Why the U.S. Can’t Repay Its Debt, What Comes Next, and How to Prepare | Ray Dalio - PT 1 (Fan Fave)

Summary

Podcast Summary

Podcast: Impact Theory with Tom Bilyeu
Episode: Why the U.S. Can’t Repay Its Debt, What Comes Next, and How to Prepare | Ray Dalio - PT 1 (Fan Fave)
Date: April 2, 2026
Guest: Ray Dalio, Founder of Bridgewater Associates, author of "Principles" and "The Changing World Order"

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Episode Overview

This episode is a wide-ranging conversation between Tom Bilyeu and legendary investor Ray Dalio, focusing on the critical state of the U.S. and global economy. The discussion dissects why the U.S. national debt is unsustainable, the mechanisms that sustain and threaten the economic system, historical precedents of crisis and recovery, and practical advice for individuals aiming to insulate themselves from systemic risk. Dalio delivers a masterclass on cycles of history, the patterns that shape empires, and concrete steps listeners can take—regardless of their situation—to adapt, thrive, and prepare for uncertainty.

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Key Discussion Points & Insights

1. Personal Finance in Uncertain Times

• Dalio’s Basic Framework (02:06):
  • Emphasizes three pillars: income, expenses, and savings.
  • Advised listeners to perform a “stress test” on their finances: “How long can you live an acceptable lifestyle if your income stops or drops?” (02:06)
• Tom’s Concern over Financial Literacy (03:29):
  • Notes that most Americans live paycheck to paycheck and struggle to handle unexpected expenses.
  • Stresses austerity as the first step: "Cut, cut, cut. Get your expenses down to as low as they can, 100%." (03:51)
• Dalio’s Response:
  • The critical factor is creativity and cleverness in managing those three components: income, expenses, savings. (05:23)

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2. Political Choices & Economic Management

• Criteria for Effective Leadership (06:38):
  • Dalio: "The most important thing is who can engineer an economy that increases and divides the pie well, and does so in a non-antagonistic way." (07:06)
  • Warns: Division and infighting historically lead to economic and societal collapse.
• Historical Examples (08:53):
  • Cites FDR’s New Deal (U.S.) as a positive model, contrasting with 1930s Germany: “Four democracies... chose not to be democracies because they became so disorderly.” (09:21)
  • Stresses that leadership style and social cohesion determine crisis outcomes.

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3. The Pivotal Role of Education

• Education vs. College Debate (11:51):
  • Dalio: "Education is the most important thing... It does not have to be college. College is overemphasized." (13:06)
  • Focus on trade schools, life skills, civility, and equal opportunity as drivers of societal productivity and fairness.
  • Dalio and his wife’s $100M donation to Connecticut to support equal educational access. (15:02)

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4. Skill Acquisition, Opportunity, & Resilience

• Tom’s “Skill Acquisition” Thesis (19:44):
  • “If you want to get your ideal job... you’ve got to be able to outperform other people.”
  • Sees a coming shift from an employee’s to an employer’s market post-crises.
• Dalio’s Encouragement & Practical Wisdom (22:42):
  • “There’s always a path out there. You just don’t happen to see it now.”
  • Advocates triangulating ideas—seeking advice, testing, trial and error—and deliberate discipline.
  • Recommends his videos: "Principles for Success" & "How the Economic Machine Works." (23:34)

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5. The Five Big Historical Forces

• Dalio’s Macro Lens (25:32):
  • 1. Debt and money creation—unsustainable borrowing/printing.
  • 2. Internal conflict—wealth gaps breeding political stress.
  • 3. External conflict—rising global powers (esp. China, Russia).
  • 4. Acts of nature—droughts, pandemics.
  • 5. Technology—innovation, disruption.
• These forces interact, driving what Dalio calls the “big cycle.” (28:10)

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6. Banking, Bonds, and the “Debt Trap”

• Explaining the SVB Collapse and the Systemic Risk (31:37):
  • Tom: “Is this just a necessary result of fractional reserve banking?” (34:16)
  • Dalio: “One man's debts are another man's assets... When interest rates went up, the value of that debt went down... central banking works like that, except the government can print the money.” (36:21)
  • The “perfect storm”—banks’ vulnerability to asset devaluation and depositor runs is a global, not local, phenomenon.

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7. Historical Parallels: The Endgame of Debt Cycles

• Why Debt Is Unpayable (41:02):
  • Tom: “Even if you took every dollar we made globally and tried to pay off the debt, you wouldn’t be able to do it.”
  • Dalio: “That’s right... If you’re holding that debt, it means it will be bad one way or another—it’s either not repaid, requires a haircut, or paid back in depreciated money.” (41:05, 41:27)
  • The “musical chairs” analogy: if everyone tries to convert debt assets to real value at once, a crisis erupts.
• Historical Comparison: 1930-45 (48:17):
  • Similar cycles (financial crisis → populism → authoritarianism → war).

