back to indexRay Dalio: Principles, the Economic Machine, AI & the Arc of Life | Lex Fridman Podcast #54
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The following is a conversation with Ray Dalio.
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He's the founder, co chairman,
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and co chief investment officer of Bridgewater Associates,
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one of the world's largest
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and most successful investment firms
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that is famous for the principles of radical truth
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and transparency that underlies culture.
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Ray is one of the wealthiest people in the world
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with ideas that extend far beyond the specifics
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of how he made that wealth.
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His ideas that are applicable to everyone
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are brilliantly summarized in his book, Principles.
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They're also even further condensed
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on several other platforms, including YouTube,
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where, for example, the 30 minute video titled
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How the Economic Machine Works
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is one of the best educational videos
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I personally have ever seen on YouTube.
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Once again, you may have noticed
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that the people I've been speaking with
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are not just computer scientists,
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but philosophers, mathematicians, writers,
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psychologists, physicists, economists, investors,
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and soon, much more.
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To me, AI is much bigger than deep learning,
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bigger than computing.
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It is our civilization's journey
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into understanding the human mind
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and creating echoes of it in the machine.
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That journey includes the mechanisms of our economy,
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of our politics, and the leaders
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that shape the future of both.
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This is the Artificial Intelligence Podcast.
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If you enjoy it, subscribe on YouTube,
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give it five stars on Apple Podcast,
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support it on Patreon,
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or simply connect with me on Twitter
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at Lex Friedman, spelled F R I D M A N.
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This show is presented by Cash App,
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which again is an organization that I've personally seen
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inspire girls and boys to dream of engineering
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And now here's my conversation with Ray Dalio.
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Truth or more precisely an accurate understanding
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of reality is the essential foundation of any good outcome.
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I believe you've said that.
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Let me ask an absurd sounding question
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at the high philosophical level.
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When you're trying to do something different
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than everybody else is doing
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and perhaps something that has not been done before,
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how do you accurately analyze the situation?
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How do you accurately discover the truth,
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the nature of things?
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Almost the way you're asking the question implies
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that truth and newness have nothing, are almost at odds.
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And I just want to say that I don't think
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that that's true, right?
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So what I mean by truth is, you know, what's the reality?
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How does the reality work?
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And so if you're doing something new
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that has never been done before,
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which is exciting and I like to do,
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the way that you would start with that
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is experimenting on what are the realities
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and the premises that you're using on that
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and how to stress test those types of things.
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I think what you're talking about is instead
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the fact of how do you deal with something
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that's never been done before
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and deal with the associated probabilities.
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And so I think in that,
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don't let something that's never been done before
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stand in the way of you doing that particular thing.
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You have, because almost the only way
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that you understand what truth is,
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is through experimentation.
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And so when you go out and experiment,
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you're going to learn a lot more about what truth is.
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But the essence of what I'm saying is that
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when you take a look at that, use truth,
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find out what the realities are as a foundation,
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do the independent thinking,
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do the experimentation to find out what's true
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and change and keep going after that.
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So I think that when you're thinking about it
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the way you're thinking about it,
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that almost implies that you're letting people
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almost say that they're reliant
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on what's been discovered before to find out what's true.
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And what's been discovered before is often not true, right?
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Conventional view of what is true is very often wrong.
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It'll go in ups and downs and I mean, there are fads
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and okay, this thing, it goes this way and that way.
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And so definitions of truths that are conventional
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are not the thing to go by.
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How do you know the thing that has been done before
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that it might succeed?
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It's to do whatever homework that you have
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in order to try to get a foundation.
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And then to go into worlds of not knowing
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and you go into the world of not knowing,
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but not stupidly, not naively, you know,
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you go into that world of not knowing
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and then you do experimenting and you learn what truth is
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and what's possible through that process.
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I describe it as a five step process.
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The first step is you go after your goals.
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The second step is you identify the problems
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that stand in the way of you getting to your goals.
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The third step is you diagnose those
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to get at the root cause of those.
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Then the fourth step is then now that you know
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the exact root cause, you design a way to get around those
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and then you follow through and do the designs
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you set out to do and it's the experimentation.
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I think that what happens to people mostly
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is that they try to decide whether they're gonna be
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successful or not ahead of doing it
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and they don't know how to do the process well
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because the nature of your questions are along those lines
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like how do you know?
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Well, you don't know, but a practical person
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who is also used to making dreams happen
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knows how to do that process.
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I've given personality tests to shapers.
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So the person, what I mean by a shaper is a person
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who can take something from visualization,
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they have an audacious goal and then they go
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from visualization to actualization, building it out.
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That includes Elon Musk, I gave him the personality test,
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I've given it to Bill Gates and I've given it to many,
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many such shapers and they know that process
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that I'm talking about, they experience it
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which is a process essentially of knowing
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how to go from an audacious goal
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but not in a ridiculous way, not a dream
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and then to do that learning along the way
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that allows them in a very practical way
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to learn very rapidly as they're moving toward that goal.
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So the call to adventure, the adventure starts
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not trying to analyze the probabilities of the situation
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but using what, instinct?
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How do you dive in?
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So let's talk about.
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It is being a, it's simultaneously being a dreamer
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and a realist, it's to know how to do that well.
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The pull comes from a pull to adventure.
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For whatever reason, I can't tell you how much
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of it's genetics and how much is environment
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but there's a early on, it's exciting.
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That notion is exciting, being creative is exciting
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and so one feels that, then one gets in the habit
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of doing that, okay, how do I know?
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How do I learn very well and then how do I imagine
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and then how do I experiment to go from that imagination?
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So it's that process that one, and then one,
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the more one does it, the better one becomes at it.
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You mentioned shapers, Elon Musk, Bill Gates.
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What, who are the shapers that you find yourself
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thinking about when you're constructing these ideas?
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The ones that define the archetype of a shaper for you.
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Well, as I say, a shaper for me is somebody
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who comes up with a great visualization,
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usually a really unique visualization
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and then actually builds it out and makes the world different,
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changes the world in that kind of a way.
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So when I look at it, Mark Benioff with Salesforce,
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Chris Anderson with TED, Mohammed Yunus
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with social enterprise and philanthropy,
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Jeffrey Canada and Harlem Children's Zone,
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there are, all domains have shapers who have the ability
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to visualize and make extraordinary things happen.
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What are the commonalities between some of them?
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The commonalities are, first of all,
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the excitement of something new, that call to adventure,
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and then again, that practicality, the capacity to learn.
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The capacity then, they're able to be,
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in many ways, full rage.
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That means they're able to go
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from the big, big picture down to the detail.
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So let's say, for example, Elon Musk,
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he describes, he gets a lot of money
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from selling PayPal, his interest in PayPal.
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He said, why isn't anybody going to Mars or outer space?
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What are we gonna do if the planet goes to hell?
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And how are we gonna get that?
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And nobody's paying attention to that.
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He doesn't know much about it.
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He then reads and learns and so on.
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Says, I'm gonna take, okay, half of my money,
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and I'm gonna put it in there,
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and I'm gonna do this thing, and he learns,
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and blah, blah, blah, blah, blah, blah, blah,
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and he's got creative, okay.
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That's one dimension.
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So he gave me the keys to his car,
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but this was just early days in Tesla,
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and he then points out the details.
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Okay, if you push this button here, it's this,
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the detail that, so he's simultaneously talking
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about the big, the big, big, big picture.
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Okay, when does humanity going to abandon the planet?
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But he will then be able to take it down into the detail
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so he can go, let's call it helicoptering.
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He can go up, he can go down,
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and see things at those types of perspective.
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And then you've seen that with the other shapers.
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And that's a common thing that they can do that.
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Another important difference that they have in mind
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is how they deal with people.
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I mean, meaning there's nothing more important
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than achieving the mission.
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And so what they have in common is that there's a test
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that I give these personality tests,
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because they're very helpful for understanding people.
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And so I gave it to all these shapers.
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And one of the things in workplace inventory test
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is this test, and it has a category called concern for others.
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They're all having concern for others.
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This includes Muhammad Yunus,
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who invented microfinance, social enterprise,
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impact investing, as Muhammad Yunus received
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the Nobel Peace Prize for this,
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the Congressional Medal of Honor.
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One of the, a fortune determined,
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one of the 10 greatest entrepreneurs of our time.
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He's built all sorts of businesses to give back money
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in social enterprise, a remarkable man.
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He has nobody that I know practically
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could have more concern for others.
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He lives a life of a saint.
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I mean, a very modest lifestyle,
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and he puts all his money into trying to help others.
