Ray Dalio: The principles that made me a billionaire

- July 17, 2026 (1 day ago) • 01:00:37

Transcript

Start Time	Speaker	Text
00:00	Ray Dalio	"You wanna be successful? Here's the mantra for investing." I got my pen. The most fundamental question is: "How do I have the upside without having the downside?" That approach was the basis of Bridgewater—going from having to borrow $4,000 from my dad to the largest, most successful hedge fund in the world. I created personality tests. I gave it to Elon Musk, I gave it to Bill Gates, I gave it to Reed Hastings. Maybe I should probably not tell stories, but no.
00:27	Shaan Puri	No, no — that's what we do here.
00:29	Sam Parr	You don't have to make it to the top to be happy.
00:30	Ray Dalio	"What's the top? 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 want to do with the money? That is so important—you better answer that question."
00:49	Sam Parr	You were, in some regard, a little bit of a late bloomer in terms of traditional metrics of success.
00:54	Ray Dalio	Oh, yeah, I think.
00:55	Sam Parr	You were 34 or 35, you had 2 kids, and you had just laid off the 5 employees you had. You're like, "Look, Dad, I've lost it all. Can you close your eyes and remember that conversation?"
01:09	Ray Dalio	So I started Bridgewater in 1975. In 1981 and 1982, interest rates were high, emerging countries had a lot of debt, and I calculated that those countries were not going to be able to pay their debts. They were going to have a big debt crisis. That was a very controversial view. Then Mexico defaulted in August 1982. I was asked to testify to Congress about what this was all about and what might happen to the economy. I thought the economy was going to be a disaster. I couldn't have been more wrong. I lost money—both for me and for my clients—and I had to lay off everybody. I was so broke I had to borrow $4,000 from my dad. Then my choice was: am I going to put on a suit and tie, commute, and work for somebody? I knew that I wasn't very good at working for people. That was painful. It changed everything in my life. It created the bottom at Bridgewater, and things just kept going up because of what I learned. I learned two things. First of all, I learned humility to balance my audacity. I didn't have much humility before—I would say things like, "I'm right," and so on. Second, I learned how to diversify my bets and substantially reduce my risk without reducing my returns. I didn't want to reduce the upside; I knew I had to reduce the downside. I really taught myself a mantra. Here's the mantra for investing: this is the holy grail of investing—find 15 good, uncorrelated return streams.
03:07	Sam Parr	How did you come up with 15?
03:09	Ray Dalio	Well, I just looked at the math of it. In other words: what are the marginal benefits of diversification given different levels of correlation? I have that on a chart that keeps reminding me. If you can get out to 15, you can reduce about 80% of your risk without reducing your return. That means you increase your return-to-risk ratio by something like a factor of five. In other words—wow—that means you can get the upside without having the downside. And then—humility. I wanted people to "kick the shit out of" whatever I thought, to try to do that and then have that. That change in approach was the basis of Bridgewater going from, you know, having to borrow $4,000 from my dad to the largest, most successful hedge fund in [sentence unfinished].
04:12	Shaan Puri	"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?"
04:20	Ray Dalio	"They don't have a game plan. What's a good...?"
04:22	Shaan Puri	"What does a game plan look like? How do you know if you have a good game plan?"
04:25	Ray Dalio	Well, the way that I did it was: every time I would make a decision — and this is the building of all the principles I used, but particularly in the markets — I would go back and study. If I made that decision in these circumstances, how would it have worked in the past? I would learn the track record of that decision, and that would give me a greater understanding of how things work. So then I would have a decision rule, and I would program it into the computer. When this thing came along, I started to realize, "Okay, now I've got criteria." Rather than just the one that I would see, I would say in the computer: dump in all of them — where do they exist anywhere in the world? ... Give me one good decision rule that, wherever it happens in the world, I have a track record of knowing how those work. Wherever it is in the world, bring me that. Then make a collection of those kinds of things and make them uncorrelated so it provides diversification. And so now you're executing a game plan. I have rules that should be timeless and universal, because if it didn't work in the long...
05:46	Ray Dalio	Of time, I would need to understand why it didn't work then and why it would work now. So that's how I would build—you know, that's how I did build game plans and execute the game plans.
05:57	Sam Parr	Did Bridgewater have any revenue coming in? Nothing. And so you're waking up in the morning and you're like, "I gotta figure this out."
06:03	Ray Dalio	It was like, I'm on the edge of a jungle. I could stay out of the jungle, go to safety, and have a safe life—employed, a regular job. Great. Or I could go into the jungle and try to get across it, get through the jungle, face all the things that can kill me. I made a choice about what I wanted in life. I mean, I have to have this great upside; I can't not do that. Also, part of it was: if I'm going into the jungle, I want to go with people who want to go into the jungle with me—people who see things differently than I do. It's like going through this jungle with animals or something that can kill you, but if you're in it together, you can sort of see the animals that'll kill you. I loved being in the jungle so much I didn't want to get out of the jungle even after I'd achieved...
07:07	Shaan Puri	"You didn't want to go to the zoo. You'd rather be in the jungle than the zoo." "Yeah... almost. Yeah." </FormattedResponse>
07:11	Sam Parr	To play off that analogy, I think a lot of successful people — and I think you've even said this — where you're like, "As long as I can 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 33 or 34, and you have young kids, and you've got a little bit of a tiger in you, you're like, "I wanna provide. I wanna win. I wanna be the best."
