Ray Dalio: Principles, the Economic Machine, AI & the Arc of Life | Lex Fridman Podcast #54

The following is a conversation with Ray Dalha. He's the founder, co chairman and co Chief Investment Officer of Bridgewater Associates, one of the world's largest and most successful investment firms that is famous for the principles of radical truth and transparency that underlies culture. Ray is one of the wealthiest people in the world with ideas that extend far beyond the specifics of how he made that wealth. His ideas that are applicable to everyone are brilliantly summarized in his book Principles. They are also even further condensed on several other platforms including YouTube, where for example, the 30 minute video titled how the Economic Machine Works is one of the best educational videos I personally have ever seen on YouTube. Once again, you may have noticed that the people I've been speaking with are not just computer scientists, but philosophers, mathematicians, writers, psychologists, physicists, economists, investors, and soon much more. To me, AI is much bigger than deep learning, bigger than computing. It is our civilization's journey into understanding the human mind and creating echoes of it in the machine. That journey includes the mechanisms of our economy, of our politics, and the leaders that shape the future of both. This is the Artificial Intelligence Podcast. If you enjoy it, subscribe on YouTube, give it five stars on Apple, podcast support on Patreon or or simply connect with me on Twitter lexfridman spelled F R I D M A N this show is presented by Cash App, the number one finance app in the App Store. I personally use Cash App to send money to friends, but you can also use it to buy, sell and deposit Bitcoin. Most Bitcoin exchanges take days for a bank transfer to become investable through Cash App. It takes seconds. Cash App also has a new investing feature. You can buy fractions of a stock, which to me is a really interesting concept. So you can buy $1's worth no matter what the stock price is. Brokerage services are provided by Cash App Investing, a subsidiary of Square and member sipc. I'm excited to be working with Cash App to support one of my favorite organizations that many of you may know and have benefited from called first. Best known for their First Robotics and Lego competitions. They educate and inspire hundreds of thousands of students in over 110 countries and have a perfect rating on Charity Navigator, which means the donated money is used to maximum effectiveness. When you get Cash App from the App Store or Google Play and use code LEXPodcast, you'll get $10 and Cash App will also donate $10 to first, which again is an organization that I've personally seen inspire girls and boys to dream of engineering a better world. And now here's my conversation with Ray Dalio.

Truth, or more precisely, an accurate understanding of reality, is the essential foundation of any good outcome. I believe you've said that. Let me ask an absurd sounding question at the high philosophical level. So what is truth? When you're trying to do something different than everybody else is doing, and perhaps something that has not been done before, how do you accurately analyze the situation? How do you accurately discover the truth, the nature of things?

Almost the way you're asking the question implies that truth and newness have nothing, are almost at odds. And I just want to say that I don't think that that's true. Right. So what I mean by truth is I, you know, what is the reality? How does the reality work? And so if you're doing something new that has never been done before, which is exciting and I like to do the way that you would start with that is experimenting on what are the realities and the premises that you're using on that and how to stress test those types of things. I think what you're talking about is instead the fact of how do you deal with something that's never been done before and deal with the associated probabilities. And so I think in that, don't let something that's never been done before stand in the way of you doing that particular thing. Because almost the only way that you understand what truth is is through experimentation. And so when you go out and experiment, you're going to learn a lot more about what truth is. But the essence of what I'm saying is that when you take a look at that, use truth, find out what the realities are as a foundation, do the independent thinking, do the experimentation to find out what's true and change and keep going after that. So I think that when you're thinking about it the way you're thinking about it, that almost implies that you're letting people almost say that they're reliant on what's been discovered before to find out what's true. And what's been discovered before is often not true, Right? Conventional view of what is true is very often wrong. It'll go in ups and downs. And I mean, there are fads and okay, this thing, it goes this way and that way. And so definitions of truths that are conventional are not the thing to go by.

How do you know the thing that has been done before that it might succeed?

