Ray Dalio: The principles that made me a billionaire

you wanna be successful here's the mantra for investing i couple the most fundamental question is how do i have the upside without having the downside that approach was the basis of bridge water going from having to borrow for thousand dollars for my dad to the largest edge for the most successful hedge fund in the world i created personality test i gave it to you lam musk i gave it to bill gates i gave it to great hastings maybe i should probably not tell stories but i don't know what we do you don't have to make sense to talk to be happy what's the time there's no correlation between the level of happiness in your life and the amount of money that you make so you have to have a purpose what do you wanna do with the money that is so important you better answer that question i feel like i could rude world i know i could be what i want to from at all in it like a days off on a goal less travel in some regard a little bit of a late bloom in terms of like traditional metrics of success oh yeah i think you were thirty four or thirty five you had like two kids i think you had just laid off the five employees that you had had and you're like look dad i've lost it all can you like close your eyes and like remember that conversation so i started bridge water in nineteen seventy five and in nineteen eighty one and eighty two interest rates were not the emerging countries had a lot of debt and i calculated that those countries were not gonna be able to pay their debts and and they were gonna have big debt crisis and that was very controversial point of view and then mexico defaulted in august of nineteen eighty two so i was asked to test flight of congress about what this is all about and and what might happen to the economy i thought it the economy was gonna be a disaster i couldn't been more raw okay so i lost money from me i lost money for my clients and i had to lay off everybody i was so broke i had to borrow four thousand dollars for my dad so then my choice was am i going to you know put on a suit and time go in commute and work for somebody in that capacity and i knew that i wasn't very good at working for people now that was painful that changed everything in my life that created the bottom at bridge water and just kept going up because of what i learned i learned two things first of all i i learned humility to balance my audacity okay i didn't have much humility i'd say i'm right i'm gonna be riding and all that and then i learned how to diversify my bets and substantially reduce my risk without reducing my returns because i didn't wanna have reduced the upside i knew that i had to reduce the downside and so i really learned and taught myself really my mantra okay here's the mantra for investing you wanna be successful that this will this is the holy grail of investing find fifteen good un encore return streams how did you come up with fifteen well i'll just look at the math of it okay so in other words what are the marginal benefits of diversification given the different levels of correlation and i have that on a chart that keeps reminding me okay if you can get out to fifteen you can get down to about reduce about eighty percent of your risk without reducing your return that means that you increase your return to risk ratio by something like a factor of five okay in other words wow so that means you can get the upside without having the downside okay and then humility you know i wanted people to kick the shit out of whatever i thought you know to try to do that and then have that and that change in that approach was the basis of bridge water going from you know be having to borrow four thousand dollars from my dad to the largest edge fund the most successful hedge fund in the world if we wanted to be better investors what do you think the most common mistake smart guys can make when it comes to investing they don't have a game plan what a good game plan look like how do you know if you have a good game plan well the way that i did it was every time i would make a decision but this is the building of all principles i did but particularly in the markets every time i would be make a decision i would go back and study if i made that decision and these circumstances how would it have worked in the past and i would know the track record of that decision and it that would give me also greater understanding of how things were and so then i would have a decision rule and then i would program it into the market into the computer and when this thing come along then i started to realize okay now i've got criteria so rather than just the one that i would see i would say in the computer up in all of them and where did they exist anywhere in the world and what what will so give give me one good decision rule that wherever it happens in the rural world that i have a track record of knowing how those work and wherever it is in the world you bring me that and then make a collection of those kinds of things and make them un cor so it provides your just ear the diversification and so now you're executing a game plan so like i've have rules that it should be timeless and universal because if it didn't work in a long period in time i would need to understand why it didn't work then and would work now so that's how i would build you know that's how i i did build a game plans and execute the game plans did bridge water have any revenue coming in nothing and so you're waking up in the morning you're like i gotta figure this out it was like i'm on the edge of a jungle i could go stay out of the jungle and i can go to safety and have a safe life employed regular job great okay or i could go into the jungle and try to work across get through the jungle that all the things that can kill me and i made a choice of what i wanted in life i mean like i have to have this great upside i can't not do that and also part of it was if i'm going in the jungle i wanna go with people who wanna go in the jungle with me who see things differently than i do so it's like going through this jungle with these animals or something that can kill you but if you're in it together then you are you can sort of see the animals that'll kill you and then i loved being in the jungle so much i didn't wanna get out of the jungle even after i've achieved it didn't wanna go you'd rather be in the jungle than the zoo yeah almost yeah to to play off that analogy i think that like i think a lot of successful people and i think you've even said this where you're like as long as i like do what i want during the day and what i love then i'll be happy but i have to imagine that when you're like thirty three year thirty four something like that you have young kids and you are like you got a little bit of a tiger in you you're like i wanna provide i wanna win i wanna be the best that wasn't like that at all to me it was like two levels just very simple like i don't need a big house i don't need a big anything my kids can go a good public school they have great like a number we like man if i make a hundred grand i counted what i started to do was i started to count how many months then and and then years of living that way could i afford if it shut down but you said two levels that was level one it's freedom