07:30	Ray Dalio	No, it wasn't like that at all for me. It was like two levels — just very simple: can I pay for the basics? I don't need a big house. I don't need a big anything. My kids can go to a good public school; they have great...
07:44	Sam Parr	Public, but did you have a number where you're like, "Man, if I can make $100..."
07:46	Ray Dalio	A year, I counted. What I started to do was count how many months, then years, of living that way I could afford if it shut down. But you said two levels. That was level one: it's freedom money, basically "fuck you" money.
08:06	Sam Parr	"What was that number for you?"
08:07	Ray Dalio	I don't remember what the number was, but... you know, it wasn't—it was an easy-to-achieve number. </FormattedResponse>
08:13	Sam Parr	"Like a million dollars."
08:14	Ray Dalio	But... oh no.
08:16	Sam Parr	Less.
08:17	Ray Dalio	Oh, much less at that time.
08:19	Sam Parr	Was there ever a grand vision, or was it always: "Well, what's the next level? Let's see if we can do that."
08:23	Ray Dalio	No — I could imagine great things. I'll tell you about a personality test. When I decided that I wanted to pass leadership of Bridgewater [Bridgewater Associates] along to others, I wanted to be an investor, let them run the business, and I wanted to do that because I'm hooked on the markets. I created personality tests. I started with Myers‑Briggs and then developed various other kinds of personality tests. I then gave the personality tests to people like Elon Musk, Bill Gates, Reed Hastings, Muhammad Yunus, and others to see the elements they had in common. I put it online for free. </FormattedResponse>
09:10	Shaan Puri	We created it. We took it, like...
09:12	Ray Dalio	Okay. Last topic. There’s a type of person that represents a very small percentage of the population: Elon Musk is one, then Bill Gates, and Reed. A number of these people are, I would call, a "shaper." They are people who love to go from visualization to actualization, to be on that mission and so on. That's my personality type. I have a certain personality type; they have to do certain things. I remember Elon—he's that personality type. Making money is not a big deal for him. I should probably not tell stories, but...
09:53	Sam Parr	No, no.
09:54	Shaan Puri	No, that's what we do here: we tell stories.
09:55	Sam Parr	We can.
09:55	Shaan Puri	I'll tell you.
09:56	Ray Dalio	That later—the excitement, you know...
09:59	Sam Parr	The
09:59	Ray Dalio	The compulsive thrill of climbing that, and aspiring to that, was my personality type. 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.
10:18	Sam Parr	It sounded like you had a story about him—where that's an example of...
10:21	Ray Dalio	Well, yeah.
10:23	Sam Parr	Hey everyone — pausing really quick because I know you were probably scrambling to write down all the stuff that Ray's talking about. Well, the good news is that we did it for you. We made a guide; the link is in the description on YouTube. This guy breaks down the five frameworks behind one of the greatest investing track records of all time, so you can actually use them and spend time listening instead of taking all the notes you're probably taking right now. You can get it for free. Click the link below in the description [YouTube] or scan the QR code right here [QR code on screen]. All right — back to the episode.
10:54	Ray Dalio	When he first started Tesla, he had made something like $180,000,000 from PayPal. He decided that he was going to take half of that money and go to Mars. He had no experience in terms of going to Mars, but he had this vision. When I said to him, I suggested that he put aside a little bit of money—take a piece of that—so that if things don't work out, he'd have that. He had that strong compulsive need. But I think everybody has a certain nature. Whether you're born with it or shaped by your environment, you have a nature. That's why I created these personality tests. For any of your listeners: Principles You — it is what it is. It's free; it's online. Take it. You'll understand more about your nature. There's a feature in there where someone you have a relationship with can take it, and then they'll tell you about the relationship.
11:58	Shaan Puri	So, we took it last night — okay. This was based on, after we talked the other day. Sam tells me, "I'm a shaper," and you had told me, "You're a shaper, Elon." I was like, "Wow — okay. I hope I get Shaper; I want to be in that club." So I'm taking it, and I'm answering as honestly as I can.
12:14	Sam Parr	Is "degenerate" an option?
12:17	Shaan Puri	Degenerate, happy but sort of foolish. What is a new-new type?
12:21	Sam Parr	"You have, moron."
12:22	Shaan Puri	"Is that what—? So, I got Explorer, and I was like, "That was not what I expected at all." A bit of characterizing. Yeah. I mean, it very much described me: I'm driven by curiosity—seeking new knowledge, new experiences, learning. I'm very objective and truthful about what I'm experiencing, and I almost take pleasure even when I have a bad result because it means you get to learn. That is so true for me. I get the most fun doing that, so I guess it really was true. I think why I may not have been a Shaper: a lot of the questions ask about being part of the visualization to execution, and I think I do a lot of that. But I'm not very detail-oriented. I don't care about the details; I overlook them. I'm not a perfectionist. I'm much less so than Sam—Sam really wants everything to be great.
13:11	Ray Dalio	Okay. One of the elements of a shaper is — and, by the way, that's where you're seeing your nature: you know what your satisfaction is and what you're likely to be most successful at. The issue for a shaper is they want to go from visualization to actualization. They move from a very big-picture view down to: what are those details? I remember Elon gave me the key to his car, and it had a little button. He showed the screen and got into the details a lot. We were talking about how he wants to put a watering can with a plant on a rocket to send it to Mars — to say "first life on Mars," to inspire things, and so on.
14:02	Shaan Puri	So, 10,000-foot level and the 10-centimeter level.
