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Moonshots with Peter Diamandis
Ray Dalio on AI, Job Loss & the Future of the Economy | #EP 148
01:46:27
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- [00:01]
A
Our country's going to go broke faster because of AI and robotics.
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B
That is likely to happen. There's going to be great disruption.
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A
I can vibrantly feel the energy in the biotech world, in the AI world.
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B
Technology and AI is going to be a force. And it's a tailwind. The question is, is the tailwind greater than the headwind?
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A
Listen, I'm the guy who, not the glass isn't half full, the glass is overflowing. I'm Mr. Optimism, Mr. Abundance. But your book, it's got me thinking.
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B
A lot as we take 1, 2, 3, 4, 5 years. Do you think you're not going to have an economic downturn? Do you think you're not going to have a bear market? Really?
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A
How do you think about China?
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B
We are at war with China, and you cannot lose the war.
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A
Everybody, welcome to Moonshots. Today my guest is none other than Ray Dalio, the founder of Bridgewater, the world's largest hedge fund with $130 billion under management. I asked Ray about why he holds gold over Bitcoin, the impact of AI and robotics on the global economy and on the US Economy. His advice for entrepreneurs, building tech companies. Over the next one to two years, we'll talk about China and we'll talk about the world ahead. It's a fascinating conversation with one of the smartest thinkers ever, particular on his new book how Countries Go Broke. And being in the United States, I want to know what's the impact on me and you as an entrepreneur? Right. Let's dive in. Ray, good evening. You're on the other side of the planet. I'm in Santa Monica. You're in Abu Dhabi right now, is that correct?
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B
Yeah.
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A
Well, welcome to Moonshots, my friend. It's a pleasure to see you. I normally run into you in Riyadh or in the Emirates, sometimes in New York. And I have to say I've been so looking forward to this conversation. I think the work that you have been doing recently and writing about how countries go broke, we'll dive into that really on the back of the changing world order as individuals, as entrepreneurs who are really focusing on AI and robotics and longevity are thinking about course of the future. A lot of us really want to have a stable world in which to build our dreams. And I think it's important for folks to understand the cycles that humanity and countries go through to help them get a sense of where things are going. So no one better than you?
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B
Well, I don't know about that, but I'll do my best.
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A
All right. Well, let's jump in. And in particular you've charted what you describe as sort of the five major forces that are driving the health and wealth of nations. Could you give us an overview of those?
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B
Yeah, and I will also just touch on how I came by them, please. I'm a global macro investor and I've been for over 50 years a global macro investor and that's taken me to all different countries and seeing how the systems work. And I'm also very much a systems mechanics person, cause effect, how does the machine work kind of person. And what I learned through my experiences is that sometimes when I was really surprised, I was surprised because the things that happened to me didn't happen in my lifetime, but they happened in history. So there were three things about five or six years ago that didn't happen in our lifetimes. And let me go back and find the cycles of rises and declines, of reserve currencies and countries and, and empires and the first three. And then I discovered really the other two or realized the other two. The first was of course I knew about the debt, money economy, market cycle. And we know that there's a short term cycle, we know what that's like. You have a recession, inflation is down, they put credit in, credit is buying power, they buy, things go up, financial markets go up, everything goes up. You get to limited capacity, inflation rises, they raise interest rates. Okay, we've been through 13 of those, we're in the 13th of those cycles. But there's also a big long term debt cycle that takes place over 80 years, give or take about 30. Debt rises relative to incomes. And then there's a limitation to that. So we're going to get into that in a minute. The second cycle very much goes with that is the political or also the internal order disorder cycle. So when you go through that cycle, there are larger wealth and values gaps that increasingly create greater and greater conflicts. The left and the right, populism of the left, populism of the right, and a fight between the two.
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A
And is that typically also an 80 year like cycle?
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B
They coincide, they don't necessarily have to be, but they are usually together. So for example, this cycle, the last cycle began, they have wars, that's what ends the cycle. And so World War II was also accompanied by many breakdowns of domestic orders and new orders, new systems that came into power. Sometimes they were just total revolutions, sometimes they did not break. In the case of the United States and the UK, we, we didn't have a new order, new domestic order, but there was A lot of internal fighting and you came out. But in most other countries cases, they happened at the same time. There was a total breakdown of the order and new orders came about.
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A
I'm going to, at some, at some point later, I want to get into the conversation, how tied is this to human life's lifespan?
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B
There's. There is, I believe, an important element that's tied to the human lifespan because these things only happen once in a lifetime, typically. So we don't learn the lessons about war and those things. It's something like also the idea of three generations, ragsleeves to ragsleeves kind of thing. But it is definitely the case, by all measures, that we say, why don't we learn? Well, because we never experienced it before.
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A
And so I remember my parents who said, you know, they were born during the Depression, effectively, or the tail end, and it changed the way they were wired.
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B
That's right, yeah. My dad. My dad and almost everybody at the Depression came out of that wanting to save.
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A
Turn the lights off, son.
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B
Eat that food, right? Because the power of saving and the security. And he never could buy stocks. And if you looked at the yield, it was very interesting. The yield on stocks, the dividend and earnings yields were both about twice the yield on bonds. So from an investment point of view, they had to go down in order to provide the same total return. It made no sense. But that was their mindset, reflection of the. I don't want to own those risky things. I want to save, work hard and so on. And that's part of the cycle. So, so the third. So that's the second. This internal order disorder, which, as you point out is all these parts of the cycle are related, that mentality affected how we saved and spend and so on and so forth. The third part of the cycle, what I call the big cycle, is the international World Order. Who is the dominant power. In other words, you have a war, and then you come out of the war and you say, who sets the rules? Well, the winner sets the rules. And that is the New World Order. And so the United States set the rules. That's why the dollar is the reserve currency. That's why the World bank, the imf, United Nations, United nations, they're all in the United States, right? Because that was the New World Order. And we created an order is a type of system in which there's collaboration. The idea was, anyway, that was that order. When then, when you have a rising power challenging an existing power, you know, there's no world court that you plead your case to and then they say, okay, you win and we're going to go by your rules or something. There's no international constitution or something. Might is right. And so then you have who has the might and you have the war. So that's the third major force tending to follow that same arc. The fourth, which isn't the same, doesn't have the same 80 year kind of cycle to it, big cycle to it, but it's a big force and it's a bigger force than the first three because it's killed more people and it's toppled more world and domestic orders, and that is climate and acts of nature. Acts of nature, droughts, floods and pandemics have killed more people and changed, toppled more world orders. Okay. And certainly it's a big deal now.
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A
You know, when you, when you speak about climate, most people go to, you know, the current climate crisis, but you're really talking about the long cycles of climate causing drought, causing starvation, basically just ending. Ending nations.
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B
Yes.
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A
Yeah.
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B
And then, and then there's number five, which I, which is, is man's inventiveness in all of its various ways, particularly technology. But that inventiveness. And so it looks something like this, right? Which I mean, what I mean is technology inventiveness, you don't lose it, you rise.
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A
And so it builds on itself, right?
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B
Upward force. And it's a great upward force now. And then there are these cycles like the business cycle and the political cycle. Left, right, left. You know, we had the left and now we have the right, now we have the left and so on. And these economic cycles are those. And then there's the big cycle, which is like debt to GDP and those kinds of things. So that's visually how it looks to me. And everything that we talk about, although there is one other force, but almost everything that we talk about is one of those five and you drop down. So whenever you're asking me, anybody, we will go into one of those five and, and you could almost see where you are in the cycle. And they all relate to each other. Right. So tariffs, relates to economics, relates to, you know, geopolitics. Oh, the sixth force, which I didn't mention, but it's also very, very destined, is demographics. Of course.
