back to indexRay Dalio: Money, Power, and the Collapse of Empires | Lex Fridman Podcast #251
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The following is a conversation with Ray Dalio,
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his second time on the podcast.
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He is a legendary investor,
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founder of Bridgewater Associates,
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author of a book I highly recommend called Principles,
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and also a new book called Principles for Dealing
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with a Changing World Order,
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that looks at the geopolitics of today,
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especially US and China, through the lens of history,
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providing a fascinating model
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for the rise and fall of empires
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that can be applied to the analysis of our world today.
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This is the Lex Friedman podcast.
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To support it, please check out our sponsors
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in the description.
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And now, here's my conversation with Ray Dalio.
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When you look at the history of the world,
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as you have done in your new book,
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Principles of Dealing with a Changing World Order,
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what is more important, more impactful, money or power?
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They go hand in hand.
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They support each other and they compete with each other.
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Those who have money have power, a certain type of power.
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That power has to do with all that they can buy,
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but it also has the ability
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to influence those with political power.
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And so you see this throughout history,
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this symbiotic relationship.
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You know, for example, between the royal families,
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the nobility, and the church.
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So you see that group of people
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supporting each other in various ways,
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and then wrestling around with each other
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for the money and power among that group.
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So the dynamic that's quite classic
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is you could look at the parties in power
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back in the 16th, 17th centuries.
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You would look at royal families, nobles,
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and the church, if you're in Europe,
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and then you would look at agricultural land,
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and there was a certain dynamic.
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And that varies over time, it changes,
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as those people get thrown out and technology changes.
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So when we evolved, when the society evolved,
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so that it would produce goods and services,
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and you have something like the Industrial Revolution,
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the first Industrial Revolution, you have machines,
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and you have the talent of people that are off the farms,
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and then you have a struggling for power.
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You see that power mix change.
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And so we don't see that same power mix anymore,
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but you still see the same dynamic.
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You see those with money,
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dealing with those who have political power
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around those assets that are considered most valuable
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to particularly the productive assets that produce money.
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And political power is usually centered around nation state,
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so the major locus of power is the nations.
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Yes, in 1668, after 30 years of war,
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there was the development of nation states.
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Before then, it was really the development of countries
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as we know it, that there were borders,
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and that within those borders,
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those who had control got to control it,
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and there were not to be intrusions in those borders,
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and that's how we established the nation state.
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And then, of course, within each country, there is levels.
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There is a central level,
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and then there is typically a province
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or state level down below,
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and then there's a municipal level,
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so they each have different levels of power,
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and it's the coordination of those
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that determines how the country is run.
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You write that the, quote, archetypal big cycle
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governs the rising and declining empires
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and influences everything about them,
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including their currencies and markets.
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The most important three cycles
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are the ones you mention in the introduction,
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the long term debt and capital market cycle,
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the internal order and disorder cycle,
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and the external order and disorder cycle.
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Can you describe this big cycle?
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There are two orders.
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There is an order, by order I mean a system,
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how the system works.
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So there's an internal order,
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that is the internal governance system,
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and it's usually set out in a constitution
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or some agreements, and then there's the world order,
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how the world system.
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So for example, in 1945, at the end of a war,
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which is basically a fight for determining the world order,
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the winners of the fight got together
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and created the world system as we now know it.
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In 1944, they created the Bretton Woods Monetary System
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that determined the money, pretty much,
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and because the United States won
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and had 80% of the world's money,
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gold was money then, and it had 80% of the world's gold,
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and it was half the world's economy,
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and it was the great military power,
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the order was built around an American world order,
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so that the United Nations was in New York,
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the World Bank and the IMF were in Washington,
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and they built that new order.
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So classically, you have a war
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to determine whose rules we're following,
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and then you have the new order being constructed.
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After that, there is usually period
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of extended peace and prosperity.
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Peace suits prosperity, and so there's not,
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and the reason you have the peace
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is because no one wants to fight with the dominant power.
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You know you're gonna lose, you've surrendered.
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There's been the surrendering.
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They carve up the world,
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they say what it's gonna look like,
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who's gonna control what,
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and then you come into that period of peace,
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and then prosperity, where then there's a working together.
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Usually, at that point, you've wiped out a lot of the debt,
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you've wiped out a lot of the issues,
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the class warfare and so on,
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and then there's good working together.
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So those great periods,
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such as the Industrial Revolution in the late 1800s,
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or what we've experienced in the post World War II period,
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are peaceful and prosperous periods
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led largely by the dominant world power.
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Over a period of time, since really 1500,
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and maybe before, but really 1500,
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when the Dutch invented capitalism,
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and what I mean by that,
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they invented the first capital markets,
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the first stocks and the first stock market,
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that since then, capitalism has been an effective tool
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for building wealth because it got resources
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into the hands of inventive people.
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That's when we moved from agriculture
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to the importance of inventiveness of people,
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they got resources, and then they built that prosperity.
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In that process of doing that,
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they create wealth gaps, naturally.
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Those who make a lot of money make a lot more
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than those that don't,
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and it also produces opportunity gaps
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because, for example,
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those who earn a lot of money have that wealth,
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they have the power to educate their children
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in a way that others don't, and the gaps grow.
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And also, the debts grow at that time.
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When they go around the world with their competitiveness,
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they earn a lot of money.
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So for example, the Dutch, the Dutch Empire,
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learned how to build ships that would go around the world.
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A key ingredient of this improvement in this cycle
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is the improvement of education,
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and by education I mean the skills that come from education,
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but also civility, the ability to deal well together.
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So the Dutch invented ships that could go around the world
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and they had military power,
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but they were also a very inventive society.
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25% of the world's new inventions came from the Dutch,
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and so as they went around the world,
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they also brought their currency,
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and they brought their military.
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They needed the currency, they paid for things,
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and that currency, and then the more that happens,
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the more that becomes a reserve currency,
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and then they have their military,
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so they need their military strength,
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and so you see it evolve in all of those ways.
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But over a period of time,
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as they become more successful and more expensive,
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they become more expensive,
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and newer countries come along,
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like the UK, then learn to build ships from a lot the Dutch
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and could do that less expensively,
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and also when they become more expensive,
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so less competitive,
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and also the work ethic begins to change.
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They believe that since they're richer,
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they can enjoy life more.
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They don't have to work quite as hard,
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and so you start to see the tilt.
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Now you start to see the development of the top,
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and when you have a world reserve currency,
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that allows you to borrow a lot of money
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because those who want to save want to hold your money,
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and that means that they'll lend you money,
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and so those countries get deeper into debt.
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So you see that they gradually lose their competitiveness,
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and they get themselves into financial circumstances,
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which are not good,
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and they have large wealth gaps,
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which set the stage for downturns.
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And when they have downturns,
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the first question is do they have enough money?
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And traditionally, money is resources.
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So you classically see that the coffers are bare,
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that they're spending more money than they are earning,
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and they run out of money in the coffers,
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and their granaries are empty rather than stocked
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so that they give them the buffer.
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And as that deteriorates, that worsens conditions.
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And if they have a rival power that's also challenging them,
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they see greater internal conflict over wealth,
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and then they have the problems internally
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and the problems externally,
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which usually results in an internal war or an external war
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that leads to the change to the new world order.
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And to you, the Dutch Empire is a good example of that.
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The British, what are some of the key examples
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that you think about in the book
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of this process that followed the big cycle?
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Well, the leading reserve currency empires,
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but it applies to all the empires,
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were the Dutch, the British, the American, and the Chinese.
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But you could follow the same pattern.
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In the book, it was very important for me
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to not just use words and concepts
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because that's subjective.
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It was very important for me to use actual measurements.
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So as you see in the book, you can see every level of this.