14:05	Ray Dalio	Right — that liking, and then taking that and going, "Okay." So, yeah, we all have our purpose. 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?
14:22	Sam Parr	So, look, Ray — we've only known each other for 30 minutes, but I'm going to show you something that might gross you out. When I was young and drunk, I gave myself a tattoo. The tattoo is on my feet and it says "act now."
14:37	Ray Dalio	Oh, good. So tell me—were you at the tattoo parlor?
14:43	Sam Parr	Have you ever heard of the phrase stick and poke? No? Okay. Basically, if you're in jail—this is kind of where it comes from—but a lot of punk-rock people do it. You get a sewing needle, dip it in ink, and then make lots of little dots on your skin; that's a tattoo. [A DIY tattoo method.] When I say I was 19, I was actually probably 22—I just don't want to be that mature when I say I did it. I was angry that I wasn't moving fast enough in life; I was so angsty. At the time I partied a lot and was drunk, and I thought, "I'm gonna tattoo 'act now' on my feet, so when I wake up that's the first thing I see: I gotta take action."
15:20	Ray Dalio	And does that work for you?</FormattedResponse>
15:22	Sam Parr	Yeah, I tend to need to tone it down — I need to think and plan because, you know, I've had a little bit of success in my career. I think occasionally you need to be a little more strategic. But yeah, I'm usually like a bull in a china shop.
15:33	Ray Dalio	"The thing about it is that you have to find the people who are different from you, who complement you."
15:40	Shaan Puri	Well, on my leadership test you don't just say the personality that you are—it's also where you're very weak. On mine, it was connecting and supporting—kind of the social side. My business partner Ben—the guy who emailed 77 times to you and your team to get you to be on this podcast—has, I think, been emailing for four years trying to make this happen. He's an amazing connector and an amazing supporter. He wanted this moment to happen even though he's not at the table; to him, that's a win. Connecting is the win. He's been my business partner. We've had unbelievable success as a partnership, even though we couldn't be more different if we tried. </FormattedResponse>
16:18	Ray Dalio	So, let's pause and reflect on that. This is very important for success: people who think differently from you—people who you ordinarily might get annoyed at—are actually your paths to success if you can understand them. It was very interesting when I did this at Bridgewater. I administered personality tests, and then people would say, "Oh, you're an ESTP," and "I'm whatever it is." They began to understand how they could work together rather than get annoyed by the other person. That was a big deal. Success comes from that. Success comes from failure and from learning from it. Success also comes from working together. I would say meaningful work and meaningful relationships are essential. If you're on a mission to do something great—go to Mars or whatever it is you're going to do together—and you have meaningful relationships, radical transparency, you know your nature, and you know how to work with others, that's the formula for success.
17:29	Sam Parr	Yeah, another example is Doctor Dalio. When Sean came in, the notes were already printed off. There you go.
17:36	Shaan Puri	I'm late — I don't have it printed, but... you know, we have a very different dynamic. For six years we've built one of the biggest business podcasts in the world, despite being completely different in our nature.
17:46	Ray Dalio	So, I hope your audience hears this. Right? Yeah — it's pause and reflect. Because, okay: what are we here for? We're here for pretty much the same reason, just a little bit different settings. I'm 76. I want to pass along whatever I add to help people in that way. That's my goal. Your goal also is to — you're obviously not only saying it's your goal, but your effectiveness is in being able to help people. Otherwise I wouldn't be listening. So I just wanted to pause on that formula: once you get that formula — pain + reflection = progress — how do you work together and all that? Wow. Follow your nature.
18:25	Shaan Puri	Can you guide us on the reflection part? I think everybody understands the word, but I bet we don't really talk a lot about how each individual person does it. So, are you writing your reflection? Do you talk to—do you have two or three people you call who tend to give you high-signal feedback or advice? What is your process to actually do the reflection? The pain part comes involuntarily.
18:45	Ray Dalio	That hits you. When the pain comes, eventually the pain will go away, but people can skip the reflection and remain hung up in their pain. So you first have to make this transition. Now, meditation has helped me a lot. I've done transcendental meditation since 1969.
19:06	Shaan Puri	"Explain what that even is. I've only heard you and Jerry Seinfeld swear by Transcendental Meditation. What is it?"
19:11	Ray Dalio	Transcendental Meditation is a very simple exercise: you sit there calmly and repeat a sound — a word called a mantra that doesn't have any meaning. An example might be "om." You sit and repeat "om" in your head. When you do that, you can't have other thoughts because your thoughts are in "om" and other thoughts can't come in. Eventually, when you get the habit down, the "om" goes away and you enter a subconscious state — very relaxing and calm. It's a real calming exercise and it brings you into your subconscious mind. Your subconscious mind is really controlling you a lot. You have a conscious, logical mind that you're aware of. The subconscious, meaning below your awareness, contains all the things that influence you: your emotions and subliminal stuff. Transcendental Meditation goes into that subliminal stuff, calms you down, and it's also where creativity comes from. It's like when you take a hot shower and ideas come to you. You can't force ideas by muscling them to come, but that relaxation produces them. I found that very helpful. I've developed an instinct — habit is a very important tool. If you know how to develop the right habit, the habit means you have an instinctual positive reaction to something. I have a reaction: "Okay, that is a lesson in reality" — in other words, pain. It becomes like a puzzle for me. The puzzle is: how does reality work? Reality tells me something about how it works and I have to deal with reality to make it successful. So what is my principle for dealing with that reality in the best possible way? That's my instinct. When you've got that instinct, it's a whole different thing. You start to say, "Okay, there's pain," and you apply your curiosity. You take your curiosity and ask: what does that tell me about how reality works and how I should deal with it? If you solve that puzzle, you will get a gem — a principle that you can carry with you to be better. And so if you start to recognize it as that, and then I do write
22:09	Sam Parr	"So what's that? What does that mean? Do you journal every morning? Every night?"
