“People DON’T KNOW What’s Coming!” Prepare For The CHANGING WORLD ORDER | Ray Dalio

What do you believe will happen if we don't prepare for the changing world order then?

What we have left our generation with is debts, a broken down infrastructure and fighting. So, I mean, the answer is... For.

People that don't know what the changing world order is or why we should be prepared for it, is it really these main three things we've talked about the first one, is it Is that what it is, or is it something bigger that we should be worried about or concerned about?

These produce big things, like financial crises or civil wars or external wars. So, we should be concerned about those things.

Yeah.

So we talked about the financial, the second one that's happening in a way that never happened in my lifetime before is the way we are with each other in terms of internal conflict that has created a polarization, which is a win at all costs mentality. mentality.

Is this nothing that you saw when you were growing up?

Oh, no, no, no. It was not like this. And I measure in the book a lot of measurements. Okay? I could tell you that the amount, but you'll see in there, the amount of political polarity and the amount of compromise. The amount of political polarity is the greatest since 1900. The amount of compromise is the lowest it's been. It's measured by how people will cross voting across party lines. There are two monoliths and they're at war with each other. And we have populism which is you have to get on one side or the other. Okay? And so when the causes that people are behind are more important to them than the system, the system is in jeopardy. So you see this reflected right now in the politicalization and ideologies out of war. You know? Yeah. And I'll give you lots of examples or I'll give you a few. The risk of neither party accepting losing the elections is high, is significant. Right? How does that work if they don't accept losing the elections? Okay? The move toward power dynamics, let's say a good example, will be, there is a couple of Supreme Court rulings that are coming out related to abortion and gun rights. It would not be surprising to me if those Supreme Court rulings are not followed by some states.

Interesting.

Or another good example would be, so.

Essentially saying we're passing a law, but then the state's saying we're not going to abide by the law. Right.

And you're seeing it's hard ball. It's hard ball. It's like Governor DeSantis of Florida and Disney. Ordinarily there is, okay, we do it by fighting each other and what kind of power, testing each other's power almost to hurt each other. And so, the idea of democracy is compromise and reaching across that the law and the rule is of a higher purpose than anything else. But when you get other things that are more important to people that they're willing to fight for, then you get greater and greater and it's self-reinforcing because moderates Arpu people who want to work across party lines and so on and compromise are through history, through the French Revolution, Russian Revolution, Chinese Revolution, or these are civil wars. In all of those cases, the moderates are either they're hurt or they're disposed of. and you have to pick a side.

Really?

Well, but you're seeing this now. You're seeing right now that the political parties are united in one way or another. There's not much. And you better pick a side, because that's what it's like. So that can have an impact. important consequences in terms of conflict. In other words, it's power. And that's happening not just internally, and it's certainly happening internally, but it's happening externally too. But internally, there's a dynamic that is going on in which the ideologies rather than normal economics that we're used to, normal politics and normal economics rather than that, the ideologies are dominant. So for example, you think about that when Elon Musk buys Twitter, the decisions he will make regarding Twitter will probably have a greater effect on our society than the decisions the Supreme Court makes.

Wow, that's crazy.

Right.

What's your thoughts on that? Him buying Twitter and doing what he's going to do?

That it's a reflection that it's one of the symptoms, like DeSantis and Disney, like tax president, like the Supreme Court, whatever. It's one of the symptoms that the ideology that I'm fighting for the power that I have, that it's not normal economics in the usual way. There used to be normal economics was, it's all just kind of almost you don't care about ideologies or something. You're just getting an ROI and that the system will be better off if we allocate resources that way. and so on. Now it's that the system is better off if we ideologically choose the things we want and put the resources in that and that there's a power game. So it's a different game that people should be aware of.

Yeah. I mean, you said one of your quotes is a nation's greatest war is within itself. over whether or not it can make the hard decisions needed to sustain success. Is there even a way we can unite behind a common purpose in the United States in your mind? Or is it the power dynamics in human psychology is so strong that people are going to be making these decisions and not want to unite over the next few years and decades?