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You can see where's the education level,
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what is the military power, each one of those,
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and you could see them back going over the 500 years.
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And so you could see the arcs and the composition
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of those arcs, and what you see is really,
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in most countries and most dynasties, you could see that.
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But you also can see through those numbers
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the health of those countries.
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Today, there are statistics that are in the book
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that show what is the level of education,
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what is the level of economic output,
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what is the level of military strength,
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what is the level of a number of different measures
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of strength, so that you can then compare that.
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And I think that because they're objective measures
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of strength that you could see change,
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that shows the picture of where we are today.
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And I think one of the most important things about the book
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is that it allows people to monitor
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how those things are transpiring.
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I think for policymakers,
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are your policymakers doing a good job?
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And there's so much subjectivity in that.
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But I think it's very simple.
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If those lines on the chart are improving,
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if your health index is improving,
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then you're moving toward a better life.
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So that's what the book works like.
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Also, it was used to create a model for the future.
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In other words, there are cause effect relationships.
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Everything that happens has reasons, causes,
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that preceded it, that made it happen.
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And so by having all those in numbers,
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one can see the probabilities of certain things happening.
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So that's what you see in the book.
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It's not just Ray's interpretation.
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I didn't wanna make it Ray's interpretation
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because I don't know if I'm right.
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Yeah, so one of the fascinating things in the book,
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so you have list these 18 measures,
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and there's like a little scorecard
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for the countries of the world today.
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So let's say US, China, and Europe,
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and what it was 20 years ago,
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and looking at the change from 20 years ago,
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and that's another indicator, the change itself,
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to see where things are headed.
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Maybe can you comment on, from a score perspective,
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how is US and China doing?
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And in the 18 measures, what are some measures
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that stand out to you as particularly important
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to think about today for the United States, for China?
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Well, there are a number.
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Financially, what you see in the United States
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is that we're borrowing a lot more money,
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creating a lot of debt, and we're printing a lot of money.
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And our capacity to do that is very much,
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is limited, first of all,
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because when there's a sale of a bond,
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when the government borrows more than it borrows money,
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because it spends more than it takes in,
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you have to sell a bond.
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And the world right now
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has a lot of US dollar denominated bonds,
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because as the world's reserve currency,
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they sell, sold on them.
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And they have very bad returns, negative real returns,
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negative real returns significantly, and so on.
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So that means that more bonds
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has to be sold than are bought.
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And that means that the Federal Reserve
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is faced with the choice of having to raise
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the interest rate to curtail borrowing,
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which slows the economy and hurts the markets,
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or by filling that difference and producing money,
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the debt monetization, which produces an inflation
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in goods, services, and financial assets.
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So in that regard, that's the United States's position.
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In China's case, its balance of payments is better.
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China has displaced the United States
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as the world's largest trading country.
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In other words, more exports to other countries.
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And as a result, it's economically competitive,
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but it doesn't have the world's reserve currency.
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It's a real blessing.
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So the United States, it has the world's reserve currency,
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but it is risking it because of this imbalance.
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So if you look at history,
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you see that those go slowly,
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but when they go eventually, they go quickly.
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So there's a risk of that financially.
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Then there's the issue of internal order.
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So I'm just giving you the major ones,
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but I'll get into some of the other ones too.
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Right now, there's a lot of internal conflict
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in the United States, which affects
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how well it works.
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In China, there's less internal conflict
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because it's a more autocratic state,
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but also they've created this bifurcation
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of what is political and what is economic
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in terms of producing that prosperity.
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So if you stay out of the politics pretty much,
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and then you're seeing entrepreneurship,
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you're seeing the finances of new businesses and so on.
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And so that internal working,
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that's subject to different people's interpretations
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whether they like it or not,
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but the internal conflict in terms of those kinds
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of measures is less.
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Sorry to pause on that for a second.
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So these measures, I guess you don't want
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to sort of romanticize any one measure
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or something like that, overinterpret any one measure,
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but is internal conflict always a bad thing?
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Is it a complicated calculation?
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Or do you kind of, the way we think
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about these measures that you've presented,
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we should be thinking like the higher, the better,
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the lower, the worse, I mean, of course,
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depending on the measure.
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Well, in many cases, the conflict that produces
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the revolution produces revolutionary changes
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that lead to resolutions and lead to new starts.
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And so a short term civil war is a hellacious experience.
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And at the same time, it can be the transition
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to a new beginning.
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Also, there are different types of conflict.
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Competition, which makes things, makes everything better,
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is a productive conflict, whereas destructive conflicts
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are not good over the short time.
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So that's how those go.
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So within each measure, the story is complicated.
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Yeah, but my measures are sort of clear,
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meaning how much political conflict,
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how much social conflict.
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In other words, you can measure conflict,
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you can measure fighting, you can measure crime rates,
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you can measure lots of different ways of conflict.
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So the measures are a composite of different types
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of internal conflict.
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What are some other interesting measures,
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maybe if you can also mention that,
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for me in particular, interest is education and innovation.
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Yes, the classic cycle, the most important leading indicator
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is the quality of education.
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Most importantly, broad based education
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drawn from the largest population
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because you can never tell who the talent is going to be.
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So where are they gonna come from?
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So for example, if you look at the Chinese dynasties,
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the great Chinese dynasties and the Confucian approach,
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it was meritocratic of everybody could sit for exams
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and so on broad base of drawing in the populations.
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And you see that if you go across societies
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because that draws on the largest number of population
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And it also, that creates a reality and a perception
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that the system is fair, equal opportunity,
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not just one of privilege.
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And that helps to create social stability.
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But education is not just education in understanding facts
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and so on, it is education in civility
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of how to behave together.
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And so if they're smart,
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they understand how to be productive
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because they work well together and they're productive.
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And then that leads to the next stage.
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You could see in the lines in the charts, I plotted these
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so that you could see in a typical cycle,
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you could see that education is the long leading indicator.
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And then you could see, as you mentioned,
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that what you see is inventiveness and technology measures
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then follow and you see then also competitiveness
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and world markets follows.
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For example, in the early stages of a cycle,
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the industries that they go into tend to be very basic
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industry because they have cheap labor,
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something like textiles and simple manufactured goods
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But as the education rises,
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then they move up the value chain to greater technologies
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and so on, which raises incomes and raises productivity.
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So yes, those and as you say,
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there are 18 different measures like that,
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but education and then civility and the inventiveness.
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So you see it reflected in who's inventing what.
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And that corresponds then who's trading with,
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who's a big trading country
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and where's the value of economic output
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and what are per capita incomes.
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They all follow those arcs.
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Yeah, like you said, the fascinating thing about your book,
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so there's philosophy, there's wisdom, but there's plots.
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Yeah, you can see it.
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So it's not just your opinion.
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It's kind of like you can interpret it in any way you like,
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but you're just giving a lot of your own insights
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along with the numbers.
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If you were to look at the American nation,
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the American empire and the trajectories
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looking into the future given these measures,
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what is the trajectory that leads to the collapse
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of the American empire based on these measures?
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What are the concerning indicators
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and if those break down further, what does that look like?
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Well, all of those indicators are concerning,
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maybe except for one, which is technology,
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the technology niche, although even in that area,
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the United States is improving at a slower rate
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than is China for various advantages that they have there.
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They put out about eight times as many computer engineers
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they have free data and so on, but if you look at them,
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so the financial is a concern.
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The internal order, disorder is a concern.
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Then if you look at education levels,
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the United States is in many ways
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is losing its educational advantage.
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If you were to look at, compare it with China,
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if you take general public education in the United States,
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it's deteriorated tremendously
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even in comparison to developed countries.
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There are scores, PISA scores and so on,
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and it's something like 38th in the world or something
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and that was a big plunge, average public education.
