1042 Create Financial Success, Develop PRINCIPLES & Understand Your Purpose w/Ray Dalio

This is episode number 1042 with number one New York Times bestselling author Ray Dalio.

The greatest problem of mankind is people having opinions that they're stuck on because it prevents them from moving forward to finding the best answer.

Welcome to the School of Greatness. My name is Lewis Howes, a former pro athlete turned lifestyle entrepreneur. And each week we bring you an inspiring person or message to help discover how to unlock your inner greatness. Thanks for spending some time with me today. Now let the class begin. Martin Luther King Jr. Once said, no work is insignificant. All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence. And writer T.F. Hodge said, Fear is the lack of faith in one's ability to create powerful solutions. My guest today is Ray Dalio, founder, co-chairman and co-chief investment officer of Bridgewater Associates, the fifth most important private company in the US according to Fortune magazine. According to Forbes, he is the 69th richest person in the world and he has been called the Steve Jobs of investing by Wired magazine and named one of the top 100 most influential people by Time magazine. He is also the author of the number one New York Times bestseller, Principles, which explains and outlines the principles that he lives and works by to create massive amounts of success in his life and business. And it was such a pleasure to dissect the world's problems and opportunities with Ray today. And we had an incredible conversation that really stuck with me. I think you're gonna get a ton out of this as well. I love diving deeper into why pain is the best teacher, how we can use our mindset to achieve great things, why we should always be willing to learn and admit when we're wrong. And in this episode, we discuss the three phases of life. the difference between the conscious mind and the subliminal mind and why you need to be aware of them. Ray talks about his personal mantra when handling self-doubt yes, a billionaire has self-doubt at times how to identify the difference between toxicity and healthy disagreement. This was powerful. The three most important things to know about what's happening in the world right now that we haven't faced before how to have a financially successful mindset that will take you to the next level and so much more. I truly enjoyed this. I did not want want this conversation to stop. If you're enjoying it, make sure to share this with someone lewishouse.com/1042 is the episode number and the link. Or just copy and paste the link wherever you're listening to it on Apple Podcast or Spotify. And make sure to subscribe on Apple Podcast as well if you're inspired by this episode. Okay, in just a moment, the one and only Ray Dalio. Welcome back everyone to the School of Greatness. I am very excited. We have Mr. Ray Dalio in the house. Thank you so much for being here, Ray.

Oh, I'm thrilled to be.

I am. I'm grateful for you because you have such a wealth of wisdom, not only on wealth accumulation and finances and the history of the financial system, which we're going to get into as well. But the more I dive into who you are, you understand people, and you've created this incredible way to build something by understanding people. And in your book on principles, it's really more a book about understanding people from my point of view and the science of how people think, how they work, and how to connect them to a greater idea. And you've done an incredible job at understanding how to do this for your vision and for your company. So I'm really grateful you're here and I'm grateful for your mission and your work.

Well, I hope I can be of some use. I focus on it. I do my best on it because I think it's important.

I'm curious, the greatest relationship in your life, who has that been for you? The person in your life who's made the biggest impact?

Well, my wife, she's been a partner for 43 years, you know, so at all dimensions, you know, I love her intellectually, spiritually, physically, in all dimensions. And we share the most important things, you know, everything from the children and the grandchildren to excitements of life. So, without a doubt it would be her.

Yeah, and you write the book in her honor, which I saw in the beginning. I'm curious, what's the greatest lesson she's taught you about becoming a better man and a better business leader?

Well, I get to see the world through her eyes, you know, and through her heart. So she shows me so many things. I would say it, you know, through all the years, it's been many, many, many different things. Right now, she's in the process of over the last 10 years of helping the poorest, most disadvantaged kids in bad neighborhoods. in high school to try to get them through high school and so on. And so she's given me a window into a different world that has been helpful. But it's everything. It's spirituality, it's different places in the world, it's so many things.

That's beautiful. You've seen a lot of pain in your lifetime. Maybe personally you've experienced somebody just in the world from the different pains that have happened in the world, whether it be the economy or injustice, different things that happen, death. You've seen a lot of loss just in general in life. And you talk about how pain plus reflection equals progress. I'm curious, it seems like there always needs to be some type of breakdown in order for people to be able to look back and ask themselves, okay, what's working? What's not working? What do I really want? And how do I get there? Do you think it's possible to have progress without some type of pain in our individual lives?

Well, pain is a heck of a teacher by comparison. I mean, you know, like when you get pleasure, then you just keep doing what you're doing, but it doesn't teach you to change. You know, pain when you put your hand on a hot stove or do anything that got you into a position teaches you maybe about how to approach it differently. And also, pain teaches you about how reality works. Reality is reality. We're given reality. A lot of people say they want to fight what reality is, you know, oh, it's what was me and stop thinking about it being differently. Just understand, like, why did that thing happen to me? And how do I put it in perspective? It's like nature doesn't care about you, right? It cares about, you know, the universe. And so when you have those experiences, just understand how reality works and also how do you approach it better. That's smart, I think. So I think pain is the best teacher.

What do you think has been the greatest pain in your lifetime that you had to learn a lesson from?

Well, of course, the greatest pains are losing people that I love the most, which then gets me to reflect on the arc of life, right? And what it's all like. But things in terms of have come differently. I remember a case that changed me profoundly to tell you the story quickly. So, I started my business in 1975, investing. And it's, you know, it's easy to be wrong in investing. That's part of the game. But in 1980, '81, I calculated that American banks had lent a lot more money to countries than those countries were going to be able to pay back. And that they would therefore have a big debt default and that would cause an economic crisis. And it got a lot of attention because it was a controversial view. and then in Mexico defaulted in August 1982. So that prediction sort of, wow, came right and some countries did. And I got a lot more attention because of that was right. And I thought we were gonna go into an economic spiral, a depression, a big debt crisis, and I couldn't have been more wrong. And that was the exact bottom in the stock market. And I lost money. I lost money for myself. I lost money for my clients. I had to let everybody in my company go. And I had to, I was so broke, I had to borrow $4,000 from my dad. Wow. I had to pay some of my family bills. So, I mean, I was, it was a lot of pain.

This was 82?

Yeah.

So you're broke then.