I have a principle which is that If you worry, you don't have to worry. And if you don't worry, you need to worry. Because if you worry about things like, if you worry because you get yourself into too much debt and you've got that, then you'll do, you won't do that. If, in our particular case, if you read about the consequences of what it's happened in history about that, and you look at the likelihood and you say, okay, we can have this kind of a conflict or we could have that kind of a conflict, external conflict, and boy, these conflicts are terrible. Maybe that sort of brings us more together because we have the power together if we don't fight each other in that way and we can compromise and so on. We have the power to produce incredible great results because We have more resources than we ever did. There's more by any measure. Life expectancy is greater, GDP is greater, technologies are greater and so on. So in a sense, our riches and our intelligence is greater than ever before. The biggest risk is how we are with ourselves. And so there are just basic things like, do you earn more than you spend? Okay? If everybody strove for that, are you being productive and earn more than you spend? Are you good with other people? Okay. So you look at, so that it's, and we're not fighting, we can compete in a healthy way, but we're not doing each other harm. We can have win-win relationships. We have a great power. but we're going to have to make a big adjustment because we're spending a lot more than we're earning, producing a lot of debt and money, it's devaluing. And we are at each other's throats. And I think that we don't do a good job of taking care of each other, even by comparison, and especially by comparison with a lot of other countries, because we don't create a bottom. a level that you don't let certain people fall below. I'll give you an example. My wife and I, particularly my wife, we live in Connecticut and she works to try to help what are called disengaged and disconnected high school students. In other words, those in the poorest neighborhoods who the education is failing and they'll drop out of school. So in this state, which is one of the richest states in the country on average per capita income, 22% of the high school students are either disengaged or disconnected. Disengaged means 22% of the high school students are either have an absentee rate that's greater than 25% in failing classes or have dropped out of school. one in five, more than one in five. So what does that mean about living in neighborhoods?

Wealthy neighborhoods, right?

Well, no, the thing about it is I live in Greenwich, Connecticut, and up the road is Bridgeport, Connecticut, not far up the road. And that's a poor neighborhood, okay? Because there's not much income in that neighborhood. In Greenwich, Connecticut, you spend $24,000 on average for a student in school, public schools. There they spent 14,000 and there are guns in their shootings. And of course, if a kid grows up in that kind of an environment where one in five, where are they going to be? Where is their income? Society is gangs. and their income is selling drugs or crime and that. And we've allowed that to happen. We've allowed that the bottom and it's perpetuated. So what's happening is that that's growing and it's encroaching. You could see how crime is changing, okay? And you could pick cities. It could be New York, it could be Connecticut, it could be Chicago, it could be San Francisco and so on, Los Angeles. It's encroaching. And so people are going to smaller and smaller enclaves, which might be terrific, okay? But that's what's going on. And it's costly. In the state of Connecticut, it costs $600 million a year for incarcerations. Because where do those people go? Okay, it's crime, and then you're trying to do it. That kind of a thing has a terrible cost. When I think about what my generation has left the other generation, it's terrible. I was just in Singapore and what they had is they had savings, a lot of savings. And because they have a large savings, the income from that savings covers 20% of their budget.

Wow.

So one generation is giving the other generation a savings, a good education and civility. And this happens in certain places. What we have left our generation with is debts, a broken down infrastructure and fighting. So, I mean, the answer is if we're all good with each other and we're productive, and we earn more than we spend, we won't have a problem, but we gotta get there.

How have you learned to bring together this great team that you've assembled where people are gonna disagree with you? It sounds like people are gonna 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 in the past. 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 everybody would ask, so reflects the fact that there's a hesitancy to 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?

First of all, I learn by it because it works. I mean, I'm afraid of the opposite. And how can 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 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 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 broke?