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8. Preparing for Turbulence: Mindset & Tactics

• Tom on Agency & Learning (60:56):
  • “No one is coming to save anybody... This is just going to suck. There is going to be a level of brutality most of us have not experienced.”
• Dalio on Planning for Simplicity (63:29):
  • “If you have a bed to sleep in, food to eat, basic healthcare... once you’ve got that in your mind, you’re free.”
  • Advocates stripping lifestyle to essentials as a prerequisite for stress reduction and resilience.

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9. What Skills and Jobs Are “Safe”?

• On Preparing for an Unpredictable Future (72:58):
  • Dalio: “In terms of any environment, you can’t be sure what’s coming... The important thing: develop flexibility and self-sufficiency, and the skill of finding a path forward.”
  • “To know how to deal with what you don’t know is more important than anything you do know.” (72:58)

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10. Learning, Research, and Navigating Change

• Dalio’s Approach to Mastering New Topics (75:08, 76:01):
  • Align curiosity and passion with work and pay.
  • “It’s all in the questions... The hunger to know is the thing that drags you forward.” (78:43)
  • Know your life arc—anticipate the phases and needs ahead.

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11. Will the U.S. Remain a World Reserve Currency?

• Probable Decline, Manageable Transition (82:09):
  • Dalio: “All currencies eventually die and all empires diminish. The pace is the question.”
  • Compares to the British Empire—decline doesn’t mean collapse of life, but adaptation is crucial.

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Notable Quotes & Moments

• Ray Dalio:

  • “There’s always a path out there. You just don’t happen to see it now.” (22:55)
  • “To know how to deal with what you don’t know is more important than anything you do know.” (72:58)
  • “If you have a bed to sleep in, food, basic healthcare, and good relationships, you’re free.” (63:29)
  • “All currencies eventually die, and all empires eventually diminish.” (82:09)

• Tom Bilyeu:

  • “No one is coming to save anybody... There is going to be a level of brutality that most of us have not experienced in our lives.” (60:56)
  • “Panic is the problem. People cannot allow themselves to panic.” (68:20)
  • “If you want to get your ideal job... you’ve got to be able to outperform other people.” (19:44)

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Timestamps for Key Segments

• [02:06] – Ray Dalio explains personal finance “stress test”
• [03:29] – Tom Bilyeu on widespread financial fragility
• [06:38] – Dalio’s advice on qualities to look for in leaders during crisis
• [08:53] – When crises have been handled well historically
• [11:51] – The centrality of education versus narrow focus on college
• [19:44] – Tom stresses skill acquisition and competitive advantage
• [22:42] – Dalio on the process of finding a path and discipline
• [25:32] – The five big forces shaping world order cycles
• [31:37] – Mechanics of banking, bonds, fractional reserve
• [41:02] – The reality that the global debt cannot be repaid
• [48:17] – Internal conflict and populism: historical warning signs
• [60:56] – Tom: “No one is coming; self-reliance is non-negotiable”
• [63:29] – Dalio: Resetting needs, preparing psychologically and practically
• [72:58] – Dalio: Flexibility, self-sufficiency are the ultimate skills
• [78:43] – Questions, hunger for knowledge are key to advancement
• [82:09] – Will the U.S. remain the reserve currency?
• [84:40] – Dalio’s single most important advice: “Plan for the worst case scenario and make it terrific.”

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Takeaways for Listeners

• Prepare for uncertainty—stress test your finances; learn to live simply.
• Control what you can—master essential skills, develop flexibility, and leverage available educational resources.
• Don’t wait for rescue—proactivity and self-reliance are crucial in turbulent cycles.
• Anticipate historical patterns—cycles of debt and discord repeat, but with awareness, individuals can adapt and thrive.
• Use resources wisely—Dalio’s free materials (books, videos, Principles in Action app) are recommended for deep dives into economic and personal resilience strategies.

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For further learning and tools:

• “Principles for Success” (YouTube)
• “How the Economic Machine Works” (YouTube)
• Principles.com for books, videos, and more from Ray Dalio

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This episode equips listeners not just with economic theory, but with a practical blueprint for personal adaptation in an era of unprecedented change.

Transcript

[Tom Bilyeu]

I sold my car in Carvana last night.

Well, that's cool.

No, you don't understand. It went perfectly. Real offer down to the penny. They're picking it up tomorrow. Nothing went wrong.