82. Broke. Totally broke. No money. No money. Wow. And that was one of the best things that ever happened to me. It was very painful, but it was one of the best things because it gave me the fear of being wrong without me losing my audacity. In other words, it gave me an open mindedness. It made me start to think, how do I deal with what I don't know? So it made me find the smartest people I could find who disagreed with me to start to understand their thinking. It made me think about how I could maintain that upside. Risk goes with return. So, I didn't want to have an ordinary life. So, I still wanted the big upside return, but how could I do that without less risk? That's right. So, that was a problem. That was part of my reflection. And that reflection led me to understand how I could diversify better, how I could stress test my thinking better, and so on. Then I brought in the smartest people I could find who were independent thinkers. who would disagree with me. And then, and I did that. And that was the exact bottom financially and so on in my life from that point up to, you know, not long ago, Fortune described Bridgewater as the fifth most important private company in the country, in the US. And so it was that pain and reflecting well on that pain that gave me a greater ability to deal with what I don't know. And I learned, this is an important thing to learn, that I learned that whatever success I had came more from my knowing how to deal with my not knowing than from anything I knew. In other words, what you know in your head is only a small percentage of what the important things and the right things to know is. And so to be able to go outside of one's head, and to take in the best of the best of the best wherever it comes, and then use that to make decisions. And all of that came from that painful, very painful mistake.

Where do you think you'd be today if in '82 you didn't go broke and have that massive pain?

I'm sure I'd have a very ordinary life, I don't know. Because I wouldn't have known how to have great upside while having acceptable risks, right? In other words, like at the time I reflected it, I felt it was like the following. I'm on one side of a jungle, and I'm on this one side of a jungle, and you could go, in order to imagine you could have great success if you can cross the jungle alive to get to the other side, but in the jungle are all sorts of terrible things that could kill you and so on. And you have a choice. You can have this ordinary life or you can try to cross the jungle. Now, each one of us would approach that differently. For me, I had to have the greatest life I could have. And I have a little bit of a taste of adventure. So how would you cross that jungle? And what I learned was that the best way to cross that jungle would be with a team of people, people who I cared about, they cared about with me, who could see things that I couldn't see, and I could see things that they couldn't see. And that way you could be effective together. And so that's what I did. That's how it worked. And what I also learned through that thing is like, I don't want to get out of the jungle. I don't want to get to the other side because the actual act of being in it with them and to do those things is itself rewarding. So I'm confident that I wouldn't have learned that. if I didn't have that kind of experience.

So you're still in the jungle today?

Yeah, I'm in my jungle. But my jungle, everyone's jungle is a life arc. There's a life arc. You have to recognize the life arc. You know, zero to, I don't know, 8085 or something is the life arc. Something like that. I'm 71. I know where I am on that journey. Okay? It's important to know where are you on your journey? and then when you start to think about that, like, where will I be in 10 years? I'm going to be a different person in 10 years. Okay. Where will the people I love be? Think about yourself. Where will you be in 10 years? And where will the people you love be? It could be your kids, it could be your parents. Where will they be? And what will their experiences and the journey that they're going through and you're going through? and this script in the journey, by the way, is pretty well known, right? Like, I'll give you example. I think it comes kind of in three phases. The first phase is when you're dependent on others and, you know, you're learning. Okay. Then what happens is you get out of school and you become independent and you go to work, and then it's entirely different. You're in the second phase of your life when others are dependent on you and you're working. and you're trying to be successful. But there are the arcs and you could see markers along those lines. You know, do you get married? When do you have a kid? Like, I realize, like, when my kids have kids, I'm now in my third phase. Okay? So you see these things, you know? Yeah. And so you have to see that. So what I want at this phase of my life at 71, I'm in transition from my second phase in which I've worked and I've won and I, you know, I played, you know, it's like had my battles and it was great and so on. And now I'm in a mission to pass along the things that were valuable to me. I want to pass them along to others and then I'm going to go quiet and then I'm in that other phase, you know, but you learn things. And so this is kind of a mentor pass it along phase.

How do you stay confident in transition from kind of one identity to a new identity. That's something new, that's something unknown, whether it be in your personal transition life or in the financial world where things are unknown, things are transitioning or it might seem like it. How do you personally stay confident in the transition?

First of all, you're really talking about comfort with ambiguity. And the way that I feel it is life is like an adventure. I mean, if you knew everything, it wouldn't be nearly as good, right? So the ambiguity is part of it. It's part of the game. It's just the way it is. So to then experience that and to know how to deal with ambiguity, because the same rules apply, you know, feel it. What's it like? How does it feel? Where are the polls to? How do you learn? How do you learn how to approach it? what's it like? Speak to others who have been in there in that spot before, taste it and so on. Our preferences change, you know, as you, as you're going through all those things. So you feel it out, you learn about it, you go to the things that you feel the pull toward.

I'm curious. You have feelings you've been talking about for a few moments, but I know you're a very thoughtful human being. You create algorithms for your entire work, your team, everything is based on algorithms, kind thoughts and ideas. But I'm hearing you say you're a deep feeler as well. Are you, would you say you're more led by thoughts or your feelings?

No, I think it's the alignment of them. Okay, here's the facts pertaining them. There is a subliminal mind that we have, and there's a conscious mind. Freud discovered that there's a subliminal mind. And in that subliminal mind, we just don't see it because it's not conscious, but it has a big effect. and so feelings and those things are coming through that subliminal mind and it really has a big control. And then there's a conscious logical mind for everybody. And so in your mind, they're like everybody's mind. They're these kind of two minds that are working. Now I find that when I align them, meditation has had a big effect on me. I've been meditating since 1969.

Wow.

So for a long time. Because what that does literally, it's an exercise where you repeat a mantra, the sound, and then you lose sort of a consciousness and you go into the subconscious mind. But in any case, to reconcile feelings with thoughts, to recognize feelings with logic and align them, like each has to double check for me. like if my feelings, yes, I'm a big feeling person. The most important things in life for me are what? Inspiration, love, you know, what is it about? I mean, what are you doing it for? But at the same time, to be able to get there, logic and be able to express oneself and, you know, in algorithms or so is a good thing. So when they're aligned, It's kind of a double check and it works at both levels. So I think that's most important.

