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
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the specifics of how you made that wealth.
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His ideas that are applicable to everyone
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are brilliantly summarizing his book, Principles.
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They're also even further condensed
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on several of the 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, psychologists,
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physicists, economists, investors, 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 on Patreon, or simply connect with me on Twitter.
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Alex Friedman, spelled F R I D M A N.
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This show is presented by Cash App,
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the number one finance app in the App Store.
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which again is an organization
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to dream of engineering a better world.
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And now here's my conversation with Ray Dalio.
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Truth or more precisely,
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an accurate understanding of reality
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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 or 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 at truth is,
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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 the fact
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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 a, because almost the only way
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that you understand what truth is, 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,
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use truth that find out what the realities are
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as a foundation, 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, you know,
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I mean, there are fads and okay, this thing,
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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
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and you learn what truth is and what's possible
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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
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those lines like how do you know or you don't know,
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but a practical person who is also used
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to making dreams happen 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 then give it
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to many, many such shapers.
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And they know that process that I'm talking about.
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They experience it, which is a process essentially
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of knowing 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 it.
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It is being a, it's simultaneously
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being a dreamer and a realist.
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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 its genetics and how much its 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?
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And then how do I imagine and then how do I experiment
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to go from that imagination?
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So it's that process that one,
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and then one, the more one does it,
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the more the better one becomes that.
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You mentioned shapers, Elon Musk, Bill Gates.
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What, who are the shapers that you find yourself thinking
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about when you're constructing these ideas?
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Who 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
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different, 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 in philanthropy, Jeffrey Canada
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and Harlem Children's Zone,
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there are all domains have shapers
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who have the ability to visualize
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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 quality of venture,
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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 from the big, big picture
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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 from selling
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PayPal as 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, blah, blah,
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blah, blah, 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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with 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,
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it's this, the detailed this.
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So he's simultaneously talking about the big,
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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 perspectives.
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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
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Concern for Others, they're all having concern for others.
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This includes Mohammed Yunus,
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who invented microfinance, social enterprise,
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impact investing as Mohammed Yunus,
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received the Nobel Peace Prize for this,
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the Congressional Medal of Honor,
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one of the 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
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to give back money in social enterprise, a remarkable man.
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He has nobody that I know practically
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can have more concern for others.
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He lives a life of a saint.
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I mean, 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, the 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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change Harlem children's zone and develop that
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to take children in Harlem 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 those 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 eight players?
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And if you have eight 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, and what a great, 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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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
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at the same time 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, 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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So how do you, when that that personality being,
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first of all, open to the fact that there's
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other people see things differently than you
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and at the same time have supreme confidence
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Is there just a psychology of that?
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Do you see attention there between the confidence
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and the open mindedness?
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And now it's funny because I think we grow up
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thinking that there's a tension there, right?
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That there's a confidence and the more confidence
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that you have, there's a tension with the open mindedness
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and not being sure, okay?
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Confident and accurate are almost negatively correlated
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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 meritocratic decision
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making a process 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
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that you described in several places
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to arrive at the truth.
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Apologize if I'm romanticizing the notion,
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blame 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 deluding yourself?
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I think what you're calling delusion is a bad word
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for uncertainty, okay?
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So I mean, in other words,
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because we keep going 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 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,
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you form your dreams first
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and you can't judge whether you're going to achieve
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those dreams 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, 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 just 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, okay,
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no, I can have that dream, but I'm so realistic
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in the notion of finding out, I'm curious,
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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, don't confuse delusion
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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, many people choose a path
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that is more comfortable than, I mean,
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that the heartbreak of that breaks people.
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So if you have the dream and there's this cycle
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of learning, setting a goal and so on,
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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 that's what, 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, dreamier guy
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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 and scared
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that I'm gonna be wrong at the same time.
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And then how do I do that? 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 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, 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 lend,
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a lot more money 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 in Mexico default
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that in August 1982, I thought that there was gonna be
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an economic collapse 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, he's 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 was
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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, in other words,
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I kept saying, okay, how do I know whether I'm right?