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A
Yeah. We have a silver tsunami, we have an aging populace and we have growing. I mean, it's interesting, right, because these are the, the age demographics are. I think I'm thinking they play a much bigger role today than they ever have.
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B
And will.
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A
And will. Yeah. Everybody, Peter here, if you're enjoying this episode. Please help me get the message of abundance out to the world. We're truly living during the most extraordinary time ever in human history. And I want to get this mindset out to everyone. Please subscribe and follow wherever you get your podcasts and turn on notifications so we can let you know when the next episode is being dropped. All right, back to our episode. I want to get into something and then get into the five stages of the big debt cycle that you write about. And I want to dive into something instantly here which has been bothering me. I did not get a good night's sleep thinking about this last night as we get ready, which is our country's going to go broke faster because of AI and robotics. So if I understand this correctly, the Federal Reserve's mandate is basically to juggle jobs and inflation, provide maximum jobs, maximum employment, stable prices, moderate long term interest rates, and traditionally you lower interest rates, that boosts employment. Because companies can borrow cheaply, they expand operation, they hire more workers. That's been the game up until recently. Now you've got Optimus humanoid robot and figure the prediction right now is we'll have billions of them by the mid-2030s. Elon's prediction when I interviewed him at FII in Riyadh, it was 10 billion by 2040. You had Sam Altman tweet out yesterday that their O3 mini model and their deep research tech will start displacing single digit employee white collar workers right away. I interviewed Marc Benioff on this podcast, I don't know two weeks ago and he said, Listen, with, with Salesforce's new agent technology, we're 30% more productive and are hiring known you engineers. And so the question becomes, you know, as we're marching forward here, if a company has access to lower interest rates, wouldn't they just buy more robots and hire more AI agents and thereby, you know, reduce labor and sort of create this massive decoupling compared to what had been the process.
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B
Yeah, it is, I think virtually certain, but even that's debatable. But it is virtually certain that it will replace a lot of people and that what we've been seeing in the form of wealth impact of technology in which there's small population that has unicorns and it's the most wonderful world that we can possibly imagine to be in. Also we have a population in the United States where 60% of the population has below a sixth grade reading level and and is pretty broke. And so that is likely to happen. There's going to be great disruption and then the question, and the question for all of these things is how are we going to deal with each other? The number one question on all five of these and demographics is how do you and I, and we deal with each other so that we're not just dealing with in a greedy way of our, of our own self. Because you can have a great civil war or conflict due to not managing such social issues. And those social issues are difficult to manage because everybody has a polarity regarding those social issues.
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A
I'm going to go a step deeper here because traditionally you would hire workers that would get money in their pockets, they would start consuming, that would fuel demand, they would pay down corporate and government debts. And the challenge again is again in coming from your recent work, how governments go broke. If workers aren't seeing wage growth and aren't getting jobs, then who's driving consumption? And then how does that drive our economy? I guess the question is, is it going to accelerate your predictions on the challenges?
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B
Well, the technology advances are a two edged sword. The way I think it is. It's going to raise productivity, it's going to raise output per man hour. Okay. And that's a good thing. And that power of that good thing, you know, means you have, you don't have to work as much or anyway you're, you get more out of that result. And then it becomes what do you do with the distribution of that? Right. So it becomes a how are you like with each other to deal with these incredible disruption effects? I would say, I just also, I want to say something. I think that we all think we're optimizing for the things that those technologies get us. In other words, it'll be wonderful. Our life expectancy rises, we become smarter, all of these wonderful things. Who could argue about their life expectancy rising and so on. And sometimes we lose sight that that may not even be the most important things in a world that's in conflict and so on. So if you look, I did, I did a study of the well being of 24 top countries using a lot of statistics. It's by the way, it's online, anybody could see it. It's the great powers measures. And it's very interesting that I measure different measures of power. Income, military power, education power, different types of power. And then I measure happiness and I measure health. And past a certain basic level there is no correlation between per income and happiness and health.
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A
Yeah, I remember that that number was around $70,000 or thereabouts for happiness.
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B
It actually is considerably less than that number I don't know what it is, but I know, like for example, Indonesia.
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A
I was thinking for the United States. Yeah, yeah.
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B
Has a much happier population and in terms of per capita income and in terms of health, it's much lower, but they have a much happier population. I would have to go back and check sort of how, but it's more mostly above that which is needed to have to be out of pain, you know, to have food. Right. And the United States in terms of health has a five year lesser life expectancy than Canada and comparable income countries. In other words, the developed countries, if we think back in time, were your parents that we knew my parents, were they less happy or well off? And then think about what the hell of wars and things are. It's not just optimized by technology and okay, I get more life. We have to pay attention to these other things too.
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A
So part of the question becomes, is there going to be a new type of social contract that's going to have to be created? I mean, I do believe, and I write about this, and I think about this a lot, that technology is a force that turns whatever was scarce into abundance. We've created massive energy abundance and food abundance to the point where obesity is the new issue. Abundance of information, abundance of all the entertainment you could possibly want, abundance of almost every. There's very little that, if you pushed me, I couldn't paint a picture of increasing abundance, even life, the amount of things you can do per unit time, per second today. So the efficiency of how we spend our time. But even with that increasing abundance, if people are unhappy and it turns us towards civil strife, then we've got real issues.
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B
Yeah, I think that we can agree on the fact that the technology and AI is going to be a force and it's a tailwind. And then we also have to realize that the other four or five forces are big headwinds. And the question is, is the tailwind greater than the headwind in the appropriate time? So when I think about that, we'll get into the debt problem. Okay, we're going to have an immediate. We're going to come into budget season and we will over the next several months. And if they don't do something, we're going to have a major debt problem. And we'll talk about that in a minute. But it's a headwind. The internal conflict is a headwind. The external geopolitical conflict is a headwind. The climate thing is a headwind. The demographic thing is a headwind. So now when I think of the Miracles that I've experienced when I. Let's say. And you've experienced. I remember when I used to do charts that I would literally do charts with a ruler and colored pencils and graph paper.
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A
Sure.
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B
And I remember when the calculator came along and I remember when spreadsheets came along and I remember the computer really, that came along. And so when we think of digitalization and devices and so on, they were pretty amazing, let's say over really, let's say a 35 year period and so on. So when we think about, I mean, they were revolutionary, right. And connectivity instantaneously. Wow. And then we live our lives. We're born, we get older, we die, we live, right?
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A
Yes.
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B
Okay. And so then I think, okay, what force will this be, this AI revolution as a multiple of the force that we experience from rulers and colored pencils and going to spreadsheets and being able to do models. What factor will that force. That was one hell of a force. And when I look at the industrial revolution and I look at these things now, I think it's going to be a bigger revolution. But when we actually say, okay, what is its magnitude? I'm sort of like, I don't know if it's 1.25 or 1.5 what the other one was, because when you look back on it, it may not look big when you're in it. And you imagine the future like this is. And then we have the headwinds and we have a timing issue. Okay. Because that baby better come on and we better get there in time. So I think about what the 20s were like. The 20s was the most patents, the most innovation. And then we came to 29 and the Great Depression. I think of the bubbles that have been in quite often they were matched also with the greatest innovations. So we cannot just simply say that these innovations will necessarily quickly and in time create such a productivity miracle that the others don't matter. Demographics and you know, okay, there's going to a lot of be a lot of people who go from working to needing, you know, and so on, who ain't going to be productive and are going to be needing. So I don't know how that works exactly. I am impressed with it, but I don't know exactly.