It's to do whatever homework that you have in order to try to get a foundation and then to go into worlds of not knowing and you go into the world of not knowing. But not stupidly, not naively, you know, you go into that world of not knowing and then you do experimenting and you learn what truth is and what's possible through that process. I describe it as a five step process. The first step is you go after your goals. The second step is you identify the problems that stand in the way of you getting to your goals. The third step is you diagnose those to get at the root cause of those. Then the fourth step is then now that you know the exact root cause, you design a way to get around those. And then you follow through and do the designs you set out to do. And it's the experimentation. I think that what happens to people mostly is that they try to decide whether they're going to be successful or not ahead of doing it. And they don't know how to do the process well, because the nature of your questions are, are along those lines like how do you know? Well, you don't know. But a practical person who is also used to making dreams happen knows how to do that process. I've given personality tests to shapers. So the person, what I mean by a shaper is a person who can take something from visualization. They have an audacious goal and then they go from visualization to actualization, building it out. That includes Elon Musk. I gave him the personality test. I've given it to Bill Gates and I've given it to many, many such shapers. And they know that process that I'm talking about. They experience it, which is a process essentially of knowing how to go from an audacious goal, but not in a ridiculous way, not a dream, and then to do that learning along the way. That allows them in a very practical way to learn very rapidly as they're moving toward that goal.

So the call to adventure, the adventure starts not trying to analyze the probabilities of the situation, but using what instinct, how do you dive in?

So let's talk about it is being a. It's simultaneously being a dreamer and a realist. It's to know how to do that well, the pull comes from a pull to adventure. For whatever reason, I can't tell you how much of its genetics and how much it's environment. But there's a. Early on, it's exciting. That notion is exciting. Being creative is exciting. And so one feels that then one gets in the habit of doing that. Okay, how do I know? How do I learn very well and then how do I imagine and then how do I experiment? To go from that imagination. So it's that process, that one. And then the more one does it, the better one becomes.

At you mentioned shapers, Elon Musk, Bill Gates, who are the shapers do you find yourself thinking about when you're constructing these ideas, the ones that define the.

Archetype of a shaper for you?

Well, as I say, a shaper for me is somebody who comes up with a great visualization, usually a really unique visualization, and then actually builds it out and makes the world different, changes the world in that kind of a way. So when I look at it, Mark Benioff with Salesforce, Chris Anderson with Ted, Mohammed Yunus with Social enterprise and philanthropy, Jeffrey Canada and Harlem Children's Zone. There are all domains have shapers who have the ability to visualize and make extraordinary things happen.

What are the commonalities between some of them?

The commonalities are first of all the excitement of something new, that call to adventure, and then again that practicality, the capacity to learn, the capacity. Then they're able to be in many ways full rage. That means they're able to go from the big big picture down to the detail. So let's say for example, Elon Musk, he describes he gets a lot of money from selling PayPal as interest in PayPal. He said, why isn't anybody going to Mars or outer space? What are we gonna do if the planet goes to hell and how are we gonna get that? Nobody's paying attention to that. He doesn't know much about it. He then reads and learns and so on. Says I'm going to take okay, half of my money and I'm going to put it in there and I'm going to do this thing. And he learns and blah, blah, blah, blah, blah. And he's got creative, okay, that's one dimension. So he gave me the keys to his car with his just early days in Tesla. And he then points out the details. Okay, if you push this button here, it's this, the detail that. So he's simultaneously talking about the big, big, big picture. Okay, when does humanity going to abandon the pan. But he will then be able to take it down into the detail. So he can go, let's call it helicoptering. He can go up, he can go down and see things at those types of perspectives.

And then you've seen that with the other shapers as well.

And that's a common thing that they can do that. Another important difference that they have in mind, invented microfinance, social enterprise impact investing. As Muhammad Yunus Received the Nobel Peace Prize for this, the Congressional medal of honor. One of the fortune determined one of the 10 greatest entrepreneurs of our time. He's built all sorts of businesses to give back money in social enterprise. A remarkable man. He. He has nobody that I know practically could have more concern for others. He lives a life of a saint. I mean, very modest lifestyle. And he puts all his money into trying to help others. And he tests low on what's called concern for others because what it really the questions under that are questions about conflict to get at the mission. So they all. Jeffrey Canada, who changed Harlem Children's Zone and developed that to take children in Harlem and get them well taken care of, not only just in their education, but their whole lives harm him. Also concern for others. What they mean is that they can see whether those individuals are performing at a level that. An extremely high level that's necessary to make those dreams happen. So when you think of, let's say Steve Jobs was famous for being difficult with people and so on, and I didn't know Steve Jobs, so I can't speak personally to that. But his comments on you have A players and if you have A players, if you put in B players, pretty soon you'll have C players and so on. That is a common element of them holding people to high standards and not letting anybody stand in the way of the mission.