money basically you money was that number for you i don't remember what the number was but you know it wasn't it wasn't it was easy to achieve number like a million dollars but oh no less oh much less at that time was there ever a grand vision or or was it always like well what's the next level let's see if we could do that no no no no no it was i could imagine great things i'll tell you a personality test when i decided that i wanted to pass leadership of bridge water along to others i wanna be investor let them run the business and i wanna do that because i'm hooked on the markets i created personality tests i started with myers briggs and then i went to dip various kinds of personality tests and i then gave the personality tests to people like elon musk i gave it to bill gates i gave it to read hastings i gave it to muhammad uni i gave it to other people to see the elements of what they are are like i put it online for free i created it we took it like you took it okay well there's a type of there's a type of person that represents a very small percentage of the population and elon musk gazette then bill gates and and re number of these people this that i would call a shape and they are people who love to go from visualization to actual visualization and to be on that mission and so on and that's my personality type i have a certain type personality type then they have to do certain things and i'm remember elon and he's that personality tied okay making money is not a big deal for him should probably not tell stories but no no that's what we do here we tell stories we can i'll take you out later the excitement you know the compulsive thrill of climbing that and an aspiring to that was my personnel personality touch and he doesn't need to he doesn't need a house he doesn't need security he doesn't need anything i mean he didn't even need my level of needing it sound like you had a story of him where that's an example of well yeah hey everyone pausing really quick because i know that you are probably scrambling to write down all the stuff that ray talking about well the good news is that we did it for you so we made a guide the link is in the description on youtube and this guy breaks down the five frameworks behind one of the greatest investing track records of all time you can actually use them and also spend time listening versus taking all the notes that you're probably taking right now so you can get it for free right now you can click the link below in the description or you can scan the qr code right here alright back to the episode when he first started tesla he had made something like a hundred and eighty million dollars from paypal and he decided that he was gonna take half of that money and he was gonna go to the the mars and he had no experience in terms of going to mars and so we had this vision and you know when i said to him i suggest that you put aside a little bit of money take a piece of that and just so that way you you know things that work out you've got that no i don't no need to do that and he had that strong compulsive need but there is i think everybody has a certain nature okay whether you're born and your environment you have a nature and it that's why i created these personality tests for any of your listeners principles you is what it is it's it's free it's our online take it you'll understand more about your nature and there's a feature in there where you can have somebody else that you have relationship with take and then they'll tell you about the relationship so we took it last night based on on your after we talked the other day so sam tells me he's like i'm a shaver and you had told me you're a shape elon and so i was like i was wow okay i hope i get shape her i think i wanna be in that club so i'm taking it i'm answering as honestly a care is degenerate and degenerate happy but sort of foolish yeah was a new near title of morons is that what so i thought i got explorer and i was like that i was not what i expected at all a bit of character yeah i mean it called it it very much called like driven very much by curiosity seeking in seeking new new knowledge new experiences learning getting being very like objective and truthful about what i'm experiencing and almost taking pleasure even when you have a bad result because it means you got to learn and so there was it was just so true for me i get the most fun doing that so i guess it really was true and i think why i may not have been a shape a lot of the questions would ask about part of the visualization to accusation and i i think i do it a lot of that but i'm not very detail oriented i don't care about the details i overlook details i'm i'm not a perfection i don't care like i'm i'm much less than sam sam really wants everything to be great okay one of the elements of a shape is and by the way that's where you're seeing your nature and you know what your satisfaction is right and what you're likely to be most successful it is that yes what the issue of a a a shape is they wanna go from visualization to actual visualization and then they go from like this very big picture down to what are those details so i remember he elon gave me the key to his car and and that you know had a little button and he showed the screen and he got into the details a lot and we're talking about how he wants to put a a watering can with a plant on a rocket to send it to mars to say first life on mars to aspire things and so on ten thousand the level and like ten centimeter level right that that liking and then taking that and going okay so yeah that we all have a purse and so the success in life the joy really is knowing your nature and finding the right path for your nature because you can't fight against your nature right so look right we've only known each other for thirty minutes but i'm gonna i'm gonna show you something that my my gross but when i was young and drunk i gave myself a tattoo the tattoo that i gave myself is on my feet and it says act now oh good just so tell me you you were at the tattoo parlor have you ever heard of the phrase stick and poke no okay so basically if you're in jail this is kinda like where it comes out of but like a lot of like punk rock people do you get a sewing needle and you dip it in ink and then you just make lots little dots on your skin and that's a tattoo and so when i was like i was actually maybe i something the say nineteen in reality audio probably twenty two i just don't wanna be that mature when i say i did it i was like angry that i wasn't moving fast enough in life and i was like i'm so i'm so you know an and at the time i was the i party lot and so i was drunk and i like i'm gonna tattoo act now on my feet so when i wake up that's the first thing that i see is i gotta take action and does that work for you yeah i've i tend to need to tone it down where i'm like i need to think and plan because i you know i've had a little bit of success in my career and i think occasionally you need like be a little more strategic but yeah i'm usually like a ball in of china the thing about it is that you have to find the people who are different from you who compliment you well like on my on the leadership test you don't just say the personality that you are it's also where you're very weak