22:11	Ray Dalio	No, no, no. It's just when thoughts or circumstances come to me, or when I'm making decisions—I start reflecting. What has happened is I've found that all those reflections are cause-and-effect relationships because principles are basically: > "If this happens, what do you do?" I put those into computer code. That's how I built Bridgewater. I built, essentially, "if this happens, you do that," and you put it in computer code. I then created computerized decision‑making systems for markets and almost everything. Because I've done this for 35 years on almost everything, I have thousands of these principles written down. They are, in effect, the ways of achieving success in whatever kind of decision—for example, if the Fed does this, or if somebody you love dies, or whatever it is. How do you reflect on them? What does that mean? I would recommend—I've put out a journal that people can use so they can journal their own principles and their reflections. If they start to think that way, pain + reflection = that, and if you reflect well, then what happens in meditation is it connects your subliminal self to your conscious.
23:36	Sam Parr	I'm on board with all that. I think that if I put myself in your shoes, between the ages of 35 to 52 you went from like nothing to like the largest head trauma in the world, which we — I want to hear all that. But when you're like 34, 35, 36, and in the first three years of starting your business anew, I would have to think that, like most small business owners, you're just trying to pay the bills.
23:56	Ray Dalio	I could always find a way to pay the bills. The question is: what was it? And I think, along those lines, that's where your priorities get tested. You think about what you really want and how you weigh one thing against another. For me, I want survival and opportunity. I want to play the game. I don't care much about convention. I don't care much about how I look to the outside world or about things that might inhibit that choice. I think people get stuck because they don't realize there are multiple possibilities. Some people say to me, "You don't understand — I'm in this job I don't like, I think my boss is a jerk, and this isn't where I want to go," and they feel they have to be there. The reality is, if you're clever and you figure it out and try, there are many ways to have a really happy life. And, by the way, a lot of money is not the most important thing. Sometimes we get hung up on this notion that it has to be a conventional life — "I've got to do this" — but is that really it? Even experiment with it.
25:22	Sam Parr	Listen to this quote, Sean had — he said: > "I cannot say that having an intense life filled with accomplishments is better than having a relaxed life with savoring. Though I can say that being strong is better than being weak, and that struggling gives one strength." I thought that was pretty cool.
25:36	Ray Dalio	"That's true."
25:40	Sam Parr	Yeah, I guess... you don't have to make it to the top to be happy. And I think that's been our...</FormattedResponse>
25:43	Shaan Puri	Well... biggest.
25:43	Ray Dalio	What's the point? You work your ass off to get a lot of money. 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 want to do with the money? That is so important. You better answer that question. What is that money going to get you? Does that get you better friends? Does it get you a better marriage? A better relationship with your kids? > "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, 'Ah, that was the life I wanted to have.' "
26:26	Sam Parr	Do you think that you could answer that for yourself?
26:28	Shaan Puri	I tried to do it. I'll read what I wrote. When I was 27 years old, I wrote this. I tried to write it out because I think I had actually read your principal's PDF around the same time, and it made me start asking these questions. One of your core principles is: figure out what you want and then understand the rules of nature — study cause and effect to understand what patterns of behavior and actions might lead to the thing you want. Here's what I wrote. You can judge it. > What I want out of life > - I want to have the ability to shape my own life. > - I want to be my own biggest fan. > - I want to make adversity part of the recipe. > - I want to treat other people well. > - I want to reread this every year, every morning, so I never forget what each day is for. > - I want to rewrite the list every year so I see myself evolving. > - I want to focus on what matters: > 1. My loved ones, because they love me even if I don't do anything on this list. > 2. My health, because without it I can't do anything on the list. > 3. My work, because it makes life fun. > 4. Being somebody who lights up the room, because it feels good to make others feel good. > 5. Learning, because it's the master key that unlocks all doors. I keep going a little bit and then I say some of the things that I'm weak at: > I want to be somebody who doesn't just want things, but who makes them happen. I need my execution to catch up with my ideas. I want to be the most optimistic person, and I want to win — not just win, I want to win on my terms, because that's the most satisfying way to do it.
27:41	Ray Dalio	"Congratulations — that's fantastic." [The speaker's sentence ends with "this"; it appears incomplete.]
27:44	Shaan Puri	Is ten years ago.
27:45	Ray Dalio	And then you reflect, and you modify. Okay. And then, so now you know what you want.
27:51	Sam Parr	"Do you change your goals every year?"
27:52	Ray Dalio	No — 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. Right now I really feel compelled to pass along everything that I have that is of value to other people. Because I'm later in life and I'm approaching my end, that role is my joy. We have different joys and different circumstances. In the middle part of our lives there's work–life balance, your kids, and whatever else. These are arcs of life — there's an arc of life almost like a script. You know, at this age I graduate, and at each phase you know what it's like. So you have that arc, but your nature doesn't change, I don't think. </FormattedResponse>
28:42	Sam Parr	You — 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, "you hired a guy — I forget his name, but I think he was a door-to-door Bible salesman." Yeah... you were — did he know anything about research or finances?