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And he tests low on what's called concern for others,
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because what it really, those questions under that
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are questions about conflict to get at the mission.
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So they all, Jeffrey Canada,
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who changed Harlem Children's Zone
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and developed that to take children in Harlem
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and get them well taken care of,
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not only just in their education, but their whole lives.
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Harlem, him also, concern for others.
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What they mean is that they can see
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whether though individuals are performing at a level
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that an extremely high level
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that's necessary to make those dreams happen.
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So when you think of, let's say Steve Jobs was famous
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for being difficult with people and so on,
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and I didn't know Steve Jobs,
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so I can't speak personally to that,
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but his comments on, do you have A players?
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And if you have A players, if you put in B players,
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pretty soon you'll have C players and so on.
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That is a common element of them,
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holding people to high standards
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and not letting anybody stand in the way of the mission.
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What do you think about that kind of idea?
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Sorry to pause on that for a second,
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that the A, B, and C players,
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and the importance of, so when you have a mission,
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to really only have A players
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and be sort of aggressively filtering for that?
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Yes, but I think that there are all different ways
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of being A players.
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And I think, in order to grade a great team,
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you have to appreciate all the differences
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in ways of being A players, okay?
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That's the first thing.
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And then you always have to be super excellent,
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in my opinion, you always have to be really excellent
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with people to help them understand each other themselves
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and get in sync with them about what's true about them
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and their circumstances and how they're doing,
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so that they're having a fabulous
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personal development experience at the same time
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as you're dealing with them.
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So when I say that they're all different ways,
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this is one of the then qualities,
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you asked me what are the qualities.
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So one of the third qualities that I would say
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is to know how to deal well with your not knowing
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and to be able to get the best expertise
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so that you're a great orchestrator of different ways,
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so that the people who are really, really successful,
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unlike most people believe that they're successful
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because of what they know,
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they're even more successful
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by being able to effectively learn from others
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and tap into the skills of people
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who see things different from them.
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Brilliant, so how do you win that personality
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being first of all, open to the fact
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that there's other people see things differently than you,
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and at the same time have supreme confidence in your vision?
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Is there just the psychology of that?
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Do you see a tension there between the confidence
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and the open mindedness?
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No, it's funny because I think we grow up thinking
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that there's a tension there, right?
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That there's a confidence
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and the more confidence that you have,
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there's a tension with the open mindedness
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and not being sure, okay?
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Confident and accurate
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are almost negatively correlated to many people.
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They're extremely confident and they're often inaccurate.
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And so I think one of the greatest tragedies of people
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is not realizing how those things to go together
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because instead it's really that by saying I know a lot
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and how do I know I'm still not wrong?
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And how do I take that the best thinking available to me
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and then raise my probability of learning?
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All these people think for themselves, okay?
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I mean, meaning they're smart,
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but they take in like vacuum cleaners,
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they take in ideas of others,
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they stress test their ideas with others,
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they assess what comes back to them
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in the form of other thinking
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and they also know what they're not good at
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and what other people who are good at the things
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that they're not good at,
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they know how to get those people
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and be successful all around
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because nobody has enough knowledge in their heads
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and that I think is one of the great differences.
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So the reason my company has been successful
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in terms of this is because of an idea
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meritocratic decision making a process
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by which you can get the best ideas.
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You know, what's an idea meritocracy?
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An idea meritocracy is to get the best ideas
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that are available out there
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and to work together with other people in the team
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That's an incredible process that you describe
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in several places to arrive at the truth,
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but I apologize if I'm romanticizing the notion,
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but let me linger on it.
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Just having enough self belief,
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you don't think there's a self delusion there
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that's necessary, especially in the beginning.
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You talk about in the journey,
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maybe the trials or the abyss.
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Do you think there is value to diluting yourself?
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I think what you're calling delusion
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is a bad word for uncertainty, okay?
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So in other words,
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because we keep coming back to the question,
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how would you know and all of those things?
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No, I think that delusion is not gonna help you,
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that you have to find out truth, okay?
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To deal with uncertainty, not saying,
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listen, I have this dream
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and I don't know how I'm going to get that dream.
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I mentioned in my book principles
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and described the process in a more complete way
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than we're gonna be able to go here.
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But what happens is I say, you form your dreams first
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and you can't judge
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whether you're going to achieve those dreams
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because you haven't learned
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the things that you're going to learn
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on the way toward those dreams, okay?
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So that isn't delusion.
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I wouldn't use delusion.
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I think you're overemphasizing the importance
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of knowing whether you're going to succeed or not.
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Get rid of that, okay?
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If you can get rid of that and say,
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okay, no, I can have that dream,
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but I'm so realistic in the notion of finding out.
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I'm curious, I'm a great learner, I'm a great experimenter.
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Along the way, you'll do those experiments
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which will teach you more truths
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and more learning about the reality
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so that you can get your dreams.
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Because if you still live in that world of delusion, okay?
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And you think delusion's helpful.
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No, the delusion isn't.
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Don't confuse delusion with not knowing.
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Yes, but nevertheless, so if we look at the abyss,
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we can look at your own that you describe.
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It's difficult psychologically for people.
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So many people quit.
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Many people choose a path that is more comfortable.
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The heartbreak of that breaks people.
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So if you have the dream
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and there's this cycle of learning, setting a goal,
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and so on, what's your value for the psychology
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of just being broken by these difficult moments?
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Well, that's classically the defining moment.
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It's almost like evolution taking care of,
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okay, now you crash, you're in the abyss.
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Oh my God, that's bad.
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And then the question is, what do you do?
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And it sorts people, okay?
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And some people get off the field
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and they say, oh, I don't like this and so on.
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And some people learn and they have a metamorphosis
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and it changes their approach to learning.
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The number one thing it should give them is uncertainty.
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You should take an audacious dreamer,
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guy who wants to change the world, crash, okay,
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and then come out of that crashing and saying,
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okay, I can be audacious
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and scared that I'm gonna be wrong at the same time.
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And then how do I do that?
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Because that's the key.
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When you don't lose your audaciousness
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and you keep going after your big goal,
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and at the same time you say,
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hey, I'm worried that I'm gonna be wrong,
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you gain your radical open mindedness
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that allows you to take in the things,
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that allows you to go to the next level of being successful.
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So your own process, I mean, you've talked about it before,
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but it would be great if you can describe it
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because our darkest moments
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are perhaps the most interesting.
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So your own with the prediction of another depression.
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Economic depression.
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Yes, I apologize, economic depression.
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Can you talk to what you were feeling, thinking,
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planning, strategizing at those moments?
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Yeah, that was my biggest moment, okay?
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Building my little company.
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This is in 1981, 82.
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I had calculated that American banks
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had given a lot more money to, lent a lot more money
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to Latin American countries
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than those countries were gonna pay back,
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and that they would have a debt crisis,
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and that this had sent the economy tumbling,
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and that was an extremely controversial point of view.
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Then it started to happen, and it happened,
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and Mexico defaulted in August 1982.
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I thought that there was gonna be an economic collapse
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that was gonna follow
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because there was a series of the other countries,
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it was just playing out as I had imagined,
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and that couldn't have been more wrong.
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That was the exact bottom in the stock market
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because central banks eased monetary policy, blah, blah, blah,
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and I couldn't have been more wrong,
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and I was very publicly wrong and all of that,
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and I lost money for me, and I lost money for my clients,
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and I only had a small company then,
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but these were close people, I had to let them go.
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I was down to me as the last person.
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I was so broke I had to borrow $4,000 from my dad
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to help to pay for my family bills, very painful,
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and at the same time, I would say it definitely
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was one of the best things that ever happened to me,
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maybe the best thing from happened to me,
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because it changed my approach to decision making.
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It's what I'm saying.
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In other words, I kept saying, okay,
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how do I know whether I'm right?
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How do I know I'm not wrong?
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It gave me that, and it didn't give up my audaciousness
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because I was in a position, what am I gonna do?
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Am I gonna go back, put on a tie,
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go to Wall Street and just do those things?
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No, I can't bring myself to do that, so I'm at a juncture.
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How do I deal with my risk and how do I deal with that?
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And it told me how to deal with my uncertainties,
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and that taught me, for example, a number of techniques.
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First, to find the smartest people I could find
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who disagreed with me and to have quality disagreement.
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I learned the art of thoughtful disagreement.
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I learned how to produce diversification.
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I learned how to do a number of things.
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That is what led me to create an idea meritocracy.