so i was like on mind it was like connecting supporting kind of the a lot of the like social side so my business partner ben who's the guy who emailed seventy seven times to you and your team to get you to be on this podcast he's for i think for four years has been emailing trying to make this happen because he's an amazing connector he's an amazing supporter he wanted this moment to happen even though he's not at the table and to him that's a win to him connecting is the win and so he's my he's been my business partner we've had this unbelievable success as a partnership even though we couldn't be more more different you know if we try so this let's pause them and reflect on that very important point in for success that people who think differently from you who you won't literally can get annoyed at are your paths to success that if you can understand that it was very interesting when i did this in bridge where i did the personality tests and and then they start saying oh you're a est t and i may whatever it is and then they started to understand and they understood how they would work together rather than get annoyed by the other person now that that was big deal you know as so success comes from that success comes from failure right and learning from it okay and success comes from working together i would say meaningful work and meaningful relationships if you're on a mission to do something great okay go to mars or whatever it is that you're gonna go do together and you have meaningful relationships and you have radical transparency and you know your nature and you know how to work with others that's the formula for success right yeah another example is doctor dal is when when sean came in the notes were already printed off there you go i i'm late i don't have it printed but you know so we have a very different dynamic but for six years we've built one of the biggest business in the world despite being completely different so i hope your audience here's this right yeah it's pause and reflect like because okay what are we here for it we're here for pretty much the same reason just a little bit different settings i'm seventy six i wanna pass along whatever i add to help people in that way right that's my goal okay your goal also is to you're obviously not only are your goal but your effectiveness in being able to help people otherwise it wouldn't be listening okay so i just wanted to pause on that formula okay that if once you get that formula bam plus reflection equals progress and how do you work together and all that wow and follow your nature can you can you guide us on the reflection part because i think everybody understands the word but i bet we don't really talk a lot about how each individual person does it and so are you is writing your reflection do you talk to do you have two or three people you call who tend to give you high signal like feedback or advice like what is your process to actually do the reflection pain part comes in voluntarily that that hits you when the pain comes eventually the pain will go away but you can skip the people can skip the reflection and they can be hung up in their pain so you first have to make this transition now meditation has helped me a lot i'd i've done meditation transcend meditation since nineteen sixty nine explain what that even is i've i've only heard you in jury seinfeld filled swear by tens dental meditation what is it transcend meditation is a very simple exercise of you said there calmly and you repeat a sound that is a word that is called a mantra that doesn't have any meaning and so let me an example might be oh okay so you're sitting there and your repeat home in your head and when you do that you can't have thoughts because when your thoughts are in own your thoughts are in home and the other thoughts can come in and then eventually when you get this habit down then the own goes away and you go into pretty much a subconscious state you know very relaxing very calm and so it's a real calming exercise and it brings you into your subconscious mind okay your subconscious mind is really controlling you a lot almost right there's a conscious mind logical god mind the job is logical and you're aware of and then subconscious means below your awareness there are all the things in your mind that influence you your emotions your subliminal stuff and it goes into that subliminal stuff and it calms you down and it's also where creativity comes from it's like if you take a hot shower and these ideas come to you but you try to muscle ideas you can't make be you can't make them come but that hot shower that relaxation and so on i found that very helpful you know i know i've i've developed a an instant habit is a very important tool like if you know how to develop the right habit so the habit means that you have an instinct positive reaction to something so i have a a reaction which is okay that is that that's lesson in reality in other words paid okay so it sound like a puzzle for me okay the puzzle is how does reality work it'll tell me something about how reality works and i have to deal with reality to make it successful and so what is my principle for dealing with my that reality to deal with it in the best possible way okay that's my now instinct so now when you've got that instinct it's a whole different thing right because you you start to say okay there's pain and you have your curiosity okay now you take your curiosity and you said what does that tell me about how reality works and how i should deal with reality okay and if you solve that puzzle then you will get a gem and that gem is a principle that you can carry with you to be better right and so if you start to recognize it as that and then i do write you so what's that what does that mean you journal every morning every night no no no no i it's just when thoughts come to me where circumstances come to me and who i'm also making decisions i'm i'm reflecting and then what has happened to me is i found that all those reflections are cause effect relationships because principles are if this happens what do you do and that kind of thing and then i put those in computer code okay that's how i built bridge water i don't okay if this happens you do that okay and you put it in computer code and i made them this all computerized sit decision making systems for markets and almost everything and because i've done this you know for thirty five years or something on almost everything i've got thousands of these principles that i've written out and they are you know the ways of achieving success in whatever kind of decision if you know if the fed does this or if somebody you love the eyes or whatever it is okay how do you reflect on them what does that mean i would recommend i put out a journal that people can do so that they could journal their own principles and they have the reflections and so on if they if they start to think that way pain plus reflection equals at and you reflect well the what happens in the meditation is it connects your sub subliminal self to your conscious i'm i'm on board with all that i think that if i put myself in your shoes between the ages of like thirty five to fifty two you went from like nothing to like the largest head headphone in the world which we i wanna hear