28:58	Ray Dalio	He was curious. I say there are three things: skills, abilities, and values. Most people look at skills and the resume to determine what someone has. In my opinion, the order should be the opposite. The most important is values — what are the person's values? Next are their abilities, because if you have abilities you can change what your skills are. Skills are the least important. We're in a world now where maybe programmers are no longer going to be the most important people. You might grow up being told, "You need to program," and then suddenly that's a lousy bet because now something else comes along. So how do you adapt? What are you going after? How do you discover your abilities? Most of your curiosity, most of everything, is in the discovery. It's not in remembering rules. The future is in discovery — that's what I'm looking for. That's what talent identification is about, because talent is more important than money. The money people are trying to find those talented people. If you look at Elon Musk, he didn't have money at first. How did people make money? They invested in Elon Musk; they found him and invested in him.
30:40	Shaan Puri	Human capital versus financial capital, right?
30:43	Ray Dalio	"That's right."
30:43	Shaan Puri	"Let's talk about you. When you were younger, what would people have seen in the talent identification at that phase?"
30:48	Ray Dalio	I think it would have been tough. I was, you know, a C student. I didn't like high school. I liked markets—I had a passion for markets. I got into C.W. Post College on probation [unclear word: "zoiu"]. But I had a passion, so... tell the story if...
31:06	Shaan Puri	You can talk about how you got that passion—how you started. You said, "I love markets." I mean, most teenagers don't know they love markets.
31:12	Ray Dalio	I used to do odd jobs as a kid: mow lawns, shovel driveways, and then caddy. I would caddy—I would walk around. I got $6 a bag; sometimes I'd make up to $50. I would talk to people—the people I was caddying with—about the markets, because everybody talked about the markets then. This was a time where, if you got a haircut, your barber's talking.
31:38	Sam Parr	About
31:38	Ray Dalio	What stocks to buy? So, naturally, I took my Caddy money and put it in the markets. The first stock I bought was the only company I heard of that was selling for less than $5 a share, and I stupidly believed that if I bought more shares I could make more money if it went up. So I did. The company was about to go bankrupt; another company acquired it, it tripled in price, and I said, "I like this game." I thought that this game must be an easy game because in the newspapers—the Wall Street Journal and on the news—they had all these thousands of names of stocks. With that big selection, I figured I just had to pick one or two that went up. I should be able to do that. Then I started in the game and realized the game is not easy. I still know the game isn't easy, but then I got hooked on the game.
32:41	Sam Parr	Did you have any peers at the time, or were you an oddity?
32:43	Ray Dalio	No. There were no kids that were doing that.
32:46	Shaan Puri	So, books—or where were you getting smarter? How did you start the job?
32:49	Ray Dalio	I remember Fortune had the Fortune 500, and when they ran it they would include little tear sheets. You could say which annual reports you wanted — you would check them off and mail it in. I checked off all of them, and they'd mail these six to the house. It became my little library. I would talk and then I'd fiddle around, and, you know, that's how I did it.
33:16	Sam Parr	Whenever I was reading The Snowball — Warren Buffett — and now I'm hearing you talk about it, I think the lucky thing is... I don't know. I don't know what it is, but that you found something you liked at such a young age.
33:26	Ray Dalio	For a lot of people I know who are like that, Bill Gates was like that — a lot of people are. They'd found something. Also, learning is different. Learning prior to puberty is different. Around 12 or 13 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 you. So yeah, that was part of it.
33:53	Shaan Puri	Were you a hustler? Because, you know, now we see you as this guy who's very wise — he's sharing all his knowledge. When I studied Buffett, it was kind of the same. Buffett is this charming, wise, patient sort of guy. But if you read about him as a kid, he was at the horse tracks; he was studying betting. He was finding slips on the ground and cashing them in that others had overlooked. He was setting up pinball machines in barbershops and fishing golf balls out of the pond and reselling them.
34:20	Ray Dalio	Oh, I did. He was a hustler.
34:21	Shaan Puri	"Were you a hustler?"
34:22	Ray Dalio	"And I could walk around in the pond and feel for them. Yeah, and then I would pick up the golf balls and sell them. "That's funny. I didn't know he did that."
34:38	Shaan Puri	Sam called you a "late bloomer," and I find that term interesting. You don't know this about Sam, but he really wanted to be successful. He studied a bunch of successful people and even made a spreadsheet he shared with you. We met when we were 24 years old, maybe, and he showed this thing of "when did our heroes make it." He had a timeline for Bezos, for Jack Dorsey, and for all the tech entrepreneurs we were admiring. When did they start? How many years did it take for them to actually win? He had mapped it all out.
35:05	Sam Parr	"Into their apprenticeship, so, like, to learn, and then starting their first."
35:10	Shaan Puri	He reverse-engineered it and almost hit it exactly. He said, "By 30 I'm going to have this many millions in the bank," because, "I know I'm here today, but I will be there." That's almost the median.
35:19	Ray Dalio	But—okay. Two things. First of all, I think you should publish that.
35:25	Shaan Puri	Okay.
35:26	Ray Dalio	And I suspect it has a big range around it. I was thinking Ray Kroc — McDonald's; he was fifty‑something. Yeah, he started McDonald's. So it's a big range, but they certainly are driven.