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In other words, person by person, I hired them,
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and I wanted the smartest people
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who would be independent thinkers
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who would disagree with each other and me well
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so that we could be independent thinkers
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to go off to produce those audacious dreams
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because you have to be an independent thinker to do that,
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and to do that independently of the consensus,
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independently of each other,
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and then work ourselves through that
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because who know whether you're gonna have the right answer?
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And by doing that, then that was the key to our success.
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And the things that I wanna pass along to people,
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the reason I'm doing this podcast with you
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is I'm 70 years old,
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and that is a magical way of achieving success.
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If you can create an idea meritocracy,
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it's so much better in terms of achieving success
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and also quality relationships with people,
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but that's what that experience gave me.
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So if we can linger on a little bit longer,
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the idea of an idea meritocracy, it's fascinating,
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but especially because it seems to be rare,
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not just in companies, but in society.
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So there is a lot of people on Twitter and public discourse
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and politics and so on that are really stuck
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in certain sets of ideas, whatever they are.
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So when you're confronted with an idea
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that's different than your own about a particular topic,
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what kind of process do you go through mentally?
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Are you arguing through the idea with the person,
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sort of present is almost like a debate,
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or do you sit on it and consider the world
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sort of empathetically?
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If this is true, then what does that world look like?
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Does that world make sense and so on?
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So what's the process of considering
link |
those conflicting ideas for you?
link |
I'm gonna answer that question,
link |
but after saying first, almost implicit in your question
link |
is it's not common, okay?
link |
What's common produces only common results, okay?
link |
So don't judge anything that is good
link |
based on whether it's common,
link |
because it's only gonna give you common results.
link |
If you want unique, you have a unique approach, okay?
link |
And so that art of thoughtful disagreement
link |
is the capacity to hold two things in your mind
link |
The, gee, I think this makes sense,
link |
and then saying, I'm not sure it makes sense,
link |
and then try to say, why does it make sense?
link |
And then to triangulate with others.
link |
So if I'm having a discussion like that
link |
and I work myself through and I'm not sure,
link |
then I have to do that in a good way.
link |
So I always give attention, for example,
link |
let's start off, what does the other person know
link |
relative to what I know?
link |
So if a person has a higher expertise or things,
link |
I'm much more inclined to ask questions.
link |
I'm always asking questions.
link |
If you wanna learn, you're asking questions,
link |
you're not arguing, okay?
link |
You're taking in, you're assessing when it comes into you.
link |
Does that make sense?
link |
Are you learning something?
link |
Are you getting epiphanies and so on?
link |
And I try to then do that if the conversation,
link |
as we're trying to decide what is true,
link |
and we're trying to do that together,
link |
and we see truth different,
link |
then I might even call in another really smart,
link |
capable person and try to say, what is true
link |
and how do we explore that together?
link |
And you go through that same thing.
link |
So I would, I said, I describe it as having open mindedness
link |
and assertiveness at the same time,
link |
that you can simultaneously be open minded
link |
and take in with that curiosity
link |
and then also be assertive and say,
link |
but that doesn't make sense.
link |
Why would this be the case?
link |
And you do that back and forth.
link |
And when you're doing that kind of back and forth
link |
on a topic like the economy, which you have,
link |
to me, perhaps I'm naive,
link |
but it seems both incredible and incredibly complex,
link |
the economy, the trading, the transactions,
link |
that these transactions between two individuals
link |
somehow add up to this giant mechanism.
link |
You've put out a 30 minute video.
link |
You have a lot of incredible videos online
link |
that people should definitely watch on YouTube,
link |
but you've put out this 30 minute video
link |
titled How the Economic Machine Works.
link |
That is probably one of the best, if not the best video
link |
I've seen on the internet in terms of educational videos.
link |
So people should definitely watch it,
link |
especially because it's not that the individual components
link |
of the video are somehow revolutionary,
link |
but the simplicity and the clarity
link |
of the different components just makes you,
link |
there's a few light bulb moments there
link |
about how the economy works as a machine.
link |
So as you described, there's three main forces
link |
that drive the economy, productivity growth,
link |
short term debt cycle, long term debt cycle.
link |
The former, productivity growth is how valuable things,
link |
how much value people create,
link |
valuable things people create.
link |
The latter is people borrowing from their future selves
link |
to hopefully create those valuable things faster.
link |
So this is an incredible system to me.
link |
Maybe we can linger on it a little bit,
link |
but you've also said what most people think about
link |
as money is actually credit.
link |
Total amount of credit in the US is $50 trillion.
link |
Total amount of money is $3 trillion.
link |
That's just crazy to me.
link |
Maybe I'm silly, maybe you can educate me,
link |
but that seems crazy.
link |
It gives me just positive human civilization
link |
has been able to create a system that has so much credit.
link |
So that's a long way to ask,
link |
do you think credit is good or bad for society?
link |
That system of that's so fundamentally based on credit.
link |
I think credit is great,
link |
even though people often overdo it.
link |
Credit is that somebody has earned money.
link |
And what happens is they lend it to somebody else
link |
who's got better ideas and they cut a deal.
link |
And then that person with the better ideas
link |
is gonna pay it back.
link |
And if it works well,
link |
it helps resource allocations go well,
link |
providing people like the entrepreneurs
link |
and all of those, they need capital.
link |
They don't have capital themselves.
link |
And so somebody is gonna give them capital
link |
and they'll give them credit along those lines.
link |
Then what happens is it's not managed well
link |
in a variety of ways.
link |
So I did another book on principles,
link |
principles of big debt crises that go into that.
link |
And it's free, by the way,
link |
I put it free online as a PDF.
link |
So if you go online and you look principles
link |
of a big debt crisis is under my name,
link |
you can download it in a PDF
link |
or you can buy a print book of it.
link |
And it goes through that particular process.
link |
And so you always have it overdone in always the same way.
link |
Everything, by the way,
link |
almost everything happens over and over again
link |
for the same reasons, okay?
link |
So these debt crisis is all happened over and over again
link |
for the same reasons.
link |
They get it overdone.
link |
In the book, it explains how you identify
link |
whether it's overdone or not.
link |
They get it overdone.
link |
And then you go through the process
link |
of making the adjustments according that
link |
and it explains how they can use the levers and so on.
link |
If you didn't have credit,
link |
then you would be sort of everybody sort of be stuck.
link |
So credit is a good thing,
link |
but it can easily be overdone.
link |
So now we get into the, what is money?
link |
Okay, you get into money and credit.
link |
So if you're holding credit and you think that's worthwhile,
link |
keep in mind that the central bank,
link |
let's say it can print the money.
link |
What is that problem?
link |
You have an IOU and the IOU says
link |
you're gonna get a certain number of dollars, let's say,
link |
And that is what the IOU is.
link |
And so the question is, will you get that money
link |
and what will it be worth?
link |
And then also you have a government,
link |
which is a participant in that process
link |
because they are on the hook, they owe money.
link |
And then will they print the money
link |
to make it easy for everybody to pay?
link |
So you have to pay attention to those two.
link |
I would suggest like you recommend to other people,
link |
just take that 30 minutes
link |
and it comes across pretty clearly.
link |
But my conclusion is that of course you want it.
link |
And even if you understand it and the cycles well,
link |
you can benefit from those cycles
link |
rather than to be hurt by those cycles.
link |
Because I don't know the way the cycle works
link |
is somebody gets over indebted,
link |
they have to sell an asset.
link |
Okay, then I don't know,
link |
that's when assets become cheaper.
link |
How do you acquire the asset?
link |
It's a whole process.
link |
So again, maybe another dumb question, but...
link |
There are no such things as dumb questions.
link |
But what is money?
link |
So you've mentioned credit and money.
link |
Another thing that if I just zoom out
link |
from an alien perspective and look at human civilization,
link |
it's incredible that we've created a thing
link |
that only works because currency,
link |
because we all agree it has value.
link |
So I guess my question is how do you think about money
link |
as this emergent phenomenon?
link |
And what do you think is the future of money?
link |
You've commented on Bitcoin, other forms.
link |
What do you think is its history and future?
link |
How do you think about money?
link |
There are two things that money is for.
link |
It's a medium of exchange and it's a storehold of wealth.
link |
So money, so you could say something's a medium of exchange,
link |
and then you could say, is it a storehold of wealth?
link |
And money is that vehicle that is those things
link |
and can be used to pay off your debt.
link |
So when you have a debt and you provide it,
link |
it pays off your debt.
link |
So that's that process.
link |
And it's, I apologize to interrupt,
link |
but it only can be a medium of exchange or store wealth
link |
when everybody recognizes it to be of value.