all that but when you're like thirty four thirty five thirty six in the first three years of starting your business and anew i would have to think like most all small business owners you're like i just gotta pay the bills i could always find the way to pay the bills the question is what was it and i think by the way along those lines that's where your priorities get tested you know you think about what you really want and how do you weigh one thing against another thing okay i mean like i want i'm want survival and opportunity and i wanna play the game and i want okay and i don't really care i i don't care much about convention i don't care about much about how i look yet to the outside world i don't care about things that can inhibit maybe that choice i think people also get stuck they get stuck because they don't realize there are multiple possibilities and so some people say to me you know but you don't understand i'm in this job i don't like the job i think my boss is a jerk and this isn't where i wanna go okay and and but they feel i have to be there okay and the reality is if you're clever and you figure it out and whatever and you try there are many ways to have a really happy life and and by the way lot of money is not important thing sometimes we get hung up on this like it's gotta be this conventional life which is you know okay i've gotta do the okay is that really what it is even experiment with it listen to this quote sean he had he i cannot say that having an intense life filled with accomplishments is better than having a relaxed life with savor though i can say that being strong is better than being weak and that struggling gives one strength though that was pretty cool that's true yeah i guess like you don't have to make it to the talk to be happy and i think that's been like a what's the top you work your ass off to get a lot of money okay just think about that is that it what's the money for money doesn't have any intrinsic value right so you have to have a purpose why are you getting the money what do you wanna do with the money that is so important you better answer that question right what does that go to get you okay does that get you better friends okay does it catch you better average a better a relationship with your kids what is your definition of success success is you knowing your nature and then finding the best path through that nature so that you look back on that and you say that was the life i want dad do you think that you could answer that for yourself i tried to do it i read what i wrote say when i was twenty seven years old i read i tried to write this out because i was like i think i had actually read your principal pdf around the same time and it made me start asking these questions because one of your core principles like figure out what you want and then understand the rules of nature because study cause an effect to understand what patterns of behavior and actions might lead to the thing you want so here's what i wrote you can you can judge i said what i want out of life i said i wanna have the ability to shape my own life i wanna be my own biggest fan i wanna make adversity part of the recipe i wanna treat other people well and i wanna reread this every year every morning so i never forget what each day is four i wanna rewrite the list every year so i see myself evolving i wanna focus on what matters number one my loved ones because they love me even if i don't do anything on this list number two my health because without that i can't do anything on the list number three my work because it makes life fun number four being somebody who lights up the room because it feels good to make others feel good and number five learning because it's the master key that unlocks all doors and i i keep going a little bit then i say some the things that i'm i'm weak at i said i wanna be somebody who doesn't just want things who makes them happen i need my execution to catch up with my ideas i wanna be the most optimistic person you know and i wanna win not but not just when i wanna win on my terms because that's the most satisfactory satisfying way to do it congratulations that's fantastic and this right ten years ago and then you you reflect and you modify okay and then so now you know what you want do change your goals every year or no might it's like my nature my nature really doesn't change my phase of life changes okay so i'm in a different phase of life like right now i'm really feel compelled to a a pass along everything that i have that is a valued to other people right and so because i'm late and i'm approaching my end so that whole is my joy we have different joys we have different circumstances in the middle part of our lives there's work life balance and your kids and your whatever and so these arcs of life there's an arc of life almost like a script i mean you know exactly you know at this age i graduate and you know at each phase you know what it's like and so you have that arc but your nature doesn't change i don't think hey let's take a quick break you know that feeling when strategy is done the brief is written everyone's aligned and you realize someone still has to sit down and actually create all the content that someone is usually you and it's due tomorrow well the breeze assistant from hubspot can help it works right inside hubspot you can draft a campaign copy blog posts emails all in your brand voice all using your actual customer data so you don't create just content you create content that converts check out hubspot dot com the agent customer platform for growing businesses i was listening to a podcast about you and there was this funny story i think this was when you were selling research you said that you hired a guy i forget his name but i think he was a door to door bible salesman yep and you're the three he know anything about research or finances not much but he was curious and he was you know like i say that there are three things their skills abilities and values and most people look at skills and they look at the resume to determine what skills they have in my opinion it's the opposite order is what's the most important first values what are the person's values like then what are their abilities because if you have abilities you can change what your skills are we're we're in a world now that maybe programmers are no longer is going to be the most important people and maybe be you know all of a sudden you were growing up with okay man you need to program because you're doing this and then all of a sudden man that's allows because you know something comes along right so how do you adapt what are you going after and then the least so the least important is the skills and so in thinking about that what's our relationship gonna be like when how do we pursue a dream is he bride is he what is his abilities what can we do well how do you discover i mean most of like your curiosity most of everything is in the discovery okay it's not in the you know remember these rules and and so on the future is in the discovery so so that's what i'm you know i'm looking for right i mean that that's what even talent identification is because talent is more important than money okay the the money people are trying to find those people right okay so if you