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A
Yeah, I mean, I had this conversation with Neil DeGrasse Tyson. He was saying, having a conversation exactly. That every generation feels like they're at the most extraordinary period of technological and societal growth ever.
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B
Right.
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A
It feels that way. I mean, the stuff that is coming, Ray, that is, I think I Have to believe it's transformational. And the question is, is it unlike what it was in the past in terms of the level of degree of transformation? Right.
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B
I. Okay, let me give you what it was for me. I computerized all of my decision making. I have artificial intelligence. I know decision making. Data comes in criteria specified, orders get placed, analysis is done. My decision making is efficient, all programmed in literally in terms of markets. Data comes in, things get no people. It's like one of those factories that has just a few people looking after it and everything happens. That came to me from the old world way of thinking, which I think most people are still in, which is I'm a smart guy and I will make my decisions. We are still a long way from you turning it over to the AI. Okay, that decision making.
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A
There is, there is debate. There is debate, but the question is, what is a long way? Is it is a long way. Three years, five years.
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B
I find it so interesting that so many people are users of AI, but they do not follow AI. Okay. And if you ask it, like if I ask it, okay, should I buy the okay, tariffs came in and should I do this, this and this, I get bullshit. Okay, okay, what would you do? Okay, I get bullshit because it still comes back to understanding cause, effect, relationships. You still have to it better understand it. And the question relationships, human relationships, sorry.
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A
This is human emotional relationships.
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B
But even, even the relationship between. Do you understand the mechanics of how the tariffs affects this, this, this and the other thing. Explain it to me and make your, would you. How you run your company, what or whatever. You're a long way from actually that decision making, okay, of having the criteria and the cause effect. And that's even more so in the markets because the markets are zero sum game. So in other words, I have to be better than the consensus to beat the markets. And so I'll get the consensus or whatever it is, I'll get that knowledge. But how do I get better anyway? All I'm saying is what when we say we're going to turn, you know, I'm going to turn it over to there. I do believe that the idea of it's a partner and an associate and so on and boy, it could teach you what it could do wonderful things. But you need this as a partner. And then we see where we go. Exactly. But there's. We'll see. I don't know anyway, but that's AI we agree a super plus for productivity. We agree a super probably divider in who benefits and who doesn't. And that it becomes a social question as to how we deal with that. Not just don't also assume that it is in an environment of law because laws are local, laws are within countries, laws do not exist between countries. And so there are competitions between countries to win at all cost. So I don't think it's going to be regulated or controlled. And we also have to look as it is a weapon because it can be a very important weapon too.
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A
And we'll get to that conversation about US and China, which I think is the dominant conversation in that realm right now. Before we get there, I want to talk about this concept of abundance. I wrote a book 12, 13 years ago now called Abundance the Future is Better Than youn Think and the Argument for Increasing Global.
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B
I know the book, it's a good book.
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A
Thank you. The follow on Age of Abundance is going to come out in 26. But the, the detail looking at access to food, water, energy, healthcare, education, almost every particular factor and the demonetization and democratization has been just off the charts and accelerating. We're on the verge of fusion potentially. The Chinese just held a fusion reaction for 18 minutes. You know, you've got Helion and many others looking at fusion by turn of the decade here, solar exploding onto the scene. And energy of course, drives everything else. So I guess the question is, when you think about abundance as a concept for America and Americans and for the.
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B
World.
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A
How do you.
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B
How do you.
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A
I'd like to know how you think about that. Is it a world of increasing abundance? Are there factors that are going to basically shut that down?
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B
The factors that could shut it down are the factors that shut it down before, and they are in the conflict. I mean, if you look at how it was shut down before the Industrial Revolution or the great revolution of the 1920s when there were more patents than any time, and all of those times it was a combination of an economic and a war and conflict.
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A
But you showed that technology as a continuous force.
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B
That's right.
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Building on itself despite the up and down cycles.
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B
Yes, but the chart that we see looks like, looks like that and that and that life, that life expectancy. If you look at life expectancy, it looks like that. If you look at gdp, it looks like that. Okay, if you're listening to this upward arcing, what you don't see, ironically, when you look at all of these things and you see the wiggles, okay, that's World War II. And so you hardly pay any attention to it, but it mattered, okay? You know, these wars last maybe three years Typically they have and so on. And so you don't stop that unless you destroy mankind and you won't stop that. So when I say stop it, I'm assuming, like what happened in the 30s, a slow down.
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A
Very slow down.
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B
Yeah, yeah. So you have. Yeah, you. Because you don't forget, you still have it. You don't go backwards. And then you build on that, but that upward movement is slow. Like if you had a bust now, okay, you could imagine how that would change allocations of money, how that would change innovations and so on. To some extent, I think that we're in a position that might be somewhat analogous to 1998 or 1999, where I'm digressing, but just completely dot com bust, right? Well, yeah. What happens is assets become more and more expensive and then there's a universal view that that is a great miraculous company and that's a great miraculous thing. And they're right. It's great miraculous company and a great miraculous thing. But the question is, how much does it cost and is it expensive? And so what happens is actually if as an investor, you'd be much better off to buy bad companies at good prices than good companies at bad prices.
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A
Yeah. When my mom starts telling me, should I buy this stock? Or my Uber driver starts telling me about that, you know, you're in trouble.
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B
And so if you look at pricing and who is the owners and so on, I'm not saying we're there. It looks more like maybe 98. But you also have a situation if you have that together with if you have an interest rate change and we'll get into the interest rate discussion in a minute, I suppose you then have expensive and you have interest rates, and then you can have what we had in 2000 and pets.com and there's a sword and things change. And also we get so used to that the disruptors don't get disrupted. Like, that's funny. I mean, like everybody, they all get disrupted.
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A
Of course, it was interesting when Jeff Bezos at one of his earnings call said, yeah, Amazon might not exist in 30 years. I mean, it shocked people for him to say that. And.
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B
But that's, I mean, like, how. Wake up. Like the Dow 30, you know, go back 30 years, go that back 20 years, you know, they didn't exist. They don't exist any longer. And the ones that are on top do exist. And that's the nature of this evolutionary process.
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A
I'm still impressed that Microsoft is, is doing as well as it's done for the last 50 years or 40 years. Yeah, let's get into the big debt cycle and the five stages you break it down into. And again, the lens I'm coming at this from is we have a lot of entrepreneurs who are building companies and when time is good, we just entered a new administration where we've got a pro technology, pro M and a, you know, mindset, minimized regulation. And I'm just, I can vibrantly feel the energy in the biotech world, in the AI world. People are building, building, building. Capital's beginning to flow again and. And people are not looking at what's likely to be coming in the next two to four, five years. They're just like, the time is good now. Borrow, build, go, go, go. So what's your advice to entrepreneurs right now? And let's do that in the context of your. Of the five stages we're in. And I'd like to understand where you think we are in the United States. What's the impact of that? Elon's having. And Doge, you know, can we, can we hold off these dead cycles? Is there any chance for that or is it just too far gone? It's a lot of questions, but let's take it.