link |
And so you see in the history around the world
link |
and you go to places, I was in an island in the Pacific
link |
in which they had as money these big stones.
link |
And literally, they were taking a boat,
link |
this big carved stone,
link |
and they were taking it from one of the islands to the other
link |
and it sank, the piece of this big stone,
link |
piece of money that they had, and it went to the bottom
link |
and they still perceived it as having value
link |
so that it was, even though it was in the bottom
link |
and it's this big hunk of rock,
link |
the fact that somebody owned it,
link |
they would say, oh, I'll own it for this and that.
link |
I've seen beads in different places,
link |
shells converted to this and mediums of exchange.
link |
And when we look at what we've got, you're exactly right.
link |
It is the notion that if I give it to you,
link |
I can then take it and I can buy something with it.
link |
And that's, so it's a matter of perception.
link |
And then we go through then the history of money
link |
and the vulnerabilities of money.
link |
And what we have is there's, through history,
link |
there's been two types of money.
link |
Those that are claims on something of value,
link |
like the connection to gold or something.
link |
Or they just are money without any connection,
link |
and then we have a system now,
link |
which is a fiat monetary system.
link |
So that's what money is.
link |
Then it will last as long as it's kept a value
link |
and it works that way.
link |
So let's say central banks, when they get in the position
link |
of like they owe a lot of money,
link |
like we have in the case, it's increasingly the case,
link |
and they also in our mind and they have the printing press
link |
to print the money and get out of that.
link |
And you have a lot of people might be in that position.
link |
Then you can print it and then it could be devalued in there.
link |
And so history has shown, forget about today,
link |
history has shown that no currency,
link |
every currency has either ended as being a currency
link |
or devalued as a currency over periods of time,
link |
long periods of time.
link |
So it evolves and it changes,
link |
but everybody needs that medium of exchange
link |
and everybody needs that storehold of wealth.
link |
So it keeps changing what is money over a period of time.
link |
But so much is being digitized today and there's this ideas
link |
that are based on the blockchain of Bitcoin and so on.
link |
So if all currencies, like all empires come to an end,
link |
what do you think, well, do you think something
link |
like Bitcoin might emerge as a common store of value,
link |
a store of wealth and a medium of exchange?
link |
The problem with Bitcoin is that it's not
link |
an effective medium of exchange.
link |
Like it's not easy for me to go in there
link |
and buy things with it.
link |
And then it's not an effective storehold of value
link |
because it has a volatility that's based on speculation
link |
and the like, so it's not a very effective saving.
link |
That's very different from Facebook's
link |
of a stable value currency,
link |
which would be effective as both a medium of exchange
link |
and a storehold of wealth.
link |
Because if you were to hold it
link |
and the way it's linked to number of things
link |
that it's linked to would mean
link |
that it could be a very effective storehold of wealth.
link |
And then you have a digital currency
link |
that could be a very effective medium exchange
link |
and storehold of wealth.
link |
So in my opinion, some digital currencies
link |
are likely to succeed more or less
link |
based on that ability to do it.
link |
Then the question is what happens?
link |
Okay, what happens is do central banks
link |
allow that to happen?
link |
I really do believe it's possible
link |
to get a better form of money
link |
that central banks don't control.
link |
Okay, a better force of money
link |
that the central banks don't control.
link |
But then that's not yet happened.
link |
And we also have to,
link |
and so they've got to go through that evolutionary process.
link |
In order to go through that evolutionary process,
link |
first of all, governments have got to allow that to happen,
link |
which is to some extent a threat to them
link |
in terms of their power.
link |
And that's an issue.
link |
And then you have to also build the confidence
link |
in all of the components of it
link |
to say, okay, that's going to be effective
link |
because I won't have problems owning it.
link |
So I think that digital currencies
link |
have some element of potential,
link |
but there's a lot of hurdles
link |
that are going to have to be gotten over.
link |
I think that it'll be a very long time,
link |
possibly never, but anyway, a very long time
link |
before we have that, let's say,
link |
get into a position that would be
link |
effective means relative to gold, let's say,
link |
if you were to think of that.
link |
Because gold has a track record of thousands of years.
link |
All across countries, it has its mobility,
link |
it has the ability to put it down,
link |
it has certain abilities.
link |
It's got disadvantages relative to digital currencies,
link |
but central banks will hold it.
link |
Like there's central banks that worry about others,
link |
other countries, central banks might worry
link |
about whether the U.S. dollar is going to print or not.
link |
And so the thing they're going to go to
link |
is not going to be the digital currency.
link |
The thing they're going to go to is gold or something else,
link |
some other currency, they got to pick it.
link |
And so I think it's a long way to go.
link |
Well, you think it's possible that one day
link |
we don't even have a central bank
link |
because of a currency that doesn't,
link |
that cannot be controlled by the central bank
link |
is the primary currency?
link |
Or does that seem very unlikely?
link |
It would be very remote possibility
link |
or very long in the future.
link |
Again, maybe a dumb question, but romanticize one.
link |
When you sit back and you look,
link |
you describe these transactions between individuals,
link |
somehow creating short term debt cycles,
link |
long term debt cycles, there's productivity growth.
link |
Does it amaze you that this whole thing works?
link |
That there's however many million,
link |
hundreds of millions of people in the United States,
link |
globally over seven billion people,
link |
that this thing between individual transactions,
link |
it just, it works.
link |
Like I go back and forth between being in it
link |
and then I think, like, how did a credit card,
link |
how is that really possible?
link |
I'm still used, I look up credit card, I put it on,
link |
the guy doesn't know me.
link |
It's all strangers. It signs, okay.
link |
We're making the digital entries.
link |
Is that really secure enough and that kind of thing?
link |
And then it goes back and it goes this and it clears
link |
and it all happens.
link |
And what I marvel at that and those types of things
link |
is because of the capacity of the human mind
link |
to create abstractions that are true.
link |
It's imagination and then the ability to go from one level
link |
and then if these things are true,
link |
then you go to the next level and if those things are true,
link |
then you go to the next level.
link |
And all those miracles that we almost become common,
link |
it's like when I'm flying in a plane
link |
or when I'm looking at all of the things that happen.
link |
When I get communications in the middle of,
link |
I don't know, Africa or Antarctica
link |
and we're communicating in the ways where I see the face
link |
on my iPad of somebody, my grandkid and someplace else
link |
and I look at this and I say, wow, yes, it all amazes me.
link |
So while being amazing, do you have a sense,
link |
the principles you described,
link |
that the whole thing is stable somehow also?
link |
Or is this, are we just lucky?
link |
So the principles that you described,
link |
are those describing a system that is stable, robust
link |
and will remain so?
link |
Or is it a lucky accident of our early history?
link |
My area of expertise is economics and markets
link |
so I get down to like a real nitty gritty.
link |
I can't tell you whether the plane
link |
is gonna fall out of the sky
link |
because of its particular fundamentals.
link |
I don't know enough about that
link |
but it happens over and over again
link |
and so on, it gives me faith, okay?
link |
So without me knowing it.
link |
In the markets and the economy,
link |
I know those things well enough, in a sense,
link |
to say that by and large, that structure is right,
link |
what we're seeing is right.
link |
Now, whether there are disruptions
link |
and it has effects that can come,
link |
not because that structure is right,
link |
and I believe it's right,
link |
but whether it can be hurt by let's say connectivity
link |
or journal entries,
link |
they could take all the money away from you
link |
through your digital entries.
link |
There's all sorts of things that can happen in various ways
link |
that means that that money is worthless or the system falls
link |
but from what I see in terms of its basic structure
link |
and those complexities that still take my breath away,
link |
I would say knowing enough about the mechanics of them,
link |
that doesn't worry me.
link |
Have you seen disruptions in your lifetime
link |
that really surprised you?
link |
Major disruptions? Oh, all the time.
link |
This is one of the great lessons of my life
link |
is that many times I've seen things
link |
that I was very surprised about
link |
and that I realized almost all of those
link |
I was surprised about because they just,
link |
they were just the first time it happened to me,
link |
they didn't happen in my lifetime before
link |
but when I researched them,
link |
they happened in other places or other people lifetimes.
link |
So for example, I remember 1971, the dollar,
link |
there was no such thing as a devaluation of a currency,
link |
it didn't experience it
link |
and the dollar was connected to gold
link |
and I was watching events happen
link |
and then you get on and that definition of money
link |
all of a sudden went out the window
link |
because it was not tied to gold
link |
and then you have this devaluation.