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If you look at the best universities in the world,
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the United States is unique
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in having the best universities in the world,
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so there are these privileged universities
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in the world, so there are these privileged spots
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that are, you know, excellent, uniquely excellent.
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So when you look at the comparison,
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education in China is improving rapidly
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and the quantity is a quantity of educated people
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in the areas that they're moving in is greater
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and the resources that they're putting behind it is greater
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and so you see the results are greater,
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but it's sort of along the lines that I'm dealing with.
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If you were to follow through
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in terms of actual productions,
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I think you know in terms of technologies,
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there are some areas that the United States is in a lead
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at the moment, there's some areas that China's in a lead,
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but China's gaining very quickly.
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When I first went to China, 1984,
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I would bring $10 calculators
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and I gave them away as gifts to high ranking people
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and they thought they were miracle devices.
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Right now, in terms of areas like quantum computing
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and AI and you know, many areas,
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you have a race going on
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and so if you take the trajectory of the competitiveness,
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not just look at the current level,
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you have a situation where they're improving
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at a much faster rate.
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This is all good for the world if the world can get along.
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And the main thing I think is,
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how do you have a healthy world
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and how do you have a strong economy
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and how do you have a strong situation is be strong.
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The United States is war is with itself.
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That's the main war.
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You know, it's very simple in history.
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Be financially sound, earn more than you spend
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and be strong in these ways
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and pretty much everything will take care of itself.
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But you make it sound simple of course
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because there's a momentum when things degrade,
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when the education system degrades,
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when you start borrowing,
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when I mean, all of these indicators,
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once they're going down, there's a momentum to it, right?
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So it's hard to reverse it.
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Right and there are circumstances that you're then in.
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For example, indebtedness.
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You know, it's politically desirable
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for those to borrow money and spend
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because their constituencies only look at what they get
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and when they get a lot, they don't pay attention
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to the balance sheet and how much debt is on the books.
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So it's always better to borrow, spend
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and then leave the cleanup to the next guy.
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And so you inherit a lot.
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You inherit it as a new president enters in
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or new legislators, they have a lot of debt,
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they have a broken down infrastructure,
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they don't have enough money to fix that.
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And so that's the lay of the land
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that the prior generations put you in
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and there you are.
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And so that's right.
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It's difficult because when you start to think,
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okay, what's healthy?
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Well, earn more than you spend.
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Well, that's not so easy
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because you know, what does that mean?
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I mean, okay, that's not so easy.
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That isn't gonna work.
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So now what do you do?
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Okay, you have this debt that you then monetize
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and that's why it's classic.
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So yes, that's why these cycles occur
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because what has created before,
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what happened before created the lay of the land
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that is then increasingly difficult to deal with.
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So what can great leaders do in this moment?
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I mean, maybe my sense is leadership is crucial here.
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So for example, to do very large projects
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and invest in the education system
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that sort of try to fix the fundamentals
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or maybe invest more and more into the innovation
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and the development of new technologies and so on.
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It feels like that just doesn't happen organically.
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So you have to have strong leaders
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that convince the populace
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of the importance of these ideas.
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Well, I completely agree with your list.
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What we have is a situation
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where everybody has their opinions
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and they have to sort of get them exactly right
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and they all fight with each other
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about whether their opinions.
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So the most important thing is that we become bipartisan
link |
so that we don't and we get over our differences.
link |
I would have a bipartisan cabinet.
link |
I would draw upon both members of both parties,
link |
the moderates who are going to be able to work together.
link |
So as then we have one country
link |
and then we deal with those in a means
link |
that works for the majority of the people in the middle
link |
rather than the polarity.
link |
I think our greatest risk is in not being able to do that.
link |
So I would say that's a paramount importance
link |
because we have the resources,
link |
wealth, real wealth and science
link |
and everything has never been better than it is.
link |
But the notion is that it has to work
link |
for the majority of people
link |
and we have to keep it being productive.
link |
So that group has got to calmly and knowledgeably
link |
work together so that they increase the size of the pie
link |
and they create broad based prosperity.
link |
So that is a paramount importance.
link |
Whatever they do, if they do it that way,
link |
I can say I'm happy about
link |
because that other alternative
link |
is the really scary alternative.
link |
The scary alternative,
link |
the different ways it has evolved throughout history,
link |
some of it has led to wars.
link |
What are the future trajectories
link |
that lead to a potential war with China?
link |
Cold war or hot war?
link |
Is this something you think about?
link |
Is this something you're worried about?
link |
Yeah, I'd like to talk about both wars.
link |
So the war with China, as I say,
link |
there are five kinds of wars.
link |
There's a trade war, technology war, geopolitical influence
link |
war, capital war, and military war.
link |
As far as military war goes,
link |
I think it's only a Taiwan issue, but that's a big issue.
link |
And we could talk about that for a minute,
link |
but those others, they'll be rough competitions
link |
and we'll have that type of evolution over a period of time.
link |
That's what that war looks like.
link |
Taiwan has been, for a long time,
link |
a sovereignty issue to China.
link |
And it has its roots
link |
in what's called the 100 years of humiliation.
link |
From the 1840s to 1949, foreign powers came in,
link |
took advantage of China, they had the opium wars
link |
and such times, and that represented
link |
the 100 years of humiliation.
link |
And Taiwan represents their sovereignty
link |
and their important thing.
link |
And 50 years ago, starting 50 years ago,
link |
there was an agreement that there is one China
link |
and Taiwan is part of China.
link |
And that there would be peaceful reunification.
link |
The peaceful reunification hasn't happened.
link |
And in their view, that's a very big issue.
link |
And so it's a big contentious issue.
link |
And that could produce a military war,
link |
could produce a military accident,
link |
could produce, it's a very tense situation.
link |
And if we had a military war, God help us
link |
because of the capacity in all different new ways
link |
to inflict harm on each other.
link |
But anyway, that's that.
link |
If you don't have that military war,
link |
you'll have the competition between those other kinds of wars
link |
and whoever is strongest in those areas will win.
link |
Where do you put cyber war within the five?
link |
Well, cyber war is a military war.
link |
I'm assuming the type of cyber war that you're referring to
link |
is that which is used to inflict pain
link |
on the other party through cyber.
link |
So cyber wars, you'll see cyber war.
link |
You could see space war.
link |
You can see drone warfare.
link |
New types of warfare, not just the traditional
link |
and nuclear type of warfare.
link |
But you could see any of the above.
link |
What are the defining characteristics?
link |
What are the interesting things about Xi Jinping,
link |
the president of China, as a leader on the world stage?
link |
His father was a early leader.
link |
He was himself in the Cultural Revolution in times,
link |
And during that period of time, it was very, very difficult.
link |
And he came up through the ranks
link |
and he's a very intelligent man.
link |
When he first came to power,
link |
as you know, they have two five year terms,
link |
and we're now coming to the end
link |
of the second of those five year terms.
link |
When he first came to power,
link |
he felt that there should be a lot of reform.
link |
And reform meant moving to much more
link |
of a market and open economy.
link |
When that happened, him coming in,
link |
I had some contact with economic policymakers,
link |
but in the circumstances then,
link |
were that five major banks lent to state owned enterprises
link |
and local governments with implied government guarantees.
link |
And so there was not control of that
link |
and the movement to aim more of a market economy.
link |
And the development of markets was a primary
link |
and also the dealing with the corruption issue.
link |
There was a lot of corruption prior to that,
link |
and that was viewed as an existential threat to the system.
link |
So that became the primary objective.
link |
And then as time progressed over those 10 years,
link |
there was a lot of changing in the world,
link |
their financial circumstances,
link |
opening many, many other markets.
link |
They particularly getting money
link |
to small and medium sized enterprises
link |
and developing a lending system
link |
and then establishing controls on it.