What do you think about that kind of idea? Sorry to pause on that for a second. That the A, B and C players and the importance of. So when you have a mission to really only have A players and B sort of aggressively filtering for that.

Yes, but I think that they're all different ways of being A players. And I think in order to create a great team, you have to appreciate all the differences in ways of being A players. Okay, yes, that's the first thing. And then you always have to be super excellent, in my opinion. You always have to be really excellent with people to help them understand each other themselves and get in sync with them about what's true about them and their circumstances and how they're doing so that they're having a fabulous personal development experience at the same time as you're dealing with them. So when I say that they're all different ways, this is one of the then qualities. You asked me what are the qualities? So one of the third qualities that I would say is to know how to deal well with your not knowing and to be able to get the best expertise so that you're a great orchestrator of different ways so that the people who are really, really successful, unlike most people, believe that they're successful because of what they know. They're even more successful by being able to effectively learn from others and tap into the skills of people who see things different from brilliant.

So how do you, when that personality being first of all open to the fact that there's other people, see things differently than you and at the same time have supreme confidence in your vision, Is there just the psychology of that? Do you see a tension there between the confidence and the open mindedness?

No. It's funny because I think we grow up thinking that there's a tension there, right? That there's a confidence and the more confidence that you have, there's a tension with the open mindedness and not being sure. Okay. Confident and accurate are almost negatively correlated to many people. They're extremely confident and they're often inaccurate. And so I think one of the greatest tragedies of people is not realizing how those things go together. Because instead it's really that by saying I know a lot and how do I know I'm still not wrong and how do I take that best thinking available to me and then raise my probability of learning? All these people think for themselves, okay? I mean, meaning they're smart, but they take in like vacuum cleaners, they take in ideas of others, they stress test their ideas with others, they assess what comes back to them in the form of other thinking. And they also know what they're not good at and what other people who are good at the things that they're not good at, they know how to get those people and be successful all around because nobody has enough knowledge in their heads. And that I think is one of the great differences. The reason my company has been successful in terms of this is because of an idea meritocratic decision making, a process by which you can get the best ideas. You know, what's an idea meritocracy? An idea meritocracy is to get the best ideas that are available out there and to work together with other people in the team to achieve that.

That's an incredible process that you describe in several places to arrive at the truth. I apologize if I'm romanticizing the notion, but let me linger on it. Just having enough self belief, you don't think there's a self delusion there. That's necessary, but especially in the beginning, you talk about in the journey, maybe the trials or the abyss, do you think there is value to deluding yourself?

I think what you're calling delusion is a bad Word for uncertainty. Okay? So, I mean, in other words, because we keep going back to the question, how would you know? And all of those things. No, I think that delusion is not going to help you, that you have to find out truth, okay, to deal with uncertainty. Not saying, listen, I have this dream and I don't know how I'm going to get that dream. I mentioned in my book Principles and described the process in a more complete way than we're going to be able to go here. But what happens is, I say you form your dreams first and you can't judge whether you're going to achieve those dreams because you haven't learned the things that you're going to learn on the way toward those dreams. Okay? So that isn't delusion. I wouldn't use delusion. I think you're overemphasizing the importance of knowing whether you're going to succeed or not. Get rid of that, okay? If you can get rid of that and say, okay, no, I can have that dream. But I'm so realistic in the notion of finding out. I'm curious. I'm a great learner. I'm a great experimenter. Along the way, you'll do those experiments which will teach you more truths and more learning about the reality so that you can get your dreams. Because if you still live in that world of delusion. Okay, and you think delusion's helpful? No, the delusion isn't. Don't confuse delusion with not knowing.

Yes, but nevertheless. So if we look at the abyss, we can look at your own that you describe. It's difficult psychologically for people. So many people quit. Many people choose a path that is more comfortable. I mean, that the heartbreak of that breaks people. So if you have the dream and there's this cycle of learning, setting a goal and so on, what's your value for the psychology of just being broken by these difficult moments?