link |
So and then, or the first oil shock or the second oil shock
link |
or so many of these things.
link |
But almost always I realized that they,
link |
when I looked in history, they happened before,
link |
they just happened in other people's lifetimes
link |
which led me to realize that I needed to study history
link |
and what happened in other people's lifetimes
link |
and what happened in other countries and places
link |
so that I would have timeless and universal principles
link |
for dealing with that thing.
link |
So I've, oh yeah, I've been, you know,
link |
the implausible happening
link |
but it's like a one in a hundred year storm, okay?
link |
They've happened before.
link |
Yeah, they've happened.
link |
Let me talk about, if we could, about AI a little bit.
link |
So we've, Bridgewater Associates manage
link |
about $160 billion in assets
link |
and our artificial intelligence systems algorithms
link |
are pretty good with data.
link |
What role in the future do you see AI play
link |
in analysis and decision making
link |
in this kind of data rich and impactful area of investment?
link |
I'm gonna answer that not only in investment
link |
but I give a more all encompassing rule for AI.
link |
As I think you know, for the last 25 years,
link |
we have taken our thinking and put them in algorithms
link |
and so we make decisions.
link |
The computer takes those criteria, algorithms,
link |
and they put them, they're in there and it takes data
link |
and they operate as an independent decision maker
link |
in parallel with our decision making.
link |
So for me, it's like there's a chess game playing
link |
and I'm a person with my chess game
link |
and I'm saying it made that move and I'm making the move
link |
and how do I compare those two moves?
link |
So we've done a lot but let me give you a rule.
link |
If the future can be different from the past
link |
and you don't have deep understanding,
link |
you should not rely on AI, okay?
link |
Deep understanding of?
link |
The cause of fact relationships that are leading you
link |
to place that bet in anything, okay?
link |
Anything important.
link |
Let's say if it was do surgeries
link |
and you would say, how do I do surgeries?
link |
I think it's a good idea to do surgeries
link |
but I think it's totally fine
link |
to watch all the doctors do the surgeries.
link |
You can put it on, take a digital camera and do that,
link |
convert that into AI algorithms that go to robots
link |
and have them do surgeries and I'd be comfortable with that
link |
because if it'll do the,
link |
if it keeps doing the same thing over and over again
link |
and you have enough of that, that would be fine
link |
even though you may not understand the algorithms
link |
because if the thing's happening over and over again
link |
and you're not asking, the future would be the same.
link |
That appendicitis or whatever it is
link |
will be handled the same way, the surgery, that's fine.
link |
However, what happens with AI is for the most part
link |
is it takes a lot of data with a high enough sample size
link |
and then it puts together its own algorithms.
link |
Okay, there are two ways you can come up with algorithms.
link |
You can either take your thinking
link |
and express them in algorithms
link |
or you can say, put the data in
link |
and say, what is the algorithm?
link |
That's machine learning.
link |
And when you have machine learning,
link |
it'll give you equations
link |
which quite often are not understandable.
link |
If you would try to say,
link |
okay, now describe what it's telling you,
link |
it's very difficult to describe
link |
and so they can escape understanding.
link |
And so it's very good for doing those things
link |
that could be done over and over again
link |
if you're watching and you're not taking that.
link |
But if the future is different from the past
link |
and you have that,
link |
then if the future is different from the past
link |
and you don't have deep understanding,
link |
you're gonna get in trouble.
link |
And so that's the main thing.
link |
As far as AI is concerned,
link |
AI and let's say computer replications of thinking
link |
in very ways, I think it's particularly good for processing.
link |
But the notion of what you want to do
link |
is better most of the time determined by the human mind.
link |
What are the principles?
link |
Like, okay, how should I raise my children?
link |
It's gonna be a long time before AI,
link |
you're going to say,
link |
it has a good enough judgment to do that.
link |
Who should I marry?
link |
All of those things.
link |
Maybe you can get the computer to help you
link |
but if you just took data and do machine learning,
link |
it's not gonna find it.
link |
If you were to then take one of my criteria
link |
for any of those questions
link |
and then say, put them into an algorithm
link |
and you'd be a lot better off than if you took AI to do it.
link |
But by and large, the mind should be used
link |
for inventing and those creative things.
link |
And then the computer should be used for processing
link |
because it could process a lot more information,
link |
a lot faster, a lot more accurately
link |
and a lot less emotionally.
link |
So any notion of thinking
link |
in the form of processing type thinking
link |
should be done by a computer
link |
and anything that is in the notion
link |
of doing that other type of thinking
link |
should be operating with the brain,
link |
operating in a way where you can say,
link |
ah, that makes sense.
link |
You know, the process of reducing your understanding down
link |
to principles is kind of like the process,
link |
the first one you mentioned,
link |
type of AI algorithm where you're encoding your expertise,
link |
you're trying to program, write a program,
link |
the human is trying to write a program.
link |
How do you think that's attainable?
link |
The process of reducing principles to a computer program
link |
or when you say, when you write about,
link |
when you think about principles,
link |
is there still a human element
link |
that's not reducible to an algorithm?
link |
My experience has been that almost all things,
link |
including those things that I thought
link |
were pretty much impossible to express,
link |
I've been able to express in algorithms,
link |
but that doesn't constitute all things.
link |
So you can express far more
link |
than you can imagine you'll be able to express.
link |
So I use the example of,
link |
okay, it's not, how do you raise your children?
link |
Okay, you will be able to take it one piece by piece.
link |
Okay, at what age, what school?
link |
And the way to do that, in my experience,
link |
is to take that and when you're in the moment
link |
of making a decision or just past making a decision,
link |
to take the time and to write down your criteria
link |
for making that decision in words.
link |
Okay, that way you'll get your principles down on paper.
link |
I created an app online call,
link |
it's right now just on the iPhone, it'll be on Android.
link |
I tried getting it on Android, come on now.
link |
Let's get it on Android.
link |
It'll be, in a few months it'll be on Android.
link |
But it has an app in there
link |
that helps people write down their own principles.
link |
Because this is very powerful.
link |
So when you're in that moment
link |
where you've just, you're thinking about it
link |
and you're thinking your criteria
link |
for choosing the school for your child
link |
or whatever that might be,
link |
and you write down your criteria
link |
or whatever they are, those principles,
link |
you write down and that will at that moment
link |
make you articulate your principles in a very valuable way.
link |
And if you have the way that we operate
link |
that you have easy access,
link |
so then the next time that comes along,
link |
you can go to that,
link |
or you can show those principles to others
link |
to see if they're the right principles.
link |
You will get a clarity of that principle
link |
that's really invaluable in words
link |
and that'll help you a lot.
link |
But then you start to think,
link |
how do I express that in data?
link |
And it'll shock you about how you can do that.
link |
You'll form an equation that will show the relationship
link |
between these particular parts
link |
and then essentially the variables
link |
that are going to go into that particular equation
link |
and you will be able to do that.
link |
And you take that little piece
link |
and you put it into the computer.
link |
And then take the next little piece
link |
and you put that into the computer.
link |
And before you know it,
link |
you will have a decision making system
link |
that's of the sort that I'm describing.
link |
So you're almost making an argument
link |
against an earlier statement you've made.
link |
You're convincing me.
link |
At first you said,
link |
there's no way a computer could raise a child essentially.
link |
But now you've described making me think of it.
link |
If you have that kind of idea meritocracy,
link |
you have this rigorous approach
link |
that Bridgewater takes with investment
link |
and applied to raising a child.
link |
It feels like through the process you just described,
link |
we could as a society arrive at a set of principles
link |
for raising a child and encode it into computer.
link |
That originality will not come from machine learning.
link |
The first time you do,
link |
so that the original, yes.
link |
That's what I'm referring to.
link |
But eventually as we together develop it
link |
and then we can automate it.
link |
That's why I'm saying the processing
link |
can be done by the computer.
link |
So we're saying the same thing.
link |
We're not inconsistent.
link |
We're saying the same thing.
link |
That the processing of that information
link |
and those algorithms can be done by the computer
link |
in a very, very effective way.
link |
You don't need to sit there and process
link |
and try to weigh all those things in your equation
link |
and all those things.
link |
But that notion of,
link |
okay, how do I get at that principle?
link |
And you're saying you'd be surprised.
link |
How much you can express.
link |
So this is where I think you're going to see the future.
link |
And right now we go to our devices
link |
and we get information to a large extent.
link |
And then we get some guidance.
link |
We have our GPS and the like.
link |
In my opinion, principles.