When you doubt a decision or maybe just a moment in your life, personal or business related, doesn't matter. When you're in doubt of something, what is your personal mantra to get you back to a kind of a centered aligned place where you can make better decisions?

Well, on the doubts, the question is always like, how big of a deal is it and what is this type of bet and so on? and little doubts, no, okay, that's no big thing. Life and death decisions, those kinds of things, those are the big questions. And what I realize on those is doubting is part of that process. You can only be sure a certain amount. How do you get to the best triangulation? in other words, take in from the smartest people and your own thoughts and so on so that you are making that, understand how reality works, and then try to make sure that none of your decisions are the ones that knock you out of the game. In other words, I've got an expression for people who work for me, you can scratch the car, but you can't total the car. I, you know, you could so realize, okay, you don't win it all, you, you, you know, you, you make your best bets, but don't have the one. So you have to eliminate the, the killer ones because you have enough killer ones and one, and odds are one of them is going to get you. Right. So, so, you know, I approach it basically that way, you know, try to make the diversification, try not to have any killer eliminate all of those unacceptable and then go for the upside and doubt. But, you know, I'm used to doubt. I doubt, you know, there's, there's everything. Every time you put on a position in the markets, for example, I am never sure if it would be easy if I knew. So there's a lot of doubt. Right. So, so doubt is part of it. But, you know, don't have, don't put yourself in a position that you can have unacceptable.

Where you go, bro.

Being ganged around a little bit is okay. Yeah. Right. Okay.

So how do you have confidence when you're doubting yourself and you're like, I think this is going to do well based on all the math and historical evidence and feelings? How do you have confidence when you, you know, place that bet?

I have enough bets that I make the bet so that none, no one of them, and I won't allow anyone that'll kill me.

Right.

And then I raise and I'll typically only want to make bets that I feel good about and I will have them stress tested my bets by having other people stress test it. So yeah, just imagine, I don't know, you're playing a chess game. Okay, now, okay, maybe you're a chess master, but okay, what are you going to do? You have to still make a move. So okay, what's the best thing to do? Now imagine you could ask the best chess masters in the world what you do and think about the pros and cons and and make your decision and just not make it that also when it's going to knock out of the game. So it's that.

You mentioned a team going through the jungle with you and supporting you, whether it be mentors or hiring, how have you learned to bring together this great team that you've assembled where people are going to disagree with you? It sounds like people are going to have different thoughts and be able to free to disagree with you on certain things. How do you know when the disagreement becomes toxic? When you can look at it from a point of view of like, okay, I need this disagreeing thought, but when does it become toxic where you actually need to let go of that person in your life or on your team?

Well, what's so interesting to me, I think, is that immediately your question about the disagreement is toxic. That's the first thing that people go to. Somehow they think, disagreement is toxic. And supposedly it's because the part of our brain, which is the amygdala, which is this fight or flight, takes disagreement as the equivalent of a fight. And so it anyway gets triggered that way. Now, instead, imagine it's a curiosity. In other words, I view it as a curiosity. I mean, I could tell if somebody's wanting to disagree with me or I'm disagreeing with them because I want to hurt them. I mean, that's a different thing. If you want to hurt them, okay, then that's a different thing. But I mean, like, disagreement should be a comfortable thing that prompts curiosity and so on, and mutual respect. Like, how could I ever get along with you if I couldn't disagree with you? I like how many times you know, I mean, you're gonna disagree. Like, you might one thing another. Then that's the beginning of trying to find out what's correct and the path. So a good partner is going to disagree with you and you have to get past it. So the fact that you're asking that question the way it is, which is a normal question that everybody would ask, so reflects the fact that there's a hesitancy for disagreement, like it's a bad thing and it's a fight and it's nastiness rather than. just a disagreement that needs to be figured out.

And how have you personally learned how to disassociate the maybe personal attack against your ideas or your position on a stance of whatever between someone personally attacking you and just, oh, this is a curious idea that they have. Let me ask them more about it. How have you learned how to do that? And what advice would you have for others?

Well, first of all, I learn by it because it, you know, like it works. I mean, you know, like, I'm afraid of the opposite. And how could I have. It helps my decision making. It helps our relationships. What are they going to do? Bottle it up and I'm going to bottle it up. Is that smart? I mean, you know, that. That sounds stupid to me. You don't even know what's true. You can't figure it out. so everybody's confused because nobody knows what each other's really thinking. And then also, like, you know, you won't get to the right answer. And, I mean, that just is too stupid a path for me, for me to do it. It's too risky a pass. And it's so much rewarding, so much more rewarding to do the other.

Right. Have you always been like that, or was it until you went.

Well, I think what helped me get that way was. the markets, okay? Because again, what happens is, you know, there's just being right or wrong. There's just a winning or a losing and, okay, so just imagine, you know, it's like being a trained monkey. You know, like what works, okay, should we push a button? Should we push the button? Okay, okay, yes, okay, it makes sense. Okay, push the button. Is better than, oh, I'm gonna push the button, push the button, whatever it is. Okay, no, I don't see it that way. Okay, let's figure it out and so on. And then the scorecard, I think probably had the benefit of that kind of notion. I got a scorecard. Okay, I don't know, like I'm not sure. Okay, bring it on, please stress test me. Oh, that's great. We're good partners. So that to some extent, I think played a role in my types of experiences. Maybe if everybody had a scorecard on all their decisions and then was being able to experience essentially, you try it one way, you try it the other way. and you start to see what's better and you get punished one way, you get rewarded the other way. Naturally, you want to go in the direction you get rewarded. Right.

So you stop thinking, okay, my way is the way. You start basing it based on data and scorecards.

Isn't that so stupid? My way is the way. I just want to make the right, the best decision possible. I don't care where it comes from. Yeah.

But did you, at one point in your life for a period of time, were you committed to your way and thinking that you had the answers?

Well, I, I, like I say, I think before that 1982-ish incident, I probably was a lot more. Okay.

Yeah.

Okay. You know, I think it's right. And what I think is right. And I'm a smart guy and so on. So I was like, you know, you that life is a good teacher. Just a good, you know, like two by four in the head, you know, and you got a couple of those and. you know, pain plus reflection equals progress.

