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,
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to 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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please check out our sponsors 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,
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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 to influence
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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,
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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 and the church,
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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, they 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 dealing with those
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who have political power around those assets
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that are considered most valuable
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to particularly the productive assets that produce money.
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And political powers usually centered around nation state.
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So the major locus is the powers, 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, I 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 would 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 a 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 that 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 mentioned 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 a system, 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,
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and then there's the world order, 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 has 80% of the world's gold
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and it was half the world 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 were following
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and then you have the new order being constructed.
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After that, there is usually period of extended peace
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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, 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 and then you come into
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that period of peace and then prosperity
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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 such as the industrial revolution
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in the late 1800s or what we've experienced
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in the post World War II period are peaceful
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and prosperous periods led largely
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by the dominant world power.
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Over a period of time, since really 1500 and maybe before,
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but really 1500 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 move 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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and then those that don't.
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And it also produces opportunity gaps
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because for example, those who earn a lot of money
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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 and by education,
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I mean the skills that come from education,
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but also civility, the ability to deal with wealth 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 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 as they become more successful
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and more expensive, they become more expensive.
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And newer countries come along like the UK
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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 and also the work ethic
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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 started 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, 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, the first question is,
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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
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or an external war that leads to the change
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and to the new world order.
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And to you, the Dutch empire is a good example
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that the British, what are some of the key examples
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that you think about in the book of this process
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that follow 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 can see them back going over the 500 years.
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And so you can see the arcs and the composition of those arcs.
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And what you see is really in most countries
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and most dynasties, you can 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 you could,
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that are in the book, that show what is the level
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of education, 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
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of different measures of strength
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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
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about the book is that it allows people to monitor
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how those things are transpiring.
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I think for policy makers,
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are your policy makers 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 also.
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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 raise interpretation.
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I didn't wanna make it raise 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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see I've listed 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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I'm looking at the change from 20 years ago.
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And that's another indicator,
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the change itself 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,
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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,
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borrows money 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 has a lot
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of US dollar denominated bonds
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because as the world's reserve currency,
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they sell, so 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 has to be sold
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And that means that the Federal Reserve
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has, is faced with the choice
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of having to raise the interest rate
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to curtail borrowing, which slows the economy
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and hurts the markets,
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or by filling that difference
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and producing money, the debt monetization,
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which produces an inflation in goods,
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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, 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 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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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
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in terms of those kinds 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 to sort of romanticize
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any one measure or something like that
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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,
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the way we think about these measures
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that you've presented,
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we should be thinking like the higher, the better,
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the lower, worse, or I mean, of course,
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depending on the measure.
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In many cases, the conflict that produces the revolution
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produces revolutionary changes
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that lead to resolutions and lead to new starts.
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And so their short term,
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a short term civil war is a hellacious experience.
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And at the same time,
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it can be the transition to a new beginning.
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Also, there are different types of conflict.
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Competition, which makes things,
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makes everything better is a productive conflict,
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whereas destructive conflicts are not good
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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,
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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
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of different types of internal conflict.
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What are some other interesting measures?
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Maybe if you could also mention that
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for me in particular interest is education and innovation.
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The classic cycle,
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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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where they're 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 fairer, 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,
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I plotted these 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
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and technology measures then follow.
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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
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very basic 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 could see it.
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So it's not just your opinion, it's kind of like
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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 looking
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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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of 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.
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But if you look at them, 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 is losing
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its educational advantage.
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If you were to 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, pieces 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 spots that are excellent,
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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 are, 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 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,
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if the world can get along.
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And the main thing I think is,
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in just, 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's 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, when you start borrowing,
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when, I mean, all of these indicators,
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once they start going down,
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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, you know,
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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,
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they don't pay attention to the balance sheet
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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.
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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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Spend less, 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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that 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 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 where everybody
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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
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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
link |
in the middle 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 of paramount importance
link |
because we have the resources, you know, wealth,
link |
real wealth and science and everything
link |
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 of 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,
link |
as I say, there are five kinds of wars.
link |
There's a trade war, technology war,
link |
geopolitical influence war,
link |
capital war and military war.
link |
As far as military war goes,
link |
I think it's only a Taiwan issue,
link |
but that's a big issue.
link |
And we could talk about that for a minute.
link |
But those others, there'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 in what's called
link |
100 years of humiliation.
link |
From the 1840s to 1949,
link |
foreign powers came in, took advantage of China.
link |
They had the opium wars in such times.
link |
And that represented 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
link |
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
link |
that you're referring to is that which it's used
link |
to inflict pain 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 |
You, new types of warfare,
link |
not just the traditional 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 |
in the Cultural Revolution in times, treated brutally.