link |
Principles, principles, principles.
link |
I wanna emphasize that.
link |
You write them down.
link |
You've got those principles.
link |
They will be converted into algorithms for decision making.
link |
And they're gonna also have the benefit
link |
of collective decision making.
link |
Because right now,
link |
individuals based on what's stuck in their heads
link |
are making their decisions in very ignorant ways.
link |
They're not the best decision makers.
link |
They're not the best criteria.
link |
And they're operating.
link |
When those principles are written down
link |
and converted into algorithms,
link |
it's almost like you'll look at that
link |
and follow the instructions
link |
and it'll give you better results.
link |
Medicine will be much more like this.
link |
You can go to your local doctor
link |
and you could ask his point of view and whatever.
link |
And he's rushed and he may not be the best doctor around.
link |
And you're gonna go to this thing
link |
and give that same information
link |
or just automatically have it input in that.
link |
And it's gonna tell you, okay, here's what you should go do.
link |
And it's gonna be much better than your local doctor.
link |
And that, the converting of information into intelligence,
link |
okay, intelligence is the thing.
link |
We're coming out with, again, I'm 70
link |
and I wanna pass all these things along.
link |
So all these tools that I've found need to develop
link |
all over these periods of time,
link |
all those things I wanna make available.
link |
And what's gonna happen as they're going to see this,
link |
they're going to see these tools
link |
operating much more that way.
link |
The idea of converting data into intelligence.
link |
Intelligence, for example, on what they are like.
link |
Or what are your strengths and weaknesses?
link |
Intelligence on who do I work well with
link |
under what circumstances?
link |
We're gonna go from what are called systems of record,
link |
which are a lot of, okay, information organized
link |
in the right way, to intelligence.
link |
And that'll be the next big move, in my opinion.
link |
And so you will get intelligence back.
link |
And that intelligence comes from reducing things
link |
down to principles into.
link |
That's how it happens.
link |
So what's your intuition if we look at future societies?
link |
Do you think we'll be able to reduce a lot of the details
link |
of our lives down to principles
link |
that would be further and further automated?
link |
I think the real question hinges
link |
on people's emotions and irrational behaviors.
link |
I think that there's subliminal things that we want, okay?
link |
And then there's cerebral, conscious logic.
link |
And the two often are at odds.
link |
So there's almost like two you's in you, right?
link |
And so let's say, what do you want?
link |
And your mind will answer one thing,
link |
your emotions will answer something else.
link |
So when I think about it, I think emotions are,
link |
I want inspiration, I want love is a good thing,
link |
being able to have a good impact,
link |
but it is in the reconciliation of your subliminal wants
link |
and your intellectual wants
link |
so that you really say they're aligned.
link |
And so to do that in a way to get what you want.
link |
So irrationality is a bad thing
link |
if it means that it doesn't make sense
link |
in getting you what you want,
link |
but you better decide which you you're satisfying.
link |
Is it the lower level you, emotional, subliminal one,
link |
or is it the other?
link |
But if you can align them.
link |
So what I find is that by going from my,
link |
you experience the decision, do this thing subliminally.
link |
And that's the thing I want.
link |
It comes to the surface.
link |
I find that if I can align that
link |
with what my logical me wants
link |
and do the double check between them
link |
and I get the same sort of thing,
link |
that that helps me a lot.
link |
I find, for example, meditation is one of the things
link |
that helps to achieve that alignment.
link |
It's fantastic for achieving that alignment.
link |
And often then I also want to not just do it in my head.
link |
I want to say, does that make sense?
link |
And so I do it with other people and I say, okay,
link |
well, let's say I want this thing and whatever.
link |
Does that make sense?
link |
And when you do that kind of triangulation,
link |
your two you's, and you do that with also the other way,
link |
then you certainly want to be rational, right?
link |
But rationality has to be defined by those things.
link |
And then you discover sort of new ideas
link |
that drive your future.
link |
So it's always, you're always at the edge
link |
of the set of principles you've developed.
link |
You're doing new things always.
link |
That's where the intellect is needed.
link |
Well, and the inspiration.
link |
The inspiration is needed to do that, right?
link |
Like what are you doing it for?
link |
It's the excitement.
link |
What is that thing?
link |
The adventure, the curiosity, the hunger.
link |
What's, if you can be Freud for a second,
link |
what's in that subconscious?
link |
What's the thing that drives us?
link |
I think you can't generalize of us.
link |
I think different people are driven by different things.
link |
There's not a common one, right?
link |
So like if you would take the shapers,
link |
I think it is a combination of, subliminally,
link |
it's a combination of excitement, curiosity.
link |
Is there a dark element there?
link |
Is there, in your sense, something dark that drives them?
link |
Most of the ones that I'm dealing with,
link |
I have not seen that.
link |
I see the, what I really see is,
link |
ooh, if I can do that, that would be the most dream.
link |
And then the act of creativity.
link |
So excitement is one of the things.
link |
Curiosity is a big pull, okay?
link |
And then tenacity, you know, okay, to do those things.
link |
But definitely emotions are entering into it.
link |
Then there's an intellectual component of it too, okay?
link |
It may be empathy.
link |
Can I have an impact?
link |
Can I have an impact?
link |
The desire to have an impact.
link |
That's an emotional thrill, but it also has empathy.
link |
And then you start to see spirituality.
link |
By spirituality, I mean the connectedness to the whole.
link |
You start to see people operate those things.
link |
Those tend to be the things that you see the most of.
link |
And I think you're gonna shut down this idea completely,
link |
but there's a notion that some of these shapers
link |
really walk the line between sort of madness and genius.
link |
Do you think madness has a role in any of this?
link |
Or do you still see Steve Jobs and Elon Musk
link |
as fundamentally rational?
link |
Yeah, there's a continuum there.
link |
And what comes to my mind is that
link |
genius is often at the edge,
link |
in some cases, imaginary genius,
link |
is at the edge of insanity.
link |
And it's almost like a radio that I think,
link |
okay, if I can tune it just right, it's playing right,
link |
but if I go a little bit too far, it goes off, okay?
link |
And so you can see this.
link |
Kay Jamison was studying bipolar.
link |
What it shows is that that's definitely the case,
link |
because when you're going out there,
link |
that imagination, whatever, is at the,
link |
can be near the edge sometimes.
link |
Doesn't have to always be.
link |
So let me ask you about automation.
link |
That's been a part of public discourse recently.
link |
What's your view on the impact of automation,
link |
of whether we're talking about AI
link |
and more basic forms of automation on the economy
link |
in the short term and the long term?
link |
Do you have concerns about it, as some do,
link |
or do you think it's overblown?
link |
It's not overblown.
link |
I mean, it's a giant thing.
link |
It'll come at us in a very big way in the future.
link |
We're right at the edge of even really accelerating it.
link |
It's had a big impact, and it will have a big impact.
link |
And it's a two edged sword,
link |
because it'll have tremendous benefits.
link |
And at the same time, it has profound benefits
link |
in employment and distributions of wealth,
link |
because the way I think about it is,
link |
there are certain things human beings can do.
link |
And over time, we've evolved to go
link |
to almost higher and higher levels.
link |
And now we're almost like, we're at this level.
link |
You know, it used to be your labor,
link |
and you would then do your labor,
link |
and okay, we can get past the labor.
link |
We got tractors and things,
link |
and you go up, up, up, up, up,
link |
and we're up over here,
link |
and up to the point in our minds,
link |
where okay, anything related to mental processing,
link |
the computer can probably do better,
link |
and we can find that.
link |
And so other than almost inventing,
link |
you're at a point where the machines
link |
and the automation will probably do it better.
link |
And that's accelerating, and that's a force,
link |
and that's a force for the good.
link |
And at the same time,
link |
what it does is it displaces people
link |
in terms of employment and changes,
link |
and it produces wealth gaps and all of that.
link |
So I think the real issue is that
link |
that has to be viewed as a national emergency.
link |
In other words, I think the wealth gap,
link |
the income gap, the opportunity gap,
link |
all of those things that force
link |
is creating the problems that we're having today,
link |
a lot of the problems, the great polarity,
link |
the disenfranchised,
link |
not anything approaching equality of education,
link |
all of these problems,
link |
a lot of problems are coming as a result of that.
link |
And so it needs to be viewed really
link |
as an emergency situation
link |
in which there's a good work,
link |
good plan worked out for how to deal with that effectively,
link |
so that it's dealt with effectively.
link |
So because it's good for the average,
link |
it's good for the impact,
link |
but it's not good for everyone,
link |
and that creates that polarity.
