I'm Ray Dalio, a global macro investor and author of Principles for Dealing with the Changing World Order. It’s my business to know how the world is changing in ways that will affect our life in important ways. Let’s talk about that.

Hello, mr. Dalio,

I recently read and thoroughly enjoyed your book Principles for Dealing with the Changing World Order, but it left me with a nagging question:

Did you take demographics into account when studying the various empires?

I ask this question because I believe that China will hit a major roadblock very soon due to its rapidly aging population. A shrinking workforce will have to support a growing cohort of retirees, which means that innovation and competitiveness might take a major hit.

The current trend of predicting that China will overtake the US reminds me of a similar trend regarding Japan in the 80s. That did not exactly pan out, and their elderly population has correlated with very weak economic growth.

Am I missing something here? I'd love to hear your thoughts.

As you point out, the demographic issue is primarily a challenge where the shrinking working population have to support the growing aging population. To me the question is largely one of productivity.

I do not believe that influence on productivity is going to be that demographic shift but rather far more influenced by technology and innovation. As far as the comparison between Japan and China, the big difference is in their sizes. Since China has a population which is about 10x the size of Japan and over 4x times the size of the US, it only has to have a per capita productivity rate that is a fraction of Japan or the US's in order to be economically bigger and more powerful.

At what point do we recognize that billionaires are a threat? As we can see from billionaires running a country like Russia and increasingly so in the U.S., it doesn't really work. It allows few select individuals, who are not elected nor vetted in any particular way, to wield enormous power and influence within society. With the U.S. becoming more and more an oligarchy and the emergence of dangerous billionaires like Peter Thiel, Robert Mercer, Elon Musk, Bill Ackman, Koch brothers, and several others, what are your thoughts on policies that would greatly reduce the net worth and thus influence of people like yourself?

I think like any group of people, the real question is whether they contribute to society which is mostly a matter of what they do with their time and money. I think we shouldn’t confuse our revulsion over the large opportunity gaps with that being a problem due to the existence of billionaires.

Question that came in from my Reddit profile from u/Milind07:

Dear Mr Ray ,
Deeply appreciate the intellectual capital that you have put up across the years , also admire the effort to answer these questions on Reddit
1. What kept you going when no one believed in you?

2. What was Ray Dalio at 22 up to in his life?
Many thanks

I just had a passion for what I was doing. I started to play the markets when I was 12 and I loved life in lots of ways--having a blast with my friends and doing the things that excited me. And I was still in college and about to enter the second phase of my life--working and not being dependent on others--playing the game I loved. People believing in me was never a motivation and I urge you not to weigh it too much because it's difficult to be an independent thinker if you're looking for people's approval.

Question that came in from my Reddit profile from u/inco2019:

Hi Ray,
I've enjoyed reading your books.
I understand you see war & conflict continually growing as history repeats, but could you see humanity/countries working together in unison for a greater course?
Also which 3 underdeveloped countries can you see economicly progressing & shocking the world over the next few decades?
Thanks INCO

People certainly have the capacity within them to work together toward a greater course--which creates much smarter and better outcomes. The question is about human nature. I have a principle which is "if you worry, you don't need to worry and if you don't worry, then you need to worry", by which I mean that if people justifiably worry because they read history and understand what is happening in the present, they make sure the bad outcomes won't happen again so they will do what it takes to create the good times you speak of. One of the elements of the classic peace-war cycle is that the old generation who has been through wars and never wants to be in them has died away and the existing generation has developed a greater inclination to fight rather than to find mutually acceptable paths forward.

This question came in to my Reddit profile from u/inquisitivesort:

What do you think are the three most important ways that the world will be different a decade from now?

The three most important influences on the world now that will affect how it will be different in the future are:

1. The financial influence—the US and most countries spending a lot more money than they are earning and printing money which is likely to go down in value
2. The internal conflict influence—the fights over different gaps (values, wealth, opportunity) and how we are with each other, and
3. The external conflict influence—the fights between the great powers for determining what the world order will be.

The future will very much depend on the capacities of people to resolve these issues through the combination of financial prudence and compromise. History has shown that we should worry. Two other big forces throughout history that will be especially important over the next ten years are acts of nature (droughts, floods and pandemics have killed even more people and toppled more civilizations than the first three forces mentioned—so climate change will certainly begin to bite in a disruptive way), and technology changes will also have an enormous impact. All of these can be handled well, but how they are handled will remain a function of human nature which hasn't changed much, and it certainly gives us reason to worry.

Answering this question that came in from LinkedIn:

Ray Dalio …Given the state of inflation and the ongoing military aggression we’re seeing globally, what does history tell us about how long we should expect the market down turns to last?
… Also, what are some of the ways we can best prepare our households for this type of volatility in financial markets & society as a whole?
Thank you for taking the time to share your thoughts and philosophies with us.