Yeah. What is thoughtful disagreement in your mind and how important is that in this moment, especially with the, this political unrest and economic unrest and just everything? How do people have thoughtful disagreement as opposed to kind of toxic disagreement?

Well, first of all, they, you know, they got to want it, but let's assume they want it. you know, then there are three things you have to do, basically. First, you have to put your honest thoughts on the table and have the other person put their honest thoughts on the table. Okay, so now you know what you honestly think both sides. That's great. Then you. Then there are protocols for disagreeing. Well, you know, I wrote a bunch in the. In the book. Yeah. Yeah. and like I could go through some of those types of things. There are certain exercises that you could do. You know, I have a two-minute rule. You speak with two minutes without the other. You start to think, are you blocking? You have a mediator, maybe. In other words, somebody, when you're disagreeing, if you can't disagree, say we mutually agree that this person will be our mediator. and, and will, or, and, or maybe to the judge, they'll decide. Maybe it's a group that decides that. But in other words, you have a protocol for disagreeing and then, and then deciding. Sometimes in that disagreement, hopefully you both learn a lot and you may reach an agreement, but you still may not have an agreement. But then you try to say, what's the best protocol for moving fast that disagreement? You know, like a, you have a judge and a jury and they have a case. And anyway, do you have good protocols? So you have to have three things. You have to put your honest thoughts on the table. You have to go through processes that helps to reach the right answer depending on how serious the question is. And then number three, you have to have a way of getting past that decision and moving on. I have a basic view though, when there's any disagreement or anything that's not going well, stop. Okay, pause. Don't just keep banging at each other.

When it's escalating, when people are yelling at each other.

Just pause and sort of go above it and say, what are our ground rules for disagree? How should we be with each other? and you turn your attention rather than to the argument at hand, but say, okay, if I think this and you think this, how do we do this? And then once you agree, okay, then you go back into the argument, and then you follow those protocols, because half of the problem is that people just don't even agree, know how to disagree. But if you do it that way with those protocols and so on and you get past your disagreement, it's great.

Yeah. I want to talk a little bit.

About the answer to your part two of your question.

Yeah, go ahead.

The greatest problem of mankind, I believe, wow, that's a big statement, the greatest problem of mankind, and it is an exceptional problem at this moment in time, is people having opinions that they're stuck on that they won't, you know, like, I have to have my opinion and that's right and so on, because it prevents them from resolving it, from moving forward to finding the best answer, from compromising and or doing, you know, so, like, everybody's arguing over everything and and they, and, you know, they're, it's almost like they're killing each other. And, and we're in a society, you know, I have another principle, which is when the causes that you're behind are more important to you and others than the system, the system is in jeopardy. So do you, are you just literally going to go fight? So here we are as we think, Will we fight or will we have protocols for having thoughtful disagreements and getting past them?

That's why I love your principles and protocols. In your opinion, how has this last couple of years been in the history of investing for you, in the history of the last 40, 50 years? Is this a really, really bad time? in your lifetime? Or is this just another bad time, but not greater than previous bad times?

You mean in the world?

In the world.

Yeah. There are three things that are going on now, the three most important things that are going on to great extremes that have not existed since the 1930 to 45 period.

Okay.

And it's important to know those three things and then to understand them well.

Okay.

The first is what is going on with money and credit when you get to something like a zero interest rate and you need buying power, the government needs buying power, but they can't tax it and they can't So, what we have is the production of a lot of debt that the central bank prints money and buys that debt to spend. And the last time that happened, in the last few years, it happened starting in 2008, interest rates hit zero. They couldn't lower their interest rates. So, they had to print a lot of debt and the government went in and bought it. and we're coming to the end of a debt cycle. Okay, so this is a big thing, like because where does the money come from and who will get what? The government will now determine that and then they'll print it and it'll devalue money. Okay, this is, and how money flows, a big deal. So that's number one. The second one are wealth and political gaps. that are causing great conflicts. Throughout history, there's always been the main things that everybody's always fought over is money and power, particularly political power. So what we have is a situation when you have a large wealth gap and you have an economic downturn, particularly if you put a lot of debt having at the same time, you have a fight. I mean, that's been true through history. And it's reflected in the political gap. So the political gap is, you know, it's classic political gap, left, right, you know, okay, capitalist, socialist. How do you distribute it? How do you, how are you going to deal with that? That becomes the other. And how you fight, so that's the second of the two, this wealth political gap that's causing the conflict. And it's coming at a time where we don't have much money because we don't have a good financial position. We're printing and then putting it out.

So- We're still paying off debt still, right?

Yeah, but with made up money. Meaning what happened like COVID was such a good example. okay, you have COVID, and a lot of people and companies had falls in their income that would be ruinous. Okay, if checks didn't go out, we would have had a revolution. And so those checks and how do you save everything and so on, okay, so, and it's not like the government had real money. Like they didn't have any money. They already owe a lot.

So they just printed more money to.

Give the- so they made more debt and then the government and the Federal Reserve printed it and the checks went out, which diminishes the value of money and so on and changes things. Yeah. So then the third thing is the rise of a great power to challenge an existing great power. So the rise of China, to challenge the United States. In all history, there are world orders. What that means are, you know, they're the dominant power. You know, it's like in nature almost, you know, the big bull or something. Anyway, there's the dominant power. And then what happens is in 1945, we entered the American world order. We, the United States won the war and it, it ended. And then in 1945, the, the winners of the world carved up the war world. We had 80% of what was considered money at the time, gold, 80% of the world's money, essentially. We counted for half the world's economy, and the rules were set in the United States. Basically, that's why the United Nations is in New York. the World Bank and the IMF are in Washington, DC, because we began the American century. Okay, that's, and then we are now at a time, we've never had somebody, another power challenges us in the same way. There was the Soviet Union, but they were always a fraction of the size economically, so couldn't compete on that same basis. They had nuclear weapons, but they didn't have the economic power and so on. But now we're dealing with China coming on as a power. I spent a lot of time in China over the last 36 years, by the way, and I admire how they're doing a lot of things. I mean, I know it's controversial to say that, but in terms of like, they're a power. Whoa, like since I started going there, their average income has increased by 30 times, you know, so they're a comparable power and they're also growing faster. And so that has an effect. So those three things are things that never happened in my lifetime before, but happened before in history, which led me to do the studies of, of what happened in history and the lessons I could gain.