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B
I'll give you my thoughts on them. I want to emphasize before I do that study, this is the draft of my book and it's free online so that people can read about the cause, effect, relationships. Because the re. I'm 75 years old, I'm in a stage of my life that I want to pass along things that are valuable. I'm not earning money and that's not my goal anymore, any of that. And I want to. Everything is cause, effect, relationships. There's mechanics to it. And if I give you less than I'm able, I'm not in this conversation going to be giving you enough. And so it's free online. Go get it and you'll see.
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A
I know it's on LinkedIn. Is it just Google?
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B
Yeah.
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A
You can go Google how countries go broke. The principle navigating a big.
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B
Let me get to you. Yeah, yeah. What is so amazing to me because I've experienced it throughout my life, is everyone pays attention to how they feel at the moment and how they feel at the moment. And they don't see the changes. And the changes, the cycles and everything are so important. And there are certain classic things of euphoria. And yet. So there are two classic things of euphoria. First, where we are in the economic cycle. There's an economic cycle. There's always been an economic cycle. And there always will be an economic cycle. So we are about 65, 70% through the economic cycle that we're in, judging by measures. I won't digress into all of them though I can if you want. But in other words, there are, it will, the cycle will go on. And in the political cycle, we are in the classic first hundred day honeymoon of the new administration, which is a time of euphoria and is a time that the new beginning begins. Okay, so we're at a unusually good moment that if you see it in a cyclical sense and you say what is likely, okay, our aspirations are high because we have capitalism, business free markets combined with technology to produce that and the United States is on top of the world and we should be very optimistic and so on. Okay. But first of all, you're not looking at the pricing, okay? So if you look at the pricing of assets in the United States relative to other countries right now, it's expected that that will improve relative to the United States. So there's a hurdle rate you always have to keep in mind, like it's a horse race, you have to bet on that. You have to keep in mind the handicap. So, and then if you take the cycle, I bet you that as we take 1, 2, 3, 4, 5 years, do you think you're not going to have an economic downturn? Do you think you're not going to have a bear market? Do you think that everybody's going to be as enthusiastic about how things are going with how the government is handling it? Do you think you're not going to have any of those other problems really?
- [43:04]
A
And it's the, I mean the challenge of an entrepreneur is you've got to be especially a moonshot entrepreneur. You've got to be super optimistic even to get into the game. And, but people are not, don't see the long term writing on the wall. So how do you properly capitalize yourself? How do you protect against the downside? How do you not over burden yourself with debt or too rapid growth? I mean this is the message I want folks to be listening to. Listen, I'm the guy who, not the glass isn't half full, the glass is overflowing. Mr. Optimism, Mr. Abundance. But I, as I said, reading your book, it's got me thinking a lot. So I want to pass on, I want to pass this on.
- [43:53]
B
I think first of all, one of the great things about the United States and our system is that you can fail and you could start again.
- [44:02]
A
Yes, it differentiates us from most of the world.
- [44:06]
B
That's right. So, okay, then you think, okay, whose money is it failing? And how does that work? And am I straight and upright and honorable with people? But, okay, in this world of you got to go for it, you want to go for it, and then you'll be straight, upright, and you go for it, and you could fail. Just don't get permanently knocked out of the game. You know.
- [44:43]
A
There'S a great talk that Bill Gross, not the economic Bill Gross. Bill Gross from my day lab, gives about what's the single most important aspect for a successful company. And it's timing. It's living long enough to live forever. If you can live. If you can live through the downturn and be there at the upturn, then.
- [45:06]
B
In my case, I never raised a dollar of debt or a dollar of equity. I built the largest hedge fund in the world and. And did very well, but I never. And now I'm not saying that's the right thing, but the don't die mantra was my mantra. And I always. And I did certain things, like I would always say, is my profitability X relative to that? How much do I have in this way? And so on. So I constructed the finances in which it couldn't die. It could contract, but it couldn't die. So now I'm not sure that that's even the smartest way. I'm saying that's how I did it, but I'm not saying it's the smartest because it's also. Sometimes it's okay if you die and people will understand it and that because of what you're like. So invest in your character. Okay. Your reputation, you can damage. You can kill your reputation, but you're, you know, if you. If the company dies and you do it the right way. That's right. Then that. That's almost allowed in our system. But be what you know, be of good character and be of good capability.
- [46:27]
A
It was about 13 years ago. I had my two kids, my two boys. And I remember at that moment in time, I made a decision to double down on my health. Without question. I wanted to see their kids, their grandkids, and really, you know, during this extraordinary time where the space frontier and AI and crypto is all exploding, it was like the most exciting time ever to be alive. And I made a decision to double down on my health. And I've done that in three key areas. The first is going every year for a fountain upload. Fountain is one of the most advanced diagnostics and therapeutics companies. I go there upload myself, digitize myself, about 200 gigabytes of data that the AI system is able to look at to catch disease at inception. You know, look for any cardiovascular, any cancer, neurodegenerative disease, any metabolic disease. These things are all going on all the time. And you can prevent them if you can find them at inception. So super important. So Fountain is one of my keys. I make that available to the CEOs of all my companies, my family members, because, you know, health is a new wealth. But beyond that, we are a collection of 40 trillion human cells and about another 100 trillion bacterial cells, fungi, viri, and we don't understand how that impacts us. I use a company and a product called viome. Viome has a technology called Metatranscriptomics. It was actually developed in New Mexico, the same place where the nuclear bomb was developed as a biodefense weapon. And their technology is able to help you understand what's going on in your body, to understand which bacteria are producing which proteins. And as a consequence of that, what foods are your superfoods that are best for you to eat or what foods should you avoid, what's going on in your oral microbiome. So I use their testing to understand my foods, understand my medicines, understand my supplements. And Viome really helps me understand from a biological and data standpoint what's best for me. And then finally feeling good, being intelligent, moving well is critical, but looking good when you look yourself in the mirror, saying, I feel great about life is so important. And so a product I use every day, twice a day, is called OneSkin, developed by four incredible PhD women that found this 10amino acid peptide that's able to zap senile cells in your skin and really help you stay youthful in your look and appearance. So for me, these are three technologies I love and I use all the time. I'll have my team linked to those in the show notes down below. Please check them out. Anyway, hope you enjoyed that. Now back to the episode. Let's get into the, into the big debt cycle and the five stages and give us understanding of where we are in that process, if you would.
- [49:39]
B
Okay, so there are these cycles that, you know, the short term debt cycle or the business cycle that six years typically described, we know what those look like. And then they rise. Debt keeps rising relative to income, okay. And the income is needed to service the debt. Okay. So the way I, the way I view it is after the war, debts are basically written off. You've got, you know that you start with clean sheet of paper My parents didn't have. They didn't have any debt. They didn't have any much. And then they begin the cycle, and it's almost what we talked about earlier. They don't want to spend money, you know, they don't want to get. And in the early stage of the cycle, it's the sound money stage. And the sound money stage can be measured by. First, does the debt create more income? Then it's needed to pay it back? I mean, that's basic.
- [50:57]
A
It's a good use of capital.
- [50:59]
B
Right. It makes everybody happy. I lent you the money. I got paid back with my interest rates. I'm happy. You borrowed the money. You used the money in a way that allowed you to move forward. You came up with the good ideas and so on. Productivity increases and debt is not rising fast relative to income.
- [51:21]
A
Confidence is high. Financial systems are stable.
- [51:23]
B
Yep. The confidence being high starts to be a red flag.