I want to tell you about the market's relationship to inflation and the market's relationship to military aggression. Regarding inflation, you should change your mindset from thinking about how many dollars you are worth to what those dollars are worth. For example, don't think your money is safe in cash or bonds because they don't go down in number while you're losing money to inflation. Have a great diversified portfolio. Regarding military aggression, please understand that all investment assets are more affected by their cash flows and what central banks do than by wars, unless those wars affect their cash flows and what central banks do. For example, you can see big events such as wars in history not hurt markets much unless the country in war is devastated.

Answering this question from LinkedIn:

How much of your own personal success do you attribute to your starting point, circumstance, luck, intelligence, gregariousness, network, philosophy towards work, and any other factors that you think led you on a path to success? It seems you come from modest, but not too modest beginnings and started working tough jobs at young age. You also seemed to believe in educating yourself, but what else makes you different? Also, you totally need to share your daily wake-up routine!

I was very lucky to grow up in an era of equal opportunity and have parents who loved me. I was very lucky to go to a good public school and to believe if that I had the opportunity, and the system would support me—and it did—that I could do anything. While I think I'm different in some ways, I think most people are different in some ways, so whatever success I had wasn't because I was unique in any way. I just learned the path that matched my nature with what I did. I urge people to understand their nature (which is why I put out PrinciplesYou for free - check it out!) and find a right path for them.

Good morning and welcome! Two questions:
1. How will cryptocurrencies effect reserve currency status?
2. As a global macro investor, to make the best decisions you have to almost be ruthlessly objective (or, radically transparent in Bridgewater speak). So, at the end of the day, to best do your job, do you consider yourself stateless?

Thank you!

There are two purposes of a currency which are as a medium of exchange and a storehold of wealth. I think we have entered an era in which fiat currencies are and will be produced a lot, which will diminish their appeal as storeholds of wealth and that alternative currencies will compete with each other. By currencies, I mean portable and universally accepted mediums of exchange. I believe that there will be a wide-ranging set of alternatives and that there is also a significant risk that they will threaten the fiat currencies which governments want to protect. This dynamic should be followed closely and one should have some diversification in one's currencies in order to protect one's buying power.

Sharing this question from LinkedIn:

I like your perspectives, Ray. My question: I understand that hot wars tend to restabilize the wealth gap (higher taxation on everyone, including the rich), and restart the long-term debt cycle. If the West averts a hot war with China, how will the west (the US, in particular) address the wealth gap and restart the cycle? Question 2: Asides from Gold, how can people protect their wealth during a hot war? Which assets are risk-averse to war?

Answer 1: While nothing is certain (other than that how we are with each other will determine the outcome), the usual way in the world is that there is a fight for power and the winner (from either the left or the right) determines how things go. These fights can either be violent or non-violent (e.g., FDR and the New Deal). In other words, if one looked at all cases when partisanship becomes extreme, some form of civil war is likely. However, if one looks at the history of the United States where rule of law and respect for the constitution is so imbued in people, it is reasonable to assume that the odds of civil war are less. It’s too close to call, but the signs of going one way or another will be clear and worth watching.

Answer 2: Portable assets that are storeholds of wealth across the world or assets that are not portable but held in peaceful, safe places.

Ray, what is your daily routine typically like? And how do you capture and develop your principles? Do you write them in a journal?

I don't have much of a daily routine--it varies a lot depending on the circumstances. I do meditate regularly, usually early in the morning, and I typically have a tea sitting with my wife early in the morning. As far as capturing my principles, I am always looking at my interactions with reality to try to understand how reality works and the best principles for interacting with it. So I reflect a lot; either when I'm making decisions or immediately after, and I write down those reflections. I typically do that by dictating them into my iPhone and then re-reading them, reflecting, and editing them.

Answering this question from LinkedIn:

Hi Ray, thanks for doing this. My question would be: do you believe the current events in Ukraine will accelerate or decelerate the changing world order from US to China, or is it too early to tell?