look at okay what did elon musk cab didn't have money and how did people make money they invested in on money they found him and they invested in elon musk human capital versus financial capital right that's right let's talk about you when you were younger what would people have seen in the talent identification at that phase i think it would have been tough i was you know a c student i didn't like it high school education i liked markets i had a passion for markets i got into c post college z you on probation but i had a passion to tell the story if you can of how you got passion how you started you said i love markets i mean most teenagers don't know they love markets i used to do odd jobs as a kid lawns shovel driveway and then cad and so why i would cat i would walk around i got six dollars a bag and when i would get up to fifty dollars and i would talk to people about the the people are chatting with about the markets because everybody talked about the markets then this was a time if you got a haircut your barber talking about what stocks the buy so then naturally i i took my cat money and i put in the markets and the first stock i bought was the only company i heard of that was selling for less than five dollars a share and i stupidly believe that if i bought more shares i could make more money if it went up okay and so i i did the company was about to go and bankrupt another company acquired it it tripled in price and i said i like this game you know and i thought that this game must be probably an easy game because like in the newspapers the wall street journal near they had all these thousands of names of stocks you know on all of those things that i just figure i have to pick one or two that go up i mean this big selection i should be able to do that and then i started in the game and then i realized the game is not easy i still know the game isn't easy but then i got hooked on the game did you have any peers at the time or humanity no i've there were no cure kids that were doing books or where were you getting smarter how did you start off i remember fortune had the fortune five hundred and they had in when they had the fortune five hundred they would have little tear sheets and you could say which annual report you would want you would check it off and mail it in and i checked off all of them and then you know mail member log these six to the house and then i it became my little library and i would talk and then i fiddle around and yeah that's all i do whenever i was reading snowball warren buffett it and now i'm hearing you talk about it i think like the lucky thing that i don't log i know what it is that you found something that you liked at such a young age that for a lot of people i know that are like that bill gates was like bad a lot of people like that they'd found something and then also learning is different learning prior to puberty is different or at around twelve or thirteen it's like learn a language learn something learn a sport and so on when you learn it prior to that it almost goes into your you know into you so yeah that was part of it were you hustle because you know now we see you as this his guy he's very wise he's sharing all knowledge and when i studied buffett it was kind of the same buffett as this charming wise patient sort of guy but if you read about him as a kid he was at horse tracks he was studying bedding he was finding the slips on the ground and cashing him in that others had overlooked he was setting up pin ball machines and barber shops and fishing golf balls out of the pond or resell them he was a were you a hustle of as no in the golf course that i had i was at they would hit they would hit them into the pond and i walk around in the pond and be them yeah and then i would pick up the golf balls and selling out but that's thought i didn't know do that sam called you late bloomberg i find that term interesting you don't know the about sam but he was really wanted to be successful he studied a bunch of sclerosis but he had a spreadsheet he shared with me we met when he was we were twenty four years old maybe he shared this thing of when did our heroes make it and he showed that like he had a timeline for bezos for jack for all of the kind of tech entrepreneurs that we were ad hiring when did they start how many years did it take for them to actually win and he had met it broke one out their apprenticeship so like to learn and then starting their first hit and he reverses engineered and almost hit it exactly like but thirty i'm gonna have this many millions in the bank because and i know i'm today i'm here but i will be here and that's like almost the median but but i okay two things first of all i think you should publish that okay i and i suspect it has a big range around it okay like i was thinking ray cro mcdonald's he was like two fifty mcdonald's okay so it's a big range but they certainly or driven it yeah i basically when i was younger i met someone who's actually mike partner now and he was successful at a very young age and he was probably fifteen years older than and i was like i didn't grow up a lot of money and i was like i i wanna be free i wanna feel you know i wanna i wanna i don't know i wanna feel free and i was like what's the number i need and he said twenty million dollars so i said alright that's the number i have to make twenty million dollars by the age of thirty and it was definitely my i was money oriented and it worked i i got i basically thirty one but it was so i felt it was so easy to like have a goal and then like reverse engineer and back into it because then all i had to think was like step one or step two step three great it and and that was smart because twenty million right will do it okay and do it and you also thought being free yeah and then you can go for it that was what i was trying to tell elon he said no i don't need okay i don't need the safety net because if i'm if i'm listening today this i'm hearing you say like god you a nice bed to sleep and want my freedom i like to want my kids to be going to good public school all of that at the same time made like twenty billion dollars right so this somebody listen to say well at some point did he did you just wait overs shoot his his his needs i didn't wasn't what happened for that yeah it's it's five five i played a game that i love the pays well if you play it well right i'm very passionate with personal finances and particularly amongst the average show of like don't buy shit you don't need which people don't tend to follow or spend less than you make which people don't tend to follow do you still do anything in your life that is a pretty frugal thing oh yeah i i i instinctively can't waste i'm reluctant to fly a private plane i'm i don't like expensive watches heard someone wanna make a joke that most of your suits are from been in in republic or something like the it's something like that where do you spend well right so like spending is also a skill i spend money on the things that i enjoy i love boats have a house on the water i don't have yacht but i have a ocean ship that i'm i'm very excited about that i give to scientists and add a lawn i cannot do a normal yacht okay but jacques i don't know if that dummy me when i was growing up i watched him die