link |
So right now there's a vibrant capital markets.
link |
You can raise capital, you can be an entrepreneur,
link |
you can become a billionaire in the capital markets.
link |
And they developed the markets
link |
to be the second largest capital markets.
link |
At the same time, they had to deal
link |
with their rising debt issue,
link |
which they began to deal with really about four years ago,
link |
when the second largest capital markets
link |
were about four years ago, when the second term began.
link |
And then Lu He became the vice premier
link |
responsible for that and to deal with those issues.
link |
So you see right now that what's happening
link |
is the dealing with the real estate bubble.
link |
There was a development in real estate, a bubble,
link |
which produced a lot of unproductive lending.
link |
And Xi Jinping said, houses are meant to live in,
link |
not to speculate on.
link |
And so that was wasteful.
link |
So they established what they call three red lines,
link |
which are financial ratios,
link |
that the property developers had to live within.
link |
And that is then causing the adjustments
link |
that are going on now, which in my view are very healthy
link |
because whenever there's bankruptcies
link |
and so on, most in the public think, okay, that's a problem.
link |
It's in many cases really a cleaning up of bad debts
link |
and bad practices.
link |
And so that's what's going on.
link |
So that's, let's say economically.
link |
At the same time, there is the changing relationships,
link |
the changing world order, the changing relationships
link |
with the United States and other countries,
link |
which is becoming much less cooperative
link |
and much more warlike, much more confrontational.
link |
Those two things, the domestic debt problem
link |
and the domestic, has led to what's called core,
link |
what they call core leadership,
link |
which means a leadership more around him
link |
that is less challenging
link |
because they believe in history
link |
that during very difficult times,
link |
a more centrally controlled decision making process
link |
lends itself better than to a more fragmented
link |
political contentious project.
link |
And that's basically what's going on now.
link |
You said it very eloquently,
link |
but you mean the leadership is surrounded by yes men
link |
and there's a lot of centralized control.
link |
That characterization is much more black and white
link |
than it really is.
link |
But it leans towards that direction.
link |
Like for example, of the standing members
link |
of the Politburo, four are more allotted,
link |
three are less so.
link |
You have to understand that it's kind of
link |
a collective leadership at the top.
link |
And then of course, there's just jockeying for power
link |
in a highly political sense at the top.
link |
But no one leader can be successful
link |
against all those powers at the top.
link |
So it's very politically negotiating.
link |
It's very much more like if you put in the United States
link |
the Democrats and the Republicans
link |
and they had to be in the same government
link |
and they work it out.
link |
It's kind of something like that.
link |
And so that's that struggle, but it's an internal struggle.
link |
Where do you put the importance of some of these ideas
link |
at the founding of the United States
link |
when now we're talking about that at the context of China,
link |
the freedom of speech, freedoms?
link |
What China is doing with the central management
link |
of a lot of things, it's enabling a lot of growth,
link |
but it's also limiting people on the very basic level
link |
in terms of freedom.
link |
The kind of freedom that I think can lead
link |
to entrepreneurship, to starting new businesses,
link |
to having big dreams and chasing those dreams
link |
and then creating totally new things in whatever the space,
link |
maybe in technology, in business and whatever.
link |
How important is that as a metric for society?
link |
Well, they have a view, which is the idea of a dialectic,
link |
which means that two things are at obvious,
link |
that everything comes with pros and cons
link |
and two opposites exist.
link |
And you want the benefits of those two opposites
link |
and how do you deal with the benefits of those two opposites?
link |
So let's say you want the capital markets
link |
because it gets money into the hands of the entrepreneurs
link |
who are motivated, they build fortunes,
link |
and that drives an economy to do very well.
link |
And at the same time, it produces the other problems,
link |
the wealth gaps, the other problems,
link |
the debt cycle that we're talking about and so on.
link |
And Deng Xiaoping, how do you reconcile communism
link |
and the market economy and the capital markets?
link |
And he famously said,
link |
it doesn't matter if it's a white cat or a black cat,
link |
just as long as it catches mice.
link |
In other words, if it works in making the country richer,
link |
then that becomes the objective
link |
and then they move that along.
link |
So there are these conflicts.
link |
And one of the leaders described it to me as follows,
link |
because it's confusion and it goes back
link |
over a period of time.
link |
There's a hierarchy and it's an extension of the family,
link |
And he said, the United States is a country of individuals
link |
and individualism, and that is its vibrancy
link |
that we see the individual rights to speak up,
link |
the individual protection of the individual,
link |
individual property rights and all of those things
link |
is of paramount importance.
link |
And we build our organization.
link |
That's why democracy is from the bottom up
link |
or even a company, we'll get together
link |
and we'll be partners to prosper together.
link |
That is the American approach.
link |
He was describing that in China,
link |
it's an extension of the Confucian family, essentially.
link |
And so it's almost like there's a hierarchy.
link |
And so what they think about is the common good,
link |
not the individualism.
link |
So for example, if they want a high speed rail
link |
to go from one place to another,
link |
and that's best in the common good,
link |
then the individual protections
link |
that would stand in the way of doing that
link |
would be of secondary concern.
link |
So that notion of controlling.
link |
So for example, what they're doing with video games,
link |
they control what type of video games
link |
and how many hours a day kids can be on video games
link |
operating in that way,
link |
because they believe that that's good for the society
link |
and that's very controlling.
link |
In the United States,
link |
I think probably most parents would say, leave it to me.
link |
And it's a matter between me and my kids.
link |
The same thing has to do with data.
link |
In other words, in the United States,
link |
who controls the data?
link |
Does the company control the data?
link |
Do you individually control the data?
link |
And so the inclination would be to figure that out,
link |
but nobody would say that the government
link |
is going to control the data
link |
because of our inclination of really anti government control.
link |
In China, it would be that the government
link |
will control the data
link |
because that's going to be best for the society.
link |
And it depends who you trust.
link |
But that's, so that difference in philosophy
link |
is very much at the heart of that.
link |
As far as your question in terms of effectiveness,
link |
it really is, in China's case,
link |
it's how you balance the things, right?
link |
So what they're attempting to do
link |
is to create a lot of freedom and creativity
link |
in areas that are not political, let's say.
link |
And so you see a lot of entrepreneurship,
link |
you see a lot of product development,
link |
you see a lot of creativity happening in that way.
link |
So the stereotype that you don't see creativity happening
link |
is an old stereotype,
link |
whereas a lot of creativity is certainly happening.
link |
And the system can work well
link |
if they can achieve that kind of balance.
link |
It's proven to have worked well.
link |
Since I started going there in 1984,
link |
per capita income, real per capita income,
link |
has increased by 26 times.
link |
The longevity rate has increased by 10 years.
link |
The poverty rate has fallen from 88% to less than 1%
link |
in terms of basics like starvation and things.
link |
And if you read history, Plato's Republic,
link |
he talks about the cycles, democracy and autocratic
link |
and the benevolent despot and all of that,
link |
each has their own vulnerability.
link |
The vulnerability of democracy,
link |
which has been a remarkable, remarkable system
link |
and I don't have to extol the benefits of it,
link |
but the vulnerability of it has always been
link |
the internal conflict that produces itself as anarchy.
link |
In World War II, four democracies
link |
chose to be autocracies
link |
because there was internal disorder
link |
and there was the belief, will somebody bring about order
link |
and get control of the situation?
link |
That was in Germany, Italy, Japan and Spain.
link |
They were parliamentary systems
link |
that turned themselves over to that.
link |
So both systems have vulnerabilities.
link |
I think the main thing that we need to think about
link |
is those vulnerabilities.