What is that? those three things, money and credit, wealth and political gaps and the rise of China. What does someone like myself or some 30, 40, 45 year old 20 year old, what should they do with that information? What should they be aware of? How should they apply it? Does it apply to people in America, General America, or is it only applied to the wealthy? What should we be thinking of?

No, it's a, it affects Everybody, you know, it affects, like we know, let's start with ourselves. Most importantly, forget about the outside thing. Can we be healthy and strong? And what do we need to do? Like to know that you have to be in it together. Like if we can row in the same direction, okay? If we can have thoughtful disagreement and get past that, if we can be in it together, like the wealthy and the poor. And if you figure it out, and I know it sounds so difficult, but at the same time, if you read history and you see what happens when it's not, when you have a civil war, like we could be on the brink of a civil war. That sounds so crazy, but the truth is, in most countries and in almost every century, there was a civil war or a revolution, some form of civil war or revolution. So it's almost inevitable that we're gonna have something, okay? You either resolve it or you start fighting so badly that you really do talk to each other.

Until you resolve it, yeah.

Well, once you cross a certain line, There's no coming back, okay? Because you do the damage, you demonize, and that person's such an enemy or that class of people is such an enemy that the communication's gone and the fight, well, you see this in politics today. In other words, is there a respect for the system and a mutual respect of trying to fight find resolve these types of things? Or will they go to any lengths to win? Because a constitution or law will only carry you to so far, okay? There has to be an element of respect for it, right? If you think about the presidential election, it's quite something that we as a country, as a people, When somebody might win the popular vote, somebody else wins the electoral vote, there's not even an argument. In other countries, you might say those who had the popular vote would say, what the hell? I've won the popular vote. I think it matters and somebody says electoral vote and so on. Okay, there's not a question about that. Okay, now when you start to say, okay, is it this vote, that vote, or this thing or that? How far are you willing to go to fight and does the rules matter? When you start to get across that line and you do harm, you hurt and you alienate, then you go to accelerate this process. And people should know what that looks like, how terrible it is. So maybe if they know what it looks like and how terrible it is, and they can empathize a little bit, But I see people don't see it. I'm living in Greenwich, Connecticut. Connecticut has the highest per capita income in the country, and it's got the largest wealth gap. Most of the people in Connecticut are pretty poor. Really? I mean, some cases, very poor. Oh, I'll give you an example. This is the community my wife works to help, high school students. 22% of the high school students in Connecticut are either disengaged or disconnected. What that means is disengaged means they have an absentee rate which is greater than 25% and they're failing classes.

They don't show up to class.

That's right. They show up three quarters of the time and they're failing. Or that's disengaged. Disconnected is they don't know where they are. They've dropped out of school, 22%, one in five. So school is not working for them. And they're in desperately poor areas like, okay, we have the coronavirus. And so her efforts and our efforts are philanthropic. That's what got her involved. They don't have computers. They don't have connectivity. They have problems getting food. They get food in school. they need the food in school because they don't have adequate food. Okay? And this is Connecticut, and it's right up the road. So we had to, we bought these kids, 60, 000 kids, computers, and then we're trying to get connectivity and so on. And you start to see this. Okay? This is the same world. Now, I, so I live in one area. neighborhood with my community, and then there's the other. They don't understand each other. They haven't lived there, they haven't empathized, and in fact, there are resentments on both sides. Right? Like the people in my community, they don't feel that they're very rich by comparison to those other people, but also to take care of their families, to educate them, They have their own challenges, the work-life balance and so on. They have their financial insecurities and so on. So that's what they're focused on. And then they might think, oh, these other people, they're not taking care of themselves. Why don't they pull themselves up by the bootstraps? Do you know what it's like to be a kid growing up in that neighborhood and trying to, what are you talking about? You can't pull yourself up from, I mean, you know, there's a problem. There's not enough food. There are gangs. They even are walking to school, past neighborhoods that are gang shootings and you can't and there are not enough police to do it. Okay? So these two worlds exist and then the others say, you know, well, here we are and you're walking around with your fancy cars and your, you know, fancy clothes and so on and we're suffering. I mean, come on. And so they don't understand each other and so on. We have to get past this. We have to be in it together, I think, otherwise we're going to kill each other.

How do we- what's the main thing that both sides need, whether that be in Greenwich, Connecticut, or in the USA on different sides? Is it empathy? Is it compassion? Is it awareness? What is that thing that both sides need in any rich-poor dichotomy?

Well, there's the intellectual thing they need and the emotional thing they need. okay, intellectually, what they need is, or maybe emotionally, the fear and the understanding that where this will lead will be devastating, okay, if they don't deal with it. If they don't deal with it together, and you look at history, you need the fear. You can't give people necessarily empathy or love. You know, we could say, oh, they should care about the other person. Okay, that's too much to ask. I mean, yeah, you know, that's not realistic. Okay, but realistic is that you, if you don't, if we all don't get it together, we're gonna have, you know, you like all that stuff you got, but you ain't gonna have it anymore. and all of a sudden, the things that are the most basic in terms of take care of it. And then if you start to realize that it's productive, like if you, if what do you need to be successful? That's all I had when I grow up was I had parents who loved me and took care of me. I went to a public school, okay? And I came out to a world in which there was equal opportunity. Those are the only things you need. And, you know, health care, but when you're young, you don't need much of that. So those are the only things you need. Now, even in these communities sometimes you can't get the parents, but you can get people who care about them. They're teachers and so on. But you have to try to strive for equal opportunity.

Do you think we have equal opportunity?