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 of the second
link |
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 of a market
link |
When that happened in him coming in,
link |
I had some contact with economic policy makers,
link |
but in the circumstances then,
link |
where 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
link |
in the world, their financial circumstances,
link |
opening many, many other markets.
link |
They particularly getting money
link |
to small and medium size 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 with their rising debt
link |
issue, which they began to deal with really
link |
about four years ago when the second term began
link |
and then Lou Ha 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 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 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 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 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 alleged,
link |
a lot of them, three are less so.
link |
You have to understand that it's kind of a collective
link |
leadership at the top and then of course
link |
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, 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 then, now we're talking about that
link |
at the context of China, 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, the kind of freedom
link |
that I think can lead to entrepreneurship,
link |
to starting new businesses, to having big dreams
link |
and chasing those dreams and then creating totally new things
link |
in whatever the space, maybe technology
link |
and 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 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
link |
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 |
then 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, and it doesn't matter
link |
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 and one of the leaders
link |
described it to me as follows because it's confusion
link |
and it goes back over a period of time.
link |
There's a hierarchy and it's an extension
link |
of the family he described it.
link |
And he said, the United States is a country
link |
of individuals and individualism.
link |
And that is its vibrancy that we see.
link |
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 will 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, I think probably most parents
link |
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, 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 is to create
link |
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 work well.
link |
Since I started going there in 1984,
link |
per capita income, real per capita income
link |
is increased by 26 times.
link |
The longevity rate is 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 the belief will somebody bring about order
link |
and get control of the situation.
link |
That was in Germany, Italy, Japan and Spain.
link |
There 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 they will not accept elections
link |
or they will not accept rules,
link |
history has shown 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 the disagreements
link |
and rely on the system 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, 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 that 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 |
the 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,
link |
what the Chinese have done to a large extent
link |
is to recognize that and have made a move.
link |
That's why the seeming dialectic or the conflict
link |
between those two things exist.
link |
But anyway, that's it, 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 |
because you mentioned like the top gets bigger
link |
with the empires and you start to get things for granted.
link |
Is some of this just human nature?
link |
So the concern with China, with the 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,
link |
they're starting to lose touch with the reality
link |
in a way that no longer makes them.
link |
I guess that's the representation
link |
of 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 |
And like Mussolini, the trains are not running on time.
link |
And that would be the example.
link |
Geez, this place has gotten chaotic.
link |
Well, 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 |
ordering around and that could work well
link |
or it could work badly.
link |
You know, most companies are run
link |
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 wanna fight
link |
and they become more nationalistic
link |
and they tend to become more militaristic.
link |
And human nature at that stage
link |
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 ones
link |
who have been through war don't wanna go to war
link |
and are more happily willing to abide by
link |
whatever the rules are.
link |
As you get farther along into that cycle
link |
and you get a new generation
link |
and they forget about wars and the horrors of wars,
link |
then they want to fight.
link |
And so you're seeing right now the emergent of fight for right.
link |
And what that means is you see it internally,
link |
fight, where are you in fight for that thing?
link |
And they mean fight.
link |
And then into externally, fight,
link |
are you going to be 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,
link |
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 see the arc and you see it happen over and over again.
link |
The only things that seem to change
link |
are the clothes people wear and the technologies.
link |
Yeah, and then somebody probably will disagree with you
link |
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,
link |
within the context of the cycles of empires
link |
that you think about?
link |
Well, Putin came to power
link |
at the failure 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 |
he was appointed by Yeltsin,
link |
who was an alcoholic and had problems,
link |
managing and was put into power.
link |
And the conditions in the Russian were,
link |
there was anarchy.
link |
There was no money.
link |
It had the classic end of cycle ingredients.
link |
It was three people 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 |
And it was not effective ministry of education,
link |
ministry of anything.
link |
And so the idea was that
link |
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
link |
as I guess I would call him,
link |
a semi autocratic leader in that,
link |
from all indications,
link |
he would respect the democracy.
link |
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
link |
in pursuit of the country's interests
link |
in a way where Russia is not
link |
a significant economic power,
link |
but it is a significant military power.