link |
Democracy is an amazing system
link |
because the adherence to the rules and the system
link |
and the checks and balances is quite amazing
link |
and it gives it a flexibility to change without civil wars.
link |
But there has to be the respect of the rules.
link |
And when you see something like
link |
they will not accept elections
link |
or they will not accept rules, history has shown,
link |
when the causes that people are behind
link |
are more important to them than the system,
link |
the system is in jeopardy.
link |
So we have a situation that's very much like that
link |
in terms of, let's say, the 2024 elections.
link |
I believe that there's a very high chance
link |
that neither side will accept losing, for example.
link |
And so we have that kind of a situation.
link |
So one would hope that one could rise above
link |
the disagreements and rely on the system
link |
for resolving disagreements.
link |
Because if that doesn't happen, then we have our own chaos.
link |
So the kind of the trend that started in 2020,
link |
or I mean, I suppose it's been there,
link |
it's been growing.
link |
One representation of this internal disorder
link |
has been the growing trend of being skeptical
link |
about the results of the election.
link |
Well, it started before that.
link |
There was the emergence of population
link |
before President Trump was elected.
link |
He was basically elected as a populist
link |
because there was a large percentage of the population
link |
that felt that the system didn't work for them.
link |
And he tapped into that.
link |
And he was largely elected as a populist leader,
link |
first populist leader in a developed country.
link |
And so populism began then.
link |
And that was a battle of one group against the other group.
link |
And so since then, it's been like that
link |
and it continued to grow.
link |
You've mentioned the vulnerability of democracy,
link |
that internal disorder is the vulnerability of democracy.
link |
What's the vulnerability of a system like China?
link |
Maybe one way to say is put China aside
link |
and look at history, look at Soviet Union.
link |
What's the vulnerability of a communist type system?
link |
Well, I'll call it both communist and autocratic,
link |
depending on how much autocracy,
link |
is that it lacks flexibility.
link |
It lacks the ability,
link |
but I should deal with them differently.
link |
In other words, there's the economic system.
link |
The economic system threatens motivation and productivity.
link |
So communism or socialism has to be done in a way
link |
where you can threaten productivity.
link |
Capitalism has, and what I mean by that,
link |
I mean free markets and capital markets
link |
have been an effective way of allocating resources
link |
and also creating the incentives and the resources,
link |
providing the resources for the inventiveness of new ideas.
link |
And so if I compare that, what the Chinese have done
link |
to a large extent is to recognize that
link |
and have made a move.
link |
That's why the seeming dialectic or the conflict
link |
between those two things exists.
link |
But anyway, that's it.
link |
As far as an autocratic system,
link |
rather than one man, one vote from the population up,
link |
the risks of the autocratic system
link |
is that there's enough discontent that arises
link |
that the system doesn't have the flexibility
link |
and that rather than bending, it breaks.
link |
That's the big risk.
link |
The notion of trying to control a population
link |
if there's that, rather than giving it the flexibility.
link |
So that would be the big risk of the autocratic system.
link |
What's the human, because you mentioned
link |
like the top gets bigger with the empires
link |
and you start to get things for granted.
link |
Is some of this just human nature?
link |
So the concern with China, with autocratic nations,
link |
the concern with the Third Reich, the Soviet Union,
link |
was that fundamentally at the individual level,
link |
the humans involved at the top,
link |
they start becoming, they're starting to lose touch
link |
with reality in a way that no longer makes them.
link |
I guess that's the representation,
link |
the flexibility that you're referring to.
link |
Well, I mean, in a democracy, you could change.
link |
You can go as far left or as far right.
link |
You can change the leaders easily.
link |
And so the people don't become,
link |
they pretty much only have themselves to blame.
link |
And one of the problems of that
link |
is they may not choose the best leaders,
link |
but they have that flexibility.
link |
So vote and you get what you wanted.
link |
In the case of the autocratic, let's say leaders,
link |
and then the movement from democracies to autocracies,
link |
what you see normally that movement
link |
is that one of the systems is not working.
link |
Let's say the democracy is not effectively,
link |
everybody's arguing with each other
link |
and nobody's getting anything done.
link |
You know, like Mussolini,
link |
the trains are not running on time.
link |
And that would be the example,
link |
geez, this place has gotten chaotic.
link |
Will somebody get to control?
link |
And then you get the autocratic
link |
and then he's autocratic enough to boss people around.
link |
And then you follow those kinds of orders.
link |
And it's like maybe a CEO in a powerful company
link |
going around and that could work well
link |
or it could work badly.
link |
Most companies are run as like autocracies in a sense.
link |
You know, there's the hierarchy and the command economy
link |
and that kind of thing.
link |
And that can work well or not.
link |
But then quite often when you get the populist autocratic,
link |
their personality is something that they want to fight
link |
and they become more nationalistic
link |
and they tend to become more militaristic.
link |
And human nature at that stage lends itself to fighting.
link |
There's an arc here that when we think of a country
link |
and we say we, and we think of a country,
link |
it's not true, it's not like that.
link |
There are individuals who change.
link |
One generation dies and another generation comes along.
link |
And one of those arcs is that the one generation
link |
of the ones who have been through war
link |
don't wanna go to war and are more happily willing
link |
to abide by whatever the rules are.
link |
As you get farther along into that cycle
link |
and you get a new generation and they forget about wars
link |
and the horrors of wars, then they want to fight.
link |
And so you're seeing right now the emerging
link |
of fight for right and what that means
link |
is you see it internally, fight where are you
link |
and fight for that thing and they mean fight.
link |
And then externally, fight, are you going to be
link |
the strong one who will fight and win?
link |
And that develops on both sides, this fight and win
link |
and each side is cheering each other on into a war.
link |
But that comes by those who really have not experienced war
link |
because it comes in their part of their lifetime.
link |
Humans are fascinating.
link |
Humans are fascinating.
link |
And by the way, human nature has not changed
link |
over the thousands of years.
link |
So it's so interesting because like in doing this study
link |
and it comes across in the study,
link |
it's like watching the same movie over and over again.
link |
You know, you see the arc and you see it happen
link |
over and over again.
link |
The only things that seem to change are the clothes
link |
people wear and the technologies they use.
link |
Yeah, and then somebody probably would disagree
link |
with you about the clothes.
link |
Maybe there's also cycles within fashions.
link |
Maybe we're not even creative there.
link |
What do you make of Russia and Vladimir Putin?
link |
What do you think about Putin as a leader,
link |
as a human being on this world stage within the context
link |
of the cycles of empires that you think about?
link |
Well, Putin came to power at the failure
link |
of Russia's last order.
link |
So there was the end of communism
link |
and there was the development of the market economy,
link |
the collapse of the Soviet Union.
link |
And at that time, he was appointed by Yeltsin
link |
who was an alcoholic and had problems managing
link |
and was put into power.
link |
And the conditions in the Russia were,
link |
there was anarchy, there was no money.
link |
It had the classic end of cycle ingredients.
link |
It was people were fighting with each other.
link |
It was in the anarchy.
link |
And that's when he came to power.
link |
And there were not institutions.
link |
The whole thing had collapsed
link |
and it was not effective ministry of education,
link |
ministry of anything.
link |
And so the idea was that they needed 25 years of stability
link |
and they needed a democracy
link |
and they needed the improvement of capital markets.
link |
So he's been in that position as I guess I would call him
link |
a semi autocratic leader in that from all indications,
link |
he would respect the democracy and he's very popular.
link |
He's won democratic elections
link |
because he's been a strong leader
link |
and he's brought peace and stability
link |
to Russia after the breakup of the Soviet Union.
link |
And he's a strong leader in pursuit of the country's interest
link |
in a way where Russia is not a significant economic power
link |
but it is a significant military power.
link |
So the issues, and then there's a strong alliance
link |
between Russia and China now.