jive and do exploration and then my son i have a son who well i took my son's diving and they learned out a dive and he then went to work at national geographic as a filmmaker and so on and then we have this common passion of ocean exploration so to create a ship that's a laboratory that they do research and so on and so forth that's a great joy but i couldn't be i'm listen i'm not against anybody doing any of these things i just wanna be clear it's not like i think whatever brings you joy it's okay it's kind of like that right and we're uncomfortable my numbers my family my wife would not be comfortable with much jewelry right you know or anything that would be fancy jewelry or something that's just happened how we grew up and you know i mean and the kids are the same thing my kids have grown up and i would say whatever you enjoy of like if you enjoy the you know the threads and the beauty or the the watch and you really are enjoying it that fantastic i know you're into the ocean do you believe in aliens and have you yet do have access and any cool insight into things like that i have no knowledge of aliens until i have no about what do you believe what do i believe i have no beliefs that are just beliefs so people i've heard different people saying things and and here's what i believe and which is there's the en enormous you know of our galaxy there are something like a hundred billion solar systems okay and in the universe there is something like a hundred billion galaxies and so there are a lot of combinations out there so i would have to believe that the probabilities of there being life in other forms and so on are great okay out there however i've also heard scientists say that there is that that's much smaller than one would think about those things but i haven't gotten into the subject while i'm giving you is you know like what i heard about those things and you know like it's not a subject that i've spent much time with right yeah i think you had a phrase like probability weighted beliefs or something like that right it's like not all beliefs or obviously equal some you have high conviction in you have much lower based on your and an analysis or an assessment it's just my way you know and also markets teach you this way right what does expected value half humility okay if you have an opinion what's the opinion worth hey how much todd like we've spent almost all of this times talking about like frameworks for thinking and and very little of it was about business or finances how much time of your day do you spend thinking about some of this high level stuff versus like actually picking or deciding making a decision on a trade they're connected to me okay i'm a global macro investor okay which is by the way i think it's the best kind of investing because it brings you into okay global that's cool you did with the whole world macro that means big stuff ford stuff okay and then how do you place your bets and and so it's connected to all of this stuff you know it's connected to the the politics and the geopolitics and all of that and it's connected to history i've did a study of last five hundred years of how things are working only because i learned in my life that if i haven't seen something before in my that didn't happen to me in my lifetime i should see whether it happened before my lifetime and so on and then when i did that because there are these big cycles like there's is there are orders right we'll call there's a monetary order there is a political order okay political and social order there is a geopolitical order in other words systems of how they work they all break down okay there's throughout history read history but they happen like you know in these big sort of cycles and they break down kinda for the same reasons all the time they break down for the same reasons so as a global macro investor in a sense i'm unconnected to that so the book that i ended up writing you know which is a changing world order i plot things and so you see them on graphs and you could see these things happening the simple measures of financial health and how does that all work and what are the consequences when you see that so yeah i'm into that because so it's connected when you said don't i see the big stuff okay yeah the big stuff bath hurts a lot right but you see it in these you you realize that a lot of people are looking at the news the news last minute okay can you put the news in the context of what's happening watch what's happening i mean just let let's take a look at those things you wanna take a minute on that yeah yeah okay okay so one of the things that i learned about is that there are five big forces that interact over a period of time to determine that and that is the debt money economic force okay and there is a big debt cycle okay so it's and it's a very simple thing it if you acquire more debt than you and then you're earning over that you your debt service payments will squeeze out your spending okay they grow and that is like in your circulatory system that's like plaque being built up in your circulatory system and when that happens and it becomes painful you have a debt restructuring and also one man debts are another man's assets so if you're producing a lot of debt let's say government's running a large budget deficit that means it has to sell bonds and then who are the buyers of the bonds and how does that work so it has a mechanical part of it that's one of the forces the other forces is wealth and values differences so there's the political force which has to wealth gaps values gaps as they become greater that's a greater threat to democracy that's a greater threat to in other words when you get to do you have irr differences so you're not gonna compromise and you're not going to even follow the system that's a risk okay that's a risk now okay we have the first risk we have the second risk right okay check check okay third risk is the geopolitical risk so there's orders right the way the order works is who's in control what are the rules of the game for the world and so the way it works is you have a war the winner of the ward sets the rules and that we call that's the order nineteen forty five we ended the war america sets the rules and so on and we created what was a multi lateral type of system you know almost representative the united nations the world health organization the world trade organizations so all those world organizations are out the picture we're no longer have a multi lateral world order okay so how do you resolve differences you fight okay you're going to have conflict how how do you get past the disagreement there's no court you go to you can't do it that okay so now you have those three things okay that's that's happening number four if force always through nature is nature in in particular droughts floods and pandemics historically have killed more people than wars and they are a big force as they come up and number five all through history is man's invent particularly of new technologies and that raises living standards and so so if you were to see life expectancy always rises productivity per capita gdp by all measures as we learn more we have that and so there's the interaction of those five forces those five forces you can measure them and you