link |
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 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 |
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 |
in 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
link |
what Russia is today
link |
or what Soviet Union was
link |
or what China is today,
link |
is you start to criticize
link |
while 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
link |
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 |
You got some criticism
link |
saying that I think China is a strict parent.
link |
Some people criticize these countries
link |
for violating human rights.
link |
I suppose there are some people
link |
that criticize the United States
link |
for violating human rights.
link |
But what are your thoughts
link |
on the world stage today
link |
behaviors it has governed
link |
in terms of respecting the rights,
link |
the basic rights of human beings?
link |
You described accurately
link |
how I just tried to
link |
look at things in a non...
link |
I don't want to impute
link |
there are intolerable things
link |
so I'm not saying there aren't
link |
intolerable things.
link |
But one of the great things
link |
of being an American here
link |
is that I grew up with
link |
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
link |
what's their business
link |
and then the question is
link |
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
link |
the issue of what is a sovereign state
link |
as I say in the piece of Westphalia
link |
and you have borders
link |
and then when do you cross the line
link |
my way of doing things
link |
has got to be their way of doing things
link |
and so that's a very
link |
or a very difficult question
link |
and we all have responsibilities
link |
to different parties
link |
and we all have different levels of knowledge
link |
about those particular things.
link |
as an international investor
link |
I have a responsibility to my investors
link |
those who run companies
link |
have a responsibility
link |
to theirs of how do they run that
link |
so if you're taking
link |
or sneakers and so on
link |
and Americans can decide
link |
whether they want to buy Chinese products
link |
or not buy Chinese products
link |
we are all faced with those types of choices.
link |
what do you want to do in your constituency
link |
and you have your choices
link |
and then beyond that
link |
in many cases the issues are quite complex
link |
like there are geopolitical
link |
questions that enter into it
link |
and then I believe that
link |
if entities like myself
link |
doing business with China disconnected
link |
I think that that would be
link |
disastrous economically disastrous
link |
and it would also be
link |
that comes from working together
link |
and so these are all complicated
link |
and who makes it my opinion matters the most
link |
why should it be my opinion that matters
link |
the most in making that decision
link |
so I largely look at
link |
the government guidance that I get
link |
not only from my own government
link |
but from the other governments and I follow the rules
link |
we invest in 40 countries
link |
and we want to do that in the best way
link |
the diversified portfolio
link |
and we sort of need that
link |
every one of those countries has
link |
similar complexities
link |
there are always one issue
link |
or another and there's only so much
link |
that we really understand
link |
about all of those issues so we rely
link |
largely on the guidance that we get
link |
yeah you have to empathize
link |
and show respect to the culture
link |
of the place the way things are done
link |
you don't necessarily
link |
relationships between nations
link |
maybe more than you talk
link |
and I think people in the public sphere
link |
about China without really listening
link |
without understanding much about China
link |
one of the things that makes me really sad
link |
because I know how to speak Russian
link |
know how much is lost in translation
link |
that I'll never really get to know
link |
the Chinese culture because
link |
like I'll never really get to know the language
link |
just talk to regular people
link |
it's not just the government or officials
link |
or scientists just regular folks
link |
and get the culture
link |
I think if you don't understand the culture
link |
just the basics of the human nature
link |
love about their country
link |
about their family
link |
what kind of hopes they have
link |
what kind of values they have without that
link |
you're not going to be able to
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
link |
so for more than half of my life
link |
I've been going there and I
link |
and the common people
link |
and all sorts of people
link |
and I've got to meet them
link |
I don't speak the language
link |
a combination of through translators
link |
or them speaking English
link |
and being in situations
link |
I had my son go to school
link |
and we developed those kinds of
link |
is the thing that's most scary
link |