link |
So that's kind of the lay of the land.
link |
And then there are sensitivities.
link |
The Ukraine issue is a sensitivity
link |
because of there are a lot of Russians
link |
who live in the Ukraine
link |
and there's also the issue of NATO on their border.
link |
So there are those kinds of things
link |
and he has military power
link |
and he has a strong alliance with China.
link |
And I guess that's my best summary
link |
of what his position is.
link |
He's a strong leader, popular.
link |
These are not subjective interpretations.
link |
These are objective interpretations.
link |
Yeah, it's interesting just in this conversation,
link |
you're not sort of doing the usual criticism
link |
of any one particular system.
link |
You're looking at these systems
link |
from the perspective of history.
link |
You're just describing how they work.
link |
It's often times when you talk about what Russia is today
link |
or what the Soviet Union was or what China is today
link |
is you start to criticize.
link |
Well, they do this kind of censorship
link |
or they do this kind of,
link |
they limit freedoms in this kind of way.
link |
But you're just kind of describing this
link |
as a nation with ideas, what they think is right.
link |
This is how they hope to get it to work.
link |
This is why it's working.
link |
This is what's not working.
link |
Here's metrics that show that it's not working.
link |
I think that's a refreshing way to think about it.
link |
It's easy though, I mean, you got some criticism
link |
saying that I think China is a strict parent.
link |
Some people criticize these countries for doing,
link |
for violating human rights.
link |
I suppose there's some people that criticize the United States
link |
for violating human rights.
link |
But what are your thoughts on the world stage today
link |
about some of the behaviors it has governed
link |
in terms of respecting the rights,
link |
the basic rights of human beings?
link |
You described accurately how I just tried to look at this
link |
and how I just tried to look at things in a non,
link |
I don't want to impute my values on anybody.
link |
I mean, there are intolerable things.
link |
So I'm not saying there aren't intolerable things.
link |
But one of the great things of being an American here
link |
is that I grew up with all different nationalities,
link |
having all different points of view
link |
and all different religions
link |
and all different ways of operating.
link |
And I've come to treasure the fact that that is,
link |
what's their business is their business.
link |
And then the question is, where do you cross the line
link |
under what circumstances
link |
that others have got to do it my way.
link |
And then when you do it internationally,
link |
the issue of what is a sovereign state,
link |
which as I say in the piece of Westphalia
link |
and you have borders and then when do you cross the line
link |
that my way of doing things
link |
has got to be their way of doing things
link |
or what are the various rights.
link |
And so that's a very delicate question
link |
or a very difficult question.
link |
And we all have responsibilities to different parties
link |
and we all have different levels of knowledge
link |
about those particular things.
link |
So for example, as an international investor,
link |
I have a responsibility to my investors.
link |
Those who run companies have a responsibility to theirs
link |
of how do they run that.
link |
So if you're taking Nike or Snickers and so on
link |
and Americans can decide
link |
whether they wanna buy Chinese products
link |
or not buy Chinese products,
link |
we are all faced with those types of choices.
link |
So you have what do you wanna do in your constituency
link |
and you have your choices.
link |
And then beyond that, in many cases,
link |
the issues are quite complex,
link |
like there are geopolitical questions that enter into it.
link |
So, and then I believe that if you disconnected,
link |
if all those entities like myself,
link |
the businesses doing business with China disconnected,
link |
I think that that would be disastrous,
link |
economically disastrous.
link |
And it would also be reduce the understanding
link |
that comes from working together that helps to reduce wars.
link |
And so these are all complicated.
link |
So what we do is, and who makes it my opinion
link |
Why should it be my opinion that matters the most
link |
in making that decision?
link |
So I largely look at the government guidance
link |
that I get not only from my own government,
link |
but from the other governments and I follow the rules.
link |
I'm in 40, we invest in 40 countries.
link |
And we wanna do that in the best way
link |
to provide the diversified portfolio.
link |
And we sort of need that.
link |
Every one of those countries has similar complexities.
link |
There are always one issue or another,
link |
and there's only so much that we really understand
link |
about all of those issues.
link |
So we rely largely on the guidance that we get.
link |
Yeah, you have to empathize and show respect
link |
to the culture of the place, the way things are done.
link |
You don't necessarily,
link |
the way you heal relationships between nations
link |
is like you said, you work together.
link |
And that requires kind of to listen
link |
maybe more than you talk.
link |
And I think people in the public sphere
link |
talk a lot about China without really listening,
link |
without understanding much about China,
link |
though one of the things that makes me really sad
link |
because I know how to speak Russian
link |
and I know how much is lost in translation.
link |
It makes me sad that I'll never really get to know
link |
the Chinese culture because like,
link |
I'll never really get to know the language,
link |
the literature, just talk to regular people.
link |
It's not just the government or officials or scientists,
link |
just regular folks, get the culture.
link |
I think if you don't understand the culture,
link |
just the basics of the human nature,
link |
what people love about their country,
link |
about their family or the kind of hopes they have,
link |
what kind of values they have,
link |
without that you're not gonna be able to
link |
fully connect with them.
link |
And you have to do that first
link |
to have a chance of building a good world.
link |
I couldn't agree with you more.
link |
I was very lucky because as I say,
link |
since 1984, so for more than half of my life,
link |
I've been going there and the common people
link |
and all sorts of people, and I've got to meet them.
link |
I don't speak the language,
link |
but a combination of through translators
link |
or them speaking English and being in situations.
link |
I had my son go to school, a local school,
link |
and we developed those kinds of understandings.
link |
I think that, but the not wanting
link |
to know the other perspective
link |
is the thing that's most scary.
link |
Like I'm right now in the middle
link |
and all I want to try to do
link |
is to help mutual understanding.
link |
You're right, if there were questions probing me,
link |
asking me, what is it?
link |
I'm not on one side or another.
link |
I don't want to be on one side or another.
link |
I believe that each has their right within there
link |
to approach their different culture in their own way.
link |
So many ways you gave an example.
link |
If they're not doing harm to others, I mean,
link |
but that issue of trying to understand
link |
is so much better.
link |
That doesn't mean agree with.
link |
If you are wanting to out clever
link |
and out compete somebody,
link |
it still pays to understand what they're thinking.
link |
So to achieve understanding of what they're thinking,
link |
even if you want to go to war with them,
link |
that understanding is the best thing to have.
link |
What we have now is a situation
link |
in which there's an enemy mentality.
link |
And that means that anything that serves,
link |
seems to be like understanding or conveying understanding,
link |
seems to mistakenly create the notion
link |
of I'm on their side in a war.
link |
And that's kind of a dangerous thing
link |
because there's a momentum here to fight.
link |
Henry Kissinger praises your new book
link |
and you thank him in it in the dedication.
link |
What's your relationship like with him?
link |
What makes him interesting?
link |
Maybe what makes him controversial?
link |
What makes him such a central figure in history?
link |
First, most importantly, he's unique about seeing things
link |
through all the others eyes.
link |
So if you were, it's like there's a chess game.
link |
I mean, I think geopolitics is like a chess game,
link |
but with multiple chess players playing the same game.
link |
So imagine there are six people around
link |
playing the chess game and he could sit in each seat
link |
and he could know how they see it, okay?
link |
And see it in a calm way of how they see it.
link |
He's unique in that way.
link |
He's 98 years old and he's equally able to do that.
link |
And he has a background in which he's a historian.
link |
So he really understands history super terrifically.
link |
He doesn't understand economic history as much.
link |
So that's why to some extent we enjoy having a conversation
link |
because he's interested in the economic piece he doesn't know
link |
and I'm so interested in the geopolitical piece
link |
that I don't know as well.
link |
But anyway, he's able to do that,
link |
but not only a historian, but a practitioner.