- [51:27]
A
Ah, okay.
- [51:28]
B
You see? So what happens is you're at that stage. And by the way, the monetary systems at that stage are hard. In other words, at the world. When we came out of World War II, this is the beginning of the new debt cycle, the new cycle. Gold was there. You couldn't lend more than gold because they had it back and so on. So you had sound money and sound finances. Okay. And then time goes on. And comp.
- [52:05]
A
By the way, I'll want to speak about Bitcoin at some point as an alternative to gold, but not right now.
- [52:13]
B
Great. And confidence builds, and everybody. Those who are doing it are making money. The prices go from cheap to expensive. Like I told you, the earnings yield on stocks were twice the bond yield. I mean, like, wow, you could just take the dividends, you know, but everybody was worried about going down. And then it changes. The prices go up. The optimism. And you know, they say, Peter, what? You're not in the market. I mean, come on, what's wrong with you, man? You start feeling your house and put.
- [52:59]
A
It in the marketplace.
- [53:01]
B
Yeah, okay. And. And you go in there, and then you come really to getting invested. Asset prices become expensive. You borrow money to do it. And so you have a debt bubble. In other words, you get to the point where the income produced doesn't service the debt. And then you begin a dynamic, very simple.
- [53:33]
A
Is that where we are today?
- [53:36]
B
We're. As I say, it looks to me like we're in 1998. You know, these all become how extreme? Okay. And so I have measures, I have indicators like that give it. And it looks like 98. Okay.
- [53:52]
A
Which would you get. We still have a year and a half of good times ahead.
- [53:55]
B
I don't. It's not so precise. It's a thing that goes like this. And I know that we're over here. And then what happens is that goes on and you see unsustainable debt growth. Now the unsustainable debt growth that we're seeing right now is particularly the government. The government is going to be in financial trouble. And I'll get into that in a minute. But what happens is you see that debt growth and then you see a rise in interest rates. This is the classic. And a tightening of monetary policy. Put some brakes on and that pops the bubble and then you go through the debt liquidation phase.
- [54:52]
A
And Ray, can I just ask a question here, which is these cycles have been over and over and over again. There are, there are historians and printed books and so forth. Is. Is it the politicians are just unable to. To make hard decisions in order to keep in political power. Is this just.
- [55:16]
B
Yeah.
- [55:16]
A
Fundamental in human nature that we can't.
- [55:20]
B
Both of both of those things. You're asking why in these cycles, you know, if you look at let's say debt to income, it goes like this and why we keep going. Why does this thing exist and why don't we sort of keep it Debt to income, more of the same. And there are the reasons politics and human nature. You touched on that. First of all, credit creates buying stimulation and everybody, everybody wants up.
- [56:16]
A
But that's historically because the credit employed people that then consume when you spend.
- [56:26]
B
I mean the government, when they say I'm now going to give you money, they're going to give you money. And credit, it's mostly credit. They make credit available and then you go take credit. That's how when they lower interest rates and they make credit more available, you go, that's. You get your car, you get your house on credit. Yeah, okay, but credit creates debt.
- [56:52]
A
Yeah.
- [56:54]
B
And debt serviced.
- [56:55]
A
Yeah.
- [56:56]
B
Okay. So what happens is every time you get one of these, then a local dick, they want to give you credit. But it's like giving an alcoholic a shot or to get him out of the. Or an addict. Okay. You give them a dose and okay. And you get that. And politicians like credit because what credit comes before debt payments. So I give you credit, we get in debt. You love me, you know, that's why they want the Federal Reserve and the central government to be separate, you know, to try to do that. But still what happens is. And that human nature wants the credit, you know, so it's so that's why debt to incomes go like that, you know. And so, you know, show you in this book, you know, this is the government and this is the cycle, and then this is the debt service payments that we're going to have going forward. So, yeah, human nature. We all want up. We're all betting on up. Okay.
- [58:36]
A
All the time.
- [58:39]
B
We have leveraged betting on up. Unless we bet to buy things that'll go up.
- [58:45]
A
Yes. So the party ends, the bubble pops.
- [58:56]
B
Yeah, that's right. You have the debt problem. And then historically, what they would do is then they would give more credit, except when you hit it, zero interest rates, you had a problem.
- [59:13]
A
And I mean, I found that incredible to get into negative interest rates even.
- [59:18]
B
Right.
- [59:19]
A
Why do I think that's incredible?
- [59:21]
B
No, I said right.
- [59:22]
A
Right, yeah. Okay.
- [59:23]
B
Yeah, it seems I was with central bankers, you know, I'm in that group, sort of. And when they had zero interest rate, negative interest rates, and they were calculating, they said, how negative can we make interest rates? And they calculated, they estimated for a very short period of time, it could be up to 400 basis points. And the way that they calculated that is by how much paper money that you could store in storage, because your arbitrage, if you had the paper money, you wouldn't have to have a negative rate. Why not hold the paper rather than to hold something that has a negative rate? And so how much negative rate could you have? And that was essentially the arbitrage. Well, anyway, when that happened, and it happened in history, by the way it happened, 1933, same thing. Wow. And what they do is then what they do is they print money and they buy the bonds. So like in 2008. Excuse me, they did that starting in 2008, and then 2020 when there was Covid, they had to send out checks. So the government had to send out checks. The government doesn't get to print money. Where do they get the money to send out the checks?
- [61:02]
A
They borrow it.
- [61:03]
B
So they send out the checks and the central bank lends them the money and prints the money and lends them the money. So everybody gets all this money and there's like a surprise that there's inflation. Everybody gets all these checks and all this money and there's a surprise that there's inflation. I mean, there were other things going on too, but disruption and supplies and things like that. But mostly it was the amount of money going in. So there are two things that happen at that deleveraging point. So I want to make that clear. Here are the things that caused the deleveraging supply demand and debt service. Okay, so let's take the government supply demand. The government is going to have to sell a lot of bonds to owners because there's so much debt around. One man's debt, another man's assets. So because all the world is holding all these debt assets that actually for various reasons they don't want to add to in a big way because it's already such a high percentage of their portfolio and there are geopolitical issues going on that the huge amount that will be sold will likely over be substantially greater than the demand for it.
- [62:45]
A
And so people start selling their debt.
- [62:47]
B
And when they start seeing that it's going to be bad because they know it could be one of two things. Either you have a problem paying and interest rates go up and you have that dynamic, or the central bank comes in and buys the debt which prints the money and devalues the value of money. Okay. Either way, when there's too much debt and a supply and demand imbalance, you don't want to own debt, which is where I think we are, unless there is a change. It's what I call my 3% solution. But we won't get into that now, I assume. But you know, there is a path here to deal with this. But if they don't deal with it, you're going to have a supply demand problem, I believe. And then in addition to that, what happens in debt service when debt service service filled? The way I think about it is the credit system is like the circulatory system in our body. And the blood, which is the credit, brings nutrients all through the system. But what happens is that when it accumulates debt, it's like accumulating plaque in the system because you have more and more debt service that constricts that amount that can pass through the system like the government debt service payments are grow and then you hit a part of it, which in markets is called, and this is usually for private creditors is called a death spiral, a debt death spiral. And the debt death spiral, what happens is as debt service payments rise so that you have to borrow money to pay the debt, and then the creditor sees that, so they pull back and the credit spread rises. And as the credit spread rises, you have to borrow more money. That is the death spiral. And when you see that dynamic, and that's close to where we are in.