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How do I know I'm not wrong?
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And it didn't give me 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 down, 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 in 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, 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 not 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 and that is a magical way
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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 it 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
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and public discourse and politics and so on
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that are really stuck in certain sets of ideas,
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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 a 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 sort of
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empathetically if this is true, then what does that world
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look like, does that world make sense and so on?
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So what's the process of considering those conflicting
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I'm gonna answer that question
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but after saying first, almost implicit in your question
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is it's not common, okay?
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What's common produces only common results, okay?
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So don't judge anything that is good based
link |
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 or you're learning something?
link |
Are you getting epiphanies and so on?
link |
And I try to then do that.
link |
If the conversation, as we're trying to decide
link |
what is true 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 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 the topic like the economy,
link |
which you have to me or have some 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 titled
link |
How the Economic Machine Works.
link |
That is probably one of the best,
link |
if not the best video I've seen on the internet
link |
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 pause that the 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 |
The 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, it helps resource allocations
link |
go well, providing people like the entrepreneurs
link |
and all of those, they need capital.
link |
They don't have capital themselves.
link |
And so somebody's 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 crisis that go into that.
link |
And it's free by the way, I put it free online as a PDF.
link |
So if you go online and you look principles
link |
for 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 in the book,
link |
it explains how you identify whether it's overdone or not.
link |
They get it overdone and then you go through the process
link |
of making the adjustments according that.
link |
And then 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
link |
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 you're gonna get
link |
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, 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 |
It's another thing that if I just zoom out
link |
from an alien perspective
link |
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,
link |
how do you think about money 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 |
That's some money, so you could say,
link |
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,
link |
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
link |
to the other, and it sank.
link |
The piece of this big stone, piece of money that they had,
link |
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,
link |
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 through history,
link |
there's been two types of money,
link |
those that are claims on something of value,
link |
like the connection of to gold or something.
link |
That would be, and or they just are money
link |
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 of value
link |
and it works that way.
link |
So let's say central banks,
link |
when they get in the position of like,
link |
they owe a lot of money,
link |
like we have in the case, it's increasingly the case,
link |
and they also are a bind 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
link |
in there, and so history has shown,
link |
forget about today, history has shown
link |
that no currency has,
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.
link |
And there's these ideas that are based
link |
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 will,
link |
do you think something like Bitcoin might emerge
link |
as a common store of value,
link |
store of wealth and a medium of exchange?
link |
The problem with Bitcoin is
link |
that it's not 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
link |
on speculation and the like.
link |
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,
link |
number of things that it's linked to,
link |
would mean that it could be a very effective
link |
storehold of wealth.
link |
Then you have a digital currency
link |
that could be a very effective medium exchange
link |
and storehold of wealth.
link |
some digital currencies 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,
link |
do central banks 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, okay?
link |
A better force of money that 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 to say,
link |
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, possibly never,
link |
but anyway, a very long time before we have that,
link |
let's say, get into a position
link |
that would be in an effective means relative to gold,
link |
let's say, if you were to think of that,
link |
because gold is a track record of thousands of years.
link |
In a union of all across countries,
link |
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 country central banks might worry about
link |
whether the US dollar is going to print to not that.
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 |
But you think it's possible that one day
link |
we don't even have a central bank
link |
because of a currency that cannot be controlled
link |
by the central bank 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 as 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 7 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 does that really possible?
link |
I'm still used to my look of credit card.
link |
I put it on, the guy doesn't know me.
link |
It's all strangers.
link |
It signs, okay, 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.
link |
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 grand kid in some place 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 principle you described that the whole thing
link |
is stable somehow also or is this, are we just lucky?
link |
So the principles that you described,
link |
are those describing a system that's stable, robust
link |
and will remain so or is it a lucky accident
link |
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 is gonna fall
link |
out of the sky because of its particular fundamentals.
link |
I don't know enough about that,
link |
but it happens over and over again.
link |
And so when 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 to say
link |
that by and large, that structure is right,
link |
what we're seeing is right.