No, of course not. Let me look at any of the statistics. I mean, I can give you examples. I studied this issue because first we, when populism started to come around, and I thought that was, I needed to study Donald Trump as a populist. And so, and then it's all around the world. And I needed to study then the different quintiles, the 20%, next 20%, so on. And I saw what the pictures of the lives of the majority of people are like, the bottom 60%. And equal opportunity, no. Put that in perspective. Those in the top 40% spend on average on their kids' education five times as much money as those in the bottom 60%. It's a self-perpetuating thing. It's not a bad thing. Those parents care about having their kids well educated. So because they do and they take care of their kids, they're taking care of their kids, they're getting them well educated and so on. But not being well educated means you're not going to have equal opportunity. And so as that gets narrower and narrower, you have that phenomenon that you, you know, so there are a lot of ways you can measure whether there's equal opportunity. If we, if, but I don't even know we can agree that we should have equal opportunity. I mean, like, I, I'd almost take a poll, you know, of the American people and see, could we agree that we should have equal opportunity? Okay, that would be an accomplishment. Okay, then if you could do that, then we say, can I take measures, metrics? by which key performance indicators, by which I could say, how are we doing on the equal opportunity goal? And then monitor that and you say, ah, it's getting better or ah, it's getting worse. If we could do that, we'd accomplish a lot.

Yeah, we gotta get to that point first. This is fascinating. I'm curious about the mindset of making money. And there is a massive wealth gap. there are people that who are making money and some that seem to be making more and more money and others that are always seem to be stuck in the ability to make money, to save money, to invest money. They always seem kind of trapped in not making it. What would you say is the mindset that wealthy people have around making it and growing their money for them versus the mindset of people that stay stuck? in not making it?

Well, I want to distinguish there's big differences in opportunities.

Yes.

So let's say, supposing you have two people of comparable opportunities.

Yes.

And then they were going to do that. Okay. The marshmallow test, as you know apparently, is you take a kid and you say, okay, you can have one marshmallow now, or you could have two marshmallows in 15 minutes.

If you don't eat the first one, yeah.

If you don't eat the first one, right?

Yep.

Okay. Once you start to realize that deferred gratification is going to make you better and so on, and you start to count and you say like something like, How many days, weeks, months, or years can I live if I don't have money come in? And you start to focus in on that. That's the first step. Okay? Like the marshmallow test. Okay? So I want to save. You got to start there. Then if you do that, you're necessarily going to go save in what? and then you'll start to get exposure to how these things are different. Okay, then you start to care. I can have one of these and one of those and you start to experience and then you start to learn and basically that's what makes the difference.

That's it. So first having the ability to have delayed gratification, Then obviously diving in, researching, testing, and trying different things. But the more and more you can say you don't want something now for greater later is the essential key.

Well, and what it does then when it comes to the money, that means money. Yeah. Now at that moment that you don't want it, you have savings. That means I want savings. Okay. Now, You got savings. So the next thing inevitably that's going to come at you is where do I put it? And then you get your choices and then you experience it and you learn, right?

Al: yeah, because there's lots of places to put it for investments. There's real estate, there's stocks, there's building your own company, there's different places to invest. What have you found are the top places that people should be investing?

Well, I think first you start with one of the most important things that you're closest to, like, is it your business? First, calculate how many days, weeks, months, or years you can live on your savings. Because when you do that, you'll start to, you'll gain security, you'll gain that, okay? So look at how much you're spending, okay, and then say, how much do I need? And whatever that number is, you're going to need more than that because it may go down rather than go up. So, okay, now do I have a year's spending? Okay, so I think you start there. Then you start to think, what are the things that are most important for me? like, and then you start with your business or your residents that have a symbiotic relationship and that you know well. Let's say if you start with your business, okay, you're closer to that investing in yourself with whatever that may end up being, that may be your best investment.

Not real estate, not stocks, not the market.

Well, it depends if you're doing something where you can do it yourself and that's the thing. But if you're in a job, that's not the thing. Because you're in a different position. Okay, but anyway, if you... And then I really think there's something good about your home, a basic thing about your home because it's nice forced savings. And it also means that you fix it up, you're saving, you find out there's, oh, well, if I add this thing or that thing, and you're enjoying it. So when you're enjoying it and you're controlling it and it's yours and so on, that's pretty good. And if they keep mortgage tax deductions and so on, there might be some benefits. to it also, okay? But that's not a black and white answer. You know, so you could take a sharp pencil and say, is it better to rent or buy? Okay, that's a different question. Maybe I said, but by and large, am I gonna move? You know, all of those other questions. But so when you start with, okay, what is it that's close to home and how much? You need a certain amount that's liquid. In other words, you got it in your house, you got to make a mortgage payment or something and all of a sudden, you're, you know, it's not liquid and you lose your job, well, that can cause you trouble. So how much do I have that's liquid? How much do I have that's not liquid? Okay. And you start to get those things right. Okay. I've got enough liquid. I got enough, okay, not liquid and those other things. Okay. pretty soon you're, you're getting yourself in good shape. Yeah. You do those things, you know, you're pretty much in good shape. And then you're also having some experiences, and then you go beyond that, you know, and then, so you start to, okay, what, you know, okay, what's a stock? What's a bond? And then, you know, you learn through experiences. I learned through my, my experiences. I started when I was a kid, 12, I used to caddy, and I took my caddying money and I put it in the stock market. And I was lucky. What happened to me, by the way, is I took my caddying money and I bought the only company that I ever heard of that was selling for less than $5 a share. And I thought that that, you know, well, I was really dumb. I thought, I'll buy more shares. So if it goes up, I'll make more money. And it was the only company. It was a company that was about to go broke, but some other company acquired it and it tripled. And I thought, ah, this is an easy game. And I like it, easy money. But you experiment and you learn.

You're a very philanthropic individual. You and your wife, your foundation, your company, you give back in a lot of ways. Some might be through donations, like computers, some might be through financial, some might be through just your work and your content on LinkedIn, which is amazing. I recommend everyone subscribe to on LinkedIn. The content there is amazing. You're giving back in lots of ways. I'm curious, what's the greatest gift a rich person or someone with money can give someone who doesn't have money?

To give the knowledge, teach a man how to fish is better than to give them a fish. I mean, I think you can give them both. You can give education and you can show but ability, the capacity to be productive. Because, you know, if I can give you the capacity to go out in the world, it's like go into a jungle, I give you a knife and can you live in the jungle? Okay, if I give you that capacity, that's the best thing I can give you. That's why I wrote the book and, you know, pass it on. I wrote those principles over years. and I wrote them down and that's what I want to pass along. That's the most important thing. But if you've got money, you can help people a lot in a lot of different ways, which is thrilling.