- [65:13]
A
The government debt, but for a company that will drive a bankruptcy in the United States, that drives what?
- [65:21]
B
It drives the central bank to come in and Buy the debt and depreciate the value of money. That's what a monetary inflation is. You know, a lot of people think, when I started, I think, why do you have an inflationary depression? In other words, how can you have. When demand is so depressed, how do you do it? You have money production. And then I say, well, why don't they just stop producing the money? Well, because if they stop producing the money, the debt, they'll have a deflationary debt problem. That's the dynamic, that's the mechanic. And that's why I want to explain these mechanics in this book, so people could see it. Because I show it in the book.
- [66:16]
A
And everybody thinks I'm a genius. My house prices are going value. My house is going up. The value of my stock portfolio is going up, but it's all in massively inflated dollars.
- [66:28]
B
I know. Like, it's so funny because people think they get richer if the price of their houses and the price of things that they're owning in a sense go up. But it's the same house, it's the same stuff. Right. When it goes up in price because of inflation. I mean, buying power is what matters, not price.
- [66:55]
A
What can a dollar value today? Which is why I still like the meme, one bitcoin equal one bitcoin. Unfortunately, one dollar does not equal dollar one. So we're in these five stages of, of the debt cycle. And just to wrap this up, we're in the deleveraging stage. And.
- [67:20]
B
Well, the government. You mean now?
- [67:22]
A
Well, no, I'm saying in your five. In your five stages.
- [67:26]
B
And then that deleveraging stage, typically if the debt is denominated in the currency that the central bank can print, you always get the printing.
- [67:38]
A
Yes.
- [67:38]
B
And you always get the devaluation of money. And then what happens is then the debt becomes so cheap that it's easy to pay it off. So if you're watching, like Japan is a good example, if you owned a Japanese bond, you would have lost about 80% of your money relative to something stable, like, let's say, gold. And you would have lost about 60% of your money relative to a US bond because you got 3% less interest rates and the currency depreciated by almost 4% a year. And that 7% of the year is what you would lose. And then what happens is, if you're in Argentina, take it to the extreme, you take that debt and you pay it off because it's worthless with barrels.
- [68:28]
A
Of pesos or whatever it might be.
- [68:29]
B
Yeah.
- [68:31]
A
Where are we in terms I mean, let me ask the question I started with, which is we're in this administration. Elon jumps in, the Department of Government efficiency is created. The goal is cut back government waste, try and get us more towards a balanced budget. I mean, clearly, had we not done anything, there's no, no hope. We're heading towards disaster. Is there any. Do you think that Doge can make an impact on this?
- [69:10]
B
I honestly don't know the consequences, the realities of that. I can't answer your question. It's too complicated for me. I'm not at the nitty gritty of being able to say, if you shut this thing off, what are the repercussions of that and how that works. I would need to have a much more. I need to have not only a much more detailed, but I would also need to be able to anticipate there's an action or reaction and what the reaction is. It's something like the tariffs. It's very difficult for me to answer your question.
- [70:07]
A
Okay, I appreciate it. But you are clear, if we're doing nothing, there's a definitive wall we're racing towards.
- [70:15]
B
Yes, this goes back to my 3% solution. Let's talk about. Yeah, it's covered in there. Under the existing budget. If there's not a rolling forward of, if there is a rolling forward of the Trump tax cuts from before, the size of the deficit will be about 7.5% of GDP. You're going to need about 3% of GDP to stabilize it. So I call this my 3%, 3 part solution. Okay, so first get 3% in your mind, okay, can we get the deficit down to 3% of GDP? And there are three things that can do that. We know. The first two is spending, taxes. And by the way, when I mean taxes, I mean tax revenue, which isn't the same as tax rates, spending taxes and interest rates, because the interest rate on the debt is such a big factor. Now, I've gone through the calculations and have studied this and in that study you can read it and whatever. If one way or another, I don't care how you do it, how you do it is almost an ideological question. The fact that you need to do it is important. So it's like, you know, the patient that has too much plaque and they're eating and they're not exercising. I don't care whether you eat greens or you exercise or I don't know, but you got to get that plaque, you've got to get that going the other way. And, and so that's the 3% and you could do it from some mix. Now in my studying these, if you do it with the right mix, so that it's not too much of anything, it's not dramatic. And if you do that, you will get a fall in rates naturally. Okay. Because the market will be better off, less risk. And if there was any weakness due to the fiscal stimuli, fiscal restraint, the central bank of least monetary policy. And that's always been the case. I show, I don't know how many cases, like 20 cases there around the world. This happened from 1991 to 1998 in the United States. So there's a way, the real issue, like I don't really care, I think the policymakers should make this 3% pledge because you're going to, whoever it is, they're going to argue over the way and they won't do it. That's my worry. Okay.
- [73:40]
A
There's a few high flying solutions out there and I want to throw one towards you. Ray, you know my passion about longevity and extended health. Spanish Dario, who's the CEO of Anthropic, I don't know if you know, Dario was at Davos and saying something that's been discussed and served by a number of other individuals that in the next five to ten years we will see fundamental breakthroughs in human health span and longevity. That we may see his words, not mine. A doubling of the human lifespan. We have $101 million Healthspan X prize going on right now to add 20 healthy years. One of the factors I find fascinating is the notion of if people are vibrant, have the cognition and the, the fortitude, the vitality to keep functioning so that at 80 or 90 you've got the wherewithal you had in your 50s or 60s. I have to imagine that would have a fundamental impact on the economics here.
- [75:07]
B
Here's my confusion. I'm not, I don't have the answer. Of course, a number of those studies I've seen studies that said that extending lifespan is going to raise the cost.
- [75:24]
A
The cost of health care.
- [75:28]
B
Okay, you would know this better than I. So I'm not. But. And, and then there becomes the retirement age question, which is very much a political question. So the question is, are you productive or are you a consumer of productivity? Okay. I would say that if you're watching around the world extending working years, you, you don't see it. I mean, you see the fight against it almost political. It's a political non starter source of fight. So you have to ask yourself, does the working years get extended? Let's say, and then what I had read was, you have more years that you have to take care of that person and so on. So it's not like you go to become young again. Now, I'm not arguing that that's the case. I'm saying I don't know the answer.
- [76:45]
A
Today in the U.S. average lifespan is around 79. The average health span is around 63. Meaning you're spending the last, you know, 16, 17 years of your life in some level of pain and decrepitude. And I think the goal is, can we actually change that so that you're healthy initially and then extend the two?
- [77:09]
B
You've got it engineered beautifully. But I suspect, you know, longevity, because you were just talking about longevity, not health in those years. You know, I mean, like the one thing we got this baby boom and these people, these old people of my generation, and you got a lot of them living, and then when they die, they're not a burden. Okay, so dying from actuarial tables or financial tables can be good.
- [77:49]
A
Remember Logan's Run, the movie?
- [77:51]
B
Oh, yeah.
- [77:53]
A
You were supposed to knock yourself off at age 35 and turn yourself into a food supply. Anyway, that's a different story. All right, I believe that if this person got the energy and the drive and is not in pain and is not restricted by regulation, that at the peak of your capability, you're going to want to keep in the game. And that's the hope. That's at least the work.
- [78:23]
B
Well, I would say if you actually look at what happens in countries, your hope is not consistent with the realities. In other words, when people come to their working, their retirement age, they will fight for that retirement age.