Well, that's classically the defining moment. It's almost like evolution taking care of, okay, now you Crash. You're in the abyss. Oh, my God, that's bad. And then the question is, what do you do? And it sorts people, okay? And that's what that's like. Some people get off the field and they say, oh, I don't like this, and so on. And some people learn and they have a metamorphosis and it changes their approach to learning. The number one thing it should give them is uncertainty. You should take an audacious, dreamier guy who wants to change the world. Crash, okay? And then Come out of that crashing and saying, okay, I can be audacious and scared that I'm going to be wrong at the same time. And then how do I do that? Because that's the key. When you don't lose your audaciousness and you keep going after your big goal. And at the same time you say, hey, I'm worried that I'm going to be wrong. You gain your radical open mindedness that allows you to take in the things, that allows you to go to the next level of being successful.

So your own process, I mean, you've talked about it before, but it would be great if you can describe it because our darkest moments are perhaps the most interesting. So your own with the prediction of the. Of another depression.

Economic depression.

Yes, I apologize. Economic depression. Can you talk to what you were feeling, thinking, planning, strategizing at those moments?

Yeah, that was my biggest moment. Okay. Building my little company. This is in 1981, 82. I had calculated that American banks had given a lot more money to lend a lot more money to Latin American countries than those countries were going to pay back and that they would have a debt crisis and that this would send the economy tumbling. And that was an extremely controversial point of view. Then it started to happen and it happened. And Mexico defaulted in August 1982. I thought that there was going to be an economic collapse that was going to follow because there was a series of the other countries. It was just playing out as I had imagined. And that couldn't have been more wrong. That was the exact bottom in the stock market because central banks eased monetary policy, blah blah, blah. And I couldn't have been more wrong. And I was very publicly wrong and all of that. And I lost money for me and I lost money for my clients. And I was. I only had a small company then, but I had. These were close people. I had to let them go. I was down to me as the last person I didn't have. I was so broke I had to borrow $4,000 from my dad to help to pay for my family bills. Very painful. And at the same time I would say it definitely was one of the best things that ever happened to me. Maybe the best thing for him happened to me because it changed my approach to decision making. It's what I'm saying. In other words, I kept saying, okay, how do I know whether I'm right? How do I know I'm not wrong? It gave me that and it didn't give up my audaciousness because I was in a position what am I going to do? Am I going to go back, put on a tie, go to Wall street, and just do those things? No, I can't bring myself to do that. So I'm at a juncture. How do I deal with my risk and how do I deal with that? And it tell me how to deal with my uncertainties. And that taught me, for example, a number of techniques. First, to find the smartest people I could find who disagreed with me and to have quality disagreement. I learned the art of thoughtful disagreement. I learned how to produce diversification. I learned how to do a number of things. That is what led me to create an idea meritocracy. In other words, person by person. I hired them, and I wanted the smartest people who would be independent thinkers, who would disagree with each other and me. Well, so that we could be independent thinkers, to go off to produce those audacious dreams. Because you have to be an independent thinker to do that, and to do that not independently of the consensus, independently of each other, and then work ourselves through that, because who know whether you're going to have the right answer. And by doing that, then that was the key to our success. And the things that I want to pass along to people. The reason I'm doing this podcast with you is, you know, I'm 70 years old, and that is a magical way of achieving success. If you can create an idea meritocracy, it's so much better in terms of achieving success and also quality relationships with people. But that's what that experience gave me.

So if we can linger on a little bit longer, the idea of an idea meritocracy, it's fascinating, but especially because it seems to be rare, not just in companies, but in society. So there is a lot of people on Twitter, in public discourse and politics and so on that are really stuck in certain sets of ideas, whatever they are. So when you're confronted with an idea that's different than your own about a particular topic, what kind of process do you go through mentally? Are you arguing through the idea with the person sort of present is almost like a debate, or do you sit on it and consider the world sort of empathetically? If this is true, then what does that world look like? Does that world make sense? And so on? So what's the process of considering those conflicting ideas for you?