like I'm right now in the middle
link |
all I want to try to do
link |
a mutual understanding
link |
you're right if there were questions
link |
probing me, asking me
link |
what is it? I'm not on one side
link |
I don't want to be on one side or another
link |
I believe that each has their right
link |
in there to approach their different culture
link |
so many ways you gave an example
link |
doing harm to others
link |
trying to understand
link |
that doesn't mean agree with
link |
out clever and out compete somebody
link |
understand what they're thinking
link |
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 |
in which there's an enemy
link |
mentality and that means
link |
like understanding
link |
or conveying understanding
link |
needs to mistakenly create the notion
link |
I'm on their side in a war
link |
and that's kind of a dangerous thing
link |
there's a momentum here to fight
link |
Henry Kissinger praises your new book
link |
and you thank him in it
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
link |
he's unique about seeing things
link |
it's like there's a chess game
link |
I mean I think geopolitics
link |
a chess game but with multiple chess players
link |
playing the same game
link |
so imagine there are
link |
playing the chess game
link |
and he could sit in each seat
link |
and he could know how
link |
and see it in a calm
link |
way of how they see it
link |
he's unique in that way
link |
and he's equally able to do that
link |
and he has a background
link |
in which he's a historian
link |
so he really understands
link |
he doesn't understand
link |
economic history as much
link |
so that's why to some extent we enjoy
link |
having a conversation
link |
because he's interested in the
link |
economic piece he doesn't know
link |
and I'm so interested in the
link |
geopolitical piece that I don't know as well
link |
but anyway he's able to do that
link |
but not only a historian
link |
but a practitioner
link |
so when you go from
link |
who has that talent
link |
to see things through
link |
others eyes in an objective way
link |
and to be strategic
link |
rather than just tactical
link |
that's a very special person
link |
and that's why Henry is
link |
to me a very special person
link |
yeah he's lived a fascinating life
link |
world events he's been involved in
link |
and like you said that's such
link |
an interesting skill to have
link |
to consider what are the concerns
link |
the hope, the dreams, the fears
link |
of all the people at the table
link |
I find that people don't
link |
once again don't do that enough
link |
when it's the obvious thing you should be doing
link |
whether it's business deals
link |
political negotiation
link |
or geopolitical negotiation
link |
I'm often surprised again sorry to go to the Russian
link |
thing because I hear
link |
I hear Putin talk in Russian
link |
and you start to infer certain intentions
link |
like not the trivial stuff
link |
like the human being
link |
what is that human being hoping
link |
for himself, for his country
link |
for his close in a circle
link |
and I just see that that's often
link |
just lost in translation
link |
I just see like American leaders
link |
there's not a connection
link |
absolutely I know exactly what you're talking about
link |
it has never failed
link |
am I listening to a conversation
link |
or even reading a speech
link |
and you see then it reported
link |
inevitably the reporter
link |
headline characterization
link |
that has very little to do
link |
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
link |
a couple questions about cryptocurrency
link |
you've had a few opinions
link |
about bitcoin over the years
link |
what are your thoughts about bitcoin today
link |
in the global financial system
link |
and just in human society in general
link |
well the evolution
link |
of bitcoin over the years
link |
is one of the things that
link |
influence changes in my view
link |
10 11 years ago imagine
link |
the programming of this
link |
and here's you throw it out and that's the idea
link |
it has not been hacked
link |
it is built it has come
link |
over that 11 years
link |
maybe probably the most excited
link |
and has been used and
link |
obtained the status
link |
of having imputed value
link |
it is one of those
link |
assets that is an alternative
link |
money I think we're
link |
where there's going to be
link |
a competition of monies
link |
of the printing of fiat money
link |
the depreciated value
link |
there will be a competition
link |
and bitcoin is part
link |
of that competition but there will be
link |
many monies not just crypto monies
link |
but there will be central
link |
bank crypto monies
link |
but there will be different
link |
are things that you buy and sell
link |
a type of money you own it
link |
and it's an investment and you could say I'd rather own it
link |
has Ray Dalio bought any NFTs?
link |
I definitely want to buy
link |
NFTs to just experience them
link |
I should have asked that
link |
have you minted an NFT
link |
just to know what it's like?