- [78:43]
A
We're going to find out soon enough. What I keep on telling people is we're alive during the 99th level of the gameplay. And a lot of these questions are.
- [78:51]
B
I want to be alive. I'm with you. Keep me alive. Keep me alive. Even if I get decrepit in my years that I wouldn't have been alive.
- [79:03]
A
Tony Robbins, who's a mutual dear friend, and I both invite you to come and join us at Fountain Life and let us.
- [79:09]
B
Well, you know, I will. Thank you.
- [79:11]
A
I appreciate that. Let's talk to bitcoin. Let's talk about bitcoin a second. I know you're a bitcoin holder, but you're still more excited about gold, if I remember correctly. How do you think about bitcoin? You know, Mike Saylor was my roommate, fraternity brother at mit and he's probably one of the most Outspoken individuals. If, if you, I'm sure you've heard Michael speak about bitcoin. Are you sold by his vision?
- [79:40]
B
Let me tell you what I think about it because I'll speak for myself and I think these things are accurate. First thing is we agree on anti money. We agree on anti debt. Okay, that's important.
- [80:06]
A
When you say anti money, define anti money please.
- [80:11]
B
That there are two purposes of money. And that is as a storehold of wealth and medium of exchange. Medium of exchange, it'll exist. Storehold of wealth, you store it in a bond. Okay. Money and debt are the same thing because when you're holding money, you're holding it in a debt instrument. Anything you're going to put your money, your dollars, you're going to be in debt instrument. Otherwise you lose 5% a year or something. And so money and debt are the same because debt is a promise to get the money. So they're the same. We have a supply demand problem with this money and debt. Okay. So I don't want to own money and debt. And so we're aligned. Anybody who's going to want to say it as a storehold of wealth is because the quantity of it cannot be increased other than through the mining activity, you know, but without that restrictions. Okay. And that's that, that. So the first thing I want to emphasize is are you there? Is that part of your there? And then how much should be in your portfolio of that thing or those things? So I may kind of those things guy that prefers gold for the reasons I'm going to explain. Okay, But I, but I have some bitcoin, but I've got much more gold. And the amount that I think is a prudent amount. If you look at correlations and the systems and all sorts of things, the least risk amount to have in terms of maintaining your buying power is somewhere between 10 and 15% of a portfolio. So I think they should be, should.
- [82:11]
A
Be bitcoin or gold.
- [82:14]
B
Anti money.
- [82:15]
A
Anti money. And you're putting the two together in that bucket.
- [82:18]
B
Okay, yeah. Now on the bitcoin versus gold, here's the thing. Bitcoin is not a private asset. The governments watch it. They know what you're going to have, they know where you are, they can tax it. They can take money away from exists at their pleasure and they can do anything they want with you. Their comfort of you being in bitcoin is better than their comfort of you being in gold, let's say.
- [82:54]
A
Well, I agree. The fact that it can be monitored, the movement of it can be monitored, but it doesn't exist at their pleasure. Are you saying that the government could shut down?
- [83:07]
B
They could if they wanted to, under regulation and so on, tax you? Yes, as a matter of fact, like I was saying, I was with the central bankers who said the reason that we. When negative interest rates. How much could it if they had a digital currency? There was no floor on the negative interest rates because they could tax you. Okay. So, okay, they. You don't have the privacy, you can get taxed and so on. Whereas the saying of gold is, you know, it's the only asset that you can have that's not somebody else's liability, meaning you have it in your possession. And, and that's. That's somewhat different. The second thing is central banks holding it as reserves. Watch, watching the periods of conflict and so on. They go to gold even in terms of their enemies. Because like what governments do in periods of conflict or whatever is they print money, they make bonds, and that's not good. And they don't want to hold each other's bonds. Nobody wants to hold the bonds. And that's why they hold gold. They don't trust each other. And that wouldn't work that way for bitcoin because governments can control it.
- [84:43]
A
We do inflate gold every year. What percentage is mined every year?
- [84:50]
B
A pittance. I don't know, like 1% or so of the stock of gold.
- [84:57]
A
Yes.
- [85:01]
B
And consumption for jewelry. And that's it anyway. And it has been for thousands of years in all different places. And another thing is I can understand price changes in gold. In other words, if prices change, if this changes and that changes, I can make sense why the gold price changed that way. I have a problem doing that with Bitcoin. It still very much moves in a way that it wouldn't be necessary. It's a supply demand, speculative market that's tougher for me to nail down.
- [85:48]
A
I am curious by the way, I just asked anthropic here and it's. We inflate gold about 1.5 to 2% per year. Yeah.
- [85:58]
B
That makes the.
- [86:00]
A
You know, I am still. I. I would expect bitcoin to go up when there is international strife or instability or, you know, difficulty predicting what's coming next. But we're seeing swings that are not related to anything that's really explainable today.
- [86:22]
B
That's right. So when I go down that list of things I say I favor gold for those reasons.
- [86:32]
A
Could you imagine changing your mind if some.
- [86:35]
B
Sure. If some thing came along that tell me why I Also, some people have said, and I'm not sure if this is right, it's been quite amazing, but that with quantum computing and so on, there's a good chance that you can break it. Yeah, I don't know if that's true. I'm not an expert. I'm just throwing another thing in there where.
- [87:01]
A
I'll give you another answer to that, Ray, just so you have it in your quiver. If quantum computing were to allow us to break encryption on Bitcoin, we have a lot bigger problems. That same, that same quantum decryption would give us the nuclear codes, would allow anybody to enter your bank accounts, allow us to do.
- [87:25]
B
We. We, you know, we need to go to the. Some island paradise. You know, like, it was so funny. I, I was in, I was in Bali in this paradise. And then I fly up to China and, you know, in Bali, there was this spot off the grid, you know, fine. And they have this food plot. I'm like, I didn't even know how much land produces how much food. And I didn't realize that you can have a plot of land that's not very big and you could live wonderfully. And everybody's in peace and they're going to their meditation and they're doing this and they're enjoying life. And I get up and I go fly to Beijing and I go, and I'm with leaders in Beijing and then I go to there and they're fighting for control of the world. You know, you're in the first place. Okay, yeah, the grid. And they're gonna get me and I, you know, they'll get, they'll take my phone and they'll do, you know, I'm almost, you know, I mean, we do have to, you know, reflect on some of these things.
- [88:56]
A
Let's two final subjects. If you've got the. I know it's getting late there, but I want to talk about China and I want to talk about what your 2025 predictions might look like. So there's a lot of conversation right now about China versus us. We've got a new administration coming in. You know, I'm. My concern, of course, is we've seen recently with Deep Seq, we've seen with nuclear fusion.
- [89:24]
B
Know, while.
- [89:25]
A
While the US Is vibrant in terms of an entrepreneurial and technology ecosystem and engine, China should never be misjudged as someone who is. Is pushing across the board. How do you think about China? How should we. How should an entrepreneur think about China?