What would you say then are the three greatest skills that people that aren't financially abundant or that are struggling financially should learn to master in order to be in a better position financially? Three skills, what would you say they should learn?

Well, as I said before, I remember watching the movie, I was young, David Copperfield with WC Fields, and he speaks to David Copperfield, and he says, he said something like, and I'll put it in dollar terms, you're at $100 and you spend $105, that's misery. If you earn $100 and you spend $95, you'll have a good life. I mean, and what wasn't exactly like that, but it was, but basically, I know so many people who don't earn much, but are there. Because if you start to think about what it is that it costs you to live in terms of, let's say, the basics, you know, give me a bed to sleep and give me the food, let me be educated and so on and so forth. I think most people can get themselves in a position where, you know, they're net positive. So if you can be net positive and you could do that, that, you know, that's number one, you know, as I carry that. So that's, you know, that's number one. Then I guess it was the list that we went to. The second is, what do you do next in terms of what do you need? What do you invest in? Going beyond it. And then avoid the following mistake, the most common mistake of investing, thinking that the investment that did good is a good investment. People rather more expensive. The things quite often, those markets that did really, really well became more expensive. And everybody, smart money, is all the time comparing them and competing. So what happens is the naive money buys the thing that was hot. or is hot. The thing that has been terrible, which might be the thing that's beaten down. So I would say also an important element. Okay, so here's another one that's really important. Diversify.

So don't put all your eggs in one basket.

Right, because what I learned about this is that, first of all, all investments compete, and it's not easy to sell. tell whether one investment is better than the other, because if people could do that, life would be easy and everybody would make a ton of money. And this is a competitive game that's very difficult to compete in. So it's very difficult to say which one's better or worse. You could take experts and do all sorts of tests, and you'll find out that they can pick that and you can't tell whether the worst ones are going to be better. So because of that, you understand that even picking the best ones is difficult, and particularly if you're naive, like we spend hundreds of millions of dollars each year on research to try to give us an edge. Now you've got to compete with us. So competing in the markets is more difficult than competing in the Olympics. You wouldn't go think I'm going to compete in the Olympics. but there are more people who try harder in order to do that. So it's a zero-sum game. But diversification that they're different will reduce your risk without reducing your return. So if you know how to diversify well, so that's critical. So I would say again, get your savings right and the reasons I say, I would say have great humility about what you don't know. Don't buy the thing that was hot just because you think it's hot. And then know how to diversify well. Those would be the most important things I could convey.

I love that you talk about the sports analogy, the Olympics. You're speaking my language now as a former football player. some of the greatest quarterbacks seem to get not too high. They get excited, but not too excited and not too low when things go good or bad. How important is that skill to be emotionally resilient on both levels, high and low for you? How important is that skill?

Yeah, it is one of the most important things possible. and it's not easy to do. So I needed to, you know, do two things. I found that by writing down my principles and the rules and then testing how they would have performed over time, and that's where the algorithms came, so that I can basically, just like a machine, play it Click, click, click, click, click, okay? With execute the game plan, you know, don't do it because I know what the experience is like. The experience is like you're wrestling around with it, you're losing money. The day you put on a trade, it doesn't go either straight up or straight down. It goes against you. So now, I don't know, you're losing money. Okay, how much should you lose? what's your game plan? You've got to know your game plan and stick to the game plan and you can't be shaken out and yet the emotions are going to cause you to doubt yourself and plus it brings you stress and all of that. So you have to execute a game plan that's very well thought out, right? Then over time you start to develop some better instincts. Like if you're excited and you're going along, Be scared. You know, if you're doing something you're really worried about and nobody else is doing it, maybe good. Don't be dissuaded. See, the markets are very different than consensus decision making. It's counter consensus because the consensus is built into the price. So if everybody loves something, it's expensive. And if everybody hates something, it's cheap. so where most people say, ah, this is like, oh, what a great company. Okay, Amazon is a great company. We got Amazon's a great company. Who doesn't got that Amazon's a great company. Okay. And then, okay, I'm gonna go on Amazon. Okay. But if everybody's got that, it's a great company and it becomes increment less great than they anticipated. Bam, that baby goes So, you have to start to develop some of those instincts or a game plan.

And what financial advice would you give to millennials who don't have these tools yet besides obviously getting your book and starting to practice some of these things? But I feel like millennials are overspending more than ever. They're uneducated on finances and personal finances. What advice would you have there?

Pay attention to the feedback you get from the realities you encounter. Okay? I mean, you know, pain plus reflection, you will get the pain. Pay attention to it, listen to it, because you're going to get the pain.

Yeah. And do you think it's you have the wealthiest friends in the world, you're friends with some of the wealthiest people in the world? Do you think it's easier to get wealthy? Wealthy? or stay wealthy? Which one is harder to do? Get there or stay there?

Stay there is definitely harder to do than get there. Getting there can also be like, has a certain element of luck. You know, I was in the right place at the right time. I held this thing or bought it, or I am at that company. I'm working at that company. And, you know, all of a sudden it goes from this to that and, you know, holding on to it and it goes. Okay, that's oh, wow. Okay, it's winning the lottery kind of thing. Okay, do that again. Okay.

And then again.

And then you do it again. And can you make the thing work over and over and can you hold on to it and so on? Yeah. Because that's where, you know, it's like, Well, using your sports analogy, right? You can luckily crack the bat and, you know, I mean, or whatever, the Hail Mary pass and so on. When you have to do it on an ongoing basis regularly, that's the test of talent and that's harder. Yeah. Yeah.