link |
this stuff is happening
link |
this stuff is real
link |
and how it operates
link |
but like all new real
link |
some are going to go
link |
it's like in the internet
link |
could have been a great but maybe
link |
Pets.com doesn't make it and who knows
link |
that's the beauty of the competitive system
link |
that it will evolve
link |
some things will be treasured
link |
and some things will be trashed
link |
but when I look at it
link |
I think we are in an environment
link |
of what is an alternative money
link |
a money has two purposes
link |
a medium of exchange
link |
and a storehold of wealth
link |
and we are looking for
link |
if it's recognized in other countries
link |
gold is one of those
link |
as an alternative gold
link |
but I look at a number of things
link |
as an alternative gold
link |
and gold is still my favorite
link |
of certain qualities for example
link |
you can't trace it
link |
in bitcoin you can trace
link |
who owns it where it's going
link |
and so on governments can have that ability
link |
to trace it and so on
link |
but if it's a piece of coin
link |
it's not connected
link |
I think not connected has benefits
link |
particularly in a world where
link |
maybe connections can be more risky
link |
and then also gold
link |
for many thousands of years
link |
universally recognized as a source of money
link |
it's the third largest
link |
in central bank reserves
link |
I don't think bitcoin is going to
link |
serve those types of purposes and so on
link |
so for various reasons
link |
I prefer gold to the other
link |
but it's a little bit part of my mix
link |
but then you look at it
link |
it hit I think 69,000 this year
link |
is the high bitcoin hit
link |
do you think it's possible
link |
you mentioned gold
link |
do you think it's possible it reaches
link |
like one million that some people talk about
link |
I don't think that's possible
link |
because the way I look at it is
link |
there's a certain amount of
link |
a certain amount of it
link |
and there's a certain amount of gold
link |
I'll use gold as a benchmark
link |
total crypto is about
link |
but let's say bitcoin
link |
is about $5 trillion
link |
if you take the amount of money
link |
that is not used for jewelry purposes
link |
central banks and I assume
link |
bitcoin won't be used for jewelry purposes
link |
or central bank purposes
link |
in gold is about $5 trillion
link |
have a portfolio that has
link |
it's worth about 20% of the value
link |
do I think it's going to be
link |
worth more than gold
link |
in terms of that mix
link |
I don't think it'll be worth more than
link |
gold but let's say
link |
I don't believe it will be
link |
I think the 20% sounds kind of about right
link |
I really don't know what the right answer is
link |
and then there's the question
link |
of what is all of that
link |
let's say gold and gold equivalents
link |
relative to everything else
link |
$6, $7, $8 trillion to $16 trillion
link |
maybe it could double
link |
it depends what it is in the world environment
link |
if you use gold as a measure
link |
it just makes no sense
link |
that it's going to be used
link |
am I sure about that?
link |
I'm not sure about anything
link |
but logically it seems to me
link |
that there's a limitation
link |
in relationship to other things that are like it
link |
for your deep financial analysis
link |
on a very important issue
link |
I just talked a couple days ago
link |
he wants to put a literal dogecoin on the moon
link |
what are your thoughts about dogecoin
link |
do you think it'll be the official currency
link |
reserve currency on the moon
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
link |
he got $180 million, $90 million
link |
why aren't we going to outer space
link |
wanted to take a spaceship
link |
that would be modified
link |
and a watering can
link |
first life on Mars
link |
or first life on that
link |
then there's always what's behind it
link |
I have a lot of respect
link |
ability to do other things
link |
and so I would take that
link |
and I'd be asking him what's behind it
link |
I'm also just on the topic of dogecoin
link |
and memecoin and there's some aspect
link |
of humor and lightheartedness
link |
that's really interesting
link |
we communicate what ideas become viral
link |
how to captivate people
link |
there's something about taking things too seriously
link |
that somehow slows it all down
link |
and it's interesting
link |
that's part of human nature somehow
link |
humor is part of this whole thing
link |
you've talked about the importance
link |
of writing ideas down
link |
in particular principles
link |
and you have this really nice thing
link |
I think there's such a brilliant way
link |
you have such a brilliant way
link |
of highlighting which parts are
link |
and you make them bold
link |
that's a brilliant idea
link |
let me just ask the high level question of
link |
what's a good system for
link |
that almost everything happens over
link |
the blizzard of these things happening
link |
if I'm making a decision
link |
after I make the decision usually
link |
or right at the time
link |
if I pause and reflect
link |
and I write my principle down
link |
principle is sort of a recipe
link |
how would I make that decision
link |
and what are the criteria around it
link |
I find that I make it much more
link |
clear and it applies
link |
to the next thing that comes along
link |
because everything happens over and over
link |
and over again and I think people make
link |
the mistake of looking at
link |
just the one like it's the first one
link |
they have I don't know they have the
link |
first problem of this sort
link |
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 |
that helped me think more clearly about it
link |
and it helped me communicate
link |
and so over the years
link |
over the last 30 years or so
link |
that's what I've done
link |
I did it originally to communicate
link |
very well with the people I work with
link |
you know I set up my company
link |
and it was very important to have good communication
link |
communication and then we could
link |
