a founder that does at least $3 million in revenue, check out joinhampton.com. Again, the URL is joinhampton.com.

54:23Is Bridgewater the biggest hedge fund because you had the best performance? Is it the biggest because you were the best at marketing? Why did it become the biggest? It became the biggest hedge fund because we the most consistently made excellent returns with minimal risk. And we were uncorrelated with the stock market or any other market. That was the main thing. It made, I think, 11.8% a year for something like 31 years when I did it.

54:58The worst down in a year was 2,000 because of the COVID and we didn't know how to deal with the COVID. 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 why. Out of the 30 years, how many did you lose?

55:29I think it was like three. Three? Lewis was whatever, he said 13%. Three, four, whatever, but not significant. But it does help your media, your work, your charming, your good leader. And you've been doing it since you were in your 30s. But 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. We became the largest hedge fund in the world, and at the same time, we have this culture, okay?

56:05And the culture was perceived as a cult. And then I put online the principles just so we have a book of how we're going to be with each other, the principles. And then that got around. Three million copies were, it was downloaded three million times. People passed it around. Otherwise, it was going to be a problem, like hiring people and someone that wouldn't understand the culture, which is the culture is an idea meritocracy in which we radical truthfulness and radical transparency.

56:36But anyway, so in answer to your question, it was not my charm had anything to do with this. I could explain the process. People can, they can understand what was our process. And I could show how it was back-tested and it worked through all of those periods of time. And that was logical. And then there were results. And we helped people learn 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.

57:08I was walking around New York because 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.