35:40	Sam Parr	Yeah. When I was younger I met someone who's actually my partner now. He was successful at a very young age and he was probably fifteen years older than me. I didn't grow up with a lot of money, and I wanted to be free. I wanted to feel—well, I wanted to feel free. I asked, "What's the number I need?" He said, "$20,000,000." I said, "All right—that's the number. I have to make $20,000,000 by the age of 30." I was definitely money-oriented, and it worked. I basically got it by 31. It felt so easy to have a goal and then reverse-engineer it, because all I had to think about was step one, step two, step three.
36:19	Ray Dalio	Great. And that was smart because 20 million—right? "We'll do it." "Okay, and do it." You also thought being free, yeah. And then you can go for it. That was what I was trying to tell Elon, and he said, "No, I don't... okay, need."
36:37	Shaan Puri	Don't need the safety net, because if I'm—if I'm listening to this, I'm hearing you say, "I just need a nice bed to sleep in. I want my freedom. I want my kids to go to a good public school," and all of that. At the same time, you've made like $20 billion. So somebody listening could say, "Did he just way overshoot his needs?"
36:54	Ray Dalio	I didn't—wasn't happening for that. Yeah, it's my client's club — play a game that I love that pays well if you do play it well, right?
37:01	Sam Parr	I'm very passionate about personal finances, particularly among the Average Joe. I say, "don't buy shit you don't need," which people don't tend to follow. Or, "spend less than you make," which people also don't tend to follow. Do you still do anything in your life that is a pretty frugal thing?
37:17	Ray Dalio	Oh yeah. I instinctively can't waste. I'm reluctant to fly a private plane. I don't like expensive watches.
37:29	Sam Parr	I heard someone make a joke that "most of your suits are from Banana Republic," or something like that.
37:34	Shaan Puri	"It's something like that. Where do you spend well, right? Spending is also a skill."
37:39	Ray Dalio	I spend money on the things that I enjoy. I love boats. I have a house on the water. I don't have a yacht, but I have an ocean exploration ship that I'm very excited about. I give it to scientists and I tag along. I cannot do a normal yacht. But when they're doing ocean exploration, Jacques Cousteau had an effect on me when I was growing up — I watched him dive and explore. I have a son. I took my son diving and he learned how to dive. He then went to work at National Geographic as a filmmaker. We share a common passion for ocean exploration. To create a ship that's a laboratory where they do research — that's a great joy. Listen, I'm not against anybody doing any of these things. I just want to be clear: whatever brings you joy is okay. My family — my wife, in particular — would not be comfortable with much jewelry or anything fancy; that's just how we grew up. My kids are the same. I would say: whatever you enjoy — whether it's the clothes, the beauty, or the watch — if you really enjoy it, that's fantastic.
39:13	Sam Parr	I know you're into the ocean. Do you believe in aliens? Do you have access to any cool insight into things like that?
39:20	Ray Dalio	I have no knowledge of aliens, and...
39:22	Shaan Puri	"I have no — not a belief. What do you believe?" </FormattedResponse>
39:24	Ray Dalio	What do I believe? I have no beliefs that are just beliefs. People—I’ve heard different people saying things—and here’s what I believe: there’s the enormity of our galaxy. There are something like 100 billion solar systems. And in the universe there are something like 100 billion galaxies. 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 out there. However, I’ve also heard scientists say that that’s much smaller than one would think about those things. I haven’t gotten into the subject; all I’m giving you is, you know, what I heard about those things. It’s not a subject that I’ve spent much time with, right… yeah, I think you had
40:29	Shaan Puri	A phrase like probability-weighted beliefs — or something like that — right? It's like not all beliefs are obviously equal. Some you have high conviction in; others you have much lower conviction in, based on an analysis or an assessment.
40:41	Ray Dalio	It's just my way... Also, markets teach you this way, right? What is expected value? How do you go — humility? Okay, if you have an opinion, what's the opinion worth?
40:51	Sam Parr	Hey — how much time have we spent? We've spent almost all of this time talking about frameworks for thinking and very little about business or finances. How much of your day do you spend thinking about this high-level stuff versus actually picking or deciding on a trade?
41:10	Ray Dalio	They're connected to me. I'm a global macro investor, which, by the way, I think is the best kind of investing because it brings you into the global — you deal with the whole world. "Macro" means big stuff, important stuff. Then the question becomes: how do you place your bets? It's connected to politics, geopolitics, and history. I did a study of the last 500 years to see how things work because I learned that if I haven't seen something in my lifetime, I should check whether it happened before my lifetime. When I did that, I found big cycles — there were orders. There's a monetary order, a political and social order, and a geopolitical order. In other words, systems and how they work — they all break down. Throughout history, these breakdowns happen in big cycles and often for similar reasons. So, as a global macro investor, in a sense I'm connected to that. The book I ended up writing, "Changing World Order," plots these things. You can see them on graphs and observe them happening: simple measures of financial health, how it all works, and what the consequences are when you recognize those patterns. So yeah, I'm into that because it's connected. When you asked if I see the big stuff: yes — the big stuff matters a lot. You see it in these patterns. A lot of people are just looking at the news, and the news lasts a minute. Can you put the news in the context of what's happening? Watch what's happening. I mean, let's take a look at those things — do you want to take a minute on that?
43:16	Shaan Puri	Yeah, yeah.