link |
So it's gotta be dealt with.
link |
Yeah, and you've talked about the American dream,
link |
and that that's something that all people
link |
should have an opportunity for,
link |
and that we need to reform capitalism
link |
to give that opportunity for everyone.
link |
Let me ask on one of the ideas
link |
in terms of safety nets that support
link |
that kind of opportunity.
link |
There's been a lot of discussion
link |
of universal basic income amongst people.
link |
So there's Andrew Yang, who's running on that.
link |
He's a political candidate running for president
link |
on the idea of universal basic income.
link |
What do you think about that,
link |
giving $1,000 or some amount of money to everybody
link |
as a way to give them the padding,
link |
the freedom to sort of take leaps,
link |
to take the call for adventure,
link |
to take the crazy pursuits?
link |
Before I get right into my thoughts
link |
on universal basic income,
link |
I wanna start with the notion that opportunity,
link |
education, development, creating equality,
link |
so that people say there's equal opportunity
link |
and is the most important thing.
link |
And then to find out what is the amount,
link |
how are you going to provide that?
link |
How do you get the money into a public school system?
link |
How do you get the teaching?
link |
The fleshing out that plan to create equal opportunity
link |
in all of its various forms
link |
is the most pressing thing to do.
link |
And so that is that.
link |
The opportunity, the most important one
link |
you're kind of implying is the earlier, the better.
link |
Sort of like opportunity to education.
link |
So in the early development of a human being
link |
is when you should have the equal opportunities.
link |
That's the most important.
link |
Right, in the first phase of your life,
link |
which goes from birth until you're on your own
link |
and you're an adult and you're now out there.
link |
And you deal with early childhood development, okay?
link |
And you take the brain and you say, what's important?
link |
The childcare, okay, it makes a world of difference,
link |
for example, if you have good parents
link |
who are trying to think about instilling the stability
link |
in a non traumatic environment to provide them.
link |
So I would say the good guidance
link |
that normally comes from parents
link |
and the good education that they're receiving
link |
are the most important things in that person's development.
link |
The ability to be able to be prepared to go out there
link |
and then to go into a market
link |
that's an equal opportunity job market,
link |
to be able to then go into that kind of market
link |
is a system that creates not only fairness,
link |
anything else is not fair.
link |
And then in addition to that,
link |
it also is a more effective economic system
link |
because the consequences of not doing that
link |
to a society are devastating.
link |
If you look at what the difference in outcomes
link |
for somebody who completes high school
link |
or doesn't complete high school,
link |
or does each one of those state changes.
link |
And you look at what that means
link |
in terms of their costs to society, not only themselves,
link |
but their cost and incarceration costs
link |
and crimes and all of those things.
link |
It's economically better for the society
link |
and it's fairer if they can get those particular things.
link |
Once they have those things,
link |
then you move on to other things.
link |
But yes, from birth all the way through that process,
link |
anything less than that is bad, is a tragedy and so on.
link |
So that's what, yeah,
link |
those are the things that I'm estimating.
link |
And so what I would want above all else is to provide that.
link |
So with that in mind,
link |
now we'll talk about universal basic income.
link |
Start with that, now we can talk about UBI.
link |
Right, because you have to have that.
link |
Now the question is what's the best way to provide that?
link |
So when I look at UBI,
link |
I really think is what is going to happen
link |
with that $1,000, okay?
link |
And will that $1,000 come from another program?
link |
Does that come from an early childhood developmental program?
link |
Who are you giving the $1,000 to
link |
and what will they do for that $1,000?
link |
I mean, like my reaction would be,
link |
I think it's a great thing that everybody
link |
should have almost $1,000 in their bank and so on.
link |
But when do they get to make decisions or who's the parent?
link |
A lot of times you can give $1,000 to somebody
link |
and it could have a negative result.
link |
It can have, they can use that money detrimentally,
link |
not just productively.
link |
And if that money's coming away
link |
from some of those other things
link |
that are gonna produce the things I want
link |
and you're shifted to, let's say,
link |
to come in and give a check,
link |
doesn't mean its outcomes are going to be good
link |
in providing those things
link |
that I think are so fundamental important.
link |
If it was just everybody can have $1,000 and use it
link |
so when the time comes.
link |
Use it well, right.
link |
And use it well, that would be really, really good
link |
because it's almost like everybody,
link |
you'd wish everybody could have $1,000
link |
worth of wiggle room in their lives, okay.
link |
And I think that would be great.
link |
But I wanna make sure that these other things
link |
that are taken care of.
link |
So if it comes out of that budget
link |
and I don't want it to come out of that budget
link |
that's gonna be doing those things.
link |
And so you have to figure it out.
link |
And you have a certain skepticism
link |
that human nature will use,
link |
may not always, in fact frequently,
link |
may not use that $1,000 for the optimal,
link |
to support the optimal trajectory.
link |
Some will and some won't.
link |
One of the big advantages of universal basic income
link |
is that if you put it in the hands,
link |
let's say of parents who know how to do the right things
link |
and make the right choices for their children
link |
because they're responsible
link |
and you say I'm gonna give them $1,000 wiggle room
link |
to use for the benefit of their children.
link |
Wow, that sounds great.
link |
If you put it in the hands of let's say an alcoholic
link |
or drug addicted parent who is not making those choices
link |
well for their children
link |
and what they do is they take that $1,000
link |
and they don't use it well,
link |
then that's gonna produce more harm than good.
link |
You're, if I may say so,
link |
one of the richest people in the world.
link |
So you're a good person to ask.
link |
Does money buy happiness?
link |
No, it's been shown that between,
link |
once you get over a basic level of income
link |
so that you can take care of the pain
link |
that you can, health and whatever,
link |
there's no correlation between the level of happiness
link |
that one has and the level of money that one has.
link |
That thing that has the highest correlation
link |
is quality relationships with others, community.
link |
If you look at surveys of these things
link |
across all surveys and all societies,
link |
it's a sense of community and interpersonal relationships.
link |
That is not in any way correlated with money.
link |
You can go down to native tribes in very poor places
link |
or you can go in all different communities
link |
and so they have the opportunity to have that.
link |
I'm very lucky in that I started with nothing
link |
so I have the full range.
link |
I can tell you I'm not having money
link |
and then having quite a lot of money
link |
and I did that in the right order.
link |
So you started from nothing in Long Island.
link |
Yeah, and my dad was a jazz musician
link |
but I had all really that I needed
link |
because I had two parents who loved me
link |
and took good care of me and I went to a public school
link |
that was a good public school
link |
and basically you don't need much more than that
link |
in order to, that's the equal opportunity part.
link |
Anyway, what I'm saying is I experienced the range
link |
and there are many studies on the answer to your question.
link |
No money does not bring happiness.
link |
Money gives you an ability to make choices.
link |
Does it get in the way in any way
link |
of forming those deep, meaningful relationships?
link |
There are lots of ways that it makes negative.
link |
That's one of them.
link |
It could stand in the way of that.
link |
But I could almost list the ways that it could stand.
link |
It could be a problem.
link |
Yeah, what does it buy?
link |
So if you can elaborate, you mentioned a bit of freedom.
link |
At the most fundamental level,
link |
it doesn't take a whole lot but it takes enough
link |
that you can take care of yourself and your family
link |
to be able to learn,
link |
do the basics of, have the relationships,
link |
have healthcare, the basics of those types of things.
link |
You know, you can cover the patients.
link |
And then to have maybe enough security
link |
but maybe not too much security.
link |
That's right, yeah.
link |
That you essentially are okay.
link |
Okay, that's really good.
link |
And you don't, that's what money will get you.
link |
And everything else could go either way.
link |
Well, no, there's more.
link |
Then beyond that, what it then starts to do,
link |
that's the most important thing.
link |
But beyond that, what it starts to do
link |
is to help to make your dreams happen in various ways.
link |
Okay, so for example, now I, you know, like in my case,
link |
it's like those dreams might not be just my own dreams,
link |
they're impact on others dreams, okay?
link |
So my own dreams might be, I don't know,
link |
I can pass along these, at my stage in life,
link |
I could pass along these principles to you
link |
and I can give those things or I could do whatever.
link |
I can go on an adventure, I can start a business,
link |
I can do those other things, be productive,
link |
I can self actualize in ways
link |
that might be not possible otherwise.
link |
And so that's my own belief.
link |
And then I can also help others.
link |
I mean, this is, you know, to the extent when you get older
link |
and with time and whatever, you start to feel connected,
link |
spirituality, that's what I'm referring to,
link |
you can start to have an effect on others
link |
that's beneficial and so on, gives you the ability.
link |
I could tell you that people who are very wealthy
link |
who have that feel that they don't have enough money.
link |
Bill Gates will feel almost broke
link |
because relative to the things he'd like to accomplish
link |
through the Gates Foundation and things like that,
link |
you know, oh my God, he doesn't have enough money
link |
to accomplish the things he wishes for.
link |
But those things are not, you know,
link |
they're not the most fundamental things.
link |
So I think that people sometimes think money has value.
link |
Money doesn't have value.
link |
Money is, like you say,
link |
just a medium of exchange at a store all the while.
link |
And so what you have to say is,
link |
what is it that you're going to buy?
link |
Now, there are other people who get their gratification
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in ways that are different from me,
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but I think in many cases,
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let's say somebody who used money to have a status symbol,
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Or that's probably unhealthy.