link |
Now, whether there are disruptions and it has effects
link |
that can come not because that structure is right,
link |
I believe it's right, but whether it can be hurt by,
link |
let's say connectivity 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
link |
or the system falls, but from what I see
link |
in terms of its basic structure and those complexities
link |
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 destruction.
link |
This is one of the great lessons of my life is that
link |
many times I've seen things that I was very surprised about
link |
and that I realized almost all of those I was surprised
link |
about because they were just the first time it happened
link |
to me, they didn't happen in my lifetime before.
link |
But when I researched them, they happened in other places
link |
or other people lifetimes.
link |
So for example, I remember in 1971, the dollar,
link |
there was no such thing as a devaluation of a currency.
link |
It didn't experience it.
link |
And with the dollar was connected to gold
link |
and I was watching events happen and then you get on
link |
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 |
And so, and then, or the first oil shock
link |
or the second oil shock or so many of these things.
link |
And when I, but almost always,
link |
I realized that they, when I looked in history,
link |
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, oh yeah, I've been, you know,
link |
the implausible happening,
link |
but it's like a one in a hundred year storm.
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 in analysis
link |
and decision making in this kind of data rich
link |
and impactful area of investment?
link |
I'm going to 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, and 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,
link |
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 the cause of fact relationships
link |
that are leading you 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 totally fine to watch all the doctors
link |
You can put it on, take a digital camera,
link |
and do that, convert that into AI algorithms
link |
that go to robots and have them do surgeries,
link |
and I'd be comfortable with that.
link |
Because 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,
link |
and 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 put the data in 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, okay,
link |
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, then the future is different
link |
from the past, 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
link |
for processing, 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 it has a good enough judgment
link |
to do that, 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 new 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 of doing that,
link |
other type of thinking should be operating with the brain,
link |
operating in a way where you can say, ah, that makes sense.
link |
You know, the process of reducing your understanding
link |
down to principles is kind of like the process,
link |
the first one you mentioned type of AI algorithm
link |
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 that's not reducible
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, ooh, you can express far more
link |
than you can imagine you'll be able to express.
link |
So I use the example of, okay,
link |
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, my experience is to take that,
link |
and when you're in the moment of making a decision,
link |
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 try getting it on Android, come on now.
link |
It'll be a few months, it'll be on Android.
link |
But it has an app in there that helps people
link |
write down their own principles,
link |
because this is very powerful.
link |
So when you're in that moment where you've just,
link |
you're thinking about it 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
link |
in a very valuable way.
link |
And if you have the way that we operate,
link |
that you have easy access,
link |
so when the next time that comes along,
link |
you can go to that, or you can show those principles
link |
to others 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 |
and 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 on investment,
link |
and apply it to raising a child.
link |
It feels like through the process he 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, 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
link |
in your equation and all those things.
link |
But that notion of, okay, how do I get at that principle?
link |
And you're saying you'd be surprised.
link |
Yes, 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, individuals,
link |
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 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 get that same information
link |
or just automatically have it input in that.
link |
And it's gonna tell you, okay,
link |
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 operating much more
link |
that way, 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,
link |
information organized in the right way, to intelligence.
link |
And we're gonna, that'll be the next big move,
link |
And so you will get intelligence back.
link |
And that intelligence comes from reducing things down
link |
to principles and to...
link |
That's how it happens.
link |
So what's your intuition if you 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 that would be further
link |
and further automated?
link |
I think the real question hinges on people's emotional,
link |
emotions and irrational behaviors.
link |
I think that there's subliminal things that we want, okay?
link |
And then there's cerebral, you know, conscious logic.
link |
And the two often are at odds.
link |
So there's almost like two us and you, right?
link |
And so let's say, what do you want?
link |
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,
link |
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 wanna not just do it in my head.
link |
I wanna say, does that make sense?
link |
Help you, and so I do it with other people.
link |
And I say, okay, well, let's say I want this thing
link |
and whatever, does that make sense?