43:16	Ray Dalio	Okay. One of the things I learned is that there are five big forces that interact over a period of time to determine outcomes. The first is the debt / monetary / economic force. There is a big debt cycle. It's a very simple idea: if you acquire more debt than you're earning, your debt-service payments will squeeze out your spending. Those payments grow — it's like plaque building up in your circulatory system. When that happens and it becomes painful, you have a debt restructuring. Remember: "one man's debts are another man's assets." If a government is running a large budget deficit, it has to sell bonds. Who are the buyers of those bonds? How does that work? There's a mechanical part to it — that's one aspect of the force. The other force is the political force, which is about wealth and values differences. As wealth gaps and value gaps become greater, that's a greater threat to democracy. In other words, you can end up with irreconcilable differences — people won't compromise and may not even follow the system. That's a risk. So, we have the first risk (debt/economic) and the second risk (political). </FormattedResponse>
44:51	Shaan Puri	Check, check.
44:52	Ray Dalio	Okay. Third risk is the geopolitical risk. So there's order, right? The way the order works is: who's in control, and what are the rules of the game for the world. The way it works is you have a war; the winner of the war sets the rules, and that — we call that the order. In 1945 we ended the war, America set the rules, and so on. We created what was a multilateral type of system — almost representative: the United Nations, the World Health Organization, the World Trade Organization. So all those world organizations are out of the picture. We no longer have a multilateral world order. How do you resolve differences? You fight. You're going to have conflict. How do you get past the disagreement? There's no court you can go to. Okay, so now you have those three things — that's happening. Number four: force through nature — in particular droughts, floods, and pandemics. Historically, they've killed more people than wars, and they are a big force as they come up. Number five: all through history is man's inventiveness, particularly new technologies, and that raises living standards. So if you look, life expectancy always rises; productivity per capita and GDP — by all measures — increase as we learn more. There is the interaction of those five forces. Those five forces you can measure, and you can measure their interactiveness, and that is what is now happening. If you know those cause–effect relationships, I think they're connected.
46:35	Shaan Puri	"I've read something that your family office — I don't know if this is right. You can correct the record: your family office has, like, 70% or 75% in gold ETFs?" "No, no, no. Is that wrong? That headline is..." </FormattedResponse>
46:44	Ray Dalio	Wrong — totally wrong. I believe that, from an investor's point of view, it depends on how their portfolio is constructed. They should have between 5–15% of a portfolio allocated to it to get that uncorrelated difference. They should even have it overweighted if they're doing it tactically. By tactically I mean there are certain times to own it and certain times not to. A particular time to own it is when there's a debt crisis and [unclear phrase: "the covenant is flooding with money"] — that's an ideal time to own it. So there's a timing question. I believe one should create a strategic asset allocation mix. Meaning: if I have no strong opinions, what is my best balanced portfolio? It’s not going to be cash, because cash always performs worst over time. People think cash is the safest, but over long periods it tends to do poorly: high certainty, low performance. What you want is a well-balanced portfolio of assets because you can lower overall risk through diversification. If one asset goes down and another moves opposite, they can offset each other. So you set a strategic asset allocation and then make tactical bets relative to that. Now, here’s how I would describe the mechanics of bubbles. Let’s say there is such a thing as a "bubble." A bubble is not about whether a stock will pay off in the long run, because in bubbles even the most successful companies can fall 80% or more. Typically, bubbles occur when there is borrowing and an increase in wealth relative to money. Wealth and money are two different things. For example, if you have a $50,000,000 offering on a $1 billion valuation, all of a sudden someone is called a billionaire even though it was only $50,000,000. The world then shows a billion dollars in wealth. But you cannot spend wealth directly — you have to sell wealth to get money, because you can only spend money. When wealth builds up a lot and then the need for money arises, problems occur. What creates that need for money? Often it’s that people borrowed money to buy or invest in that wealth. If interest rates go up, they suddenly need to pay back debt. Where do they get that money? They sell the wealth to get money. That dynamic is taking place, and there are other ingredients: it becomes the rage to buy, everyone buys (sometimes more than they should because they don't diversify), and popularity feeds itself. Those elements together create a bubble. Right now, on that scale, I have a bubble gauge — I measure all these things. I have this gauge going back across countries to about 1900, so I can see where they are. By the way, these bubbles typically take place quite often when there are great new technologies. </FormattedResponse>
50:18	Shaan Puri	"A reason to be exuberant — the reason."
50:20	Ray Dalio	To be exuberant and to bet—people confuse that with investing. They say, "I believe that technology is going to be great and revolutionary," and it is. But that doesn't mean the stock will be great. There are a lot of reasons the stock could be too high, and competitors can come in. There's Google, and there's Yahoo.
50:43	Shaan Puri	So... what's the bubble gauge saying right now?
50:45	Ray Dalio	The bubble gauge is saying it's about 75% toward where it was in February 1929, so it's pretty high up there. In Japan, in its bubble in 1990, it got higher even than those cases. So it's high, but people pay too much attention. Let's say if I just did the bubble gauge, I could tell you, probably with good probability, that it won't be a good investment for the next—you know, I couldn't tell you whether it's going to 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 prick in the bubble. What causes it to prick the bubble? If you've got a bubble and then you see, "OK, 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 going to be on the pricking of the bubble. The pricking of the bubble typically is the creating of the need for cash, for converting that wealth into cash for one reason or another. Quite often the most typical thing is tightening monetary policy. Typically, when stocks go up and bonds go down, the future expected return of equities becomes low relative to interest rates. When interest rates go up—say, a tightening of monetary policy—that's a classic dynamic. Other things, like wealth taxes, could do it. In other words, for example, if you say you're going to have to pay a wealth tax, then whoever has the wealth is going to have to sell some of the wealth to get the money in order to be able to pay. Looking out for those things in terms of timing is my machine—take that for whatever it's worth. I don't want people to trade on this and so on, but I'm just trying to answer the question: there are mechanics. Everything that happens has causes that make it happen, and if you understand the mechanics of the cause–effect relationships, you can see all this and understand it that way.