debate the principles
link |
and so that's the process
link |
I urge people to do that
link |
there are many excellent
link |
and I just wish that they
link |
wrote down their principles when
link |
we were talking about Henry Kissinger
link |
and his new book is going to come out with a book
link |
and don't just describe the leaders
link |
what about them were the essential
link |
elements to make a good leader
link |
under what circumstances
link |
and so if we think about that
link |
then you begin to think in a
link |
and then when you start to think in a
link |
principled way life becomes
link |
it's so much easier to make
link |
decisions and it's so much less
link |
confusing because it's like
link |
coming up on a species
link |
and you say okay well
link |
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
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
link |
wrote down their principles
link |
or their recipes for making those types
link |
of decisions. So the events
link |
happens over and over and over
link |
in similar ways as you're looking
link |
for the patterns and you're defining the process
link |
to respond to those patterns
link |
and you call that the principles
link |
that allows you to deal with the future effectively
link |
so like that codifies
link |
the lessons from the past to be able
link |
to deal with the future
link |
what advice do you have
link |
for young folks today in high school
link |
in college thinking about
link |
have a career they can be proud of
link |
or maybe have a life they can
link |
be proud of. Know yourself
link |
follow your passion
link |
and passion the same thing
link |
while considering the money part
link |
because money will get you
link |
freedom and choice
link |
and be able to make that but
link |
if you know yourself
link |
and pursue that passion
link |
along those lines by the way
link |
that using personality
link |
profile tests 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 so I created
link |
principles you it's online
link |
who've taken it learn about themselves
link |
but also you can put in
link |
somebody else and it'll tell you about
link |
your relationship with them
link |
that's like 30 minutes is a quick
link |
discovery but the main thing
link |
is to understand on your journey
link |
your hero's journey
link |
that you will have
link |
mistakes and you will have
link |
understand those not fight
link |
mistakes you will learn not to make
link |
mistakes again I have a principle
link |
which is pain plus
link |
so that reflection is important
link |
to know yourself know your pulls
link |
know your weaknesses
link |
and when you also know
link |
your weaknesses and the strengths of other people
link |
there are people who
link |
have strengths where you're weak
link |
and you have strengths where they're weak
link |
and to be able to work well
link |
together is the most effective way
link |
so yeah it's that journey
link |
and there's a life arc
link |
and there's a journey
link |
and you want to make it the best that you can
link |
make it and it has
link |
it's like a video game
link |
you know it has the
link |
challenges and the
link |
obstacles and the learning
link |
experiences and the temptations
link |
and the maximizing learning
link |
to go where you want to go
link |
to achieve the life you want is
link |
the most important that's kind of maybe
link |
a long winded way of seeing it
link |
I think I'll try to say it simply
link |
there's a five step process
link |
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
link |
and you move in that direction
link |
on the way to your goals you're going to
link |
encounter your problems and your obstacles
link |
step two is understanding
link |
your problems and your obstacles
link |
step three is to diagnose
link |
them to get at the root cause
link |
your causes but it could also be
link |
your weaknesses or weaknesses of others
link |
but you have to be objective about them
link |
once you diagnose them
link |
then you go to step four
link |
which is to design
link |
a way to get around them
link |
after you have that design
link |
you implement that design
link |
so you have to follow through and do it
link |
and that will then produce
link |
its new results which should be better results
link |
the looping process
link |
it's the evolutionary looping process
link |
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 |
and you only have one minute to answer
link |
you dedicate the book
link |
to my grandchildren and those of their generation
link |
who will be participants
link |
in the continuation of the story
link |
may the force of evolution
link |
so let me ask where is this force of evolution
link |
taking human civilization
link |
and what in this story
link |
that evolution is writing
link |
is in a direction toward improvement
link |
and the greatest force
link |
to adapt and invent
link |
and so you see in the charts in the book
link |
this upward movement
link |
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
link |
from depressions and wars
link |
that is the greatest power
link |
and man's ability to
link |
and that's the greatest power
link |
gives me justifiable hope
link |
and a continuation of that
link |
like we mentioned with Elon
link |
maybe we'll become a multiplanetary species
link |
so not only will we
link |
keep creating amazing things here on earth
link |
we'll keep expanding out into the cosmos
link |
hope so and I agree
link |
that that would be in the next
link |
so I'm not going to ask you for the best financial
link |
I think we'll focus on earth for now
link |
thank you so much for your brilliance
link |
for the books you've written
link |
for the works you've done for the inspiration of millions
link |
spending your valuable time 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 |
let me leave you with some words from Ray Dalio himself
link |
you confront something painful
link |
you are at a potentially important juncture
link |
you have the opportunity to choose healthy and painful truth
link |
unhealthy but comfortable
link |
thank you for listening and hope to see you