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 it, what works? Okay, should we push a button? Should we push the button? Okay, okay, yes, okay, it makes sense. Okay, 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. Basing it based on data and scorecards.

I don't think that's 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, 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 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 there are protocols for disagreeing well. I wrote a bunch in the book. Yeah. And I could go through some of those types of things. There are certain exercises that you could do. I have a two-minute rule. You speak with two minutes without the other. 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. Or maybe do the judge, they'll decide. Maybe it's a group that decides. In other words, you have a protocol for disagreeing 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 discipline? You know, like you have a judge and a jury and, you know, 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, right? And then number three, you have to have a way of getting past that decision and moving on. I have a basic view though, whenever 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 disagreeing? 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 wanna talk a little bit about-.

I wanna answer the 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 they, you know, it's almost like they're killing each other. 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 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. And it's important to know those three things and then to understand them well. 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, It's classic political gap, left-right. Capitalist socialist, how do you distribute it? 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.

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.

Mm-.

Okay, if checks didn't go out, we would have had a revolution. Right. 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 them- 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. The United States won the war and it ended. And then in 1945, the winners of the world carved up the 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, since I started going there, their average income has increased by 30 times. 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 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 affects everybody. 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 going to have something, okay, you either resolve it or you start fighting so badly that you really do damage 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 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 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. Like in other countries, you might say, Those who had the popular vote would say, what the hell, I 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 or that vote or this thing or that, and 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? 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, so I live in one 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, well, and 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, 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, what do you need to be successful? It'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, healthcare, 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, their 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, when populism started to come around, and I thought that was, I needed a study, Donald Trump is a populist. And then it's all around the world, and I needed to study the different quintiles, the top 20%, next 20%, and 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. But I don't even know we can agree that we should have equal opportunity. I mean, like, I'd almost take a poll of the American people and see, could we agree that we should have equal opportunity? That would be an accomplishment. 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.

What would you say if you could.

Make the decisions on three things to change moving forward with the debt crisis, with the internal wars and conflicts from people and this bottom that needs to rise up, what would you do if you could kind of snap your fingers?

I would say bipartisan If I was president of the United States, I would have a bipartisan cabinet to try to bring moderates from both sides, because the moderates from both sides together, I'd have an economic program that was put together by like a Manhattan Project type of thing in which they would people from those both sides, not the extremes of both sides, but smart people from both sides would make changes. I have my own changes that could happen, but in which they would both increase the size of the pie and divide it well. And when I say divide it, I mean move much more toward equal opportunity, which people are productive, like for example, it's a hell of a return on investment if you provide good education, if you do that well. But, and I can give you many, if you provide good infrastructure, like it's really uneconomic to not have, and everybody can not have connectivity anywhere. You know, there's certain things you could, so you, so I would want to have a program that increases the size of the pie and divides it well, particularly to productive people and those who in some way or another can't be productive because they're handicapped in one way or another in that productivity to provide them the assistance. So you have a civil society, but with still great opportunities to make do great things and acquire wealth and distribute wealth. you do need it to be benefit most of the people. Okay, you need the system. So that's what I would do. Then what would happen is I'd have that middle each deal with its extremes. So I think on each party, there's an extreme, there are extremists. And now what's happening is the moderates are dropping out of the political system. So because the moderates are dropping out of the political system, we're getting more and more- Extremist. -ardent extremists who won't lose. They'll fight to the death with each other and laws and that. So that scares me, where if we were in it together and we did that in a bipartisan, smart way that not everybody's gonna love, But everybody knows something. That would be the most important thing I would do.

Yeah. You're a wise man. And the third part of this, that you talked about, the changing world order, is how really all empires rise and fall at some point in what you call a big cycle. Can you explain more what this big cycle is and what part of the big cycle the USA is in and also China is in right now?