52:56	Shaan Puri	"Is Bridgewater the biggest hedge fund because you had the best performance? Is it the biggest because you were the best at marketing? Why did it become the biggest?"
53:06	Ray Dalio	It became the biggest hedge fund because we most consistently made excellent returns with minimal risk, and we were uncorrelated with the stock market or any other market. That was the main thing. It made 11.8% a year for something like 31 years when I did it. The worst down year was 2020 because of the COVID [pandemic], and we didn't know how to deal with COVID well — we were down about 13% that year. The next two down years were only about 2%. If you lose 50%, you have to make 100% to get back to even, and so the compounded effect of that matters. It was comfortable, so that's why.
53:59	Shaan Puri	Out of the thirty years, how many did you lose?</FormattedResponse>
54:01	Ray Dalio	I think it was like three... three.
54:04	Shaan Puri	Lewis was what?
54:05	Ray Dalio	About thirteen, three, four, or whatever, but not significant.
54:09	Sam Parr	But it does help your media, your work. I mean, you're charming — you're a good leader — and you've been doing it since you were in your thirties...
54:17	Ray Dalio	But Bridgewater became the largest hedge fund before anybody knew me. I was trying to stay below the radar, and then two things happened: we became the largest hedge fund in the world, and at the same time we had this culture. The culture was perceived as a cult. So I put the Principles online — just so we would have a book of how we're going to be with each other. The Principles were downloaded around 3 million times. People passed it around. Otherwise it would've been a problem when hiring people who wouldn't understand the culture. The culture is an idea meritocracy in which we practice radical truthfulness and radical transparency. So, in answer to your question: it was not my charm that had anything to do with this. I could explain the process; people could understand what our process was, and I could show how it was back-tested and that it worked through all of those periods of time. It was logical, and then there were results. We helped people learn meaningful work and meaningful relationships. We built relationships with them, we taught them, they learned, and they became better investors.
55:40	Shaan Puri	I was walking around New York — this is my first time here in ten years. I went to Rockefeller Center and saw this giant stone with John D. Rockefeller Jr.'s name. It has several of his principles etched in stone. One reads: > "I believe in the sacredness of a promise, that a man's word should be as good as his bond." There are about ten of these principles sitting outside the building. Another reads: > "I believe that love is the greatest thing in the world and that love alone can and will overcome hate."
56:09	Ray Dalio	Right, and we are missing these now more than ever. The idea is: what are these principles? What are the principles that bind us together? What are the principles that we follow? Really—what is most important? People are not... everybody should write down their principles and then be judged on how they're living by those principles, and whether they are together.
56:38	Shaan Puri	Well, this is the best part of your book. You write the principle — you're not saying, "These are your principles for everybody." You're like, "These are my principles." If you take away anything, it should be that you should figure out what yours are.
56:48	Ray Dalio	That's.
56:48	Shaan Puri	Right. In Europe, most people don't know what theirs are. Even fewer will ever write them down, and the fewest will be those who act in alignment—who walk their talk. But to get there... </FormattedResponse>
56:59	Ray Dalio	You 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 clearly etched in stone bring us to a higher level of how we should be. Or we're short of those, just like we're short of heroes — role models that you say, "Ah, that was a great man... oh, and that's a way to be."
57:26	Sam Parr	"Who was yours growing up? And maybe, do you have a hero now?"
57:29	Ray Dalio	Like, one of them was Paul Volcker. Okay, Lee Kuan Yew started Singapore and ran it. But no—there were many, many people who will sacrifice for the things I believe we talk about: love, karma. 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 superstitions, their beliefs, and so on, but there's a commonality, which is: > "Do unto others as you would have them do unto you," or karma—what goes around comes around. 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. If you do that both ways, you have a much better world. People who do that are role models to me. As you look at that, okay, there's the sting of selfishness and fight—in other words, what I mean is mutually destructive behavior—and you see that. So I think it's a question for humanity now: can we rise above ourselves and deal with what will certainly be better for everybody if we can get along? I don't mean that idealistically—this is practical. It doesn't cost me a lot to help you; it doesn't cost you a lot to help me. But it could make a world of difference when you have that. It's a practical thing. What has heroism contributed to that? I think that's literally what it is. And we're now operating a lot the opposite way, I think.
59:27	Shaan Puri	You know, we've been doing this podcast for a little while here. We've talked about lots of different angles — some about investing, some about life and principles, and entrepreneurship. I'm curious: if somebody were listening and there was one thing they were going to remember, what would you hope people remember or take away? What's the one big thing?
59:47	Ray Dalio	Know what you want and understand that it's a journey of having your nature, then running into your mistakes and learning from those mistakes to get what you want. I would say it's all about meaningful work and meaningful relationships. If you have work that you love and relationships that you love, you're probably going to have a great life.
01:00:13	Sam Parr	Well, for doing this, man.
01:00:14	Shaan Puri	Yeah, we appreciate it. This was fun for us. I hope it...
01:00:16	Ray Dalio	Was it fun for you? It was fun, yeah.</FormattedResponse>

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Ray Dalio: The principles that made me a billionaire

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