I'm going to answer that question, but after saying first, almost implicit in your question is it's not common. Okay? What's common produces only common results. Okay? So don't judge Anything that is good based on whether it's common, because it's only going to give you common results. If you want unique, you have a unique approach. Okay? And so that art of thoughtful disagreement is the capacity to hold two things in your mind at the same time. The gee, I think this makes sense. And then saying, I'm not sure it makes sense, and then try to say, why does it make sense? And then to triangulate with others. So if I'm having a discussion like that and I work myself through and I'm not sure, then I have to do that in a good way. So I always give attention. For example, let's start off, what does the other person know relative to what I know? So if a person has a higher expertise or things, I'm much more inclined to ask questions. I'm always asking questions. If you want to learn, you're asking questions. You're not arguing, okay, you're taking in, you're assessing. When it comes into you, does that make sense? Are you learning something? Are you getting epiphanies and so on. And I try to then do that. If the conversation, as we're trying to decide what is true and we're trying to do that together and we see truth different, then I might even call in another really smart, capable person and try to say what is true and how do we explore that together? And you go through that same thing. So I describe it as having open mindedness and assertiveness at the same time. That you can simultaneously be open minded and take in with that curiosity and then also be assertive and say, but that doesn't make sense. Why would this be the case? And you do that back and forth.

And when you're doing that kind of back and forth on the topic, like the economy, which you have to me, perhaps I'm naive, but it seems both incredible and incredibly complex. The economy, the trading, the transactions, that these transactions between two individuals somehow add up to this giant mechanism. You've put out a 30 minute video. You have a lot of incredible videos online that people should definitely watch on YouTube. But you've put out this 30 minute video titled how the Economic Machine Works that is probably one of the best, if not the best video I've seen on the Internet in terms of educational videos. So people should definitely watch it. Especially because it's not that the individual components of the video are somehow revolutionary, but the simplicity and the clarity of the different components just makes you. There's a few light bulb moments there about how the economy works as a Machine. So as you described, there's three main forces that drive the economy. Productivity growth, short term debt cycle, long term debt cycle. The former, productivity growth is how valuable things, how much value people create, valuable things people create. The latter is people borrowing from their future selves to hopefully create those valuable things faster. So this is an incredible system to me. Maybe we can linger on it a little bit. But you've also said what most people think about as money is actually credit. Total amount of credit in the US is $50 trillion. Total amount of money is $3 trillion. That's just crazy to me. Maybe I'm silly, maybe you can educate me, but that seems crazy. It gives me just pause that the human civilization has been able to create a system that has so much credit. So that's a long way to ask, do you think credit is good or bad for society? That system that's so fundamentally based on credit?

I think credit is great even though people often overdo it. Credit is that somebody has earned money and what happens is they lend it to somebody else who's got better ideas and they cut a deal and then that person with the better ideas is going to pay it back. And if it works well, it helps resource allocations go well. Providing people like the entrepreneurs and all of those, they need capital, they don't have capital themselves. And so somebody's going to give them capital and they'll give them credit along those lines, then what happens is it's not managed well in a variety of ways. So I did another book on principles, Principles of Big Debt Crisis that go into that and it's free by the way, I put it free online as a PDF. So if you go online and you look, Principles for Big Debt Crisis is under my name, you can download it in a PDF or you can buy a print book of it. And it goes through that particular process. And so you always have it overdone in always the same way. Everything, by the way, almost everything happens over and over again for the same reasons. Okay, so these debt crises all happen over and over again for the same reasons. They get it overdone. In the book, it explains how you identify whether it's overdone or not. They get it overdone and then you go through the process of making the adjustments according that and then. And it explains how they can use the levers and so on. If you didn't have credit then you would be sort of everybody's sort of be stuck. So credit is a good thing, but it can easily be overdone. So now we get into the what is money? What is credit? Okay, you get into money and credit. So if you're holding credit and you think that's worthwhile, keep in mind that the central bank, let's say it can print the money. What is that? Prom, you have an iou. And the IOU says you're going to get a certain number of dollars, let's say, or yen or euros. And that is what the IOU is. And so the question is, will you get that money and what will it be worth? And then also you have a government which is a participant in that process because they are on the hook, they owe money, and then will they print the money to make it easy for everybody to pay? So you have to pay attention to those two. I would suggest, like you recommend to other people, just take that 30 minutes and it comes across pretty clearly. But my conclusion is that of course you want it. And even if you understand it and the cycles well, you can benefit from those cycles rather than to be hurt by those cycles because I don't know, the way the cycle works is somebody gets over indebted, they have to sell an asset. Okay, then I don't know, that's when assets become cheaper. How do you acquire the asset? It's a whole process.