can measure their interactive and that is what is now happening so if you know those cause of affect relationships i think they're connected i've read something that your family office i don't if is right you can correct the record family office has like seventy percent or seventy five percent in gold etfs no is that wrong wrong totally wrong i believe that from an investors point of view that they should depends with their portfolios constructed and they should have between five and fifteen percent of a portfolio on getting that fifteen non correlated difference that's they should have something like that and then it should have it overweight if they're tactically doing it tactically means let's say there's a certain time to own it and a certain time not to own it certain time to own it is particularly when there's a debt crisis and the government is flooding with money that's that's an ideal time to own it so there's a timing question so i believe that one should create a strategic asset allocation next meaning what is my best balance portfolio if i have no opinions what is it's not gonna be cash because cash always is the worst performing over a period of time people think it's the safest it's the sure to do poorly over the longest period of time so certainty low performance so what you want to have the best thing to do is have a well balanced portfolio of assets because you can lower their risk as by through the diversification because if you have one it goes like this but if you have another that does the opposite with it you could have that so there's a strategic asset allocation mix and then you've make your tactical bets relative to that and and so on but here's what i would describe the mechanics let's say there is such a thing as bubbles what is a bubble a bubble is not whether the stock will pay off in the long run because in bubbles even the most successful companies go down eighty percent or something along those lines so typically when there's borrowing of money or whatever and there's a increase in wealth relative to money okay wealth and money or two different things okay wealth is you can make up wealth if if you have a fifty billion a fifty million dollar offering on a billion dollar valuation then all of a sudden you're tech you're called a billionaire and it it was fifty million dollars but and and then the the world has a billion dollars in wealth but what happens is is wealth builds up you can't spend wealth you have to sell wealth in order to get money because you can only spend money and so when wealth builds up a lot and then there comes the need for money and what creates the need for money the need for money often is that they borrowed the money to buy the wealth to invest in the wealth and then they be interest rates go up and then all of a sudden they have to pay their debt back and so where do they get that money from they sell the wealth in order to get the money and there's so there's this dynamic that's taking place and then has another number of ingredients like it's all the rage to buy it and everybody buys it everybody buys maybe more than they should because they don't diversify or and what happens is it's all the rage and so is it logical and there are these elements that create a bubble okay there are right now on that scale i have a bubble gauge i measure measure all these things and i have this bubble gauge going back across countries to about nineteen hundred and so i can see where they are and these by the way typically take place out quite often when there's great new technologies a reason to be ex the reason to be ex uber and and and to tibet and and people confuse investing and they they say i believe that technology is gonna be great and revolutionary and it is okay but that doesn't mean the stock will be great okay there's a lot of reasons that the stock could be too high and competitors come in and they you know there's a google on the yahoo so so what's the bubble gauge saying right now so the bubble gauge is saying it's about seventy five percent toward where it was both in two thousand and nineteen twenty nine so it's pretty high up there okay in japan in its bubble in nineteen ninety it got higher even than than those cases so it's high but people pay too much attention let's say if i just the did the bubble gauge i could tell you probably with good probability that it won't be good to for the next i couldn't tell you whether it's gonna be three years or ten years but it won't be a good investment but it won't tell you timing timing you need the pre scaling the bubble okay so what causes it to prick the bubble so if you got a bubble and then you see okay here are the things that prick the bubble then you've got a good combination of things to do your market timing because the timing is gonna be on the prick of the bubble the prick the bubble it typically is the creating the need for the cash for the converting that wealth into cash for one reason or another quite often is the most typical thing is tightening monetary policy okay so what you have typically is that when stocks go up and bonds go down then what you have is the future expect to return of equity becomes low relative to interest rates and when interest rates go up let's say a tightening a monetary policy you you know that's that's a classic dynamic other things like wealth taxes could do it so in other words for example if you say you're gonna have to pay wealth tax then whoever has the wealth is gonna money more sell some of the wealth to get the money in order to be able to pay so looking out for those things in terms of the timing is my machine take with that before whatever it's worth i don't want people to trade on that this and so on but i'm just trying to answer the question that there are mechanics okay everything that happens has causes to make it happen and if so you understand the mechanics of the cause effect relationships you can see all this and understand it that way okay so you've probably have heard this on the podcast but if you're running a company i think that the number one attribute that will determine if you are gonna succeed in business is how fast you can learn from others specifically how fast you can learn from other entrepreneurs but there's a problem with that i have this problem and in fact you probably have it too that's one of the reasons why you listen to my first million in the first place the problem is that finding other successful entrepreneurs to learn from it's a pain in the butt and so that's why a few years ago i started a company called hampton you can check it out at join hampton dot com we have thousands of members and they exist for this exact reason so here's how it works if you're a founder that does at least three million in revenue and you make it through our incredibly thorough vetting process we then match you and put you in a group with nine other entrepreneurs you meet in real life in your city once a month and it becomes your peer group that will frankly change your entire life it's changed mine i'm in a group as well and so if you're a founder that does at least three million in your in revenue check out join hampton dot com again the url is join hampton dot com is bridge water the biggest hedge fund because you were the you