So what's the problem?

That is the problem. Nothing in my life goes as smoothly. I'm waiting for the catch.

Maybe there's no catch.

That's exactly what a catch would want me to think.

Wow. You need to relax.

I need to knock on wood. Do we have wood?

Is this table wood? I think it's laminate.

Okay. Yeah, that's good. That's close enough.

Car selling without a catch. Sell your car today on Carvana. Pick up fees may apply.

[Ray Dalio]

Sometimes you just want a good stor.

[Tom Bilyeu]

On TikTok, you'll find short dramas, emotional, fast and impossible to stop watching. Download TikTok now.

[Podcast Host / Narrator]

I'm Tom Bilyeu and this is Impact Theory. Today's episode is about the economy and it could not be any more relevant or urgent. We are diving into the forces that are shaping our future, and I've got none other than the legend Ray Dalio to help guide us through it. You guys know I am all about preparing for the future, whether that's personal development or making sure you're not caught off guard by the massive shifts that are happening right now in the world. And trust me, we're facing huge shifts in this moment. Ray Dalio is a guy who's been at the top of the financial game for decades. And nobody has made more money betting that he understands what is actually happening than him. He understands the cycles of history and how they repeat, and he brings that all to his analysis. In this conversation, we're talking about the staggering national debt, the shifting balance of power globally, and how these forces are shaping your life. Whether you realize it or not, I'll be honest, these are topics I think about constantly. How do we navigate these turbulent times while still living a life of meaning and fulfillment? Raised insights are exactly the kind of deep wisdom that are going to help you guys navigate. Well, if you're not paying attention to these issues, you're going to be left behind. And being left behind financially is deeply problematic in these times. So without further ado, I bring you the legend Ray Dalio.

[Ray Dalio]

It's the same for every individual, same for every company. Same. And you, if you understand this, then you understand well, there are three things. The first is look at your income, your expenses and your savings. And then do a stress test so that you get yourself secure. If you were to lose your income or if the Income were to fall beyond a certain level and you play that out, maybe that means you go get unemployment insurance or whatever. How long can you live in an acceptable lifestyle and do you have a savings that is adequate for that? Okay, so what you do is you calculate if I lived in a simpler lifestyle and I had this amount of earnings, how many months, how many months or years could I live acceptably? Then you look at your, what do you put the money in? What do you save in?

[Tom Bilyeu]

Don't you worry though that there's a level of financial literacy. So you're saying the basics, right? And there's no question like get your blocking and tackling right before you start trying to get fancy. But Ray, I have legitimately started losing sleep over like how we help the average person through this. I'm not a guy, I don't lose sleep over much. But when I stop and think about most people, I think the stat is the average American, if they're hit with a surprise $500 bill, they're not able to make it. They are living month to month. You've got 30 plus million people now out of work. It's, you know, trying to figure out like definitely basics, right? You've got make sure that you're spending less than you make austerity first. Cut, cut, cut, get your expenses down to as low as they can, 100%. What I'm hoping for is that there's, I don't know, there's something that we can see in this kind of transition where either you've got a new rising power and there's opportunity with that. I'm trying to find that sort of ray of hope for people of what they can do to be proactive either to generate more income if they've lost their income or to be more proactive in their 401k. I think about personal finance the way I think about health. And right now I worry that people are outsourcing everything to somebody else, to the government. They have a wait and see approach. And what I'm desperately trying to figure out for myself is what level of proactiveness of learning about their health they can do to try to weather this storm. Because short of just saving and cutting expenses and maybe that's it, maybe there isn't any more that they can do. But I guess that's my direct question. Is there something more?

[Ray Dalio]

I mean, you know the parts, right? It's income, expenses and savings. Okay, now you can go get the money. Maybe the money comes in and you say, okay, my unemployment benefits are Going to be this or my this is. But those are the parts. Then the issue is how clever are you at dealing with those parts?

[Tom Bilyeu]

Well, let me ask it another way then. Who should they be voting for? Like when you talk about a beautiful deleveraging, which one? You should probably define that. So you've looked at this stuff so many times, it's really, really quite breathtaking that there are ways to do this well. There are ways to do this poorly. You know, we're in an election year. I consider myself like the most apolitical human being on the planet. But when I stop and think about, okay, well if I'm an average person and let's say that I'm really doing my best, I'm doing the blocking and tackling, I'm saving what I can save, I've cut my expenses back, I'm earning, you know, what I can. Let's hope that they either have kept their job or were able to quickly get another job. How should they be thinking? Like what is the right way to go through this deleveraging at a political level? Maybe politics isn't the right word, but like at a higher level.