So again, maybe another dumb question, but.

There are no such things as dumb questions today. There you go.

But what is money? So you've mentioned credit and money. Another thing that if I just zoom out from an alien perspective and look at human civilization, it's incredible that we've created a thing that's not, that only works because currency, because we all agree it has value. So I guess my question is how do you think about money as this emergent phenomenon? And what do you think is the future of money? You've commented on Bitcoin, other forms. What do you think is its history and future? How do you think about money?

There are two things that money is for. It's a medium of exchange and it's a storehold of wealth. So you could say something's a medium of exchange and then you could say, is it a storehold of wealth? Okay. And money is that vehicle that is those things and can be used to pay off your debt. So when you have a debt and you provide pays off your debt. So that's that process.

And I apologize to interrupt, but it only can be a medium of exchange or store wealth when everybody recognizes it.

To be of value.

That's right. And so you see in the history around the world, and you Go to places. I was in an island in the Pacific in which they had as money, these big stones. And literally they were taking a boat, this big carved stone, and they were taking it from one of the islands to the other, and it sank the piece of this big stone, piece of money that they had, and it went to the bottom and they still perceived it as having value. So that it was, even though it was in the bottom and it's this big hunk of rock, the fact that somebody owned it, they would say, oh, I'll own it for this and that. I've seen beads in different places, shells converted to this in mediums of exchange. And when we look at what we've got, you're exactly right. It is the notion that if I give it to you, I can then take it and I can buy something with it. And that's. So it's a matter of perception. Okay. And then we go through then the history of money and the vulnerabilities of money. And what we have is through history there's been two types of money. Those that are claims on something of value, like the connection to gold or something. That's right, that would be. Or they just are money without any connection. And then we have a system now which is a fiat monetary system. So that's what money is. Then it will last as long as it's kept a value. And it works that way. So let's say central banks, when they get in the position of like they owe a lot of money, like we have in the case, it's increasingly the case. And they also in a bind and they have the printing press to print the money and get out of that. And you have a lot of people might be in that position, then you can print it and then it could be devalued in there. And so history has shown, forget about today. History has shown that no currency has. Every currency has either ended as being a currency or devalued as a currency over periods of time, long periods of time. So it evolves and it changes. But everybody needs that medium of exchange and everybody needs that storehold of wealth. So it keeps changing what is money over a period of time.

But so much is being digitized by Google today. And there's these ideas that are based on the blockchain of bitcoin and so on. So if all currencies, like all empires, come to an end, what do you think will? Do you think something like bitcoin might emerge as a common store of value, store of wealth and a medium of Exchange.

The problem with Bitcoin is that it's not an effective medium exchange. Like it's not easy for me to go in there and buy things with it. And then it's not an effective store hold of value because it has a volatility that's based on speculation and the like. So it's not a very effective saving. That's very different from Facebook's of a stable value currency which would be effective as both a medium of exchange, exchange and a storehold of wealth. Because if you were to hold it and the way it's linked to number of things that it's linked to would mean that it could be a very effective storehold of wealth. Then you have a digital currency that could be a very effective medium exchange and store hold of wealth. So in my opinion, some digital currencies are likely to succeed more or less based on that ability to do it. Then the question is, what happens? Okay, what happens is, do central banks allow that to happen? I really do believe it's possible to get a better form of money that central banks don't control. Okay, A better force of money that central banks don't control. But then that's not yet happened. And we also have to. And so they've got to go through that evolutionary process in order to go through that evolutionary process. First of all, governments have got to allow that to happen, which is to some extent a threat to them in terms of their power. And that's an issue. And then you have to also build the confidence in all of the components of it to say, okay, that's going to be effective because I won't have problems owning it. So. So I think that digital currencies have some element of potential, but there's a lot of hurdles that are going to have to be gotten over. I think that it'll be a very long time, possibly never, but anyway, a very long time before we have that, let's say, get into a position that would be in effective means relative to gold. Let's say, if you were to think of that, because gold has a track record, you know, of thousands of years all across countries. It has its mobility, it has the ability to put it down, it has certain abilities, it's got disadvantages relative to digital currencies. But central banks will hold it. Like the central banks that worry about others. You know, other countries, central banks might worry about whether the US dollar is going to print that. And so the thing they're going to go to is not going to be the digital currency. The thing they're going to go to is gold or something else, some other currency. They got to pick it. And so I think it's a long way to go.