- [89:45]
B
We are at war with China, and it is a. It hasn't turned to a military war, but it's actually turned to very much a subversive war in which each would overthrow the government and do all sorts of stuff. And it's not going to go back. It's going to be that way. The two countries fight wars differently. A leader in China, one of the top leaders in China, was describing the Chinese way of fighting war and the Western way, which he calls the Mediterranean way of fighting war. The Mediterranean way is that you go in and you fight and you fight to win and you kill each other and you do that. The Chinese way of fighting is so that your opponent doesn't even know they're fighting you. If you're not smart enough to win the war without actually fighting, you might not be very smart. So it's a war of deception. It's a war of. Anyway, so there are these different wars going on, the different mentalities. And so that's where we are. And then there's this desire to have these separate parallel universes in technology. I don't believe that you're going to be able to maintain control of intellectual property that is something that is publicly used. I mean, maybe if you go inside your spot and you have sandboxing and whatever it is and you never bring it out and you never look at it, then maybe you can intellectually protect it, and that's sort of how the atomic bomb was built, and maybe you can do some of that. And by the way, both countries are trying to secretively build the weapon that the other one can't fight against. Because if they show the way you really win is you build the weapon that the other one can't fight against secretively, you show it to them, they find out that they can't win, and then you win without fighting. That's the best way. But we've changed the world order. And it's been very clear by Donald Trump that we have gone from a multinational, multilateral environment to a unilateral, each country for their own might is right kind of environment. And so we are in that unilateral might is right. If I can exert pressure on you to get what I want, that's the. That's the way it is. Which is historically what most of history has been like. And we have actually done that because we've had a few wars. We had the Ukraine, Russia war, which I think will come to some kind of a ceasefire, which will be temporary. Probably. You've had the Israeli Iran and proxies, Iran's proxies War that Israel won. Okay. And you've had a conflict between the United States and China, that the United States did much better and China did much worse than they would have expected. And particularly, let's say the Chinese. And the Chinese have domestic issues. We have domestic issues. We will have our domestic issues, but they have domestic issues. And I think it's like you've banged things around and you're sort of surprised. The Chinese probably are a bit. And nobody wants to go to worse war. So I think that probably over the near term, you're going to have this behind the scenes, subversive kind of war. You're going to. But in terms of economics and technologies, look, the winner of the technology, you cannot lose the war. You cannot.
- [94:44]
A
Yeah.
- [94:45]
B
In the technology war. And by the way, that's also something that's economically like, I think in terms of, let's say the super scalers. And you must win the technology. Not only countries must win the technology war, those companies must bend. And profit may not be the number one thing. And I think the opportunities are in the applications and the usage of it, by the way. And China is doing a lot better than that in terms of actual applications. We're advanced on the chips and by how much, but in terms of actual usage of IT and embedding in Chinese. So we have this dynamic going on and China has its own set of issues. So I think that probably over the near term, you'll have a lot of pushing the edge and that kind of stuff, but probably not going over the edge. But that's not a permanent set of circumstances. But that would be my take.
- [95:59]
A
Yeah, you said a few things I think are really important to hit on here. Number one, any kind of restrictions we put on China for AI, like chips from Nvidia and so forth, all that does is force them to basically start building capabilities internally. And with Huawei chips right now, the second thing it forces them to do is to become a lot more efficient. So Deepseek was an example of, okay, we don't have the chip resources, so how do we change the algorithms and just do it a lot more efficiently? So intelligence bringing a new sort of Darwinian evolution of a constraint. Evolution will find a way around it. So I think we've been seeing. We see that also. I'm a bit concerned. I'm curious what your thoughts are. You mentioned that 60% of the US doesn't really read above the sixth grade level, which is kind of shocking. We do have a leveling of the education playing field happening very soon. When this device becomes a polymath in your pocket, right? Where in a conversation with your AI agent, you're able to deduce or learn or create or, or anything that you need. Both in China and the U.S. i mean, so we've got an augmented population. You don't think so?
- [97:34]
B
Well, I just go back to my experience. I happen to have a son whose passion is ed tech, okay. And he's gone into the third world and gone to the poorest areas to make this connected, to make it like computers and all of that. And the original theory was, and the expectation was, why shouldn't they not only get educated by this, and he made a device so that it connects to TVs and makes computers and all of that. And why shouldn't they do that? And then if they do, not only do you educate those, but you have them have different kinds of jobs that they can do remotely and so on. When I look at the wealth gaps or these gaps and so on, I was surprised that that didn't happen. So I'm hesitant to leap to the notion of a lot has to do with parenting. A lot has to do with who's giving the guidance. What is it like? We have an issue of parenting. Even we have an issue, okay, why does the 60% of the population have less than a sixth grade education? There's almost a leap that those people are going to take this and they're going to be productive and so on and so forth. Well, I was surprised that it didn't happen and I can kind of see maybe why it might not happen is at least my. I'm not assuming it necessarily will.
- [99:24]
A
Fair enough. 2025 year ahead. What are you seeing? What are your predictions for the. What's the best we're going to see in this year? Right.
- [99:37]
B
Obviously, 2025 is a year of great, great, great uncertainty. I think that, I think honestly the first big issue that we're going to deal with is the budget issue right now. It's not the issue. And everybody thinks of it not as the issue in the first half of the year, it's going to be the issue. And how they deal with that is very important to me in terms of the supply demand. Because let's remember that the treasury market is the basis of all markets, okay? It's the foundation of all markets. And if you create a reverberation for supply demand, then it changes all that capital raising and that's funding this thing or that. I mean, the world gets disrupted. Okay? So it's very important so that's the first thing that I'm sort of. Then we're going to actually see. The first hundred days of a new administration is a time of great optimism and also is a time when you have what priorities have got to be. It's got to, you know, it's real world time now. Okay. It's game time. So the theories are going to be put to the test and the consequences, you know, does, you know, does the cost cutting happen? Does the, is that realistic? You know, how many numbers can you do that? And not only because of, you know, its secondary consequences, but. And then there has to be prioritization. I think the prioritization is also going to be smartly on energy for data centers and the building of AI and so on to win. Because whoever wins the tech war is going to win the military war with China and so on and so. But how that game goes, it's going to be a tough game. So when I look at that, I think we're not going to be as happy a year from now as we think we're going to be. And because also there's that cycle, things are pretty expensive if you have interest rates rising. There are these issues we can't get. So ignoring those that we in the face of the AI thing and then you have to do it within two years. And it's got to stick because midterm elections or swing are going to be harder for the Republicans because they have more seats up. So it's going to be interesting.
- [102:48]
A
You're an entrepreneur or I'm an entrepreneur. Your advice, Looking forward, thinking about planning your business for the next year or two years. What's your wisdom?
- [103:07]
B
You're at a time of relatively good capital markets. Credit spreads are narrow. There's a lot of money. Plan on surviving droughts as well as the difficult time. You know, the good times.
- [103:38]
A
Fill your equity coppers.
- [103:40]
B
Yeah.
- [103:44]
A
Don't take on too much debt.
- [103:46]
B
That's right.
- [103:47]
A
Plan for realistic growth.
- [103:52]
B
And make great partners with the investors that are in it. Ultimately it's going to be not only your numbers, but it's going to be your character. And don't be overly greedy. So have the relationships as well as the money that is your foundation.
- [104:23]
A
Yeah. I think that's beautiful wisdom, Ray. Grateful for you. Thank you for making your research available and writing these books. I sure wish we humans were a bit more intelligent or a bit more had longer memories. You know, I, I do wonder sometimes whether AI can help us get out of these repeated cycles and support us in. In in more logical planning and growth. I guess we're going to find out.
- [105:01]
B
Maybe if we ask it the right questions.
- [105:07]
A
Oh, good to see you my friend. Thank you again for your time. Grateful for you.
- [105:10]
B
It's always a pleasure. Pleasure. Thank you, Peter.
- [105:13]
A
Thank you, buddy.
- [105:27]
B
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