Transcript excerpt from a Lex Fridman interview with Ray Dalio discussing automation’s large-scale economic effects and policy responses, especially universal basic income (UBI). Dalio argues automation is a major, accelerating force that creates tremendous benefits but also significant job displacement and widening wealth/income/opportunity gaps; he calls it a national emergency requiring plans emphasizing early-life opportunity (education, childcare) and careful design of safety nets. On UBI, Dalio sees merit in providing people with a cash cushion (e.g., ~$1,000) but is concerned about funding trade-offs, misuse, and whether it displaces higher-priority investments in education and child development.
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So let me ask you about automation. That's been a part of public discourse recently. What's your view on the impact of automation, of whether we're talking about AI or more basic forms of automation, on the economy in the short term and the long term. Do you have concerns about it as some do, or do you think it's overblown?
It's not overblown. I mean, it's a giant thing. It'll come at us in a very big way in the future. We're right at the edge of even really accelerating it. It's had a big impact and it will have a big impact and it's a two edged sword because it'll have tremendous benefits and at the same time it has profound benefits in employment and distributions of wealth. Because the way I think about it is there are certain things human beings can do and over time we've evolved to go to almost higher and higher levels. And now we're almost like we're at this level. You know, it used to be your labor and you would then do your labor and okay, we can get past the labor, we got tractors and things and you go up, up, up, up, up, and we're up over here and to the point in our minds where, okay, anything related to mental processing, the computer can probably do better and we can find that. And so other than almost inventing, you're at a point where the machines and the automation will probably do it better. And that's accelerating and that's a force, and that's a force for the good. And at the same time what it does is it displaces people in terms of employment and changes and it produces wealth gaps and all of that. So I think the real issue is that that has to be viewed as a national emergency. In other words, I think the wealth gap, the income gap, the opportunity gap, all of those things that force is creating the problems that we're having today. A lot of the problems, the great polarity, the disenfranchised dis, not anything approaching equality of education, all of these problems, a lot of problems are coming as a result of that. And so it needs to be viewed really as an emergency situation in which there's a good work, good plan worked out for how to deal with that effectively so that it's dealt with effectively because it's good for the average, it's good for the impact, but it's not good for everyone and it creates that polarity. So it's got to be dealt with.
Yeah, and you've talked about the American dream and that that's something that all people should have an opportunity for and that we need to reform capitalism to give that opportunity for everyone. Let me ask one of the ideas in terms of safety nets that support that kind of opportunity. There's been a lot of discussion of universal basic income amongst people. So there's Andrew Yang who's running on that, he's a political candidate running for president on the idea of universal basic income. What do you think about that? Giving $1,000 or some amount of money to everybody as a way to give them the padding, the freedom to sort of take leaps, to take the call for adventure, to take the crazy pursuits.
Before I get right into my thoughts on universal basic income, I want to start with the notion that opportunity, education, development, creating equality so that people say there's equal opportunity is the most important thing. And then to find out what is the amount, how are you going to provide that? How do you get the money into a public school system? How do you get the teaching? How do you, what do you. The fleshing out that plan to create equal opportunity in all of its various forms is the most pressing thing to do. And so I'm, you know that is.
That the opportunity, the most important one you're kind of implying is the earlier the better, sort of like opportunity to education. So in the early development of a human being and is when you should have the equal opportunities, that's the most important, right?
In the first phase of your life, which goes from birth until you're on your own and you're an adult and you're now out there and you deal with early childhood development, okay? And you take the brain and you say what's important, the child care, okay? It makes a world of difference. For example, if you have good parents who are trying to think about instilling the stability and in a non traumatic environment to provide them. So I would say the good guidance that normally comes from parents and the good education that they're receiving are the most important things in that person's development. The ability to be able to be prepared to go out there and then to go into a market that's an equal opportunity job market. To be able to then go into that kind of market is a system that creates not only fairness, anything else is not fair. And then in addition to that, it also is a more effective economic system because the consequences of not doing that to a society are devastating. If you look at what the difference in outcomes for somebody who completes high school or doesn't complete high school or does each one of those changes and you look at what that means in terms of their costs to society, not only themselves, but their cost and incarceration costs and crimes and all of those things. It's economically better for the society and it's fairer if they can get those particular things. Once they have those things, then you move on to other things. But yes, from birth all the way through that process, anything less than that is bad, is a tragedy, and so on. So that's what that's. Yeah, those are the things that I'm estimate. And so my. What I would want above all else is to provide that. So with that in mind, now we'll talk about universal basic income.
Start with that. Now we can talk about you.
Well, right, because you have to have that. Now the question is, what's the best way to provide that? Okay, so when I look at ubi, I really think is what is going to happen with that thousand dollars? Okay. And will that thousand dollars come from another program? Does that come from an early childhood developmental program? Who are you giving the thousand dollars to and what will they do for that thousand dollars? I mean, like, my reaction would be, I think it's a great thing that everybody should have almost $1,000 in their bank and so on. But when do they get to make decisions or who's the parent? A lot of times you can give $1,000 to somebody and it could have a negative result. It can have, you know, they can use that money detrimentally, not just productively. And if that money's coming away from some of those other things that are going to produce the things I want, and you're shifted to, let's say, to come in and give a check, doesn't mean its outcomes are going to be good. In providing those things that I think are so fundamental, important. If it was just Everybody can have $1,000 and use it. So when the time comes and use it well, that would be really, really good because it's almost like everybody, you'd wish Everybody could have $1,000 worth of wiggle room in their lives. Okay. And I think that would be great. I love that. But I want to make sure that these other things that are taken care of. So if it comes out of that budget, and you know, I don't want it to come out of that budget that's going to be doing those things. And you know, so you have to.
Figure it out and you have a certain skepticism that human nature will use, may not always, in fact, frequently may not use that thousand dollars for the optimal to support the optimal trajectory.
Some will and some won't. One of the big advantages of universal basic income is that if you put it in the hands, let's say, of parents who know how to do the right things and make the right choices for their children because they're responsible, and you say, I'm going to give them $1,000 wiggle room to use for the benefit of their children. Wow, that sounds great. If you put it in the hands of, let's say, an alcoholic or drug addicted parent who is not making those choices well for their children, and what they do is they take that thousand dollars and they don't use it well, then that's going to produce more harm than good.
