On market pricesĬOWEN: If I look today, say, at equities prices, they seem fine. Those are the drivers, and they will remain the main drivers, and as they change, prices will continue to change. When you have the pandemic or the drought or that event that comes along once in 100 years or so, they have had big effects, too, so pandemic is a reminder of those. They are something that comes along irregularly. The one thing that was interesting to me when I studied the last 500 years of history is that acts of nature - and they could be climate-related droughts and floods and pandemics - had cost more lives and toppled more civilizations than anything else, including wars. That adaptability and change is affecting our lives in big ways, so you cannot ignore the technologically and inventiveness changes. We’re accelerating the rate at which they are occurring.
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The other two that have been reflected through history - and I didn’t have a full appreciation of until I studied the last 500 years of history - those two are technology and inventiveness changes. Those are the three big influences - to answer your questions - that are reflected, maybe not yet adequately, and we have to look ahead of what things will change.
That is being reflected in market prices but will be reflected more as those circumstances change. The third big influence is the rise of a great power, China, to challenge the existing leading power and the existing world order. They’re reflected in market prices and will change as those circumstances change. The second is the very large internal conflicts that we’re having that are due to wealth gaps, political gaps, and so on, that influence the left and the right and the dynamic between them, that affects tax policies, that affects capital flows and the like. In other words, when you get close to a zero interest rate, and you spend a lot more money than you earn, then the government does that, that means that a lot of money is printed, and it moves its way through the system in a way that is reflected in market prices. Those three big ones are, first, that which is happening with money and credit.
They are reflected in market prices and the dynamics behind them, and their change will be reflected in changes in market prices. There are three - sometimes, maybe we could stretch that to five - big things that are happening. Thank you for having me.ĬOWEN: The very first sentence of the introduction in your book is this: “The times ahead will be radically different from those we’ve experienced in our lifetimes, though similar to many times in history.” Do we see this today in current market prices? And if so, which ones?ĭALIO: We certainly see it today in market prices and in everything that’s happening. Most notably, Ray has a new book out, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail. TYLER COWEN: Today I am here with Ray Dalio, who needs no introduction. You can also watch a video of the conversation here. Your gift helps create enhanced transcripts like this one. Want to support the show? Visit /podcasts. Ray joined Tyler to discuss the forces that will affect American life in the coming decades, why we should be skeptical of the saliency of current equities prices, the market as a poker game, the benefits and risks of the US dollar as the world reserve currency, why he thinks US inflation will not be transitory, the key to his success as an investor, how studying the Great Depression enabled him to anticipate the 2008 financial crisis, Bridgewater’s culture of radical transparency, the usefulness of psychometric profiles, where the United States is falling short most in terms of moral character, his truth-seeking process, the kinds of education crucial to building a successful dynasty or empire - and what causes them to fail, how transcendental meditation helps him be creative and objective, what he loves about jazz music, what we undervalue about the ocean, why he loves bow-hunting Cape Buffalo, and more. His latest book draws on the patterns he’s gleaned from studying dynasties and empires throughout time, as well as his own experiences as a hedge fund manager and founder of Bridgewater Associates. Curious to understand this phenomenon, he began to read about similar events in 1933, and it opened his eyes to the lessons that could be drawn from history. Clerking on the floor of the New York Stock Exchange, Dalio expected to see chaos - but instead stocks soared. When Ray Dalio was 23, President Nixon announced that the United States would no longer be adhering to the gold standard for American currency.
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