[Ray Dalio]

Well, I don't know what you want me to say. I think that each person should understand there's a certain level of basic understanding. First, take care of yourself. And then you hope that you have smart people who I think will most important thing is that they're smart in being able to engineer an economy that will increase the size of the pie as well as divide the pie well, and then also that this is done in a non antagonistic way. Smart people working together in a bipartisan way have the capacity of managing this well. So if I was giving political advice, and that's not what I do, but if I was giving political advice, the most important thing I think is who can do this, who's got the intelligence to do the engineering plus to do it in a manner that we are not fighting with each other. That what history has shown us is that when things get difficult, people get stressed and they can get angry and they could all fight with each other and that produces the next leg of a terrible economy. Because the economy won't work efficiently if people are fighting with each other. The system doesn't work well. So one would have to say, you know, who's going to bring the country together behind sensible, I would say bipartisan programs. Because if you don't have that, then you have a form of revolution and you don't have good management and that's the greatest risk I would say politically.

[Tom Bilyeu]

So looking at the historical perspective, who has done this? Well, and then what have been mistakes that have led to literal revolution?

[Ray Dalio]

When you say who has done it well, what do you mean?

[Tom Bilyeu]

What countries or what periods of time has going through this kind of crisis been managed well so that we come out the other side with as little sort of pain and suffering as possible?

[Ray Dalio]

Well, an example of well would be the differences in the way Roosevelt did it. So again, 1929-32, interest rates hit zero. They print money. We had a large wealth gap. And then they sat down and they figured out how do we keep it orderly and how do we change the circumstances with whether it's taxes or how do you reorganize it so that the system works? Well, there is a risk also at the same time, because the world is going through that, there's a risk of conflict. So in Germany, Hitler came in power in 1933, and he came in power in 1933 because there was a lot of internal fighting as to try to bring produce order. Because everybody, the left and the right, you know, the communists and the fascists, and they're all fighting about wealth because everybody's fighting about wealth when you have a downturn and then they need. They were democracies. Four democracies existed then that chose not to be democracies because they became so disorderly that they wanted some strong leader to take charge and run the country. And then of course, we had a bunch of those types of leaders. And then they had a war. That's how World War II happened. So when you look at that, you know, that's kind of the political landscape. But back to the average man in terms of his finances, I would say the important thing is those three elements. To have a plan and maybe to have a plan with both your family, how do you get down when things get tough? And then you have to look at what happens in policy. Well, policy depends on the person. Some people would understand more about policy than other people. So it depends on what they should do. Depends on what they're able to do.

[Tom Bilyeu]

Well, as we sort of step back and start taking a longer view of this, what's the role that you see education playing in? I've sort of. When I grew up, it was just assumed I was going to go to college. I did go to college. And I would have for a very long time told everybody they should be going to college. Now I've sort of cooled off on that. In terms of the debt that people are getting into, I know you and your wife are working a lot in the school system there in Connecticut. How do you think about that? What's the importance of education in, you know, when we start thinking about protecting successive generations, how much of that comes down to education?

[Ray Dalio]

Education is the most important thing. I was raised with a very modest economic background. My dad was a jazz musician, my mom was a stay at home mom. But I was lucky to have parents who cared for me. And I went to a public school and I got a good education and I came out to a world of equal opportunity. And I believe that those are fundamental necessities that you have to know how to have an education of. You know, facts like you have to know how to read, write and arithmetic, but you also have to know how to behave well with others to be a good citizen, operate in a civil way, to be able then to go into jobs and that those that education can be anything that works. I think the big thing is, you know, three big things on what I think work should be. Make your work and your passion the same thing and make it economic. If it works, that you love your work, you'll probably be better at your work. And then you find the. So you want those things. And then there's the economics of it. And so it could be anything from learning trades. Whatever it may be. Education certainly does not have to be college. College is overemphasized and having a good productive career. When I watch these remarkable people who are on the front lines of dealing with this virus situation, and I look at them, some of the greatest people are the people who have the capabilities of doing certain things that have nothing to do with going to college. And they're on the front lines and they're contributing a lot. And so we so in education and civility. But that means that there has to be equal opportunity. So yes, what my wife and I have done is we're particularly heartbroken or disenchanted with poverty affecting children and high school students having the equal opportunity of education. So our particular focus in Connecticut we made a donation, a large donation, $100 million donation to the state of Connecticut for them to match and are working to get those students through high school. But it could be trade school and into jobs and to be able to be productive. So you look at all societies and these are the things that matter most. The society becomes a fairer society when there's equal opportunity for education. And also it becomes a more productive society because the opportunities when extended throughout the whole population means that you get more people on the basis of merit. Right now, that system is not operating in a good, effective way. For example, people in the top 40% of income will spend about five times as much money on their children's education than those in the bottom 60%. And that's neither fair nor productive. So I think that these types of questions are going to have to be examined by policymakers in a bipartisan way as we go through this. But yes, in answer to your question, you know, it really starts with good total education, the good raising of children in terms of their actual formal education and their informal education, and then going out and having an environment of equal opportunity.