link |
So when you go from an academic to a practitioner
link |
who has that talent to see things through others eyes
link |
in an objective way and to be strategic
link |
rather than just tactical, that's a very special person
link |
and that's why Henry is, to me, a very special person.
link |
Yeah, he's lived a fascinating life.
link |
Just all of the world events he's been involved in
link |
is fascinating and like you said,
link |
that's such an interesting skill to have
link |
to consider what are the concerns, the hope, the dreams,
link |
the fears of all the people at the table.
link |
What are they thinking?
link |
I find that people don't, once again, don't do that enough
link |
when it's the obvious thing you should be doing,
link |
whether it's business deals or political negotiation
link |
or geopolitical negotiation.
link |
I'm often surprised, again, sorry to go to the Russian thing
link |
because I hear Putin talk in Russian
link |
and you start to infer certain intentions,
link |
like not the trivial stuff, like the human being.
link |
What is that human being hoping for himself,
link |
for his country, for his close inner circle,
link |
for the bigger, and I just see that
link |
that's often just lost in translation.
link |
I just see American leaders talking to Putin
link |
and it's just not, there's not a connection.
link |
Absolutely, I know exactly what you're talking about.
link |
It has never failed that in my listening to a conversation
link |
or even reading a speech and you see then it reported,
link |
inevitably, the reporter picks some headline characterization
link |
that has very little to do with what was really happening
link |
but might be a headline grabber
link |
that's at some kind of distortion
link |
and there's a lack of understanding
link |
of really what's going on.
link |
If it's okay, let me ask you a couple questions
link |
about cryptocurrency.
link |
You've had a few opinions about Bitcoin over the years.
link |
What are your thoughts about Bitcoin today,
link |
its role in the global financial system
link |
and just in human society in general?
link |
Well, the evolution of Bitcoin over the years
link |
is one of the things that has influenced changes in my view.
link |
It has proven itself something like 10, 11 years ago.
link |
Imagine the programming of this and you throw it out
link |
and that's the idea.
link |
It has not been hacked.
link |
It has operated, it has built,
link |
it has come an amazing way over that 11 years
link |
to be maybe probably the most excited topic
link |
among a lot of people and has been used
link |
and is now has obtained the status of having imputed value.
link |
At the same time, it is one of those assets
link |
that is an alternative money.
link |
I think we're entering an era
link |
where there's going to be a competition of monies.
link |
Because of the printing of fiat money
link |
and the depreciated value,
link |
there will be a competition of monies
link |
and Bitcoin is part of that competition.
link |
But there'll be many monies, not just crypto monies,
link |
but there'll be central bank crypto monies,
link |
but there'll be different kinds of monies.
link |
And even monies are things that you buy and sell.
link |
NFTs can become a type of money.
link |
You own it and it's an investment
link |
and you could say I'd rather own it than own Bitcoin.
link |
Has Ray Dalio bought any NFTs?
link |
But only just because I definitely want to buy NFTs
link |
to just experience them.
link |
Like I think I should produce one and I should.
link |
I should have asked that.
link |
Have you minted an NFT?
link |
You probably should just to know what it's like.
link |
Yeah, that's right.
link |
This stuff is happening.
link |
This stuff is real and how it operates.
link |
But like all new real things, some are gonna go
link |
and some are gonna, it's like in the internet
link |
in the year 2000, pets.com could have been a great,
link |
but maybe pets.com doesn't make it and who knows.
link |
That's the beauty of the competitive system
link |
that it'll evolve and some things will be treasured
link |
and some things will be trashed.
link |
But when I look at it, I think we are in an environment
link |
of what is an alternative money?
link |
A money has two purposes, a medium of exchange
link |
and a storehold of wealth.
link |
And we are looking for, and it's portable.
link |
And it's best if it's recognized in other countries.
link |
So gold is one of those.
link |
So I look at it as an alternative gold,
link |
but I look at a number of things as alternative gold.
link |
And I think that, and gold is still my favorite
link |
because of certain qualities.
link |
For example, you can't trace it.
link |
In Bitcoin, you can trace who owns it,
link |
where it's going and so on.
link |
Governments can't have that ability to trace it and so on.
link |
A gold piece of coin, it's not connected.
link |
I think not connected has benefits,
link |
particularly in a world where maybe connections
link |
can be more risky.
link |
And then also gold has been for many thousands of years
link |
universally recognized as a source of money.
link |
And central banks, it's the third largest source of money
link |
in central bank reserves.
link |
And I don't think Bitcoin is going to serve
link |
those types of purposes and so on.
link |
So for various reasons, I prefer gold to the other,
link |
but it's a little bit part of my mix.
link |
But then you look at it, it hit, I think 69,000 this year
link |
is the high Bitcoin hit.
link |
Do you think it's possible, you mentioned gold,
link |
do you think it's possible it reaches very high numbers,
link |
like one million that some people talk about?
link |
I don't think that's possible because the way I look at it
link |
is there's a certain amount of it.
link |
A certain amount of it, and there's a certain amount of gold.
link |
I'll use gold as a benchmark.
link |
The amount of it is worth about $1 trillion.
link |
Total crypto is about 2.2 trillion.
link |
But let's say Bitcoin, it's $1 trillion.
link |
If you take the amount of money that is in gold
link |
that is not used for jewelry purposes
link |
and not used by central banks,
link |
and I assume Bitcoin won't be used for jewelry purposes
link |
or central bank purposes,
link |
that amount in gold is about $5 trillion.
link |
So right now, if you were to have a portfolio
link |
that has gold and crypto, gold and Bitcoin,
link |
it's worth about 20% of the value of gold.
link |
Do I think it's going to be worth more than gold
link |
in terms of that mix?
link |
I don't think it'll be worth more than gold.
link |
But let's say it became worth as much as gold.
link |
I don't believe it will be.
link |
I think that 20% sounds kind of about right.
link |
I really don't know what the right answer is.
link |
And then there's the question of what is all of that pool
link |
of money that let's say gold and gold equivalents
link |
relative to everything else?
link |
Does it go from, let's call it
link |
six, seven, eight trillion to 16 trillion?
link |
Maybe it could double.
link |
It depends what it is in the world environment.
link |
But basically, if you use gold as a measure,
link |
it just makes no sense
link |
that it's going to be used that much more.
link |
Am I sure about that?
link |
I'm not sure about anything.
link |
But logically, it seems to me that there's a limitation
link |
on its price in relationship to other things
link |
Let me ask for your deep financial analysis
link |
on a very important issue.
link |
I just talked a couple days ago with Elon Musk.
link |
He wants to put a literal Dogecoin on the moon.
link |
What are your thoughts about Dogecoin?
link |
And do you think it'll be the official currency?
link |
How many be reserve currency on the moon and on Mars?
link |
My reaction is that's cute.
link |
I remember Elon when he first got,
link |
he first got his money from PayPal.
link |
I think he said to me it was,
link |
he got $180 million, $90 million.
link |
He decided to say, why aren't we going to outer space?
link |
And he wanted to take a spaceship that would be modified
link |
using Russian technology to put a plant
link |
and a watering can on the moon or on Mars, I think it was.
link |
And he said, first life on Mars,
link |
or first life on that as an inspiring notion.
link |
And so then there's always what's behind it.
link |
I have a lot of respect for Elon's ability
link |
to do other things behind it.
link |
And so I would take that as symbolic
link |
and I'd be asking him what's behind it, what's next.
link |
And I'm also just on the topic of Dogecoin and memecoin
link |
and there's some aspect of humor and lightheartedness
link |
that's really interesting about the way we communicate,
link |
what ideas become viral,
link |
how to captivate people with ideas.