link |
And when you do that kind of triangulation,
link |
you're to use and you do that with also the other way,
link |
then you certainly wanna be rational, right?
link |
But rationality has to be defined by those things.
link |
And then you discover sort of new ideas that that drive
link |
your future, so 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, the adventure, the curiosity,
link |
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 demons, there's their fears,
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 who, if I can do that,
link |
that would be the most dream.
link |
And then the act of creativity.
link |
And you say, ooh, 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, it may, can I have an impact?
link |
Can I have an impact?
link |
The desire to have an impact, that's an emotional thrill.
link |
And, but it also has empathy.
link |
And then you start to see spirituality,
link |
but a 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 genius
link |
is that often at the edge of, in some cases,
link |
imaginary genius is at the edge of insanity.
link |
And it's almost like a radio that I think, okay,
link |
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 |
K. Jameson was studying bipolar, what it shows is that,
link |
that's definitely the case,
link |
because when you're going out there,
link |
that imagination, whatever,
link |
is that the 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, a more basic forms
link |
of automation on the economy in the short term
link |
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 edge sword because it'll have
link |
tremendous benefits.
link |
And at the same time,
link |
it has profound benefits in employment
link |
and distributions of wealth.
link |
Because the way I think, think about it is,
link |
there are certain things human beings can do.
link |
And over time, we've evolved to go to
link |
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 and, okay,
link |
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 to the point in our minds
link |
where, okay, anything related to mental processing,
link |
the computer can probably do better 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, 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,
link |
the wealth gap, the income gap, the opportunity gap,
link |
all of those things that force is creating the problems
link |
that we're having today.
link |
A lot of the problems, the great polarity,
link |
the disenfranchised, not equal,
link |
not anything approaching equality of education.
link |
All of these problems, a lot of problems
link |
are coming as a result of that.
link |
And so it needs to be viewed really 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 one of the ideas in terms of safety nets
link |
that support 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
link |
opportunity, education, development,
link |
creating equality so that people say
link |
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 |
Where, how do you get the money into a public school system?
link |
How do you get the teaching?
link |
How do you, the fleshing out that plan
link |
to create equal opportunity in all of its various forms
link |
is the most pressing thing to do.
link |
And so I'm, you know, 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 |
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 child care, okay?
link |
Like it makes a world of difference, for example,
link |
if you have good parents who are trying to think about
link |
instilling the stability in a non traumatic environment
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, you know, the most important things
link |
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 that's an equal opportunity
link |
job market 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 in terms of
link |
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, those are the things
link |
that I'm estimating.
link |
And so my, what I would want above all else
link |
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 it.
link |
Well, right, because you have to have that.
link |
Now the question is what's the best way to provide that, okay?
link |
So when I look at UBI,
link |
I really think is what is going to happen
link |
with that thousand dollars, okay?
link |
And will that thousand dollars come from another program?
link |
Does that come from an early childhood developmental program?
link |
Who are you giving the thousand dollars to
link |
and what will they do for that thousand dollars?
link |
I mean, like my reaction would be,
link |
I think it's a great thing that everybody should have
link |
almost a thousand dollars in their bank and so on.
link |
But when do they get to make decisions?
link |
Or who's the parent?
link |
A lot of pit times you can give a thousand dollars
link |
to somebody and it could have a negative result.
link |
It can have, you know,
link |
they can use that money detrimentally,
link |
not just productively.
link |
And if that money's coming away from some of those other
link |
things that are going to 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 a thousand dollars
link |
and use it so when the time comes and use it well,
link |
that would be really, really good
link |
because it's almost like everybody you'd wish
link |
everybody could have a thousand dollars worth
link |
of wiggle room in their lives.
link |
And I think that would be great.
link |
But I want to 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 going to be doing those things.
link |
And so you have to figure it out.