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But then, I don't know, somebody who says,
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I love a great, gorgeous painting
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and it's going to cost lots of money.
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In my priorities, I can't get there.
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But that doesn't mean, who am I to judge others
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in terms of, let's say, their element of the freedom
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to do those things.
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So it's a little bit complicated.
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But by and large, that's my view on money and wealth.
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So let me ask you in terms of the idea of,
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so much of your passions in life has been
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through something you might be able to call work.
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Alan Watts has this quote.
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He said that the real key to life, secret to life,
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is to be completely engaged with what you're doing
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in the here and now.
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And instead of calling it work, realize it is play.
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So I'd like to ask, what is the role of work
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in your life's journey, or in a life's journey?
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And what do you think about this modern idea
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of kind of separating work and work life balance?
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I have a principle that I believe in is,
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make your work and your passion the same thing.
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So that's a similar view.
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In other words, if you can make your work and your passion,
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it's just gonna work out great.
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And then of course, people have different purposes of work.
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And I don't wanna be theoretical about that.
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People have to take care of their family.
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So money at a certain point is the base,
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is an important component of that work.
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So you look beyond that, what is the money gonna get you
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and what are you trying to achieve?
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But the most important thing, I agree,
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is meaningful work and meaningful relationships.
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Like if you can get into the thing that you're at,
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your mission that you're on,
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and you are excited about that mission that you're on.
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And then you can do that with people
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who you have the meaningful relationships with.
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You have meaningful work and meaningful relationships.
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I mean, that is fabulous for most people.
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And it seems that many people struggle to get there,
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not out of, not necessarily because they're constrained
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by the fact that they have the financial constraints
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of having to provide for their family and so on.
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But it's, I mean, this idea is out there
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that there needs to be a work life balance,
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which means that most people,
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we're gonna return to the same things,
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most doesn't mean optimal,
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but most people seem to not be doing their life's passion,
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not unifying work and passion.
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Why do you think that is?
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Well, the work life balance,
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there's a life arc that you go through.
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Starts at zero and ends somewhere in the vicinity of 80,
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and there is a phase.
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And you could look at the different degrees of happiness
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that happen in those phases.
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I can go through that if that was interesting,
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but we don't have time probably for it.
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But you get in the part of the life,
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that part of the life,
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which has the lowest level of happiness is age 45 to 55.
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And because as you move into this second phase of your life,
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now the first phase of your life
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is when you're learning dependent on others.
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Second phase of your life is when you're working
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and others are dependent on you
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and you're trying to be successful.
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And in that phase of one's life,
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you encounter the work life balance challenge
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because you're trying to be successful at work
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and successful at parenting
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and successful and successful in all those things
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that take your demand.
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And they get into that.
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And I understand that problem in the work life balance.
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The issue is primarily to know how to approach that, okay?
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So I understand it's stressful, it produces stress
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and it produces bad results
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and it produces the lowest level of happiness.
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It's interesting as you get later in life,
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the levels of happiness rise
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and the highest level of happiness
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is between ages 70 and 80,
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which is interesting for other reasons.
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and the key to work life balance
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is to realize and to learn
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how to get more out of an hour of life, okay?
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Because an hour of work,
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what people are thinking is that they have to make a choice
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between one thing and another.
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And of course they do.
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But they don't realize that if they develop the skill
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to get a lot more out of an hour,
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it's the equivalent of having many more hours in your life.
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And so, that's why in the book principles,
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I try to go into, okay, now,
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how can you get a lot more out of an hour?
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That allows you to get more life into your life
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and it reduces the work life balance.
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And that's the primary struggle in that 35 to 45.
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If you could linger on that,
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so what are the ups and downs of life
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in terms of happiness in general
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and perhaps in your own life
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when you look back at the moments, the peaks?
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It's pretty much the same pattern.
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Early in one's life tends to be a very happy period,
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all the way up and 16 is like a really great happy,
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I think like myself, you start to get elements of freedom,
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you get your driver's license, whatever, but 16 is there.
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Junior year in high school quite often
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could be a stressful period
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to try to get thinking about the high school.
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You go into college,
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tends to be very hot happiness, generally speaking.
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And then freedom, friendships, all of that.
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Freedom is a big thing.
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And then 23 is a peak point kind of in happiness,
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Then sequentially, one has a great time,
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they date, they go out and so on,
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you find the love of your life,
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you begin to develop a family.
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And then with that, as time happens,
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you have more of your work life balance challenges
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that come in your responsibilities.
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And then as you get there in that mid part of your life,
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that is the biggest struggle.
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Chances are you will crash in that period of time,
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you'll have your series of failures,
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that's when you go into the abyss,
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you learn, you hopefully learn from those mistakes,
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you have the metamorphosis, you come out, you change,
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you hopefully become better
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and you take more responsibilities and so on.
link |
And then when you get to the later part,
link |
as you are starting to approach the transition
link |
in that late part of the second phase of your life,
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before you go into the third phase of your life,
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second phase is you're working, trying to be successful.
link |
Third phase of your life is you want people
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to be successful without you, okay?
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You want your kids to be successful without you
link |
because when you're at that phase,
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they're at making their transition
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from the first phase to the second phase
link |
and they're trying to be successful
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and you want them to be successful without you
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and your parents are gone and then you have freedom
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and then you have freedom again.
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And with that freedom and then you have these,
link |
history has shown with this, you have friendships,
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you have perspective on life, you have different things
link |
and that's one of the reasons
link |
that that later part of the life can be real.
link |
On average, actually, it's the highest.
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Very interesting thing, there are surveys
link |
and say, how good do you look and how good do you feel?
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And that's the highest survey.
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Now, they're not looking the best
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and they're not feeling the best, right?
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Maybe it's 35 that they're actually looking the best
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and feeling the best, but they rank the highest
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at that point, survey results of being the highest
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in that 70 to 80 period of time
link |
because it has to do with an attitude on life.
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Then you start to have grandkids,
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oh, grandkids are great
link |
and you start to experience that transition well.
link |
So that's what the arc of life pretty much looks like
link |
and I'm experiencing it.
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When you meditate, we're all human, we're all mortal.
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When you meditate on your own mortality,
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having achieved a lot of success on whatever dimension,
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what do you think is the meaning of it all?
link |
The meaning of our short existence on earth as human beings?
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I think that evolution is the greatest force
link |
of the universe and that we're all tiny bits
link |
of an evolutionary type of process
link |
where it's just matter and machines that go through time
link |
and that we all have a deeply embedded inclination
link |
to evolve and contribute to evolution.
link |
So I think it's to personally evolve
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and contribute to evolution.
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I could have predicted you would answer that way.
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It's brilliant and exactly right.
link |
And I think we've said it before, but I'll say it again.
link |
You have a lot of incredible videos out there
link |
that people should definitely watch.
link |
I don't say this often.
link |
I mean, it's literally the best spend of time
link |
and in terms of reading principles
link |
and reading basically anything you write on LinkedIn
link |
and so on is a really good use of time.
link |
It's a lot of light bulb moments,
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a lot of transformative ideas in there.
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So Ray, thank you so much.
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It's been an honor.
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I really appreciate it.
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It's been a pleasure for me too.
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I'm happy to hear it's a use to you and others.
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Thanks for listening to this conversation with Ray Dalio
link |
and thank you to our presenting sponsor, Cash App.
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Download it, use code LexBodcast.
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You'll get $10 and $10 will go to FIRST,
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If you enjoy this podcast, subscribe on YouTube,
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Finally, closing words of advice from Ray Dalio,
link |
pain plus reflection equals progress.
link |
Thank you for listening and hope to see you next time.