link |
There's something about taking things too seriously
link |
that somehow slows it all down and it's interesting.
link |
That's part of human nature somehow.
link |
So like humor is part of this whole thing.
link |
You've talked about the importance of writing ideas down
link |
and you have a fascinating.
link |
Principles in particular.
link |
And you have this really nice thing in your book
link |
where you actually, I mean there's such a brilliant way.
link |
You have such a brilliant way of highlighting
link |
which parts are extra important and you make them bold.
link |
That's a brilliant idea.
link |
But let me just ask the high level question
link |
of what's a good system for taking notes?
link |
Well, I find that almost everything happens
link |
over and over again.
link |
And we're in the blizzard of these things happening.
link |
And what I found is that if I'm making a decision
link |
that after I make the decision usually
link |
or write at the time,
link |
if I pause and reflect and I write my principle down,
link |
in other words, principle is sort of a recipe,
link |
what would I use to, how would I make that decision?
link |
And what are the criteria around it?
link |
I find that I make it much more clear, it becomes clearer
link |
and it applies to the next thing that comes along,
link |
it'll be that way.
link |
Because everything happens over and over and over again
link |
and I think people make the mistake
link |
of looking at just the one like it's the first one.
link |
I don't know, they have the first problem of this sort
link |
or the first child or whatever it is.
link |
And this has been happening plenty of times.
link |
And so if you have the principles,
link |
I found that that helped me think more clearly about it
link |
and it helped me communicate better, like why.
link |
And so over the years, over the last 30 years or so,
link |
that's what I've done.
link |
I did it originally to communicate very well
link |
with the people I work with.
link |
I set up my company and it was very important
link |
to have good communication.
link |
And then we could debate the principles
link |
and so that's the process.
link |
I urge people to do that.
link |
There are many excellent decision makers
link |
and I just wish that they wrote down their principles.
link |
When this set, so for example,
link |
we talk about Henry Kissinger and his new book
link |
is gonna come out with a book on leadership.
link |
And don't just describe the leaders,
link |
describe then what about them were the essential elements
link |
to make a good leader under what circumstances.
link |
And so if we think about that,
link |
then also then you begin to think in a principled way.
link |
And then when you start to think in a principled way,
link |
life becomes, it's so much easier to make decisions
link |
and it's so much less confusing
link |
because it's like coming up on a species
link |
and you say, okay, well, what species is it?
link |
Not just another, it's a thing.
link |
No, what species is it
link |
and how do I deal with that species effectively?
link |
And so that's what that is.
link |
And so I encourage people to write it down.
link |
I wish anybody who's successful wrote down their principles
link |
or their recipes for making those types of decisions.
link |
So the events of interest here happens
link |
over and over and over in similar ways.
link |
As you're looking for the patterns
link |
and you're defining the process,
link |
that's right to respond to those patterns
link |
and you call that the principles
link |
and that allows you to deal with the future effectively.
link |
So like that codifies the lessons from the past
link |
to be able to deal with the future.
link |
What advice do you have for young folks today?
link |
In high school, in college, thinking about how to live,
link |
have a career they can be proud of
link |
or maybe have a life they can be proud of?
link |
Know yourself, follow your passion,
link |
make your work and passion the same thing
link |
while considering the money part
link |
because money will get you freedom and choice
link |
and be able to bank that.
link |
But if you know yourself, feel the pull
link |
and pursue that passion.
link |
And along those lines, by the way,
link |
I found that using personality profile tests
link |
has been very helpful.
link |
I've used those for about 25 years
link |
for people to help to understand themselves
link |
and understand each other.
link |
So I created a free one that is called Principles You.
link |
It's had remarkable, loving people who've taken it,
link |
learn about themselves,
link |
but also you can put in somebody else
link |
and it'll tell you about your relationship with them.
link |
That's like 30 minutes is a quick discovery,
link |
but the main thing is to understand on your journey,
link |
your hero's journey that you will have mistakes
link |
and you will have weaknesses
link |
and to understand those, not fight those
link |
because by understanding mistakes,
link |
you will learn not to make mistakes again.
link |
I have a principle which is pain plus reflection
link |
And so that reflection is important to know yourself,
link |
know your pulls, know your weaknesses.
link |
And when you also know your weaknesses
link |
and the strengths of other people,
link |
there are people who have strengths where you're weak
link |
and you have strengths where they're weak.
link |
And to be able to work well together
link |
is the most effective way of achieving success.
link |
So yeah, it's that journey.
link |
And there's a life arc and there's a journey
link |
and you wanna make it the best that you can make it.
link |
And it's like a video game.
link |
It has the challenges and the obstacles
link |
and the learning experiences and the temptations
link |
And the maximizing learning to go where you wanna go
link |
to achieve the life you want is the most important.
link |
That's kind of maybe a long winded way of saying it,
link |
but to learn, I think I'll try to say it simply.
link |
There's a five step process.
link |
Step one is know your goals, know what you're going after.
link |
You could have almost anything you want,
link |
but you can't have everything you want.
link |
And so you have to prioritize and you move in that direction.
link |
On the way to your goals,
link |
you're going to encounter your problems and your obstacles.
link |
So step two is understanding your problems
link |
and your obstacles, identify them.
link |
Step three is to diagnose them
link |
to get at the root cause of the problem.
link |
And that could be many root causes,
link |
but it could also be your weaknesses or weaknesses of others,
link |
but you have to be objective about them.
link |
Once you diagnose them, then you go to step four,
link |
which is to design a way to get around them.
link |
And then after you have that design,
link |
you implement that design.
link |
So you have to follow through and do it.
link |
And you do that, and that will then produce its new results,
link |
which should be better results.
link |
I call this kind of a looping process.
link |
It's the evolutionary looping process.
link |
And you just keep doing that
link |
and you learn over a period of time
link |
and you move in the direction that you want.
link |
Last question, and you only have one minute to answer.
link |
You dedicate the book, quote,
link |
"'To my grandchildren and those of their generation
link |
"'who will be participants
link |
"'in the continuation of this story.
link |
"'May the force of evolution be with you.'"
link |
So let me ask, where's this force of evolution
link |
taking human civilization?
link |
And what in this story that evolution is writing
link |
Evolution is a direction toward improvement.
link |
And the greatest force is man's capacity to adapt and invent.
link |
And so you see in the charts in the book,
link |
you see that this upward movement, life expectancy,
link |
health, all the things that we think are better,
link |
you see there's a chart
link |
and it shows that over a period of time
link |
and you barely see the downturns
link |
from depressions and wars in that.
link |
That is the greatest power.
link |
Man's ability to invent and adapt is evolution
link |
and that's the greatest power
link |
and that is what gives me justifiable hope.
link |
And a continuation of that, like we mentioned with Elon,
link |
maybe we'll become a multi planetary species.
link |
So not only will we keep creating amazing things
link |
here on Earth, we'll keep expanding out into the cosmos.
link |
My time horizon isn't gonna have me analyzing that yet,
link |
but I hope so and I agree that that would be
link |
So I'm not gonna ask you
link |
for the best financial system on Mars.
link |
I think we'll focus on Earth for now.
link |
Ray, thank you so much for your brilliance,
link |
for the books you've written,
link |
for the works you've done,
link |
for the inspiration of millions.
link |
And thank you for spending your valuable time
link |
here with me today.
link |
Thanks for listening to this conversation with Ray Dalio.
link |
To support this podcast,
link |
please check out our sponsors in the description.
link |
And now, let me leave you with some words
link |
from Ray Dalio himself.
link |
Every time you confront something painful,
link |
you are at a potentially important juncture in your life.
link |
You have the opportunity to choose healthy
link |
and painful truth or unhealthy but comfortable delusion.
link |
Thank you for listening and hope to see you next time.