I want to respect your time, Ray. I've got two final questions, if that's okay with you. We might go a minute over if that's okay with you. Before I ask those questions, I want to make sure people get your book because this is Decades of Wisdom. One of the greatest mentors financially you'll ever meet is right here in this interview. And this book is Decades of Wisdom from testing pain, pain after pain, trial and error, and incredible lessons from Ray's mentors that he's learned from. and applied in his life over and over again with an algorithm approach to life. And for me, the thing I love about this is it's so much about emotional intelligence from what I learned in the book. A lot of it is understanding yourself, understanding people, understanding emotions, which is one of the reasons I created the School of Greatness was to create the tools for people that they didn't teach us in school. They don't teach us how to be emotionally resilient, which is something you've learned through. You put a lot of money in something and you lose it. You got to learn to be emotionally resilient. So Make sure you guys get this book. Also, follow Ray on LinkedIn. Your LinkedIn posts are amazing. A lot of bite-sized information from the book there. And so go follow you Ray Dalio over there on LinkedIn, Twitter, Instagram, Facebook as well. All Ray Dalio and principals.com has incredible content and information there. So if you want a more mentorship from Ray, then you've got the information. You've just got to take action on it. you also have a, I don't know if you're talking about the personality test, but this is coming out in a few months.

Let's talk about that.

This is a test that I took that you've been developing for years with behavioral scientists and researchers on how to understand the people that you're hiring or working with or people in your family and your life.

Or yourself.

Or yourself. So you know what you should be taking action on or creating in your life, what you're good at and things like that. I took this test. Powerful. I've taken a lot of personality tests, but this is probably one of the best and most accurate. That's going to be coming out soon so they can get on your newsletter.

List or what should they- yeah, by the way, it'll all be free.

Amazing.

So, but yes, if you go to principals.com, you can- you- you'll see the information there.

If you're following Ray anywhere on social media, I'm sure when it comes out, you'll be talking about it. They'll be posting it online and in your newsletter. So make sure to subscribe to that because this test will help you understand yourself better and make better decisions in your life and also the people around you. So, and I didn't know it's gonna be free. So that's amazing. So it should be out here in a few months. Make sure you guys go to principles.com to check that out and get access to it when it comes out. Two final questions for you, if that's okay. Yeah. Number one, this is a hypothetical question I ask all my guests at the end. It's called the Three Truths. And I like for you to imagine that you get to live as long as you want to live, Ray. But for whatever reason, it's your last day on Earth. And for whatever reason, hypothetically, all of your content, like your book, your social media, this interview, your videos, for whatever reason, you got to take them with you to the next place. So no one has access to your content anymore or your principles. But you get to leave behind three things you know to be true from all the lessons you've learned in your life. and what I like to call your three truths that you'd share with the world. What would you say would be those three truths for you?

I guess I would relate it to what I would say before about the principles, which is that life is a journey, an adventure that is an arc. It has a life arc and to know how to play that well, to have principles that you believe in and that you related to that is that knowing how to deal with what you don't know is more important than anything you know. And that I think the most important thing in life is meaningful work and meaningful relationships. if you love your work and you have a passion that you're pursuing like you do, and you have meaningful relationships, either in that work or beyond that work, there's nothing richer. You can't get a better life.

Those are beautiful truths. Thank you for sharing those. And before I ask the final question, I want to acknowledge you, Ray, for being an incredible giver in the world, because if someone who is one of the richest people in the country, in the world, you've accumulated so much, but you're wanting to give so much back now. And I really acknowledge you for that, for your service.

But it's a pleasure. I think, like, I'm not going to do anything, just so you understand, I pay people, yeah, pat on the back and everybody says, okay, thank you and whatever, so on. But the truth is, there's an evolutionary process. You take care of yourself and so on. And what do you need? and then there's an increment of, like, how much? Okay, you Heap on yourself versus you look around you and you start to see what's needed and so on. And so there's a natural Evolution, I think. I think most people would have that kind of Evolution, so I don't think it's such a big deal.

Well, not everyone has that. There's some people that just continue wanting. focus on themselves and their ego and the fact that you don't need to write a book and share all this stuff. This probably took a lot of time and energy. You could have kept just doing your thing, but you're providing this, you're providing free tools, and you're taking the time to show up for interviews like this and share your wisdom, which a lot of people don't have that wisdom.

So, well, let me ask you, why are you doing your School of Greatness?

My mission is to serve humanity at the highest level.

And.

I'm doing it from a pain. if I think about it because I felt very insecure as a kid growing up. I felt like I didn't have the tools to manage my pain emotionally, physically, mentally, financially. And I wanted to learn for myself by interviewing the greatest minds like yourself and then create a platform to share the wisdom for free to people. So for me, it's a selfish need, but also how can I impact the most people with my personal needs as well?

We understand each other. I get it. I mean, so right. So it's your selfish need that brings you so much joy so we get each other, right?

Yeah, exactly. Exactly. Well, I appreciate you. I acknowledge you, Ray, for showing up. And my final question, because I know I'm a few minutes over now, is what's your definition of greatness?

Greatness is self-actualization. I think it's evolving well and contributing to evolution.

I love it. I'm very grateful for you sharing and I'm grateful that you've evolved well over the years so that you could share this wisdom with us. And when you have your next book in the future out, hopefully we can have you back on and share some more great wisdom with our audience. But thank you.

I look forward and thank you for doing this.

Thank you for your time and all your inspiration. Appreciate it.

My pleasure.

My friend, thank you so much for listening to this episode. I got so much value out of this. Just getting to sit down and ask some incredible questions to Ray and hear his responses about how he takes his thinking to the next level in every phase of his life. So powerful and profound. If you found value to this, click on that subscribe button on Apple Podcasts right now for the School of Greatness and leave us a rating and review. you would love to hear your thoughts over there. Also, share this with a friend. You have the power to transform someone's life today and help them improve their life by sharing them this link and this episode with Ray Dalio. Just send them the link lewis.howes.com/1042 and also tag Ray Dalio over on Instagram and social media and check out his book Principles as well. Truly impactful for my life and my business. And if you want inspirational messages sent to your phone from me every single week. I send out inspiring messages to remind you of your greatness. Just text the word podcast right now to 614-350-3960. Again, podcast. Send me that word right now to 614-350-3960. And I want to leave you with this quote from Steve Maraboli who said, the universe is so well balanced that the mere fact that you have a problem also serves as a sign that there is a solution. I'm so grateful that you decided to show up today and help solve the problems of your life and create more meaningful solutions so you can find purpose, love and abundance in everything that you take on. And I want to remind you, if no one's told you lately that you are loved, you are worthy, and you matter. I'm so grateful for you. And you know what time it is. It It's time to go out there and do something great.