link |
And you have a certain skepticism that human nature
link |
will use, may not always, in fact,
link |
frequently may not use that thousand dollars 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 parents who know how to do the right things
link |
and make the right choices for their children
link |
because they're responsible and you say,
link |
I'm going to give them a thousand dollars 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,
link |
an alcoholic or drug addicted parent
link |
who is not making those choices well for their children
link |
and what they do is they take that thousand dollars
link |
and they don't use it well,
link |
then that's going to produce more harm than good.
link |
Well put, 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, 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 had 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 start 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 of forming those deep
link |
meaningful relationships?
link |
It can, 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 |
Yes, okay, but I could almost list the ways
link |
that it could stand, 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, it doesn't take a whole lot
link |
but it takes enough that you can take care of yourself
link |
and your family to be able to learn, do the basics,
link |
of have the relationships, have healthcare,
link |
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 |
Okay, 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, look at my case.
link |
It's a, those dreams might not be just my own dreams.
link |
They're impact on others, dreams, okay?
link |
So my own dreams might be,
link |
I don't know, I can pass along these,
link |
at my stage in life,
link |
I can pass along these principles to you
link |
and I can give those things
link |
or I can do whatever I can go on an adventure.
link |
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 |
That's my own belief.
link |
And then I can also help others.
link |
I mean, this is, you know, to the extent
link |
when you get older and with time and whatever very,
link |
you start to feel connected, spiritual,
link |
spirituality is 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, just a medium of exchange
link |
at a store although well.
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
link |
in ways that are different from me.
link |
But I think in many cases, let's say somebody
link |
who used money to have a status symbol.
link |
What would I say, or that's probably unhealthy.
link |
But then I don't know, somebody who says,
link |
I love a great gorgeous painting
link |
and it's gonna cost lots of money.
link |
In my priorities, I can't get there.
link |
But that doesn't mean, who am I to judge others
link |
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, you know,
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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 as 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 similar to you.
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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,
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the base is an important component of that work.
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So you look beyond that, what is the money
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gonna get you 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 your mission,
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that you're on and you are excited
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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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and 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 be 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 was a phase and there's a,
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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 which has the lowest level
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of happiness is age 45 to 55.
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And because as you move into this second phase
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of your life, and 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 in one's life.
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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 is between ages 70 and 80,
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which is interesting for other reasons.
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But in that spot, and the key to work life balance
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is to realize and to learn how to get more
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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, you know, 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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sort of 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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you know, I think like myself,
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you start to get elements of freedom,
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you get your driver's license, whatever,
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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 the thing about the high school.
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You go into college,
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tends to be very happiness, generally speaking.
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Freedom and then freedom, friendships,
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all of that freedom is a big thing.
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And then you, and then 23 is a peak point
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kind of in happiness, that freedom.
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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 know, 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 to 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.
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And then when you get to the later part,
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as you are starting to approach the transition
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and 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.
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Third phase of your life is
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you want people to be successful without you, okay?
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You want your kids to be successful without you
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because when you're at that phase,
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they're making their transition
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from the first phase to the second phase
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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,
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history has shown with this, you have friendships,
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you have perspective on life, you have different things.
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And that's one of the reasons
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that that later part of the life can be real.
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On average, actually, it's the highest.
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Very interesting thing.
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If there are surveys and say,
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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.
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But they rank the highest at that point,
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survey results of being the highest
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in that 70 to 80 period of time
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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.
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And you start to experience that transition well.
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So that's what the arc of life pretty much looks like.
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And I'm experiencing it, you know?
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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?
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The meaning of our short existence on earth
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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
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where it's just matter and machines that go through time.
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And that we all have a deeply embedded inclination
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to evolve and contribute to evolution.
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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.
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And I think we've said it before, but I'll say it again.
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You have a lot of incredible videos out there
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that people should definitely watch.
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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.
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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, 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 used to you and others.
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Thanks for listening to this conversation with Ray Dalio.
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And thank you to our presenting sponsor, Cash App.
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Download it, use code LEX Podcast.
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You'll get $10 and $10 will go to FIRST,
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Finally, closing words of advice from Ray Dalio.
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Pain plus reflection equals progress.
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Thank you for listening and hope to see you next time.