Okay. Yeah, I'll describe the cycle. By an order, I mean like a world order or domestic order, I mean the system that's in place run by the people who have the power and then they determine what the system is like. And so you change orders usually by wars because you have a conflict and then, okay, how do you resolve the conflict? They have a war. So World War II, ended in 1945. The United States won World War II dominantly. It became rich, the richest country in the world, having 80% of the world's money. Money was gold then. It had 80% of the world's gold and a dominant military. It had a monopoly on that and accounted for half the world's economy. And so it set the rules. It's the reason why the United Nations is in New York and the IMF and the World Bank in Washington, DC. It was the American world order because it was dominant power. Now, when you are in a dominant power, also these wars are sort of great equalizers. People come back from the war. It's not like some are rich and some are poor in the same way. There's a restructuring and you don't have the same wealth gaps and resentments and so on. And then that usually means that you have a period of peace and prosperity, peace because nobody wants to fight the dominant power. And then they work together and they produce peace and prosperity and that happens. And that's really does best in the capitalist system in which capitalism capital is provided to those who have good ideas because they say, we'll invest in you and you'll be productive and so on. But what capitalism does at the same time, is it has two challenges, two problems, is it creates wealth that creates large wealth gaps, and it also creates higher levels of indebtedness. So it creates the large wealth gaps because it distributes that unequally, and then that can be self-perpetuating because those who get power, like if you have more money, you can educate your children better. then if you don't, the situation we're talking about in Connecticut, you know, those parents are not going to be able to provide the education for the kids or the benefits that the others can. And so you gradually you lose equal opportunity and that, and you produce wealth gap and you produce resentments. And you also then create larger amounts of debt quite often. That means that that's a problem down the road. Now, what happens when you become the world's largest power? This is also always the case. It happened with the Dutch, it happened with the British, that because you're so powerful on production, you go all around the world and you are the largest trading country in the world. You get more exports than other countries and more transactions are in your currency. And so everybody uses your currency, which becomes the world's reserve currency because everybody's using it. And because it's the world's currency, those who are, those want to save in it. And so different countries save in it, which means that they lend to you in it. And that increases your debt to foreigners because they're when they hold a bond or they hold cash in that, they're lending it to you to get the dollars back in the future. And so that is also one of the ingredients of making a top. There are the wealth gaps, there's that. And then there's also a change in generations and generation psychology. You know, it's like the story of the three generations, you know, from, you know, whatever it is from, Rags to Riches, Rags to Riches again or something. The greatest generation, in a sense, are those who fought through the war, appreciate basic things, you know, that kind of a thing. And then what happens is you become, when you're on top, you become more expensive and quite often more decadent. And what I mean by decadent, I mean, that you might spend on things that are not good investments and don't last very long or whatever for entertainment at the sink of buying. So for example, in the United States, I remember when we had a per capita income, which was 40 times China's, and we started borrowing from China. So anyway, these are the ingredients, and then you start to see that they cause the financial problem, the internal conflict problem, and so on. And then the type of fighting that we're talking about, where, you know, some moderates say, well, we need to make things, reform things and make them better. Each of it is in their extremes. So you classically have the populace of the left and the populace of the right, who are individuals who will just fight for that side. And then you come down and you have that conflict and you have that internationally as well. So when you have, let's say, a country like the United States, if you take the United States percentage of world GDP or the United States is percentage of world trade, we used to be the largest trading exporting country in the world. But China's replaced that. Where are we now? and the GDP thing. So now we have a rivalry and you have different approaches to life. And then you say, oh, maybe you're going to have a conflict. And so everybody prepares for a conflict, which almost makes itself fulfilling. So when you have this dynamic, which we're seeing, the world starts to split because countries want to align themselves with who's going to help them financially or militarily. The ideology, if you look at history, is not as been as much an important determinant. Let's say the United States and Saudi Arabia have been aligned for a long time, having nothing to do with whether the system's democratic or not. It has to do with whether their interests are aligned. And those are economic, and military. And so we're seeing, when I go around from country to country, and people say, okay, the leaders say, should I be on China's side or should I be in the United States' side, whichever. They say, well, if it's economic, China's more important to me. If it's military, the question is, will the United States be there when we need them to operate that way? And it's those kinds of calculations that produces the cycle that traditionally, unless you rectify it, like we all come back together again somehow and we're all good with each other, ends up causing the fight to find out who is more powerful. And then it's the war or whatever. And then there's a winner and a loser, and a new world order begins. And that's what the cycle looks like.