But you think it's possible that one day we don't even have a central bank because of a currency that doesn't, that cannot be controlled by the central bank is the primary currency? Or does that seem very unlikely?

It would be very remote possibility or very long in the future.

Got it. Again, maybe a dumb question, but romanticized one. When you sit back and you look, you describe these transactions between individuals somehow creating short term debt cycles, long term debt cycles, productivity growth. Does it amaze you that this whole thing works? That there's however many million, hundreds of millions of people in the United states, globally over 7 billion people, that this thing between individual transactions, it just, it works?

Yeah, it amazes me. Like I go back and forth between being in it and then I think like, how did a credit card, how does that really possible? I'm still used, I look up credit card, I put it on, the guy doesn't know me. It's all strangers. Okay, we're making the digital entries. Is that really secure enough and that kind of thing. And then it goes back and it goes this and it clears and it all happens. And what I marvel at that and those types of things is, is because of the capacity of the human mind to create abstractions that are true. You know, it's imagination and then the ability to go from one level. And then if these things are true, then you go to the next level. And if those things are true, then you go to the next level. And all those miracles that we almost become common. It's like when I'm flying in a plane or when I'm looking at all of the things that happen when I get communications in the middle of, I don't know, Africa or Antarctica. And we're communicating in the ways where I see the face on my iPad of somebody, my grandkid in someplace else and I look at this and I say, wow, yes, it all amazes me.

So while being amazing, do you have a sense, the principle you described, that the whole thing is stable somehow also? Or is this, Are we just lucky? So the principles that you describe are those describing a system that is stable, robust, and will remain so, or is it a lucky accident of our early history?

My area of expertise is economics and markets, so I get down to like a real nitty gritty. I can't tell you whether the plane is going to fall out of the sky. Because of its particular fundamentals. I don't know enough about that, but it happens over and over again and so on. It gives me faith. Okay, so without me knowing that in the markets and the economy, I know those things well enough in a sense to say that by and large, that structure is right. What we're seeing is right now, whether there are disruptions and it has effects that can come not because that structure is right. I believe it's right. But whether it can be hurt by, let's say, connectivity or journal entries, they could take all the money away from you through your digital entries. There's all sorts of things that can happen in various ways. That means that that money is worthless or the system falls. But from what I see in terms of its basic structure and those complexities that still take my breath away, I would say knowing enough about the mechanics of them, that doesn't worry me.

Have you seen disruptions in your lifetime that really surprised you all the time.

This is one of the great lessons of my life, is that many times I've seen things that I was very surprised about and that I realized almost all of those I was surprised about because they were just the first time it happened to me. They didn't happen in my lifetime before, but when I researched them, they happened in other places or other people lifetimes. So, for example, I remember 1971, the dollar, there was no such thing as a devaluation of a currency, didn't experience it. And the dollar was connected to gold. And I was watching events happen. And then you get on and that definition of money all of a sudden went out the window because it was not tied to gold. And then you have this devaluation or the first oil shock or the second oil shock, or so many of these things. But almost always I realized that they, when I looked in history, they happened before. They just happened in other people's lifetimes, which led me to realize that I needed to study history and what happened in other people's lifetimes and what happened in other countries and places so that I would have timeless and universal principles for dealing with that thing. So I. Oh yeah, I've been, you know, the implausible happening. But it's like a one in a hundred year storm.

Right?

Okay. Or it's.

Or they've happened before. Yeah, they've happened, just not to you. Let me talk about, if we could, about AI a little bit. So if Bridgewater Associates manage about $160 billion in assets and artificial intelligence systems, algorithms are pretty good with data. What role in the future. Do you see AI play in analysis and decision making in this kind of data rich and impactful area of investment?

I'm going to answer that not only in investment, but I give a more all encompassing rule for AI as I think, you know, for the last 25 years we have taken our thinking and put them in algorithms and so we make decisions, the computer takes those criteria.