had the best performance is it the biggest because you were best at marketing is it big why did it become the biggest it became the biggest hedge fund because we the most consistently made excellent returns with a minimal risk and we were un correlated with the stock market or any other market that that was the main thing it made i think eleven point eight percent a year for for something like thirty one years when i did it the worst down in a year was two thousand because of the covid and we didn't know how to deal with the covid well that was out there about thirteen the next two times was down like two percent okay and that was not correlated with anything you know the losses you lose fifty percent to have a hundred percent to make money and so the compounded effect of that and it was comfortable so that's that's that's why out of the thirty years how many did you lose i think it was like three three three when this was what about eighteen percent three four a motive but not not significant but it does help your your your your media your work your i mean your you're charming your good leader like and you've been doing it since you were in your thirties of like but i became the bridge water became the largest hedge fund before anybody knew me and it was the opposite reaction like i was trying to be below the radar and then two things happen we became the largest hedge fund in the world and at the same time we have this culture okay and the culture was perceived as a cult and then i put online the principles just so we we have a book of how we're gonna be with each other the principles and then that got around three million copies were it was down over than three million times people passed it around otherwise it was gonna be a problem the hiring people and someone that wouldn't understand the culture which is the culture is an id merit in which we radical truth from this and radical transparency but anyway so an answer to your question it was not my charm head if they to do with this i could explain the process people couldn't they can understand what was our process and i could show how it was back tested and it worked through all of those periods of time and that was logical and then there were results and we helped people learn meaningful work meaningful relationships so i would have we would have relationships with them and we would teach them and they would learn and they became better investors i was walking around new york because i this my first time here in like ten years and i went to the rockefeller center and there's this like kind of this giant stone and it's john d rockefeller junior and he's just writing these things i believe in the sacred of a promise that a man's word should be as good as as bond and it just has each it's there's like just ten of these principles etched in stone sitting outside the building you know it's like i believe that love is the greatest thing in the world and that love alone can and will overcome hate right and we are missing these now more than ever right the idea of what are these principles what are the principles that bind us together okay what are the principles that we follow really what is most important people are not you know everybody should write down their principles and then be judged at how they're living by those principles and are they together well this is the best part of your book it's you write the principal you're not saying these are your principles for everybody you're like these are my principles if if you take away anything it should be that you should have figure out what yours are that's right in europe most people to don't know what there's are even fewer we'll ever write them down and then the few will be those who act in a line who walk their talk but to get there you're have to write it down you have to look at it you have to have the shit kicked out of it you have to you know and you say yes that's right those that are clear etched in stone that bring us to a higher level of how we should be or so we are short of those just like we're short of heroes okay role models that you say oh that was a great man or and that's a way to be who is yours growing up and maybe do you have a hero now find one of them was paul vol okay lee on you started singapore and and and run that but no there were many named many people who will sacrifice for for the things i believe that we we talk about love with karma okay or what i mean is you go across the world and you look at all religions and there's something common everybody can have differences in their superstition their beliefs and so on but there's a commonality which is doing to others as if we'd would have them do you or karma what goes around comes around and it is a reality that the whole is much better than the individual parts because a little bit of consideration and help for others can make such a world of difference and if you do that both ways you have a much better world right and then people who do that are role models to me as a as you look at that okay as the thing from selfish ness and fight in other words and one i mean that is mutually destructive and and you see that so i i think it's a question for humanity now can we rise above ourselves for dealing with you know what will certainly be better for everybody if we can get a along i bet the i don't know mean that idealistic realistically this is practical right because it doesn't cost me a lot to help you doesn't cost you a lot to help me and but if but it could make a world of difference when you have that it's a practical thing and and then that what is har contributed to that i think that's literally what it is and and we're now operating a lot the opposite way i think you know we've been doing this podcast for for a little while here and we've been talking about lots of different angles some about investing some about life and principles and entrepreneurship i'm curious like if somebody was listening to this and there's one thing that they were gonna remember what would be the thing that you hope people remember or takeaway away what's like what's the what's the one big one know what you want and understand that it's a it's a journey of having your nature and then running into your mistakes and learning from those mistakes to get what you want and then i would say it's all about meaningful work and meaningful relationships if you have work that you love and you've got relationships that you love you're probably gonna have a great life well thanks for doing this man yeah we appreciate it this is fun for us hope this one for you that was fun yeah i feel like i could rule word i know i could be what i want to from at all in it like a days off on a road less travel never looking back alright let's take a quick break to talk about a podcast because if you're listening to this you like podcast and what's better than one podcast another podcast and let me tell you another podcast you should check out it's called success story if you like hearing about different success stories and hearing q and a sessions with successful business leaders or hearing ken presentations or just checking out conversations about sales and business and marketing tactics is a great podcast for you so check it out wherever you get your podcast