So is there a world where we will never have war? Or is it always going to be some type of war happening so that power dynamics shift and this just continues?

It's so interesting because in the mid-1600s, this is interesting, in the mid-1600s, there was 30 years of war. They call it the 30 Years War in Europe. And they just kept beating the daylights out of each other.

And.

That is when they invented countries as we know it. Before then, there were no boundaries.

It was winter takes all. It was just kind of this- well.

No, it was just- yeah, it was like there were no boundaries. And if you want, what mattered was power. And if you wanted something that the other guy had, you'd go get it and he'd do the same with you. And there was this constant fighting about things. And then in the 1600s, they were fighting about religion too. You know, there's the religious reformation and the others, which also had to do with power, 'cause the church was powerful. But anyway, so they invented countries as we know it with boundaries. and you determine what goes on in your borders and so on. And of course, we've, and that reduced for the next 100 years, there were hardly any wars. Interesting. And, but they, when the time comes, there's no universal legal system. You know, there's no universal policeman. So, if you don't have a universal legal system, they've been attempts at that with the United Nations or before that, the League of Nations, they're attempted that, but power rules. And so, you're going to have tests of power. It'll come down to tests of power. Right.

You've come up with a template for assessing the health of a country. and what leads them to success or failure, what are the main metrics that you've come up with to assess? And where's the USA at right now in that assessment?

I want everything that I do to not be opinionated. I want everything that I do to take measurements. of health. So, and there were different 18 different measurements of health that you can see in the book. So you could look at it as a health indicator. And then you could see with those, like a health indicator, what does that create the next 10 years prognosis for that? Because if you're healthy, then you'll have a better prognosis if you're not healthy. And so there are 18 of them. I won't take you through them, but anybody who cares to go through them, you can see them. But there are basic things like, first, are you financially healthy? What's your income statement and balance sheet look like? Do you spend more than you earn or do you earn more than you spend? Are you saving? What's your income statement and balance sheet look like? A very big leading indicator. is the relative level of education. And those that have a more educated population, and you could see the numbers rise, you could see education levels in one country or another rise or decline in these charts. So you could see how is the United States in its education and how are other countries and is that gap, is it improving or worsening? because education levels are very indicative of well-being and economic behavior. Related to education is civility. Civility is not, so you learn education like facts and how to do calculations and things, that's one type of education, but you also learn how to behave with each other, the civility, the idea of respect and so on. So you have a civilized society of behaving well. That's part of it. And that usually happens in the home as well as in the school system. School can't do everything. And there are, and you could see these numbers and they're a problem, okay, in terms of these kinds of numbers, civility, and we have challenges as there's some often single families that are having financial problems and don't have, you know, those circumstances. And, and so, and then you have an opiate problem. You have other things that stand the one. Okay. Rule of law, countries that have rule of law and respect for the law that keeps order. and effectively, loss of when crime rates go up, it's probably a very good indicator is corruption levels. There's a corruption index that countries, that all countries have, that you can get for every country. You can see how it changes. And as it goes up, there's a negative 52% correlation with the growth of a country and its corruption over the next 10 years. Okay, so where's, where's the USA at right now? The USA is reasonably good. Reasonably good on the corruption element.

Where is Mexico, I guess, maybe bad.

Russia is bad. You know, it's interesting because these are predictors of the future. And what you find out is like, if you look at Russia, I'll give that as an example, it's blessed with the greatest natural resources of any country in the world. The value of its natural resources are 40% higher than the next highest country, which is the United States.