I'm not sure yet. Let me be clear that what I don't know is much greater than what I do know. We are entering an era in which there will be increasing challenges to the existing world order between the world's biggest powers, and how these challenges are handled will have a big impact. I have a principle from the chapter on external order/disorder in Principles for Dealing with the Changing World Order which is that there are two things that one can be most confident in:

1. It won't go as planned, and
2. That it will be far worse than imagined.

Answering this question from my post on Reddit yesterday from u/mathioudakiss:

Hi Ray,
The analysis you present in your book is based on quite rich data.
Q: Will you make the data publicly available in a curated format, so that other people can easily verify the claims and do further research on the topic?
Thanks, Michael

In the next week or two, I will be putting out the 18 Power indices for each of the 24 major countries. I plan to update them annually so that people can see whether countries are improving or worsening in these 18 dimensions and also compare different countries' strengths . I am eager to do this because I believe that if people and policy makers see health indices, that will provide feedback that will encourage them to be healthier. In terms of your question on sharing data, I'm eager to do that within my legal abilities to do so. The 18 power indices are composed from hundreds of data series, many of which are proprietary (or licensed from others), so I will not be able to make them available. However, there are some that are public and I will do my best to describe the types of series that we've used.

u/RayTDalio
Hey Mr.Dalio, I hope you are doing well. I bought your book a few weeks ago and I really loved reading it! Thank you so much for doing this AMA.
I have two questions though. You advocate that countries try and decrease the amount of extreme wealth inequality they have through the taxation of very wealthy individuals. My question is couldn’t this provoke anger not only from the very wealthy but from those that want to achieve this kind of wealth in the future? Many people want to enjoy the benefits of being wealthy in a capitalist system so wouldnt high taxation provoke anger that the government is punishing those that worked really hard and strived for wealth?
My second question is a bit more personal to me. If the United States continues down this path and falls as an empire what do you think will happen to American hedge funds and the analysts that work at them. Do you think we will see a boom in Chinese hedge funds?
Thank you so much! I really appreciate it!

As a society we have to both increase the size of the pie through greater productivity and we have to divide the pie well by providing something approaching equal opportunity. I was lucky to be able to live the American Dream and believe in it. It is very painful for me to watch the terrible disparities in opportunities that exist today. It's not fair and it's not productive and history has shown that it is why nations fail.

What activity do you get most joy out of? Which are the moments that you live for?

I love great music with friends, quality time with my family, especially my grandkids, and, at this stage in my life, helping people by passing along what I have that's of value.

Hi Ray, I watched the ‘Changing World Order’ video and thought it was a very thoughtful and well done presentation. Can’t wait to read the book.

My question relates to the impact that corporations have on the ‘changing world order’. The US currently has massive corporations that rival the size & power of some nation states. Although this fact may have been true in the past, todays technologies enable a level of cooperation, transparency, and rate of innovation that we’ve never experienced.

What would a nation look like if it were to lose its power as the reserve currency but still produce the most sought after goods/services? Is that even possible? Would losing the title of reserve currency imply that the technologies, education, and innovation had fallen off and or become too expensive when compared to poorer nations?

Thank you for passing your knowledge and wisdom along, it’s much appreciated.

I'm so glad you liked the video - for those who haven't seen it, you can find it here. Thank you for your great and thoughtful question. What you are focusing in on is the intrinsic value of things—that's what matters. But lose your reserve currency and you can't borrow. You better damn well produce more of the good stuff (i.e., stuff with intrinsic value) in order to buy the other stuff you want.

Do you have any favorite books?

There are so many great books, but three that come to mind are:

• Lessons from History by Will and Ariel Durant which is a 104 page book that conveys the lessons of history from two of the greatest historians ever
• River out of Eden, which is by Richard Dawkins who understands and conveys the forces of evolution, and
• Hero of 1000 Faces by Joseph Campbell which describes the live journey of personal evolution overcoming obstacles and changing through the life cycle.

Hi Ray, I was wondering what do you consider to be the essentials to being successful in life?

First let me describe what I think success in life is. It is not having the most amount of money or status or power or most of the things that people associate with success. It is having the life you want to have and being more than self-sufficient. That can happen without having a lot of money and power. I believe the path to that success comes from knowing your nature and finding the path that is most suitable for it. I created free personality profile assessment called PrinciplesYou which I think provides a lot, but not enough, of guidance on discovering one's nature. More experimentations to find out what you love can help you achieve that. I believe that most importantly, meaningful work and meaningful relationships will give most people a successful life, and I believe that loving your work and loving those who you have the most contact with brings most people a successful life.

Hi Ray - I’m about to be a new father.

What do you recommend I do to improve my family’s happiness and security over the short and long term?

Thanks!

Congratulations! You are about to enter the new and middle phase of your life and, in my opinion, have one of the most meaningful developments that you can imagine. There are far too many suggestions that I would like to make that can't be made here for lack of time, so I will make just a couple and then refer you my 30-minute animated video, Principles for Success.
My two most important recommendations are to understand how to handle the work-life balance challenge well (on which there are many good sources available to you) and how to work with your partner on parenting well. I also recommend accessing sources that describe the various stages of a child's development which helps you understand what their needs are at various ages and help you and your partner get in sync on how to handle them.