[Podcast Host / Narrator]

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[Tom Bilyeu]

One thing that I know you have leveraged to tremendous effect, and this is the very thing I took from Principles that Changed my life, is to stress test your ideas, to put them out there, to ask how do I know I'm right? So like I said, I've really been losing sleep over how I can be most helpful in helping people navigate all of what's happening. And I have come to a conclusion that could be pure delusion and I would love to know what you think. It's along the lines of education, which is why I was asking about that. So my obsession is skill acquisition. I think that. So the advice that I've been giving to people, if you've lost your job or not, like we have spent probably the last 10 years, maybe more, in an employee ease market. They've really had this election. They've been able to put a lot of pressure on employers and now you're seeing a flip and you're seeing this is going to be an employer's market. There's going to be a lot of people, obviously there's north of 30 million now. It's going to be a lot of people looking for work. And my thing is if you want to get your ideal job, you want to make your passion something that you're able to pursue, you've got to be able to outperform other people. And I would say the same thing To a kid that's coming up, somebody that's about to graduate, whatever. Like, you've got to be better than the next person. You've got to build a skill set that allows you to excel. And my thing is like you are living proof of one simple thing. If you can outperform people, there really is no cap to how far you can go. You put your money where your mouth is. When it comes to an investment strategy, obviously with Bridgewater, you guys have just outperformed people. It's really been quite extraordinary. And yes, people need to save, yes, they need to focus on where they're getting their income from. They need to practice austerity measures, all of that. But ultimately people can propel themselves forward if they're out there learning, growing, getting better, pushing. I would go so far as to say even being aggressive to try to continue to move up. But it comes down to recognizing that skills have utility. They actually let you do something, they let you out invest somebody, they let you build a better house or a better bridge. And so what I want to see people do through this time, I just think most people will be obliterated mentally. They're going to get scared, they're going to panic, they're not going to be able to think clearly and they won't put themselves on a path to excel. So wonder what am I missing there? Because I know that people don't. That is not a popular thing to say right now. That's something that I get a lot of negative feedback from people. It's like basically pull yourself up by your bootstraps. So I'd love to understand where are the flaws in that thinking where when you talk about there not being equal opportunity one, what can people do to right that ship? At a personal level, I get at the higher up systemic, the way that we address it through policy and things like that. But at a personal level, is there something people can do?

[Ray Dalio]

Well, I think you're exactly right. I think that that though is short of specifics and you know that particular action. And the question is who can help them? So yes, if they're wily and hardworking and clever enough, they still need triangulation and help to find out where is the training program, what is that skill. They can't do it alone, they have to do it with the help. And I would Recommend I did two 30 minute videos. One is principles for success at 30 minute YouTube video. And it's about an approach to life that a lot of people, something like 14, I don't know, a Lot of people have seen this and I would say it's worth your 30 minutes, I think in terms of approach to life. And then there's also, if you're interested in the economy, I did a 30 minute video, how the economic machine works in 30 minutes. And that had a lot of views, 14 million I think. And it was liked. So I can't tell them in this very brief interview how we're going to exactly who will get them that training and that capability. But I think you're right. Skill that you love, that sells is what you need now you go to each person has their own particular way of possibly getting that. To some case it might be a start low in an organization and work your way up. To some cases it may be a government training program, in some cases it may be a relative or a friend who can get you going and so on. As I said, one of my main principles is there's always a path out there. You just don't happen to see the path now. So you have to find the path. If you find that path and you can't find it alone, the way you find that path is to speak to other people, get many ideas by other people and then you know, you have to keep yourself trial and error, you got to keep at it. Like when you're getting a job or getting a skill, it's a lot of trying. And so that requires a certain amount of discipline. And if you have a discipline problem, get help with the discipline problem, have somebody kick you out of bed or whatever it is that you can get there. There is a path. You just don't see the right path at the moment.

I look at three major forces that are happening now haven't happened in our lifetimes, but have happened many times in history. And those three major forces are the creation of a lot of debt and the printing of a lot of money to buy that debt because particularly because the government is running large deficits and so they don't have enough money. So that government has to print that money. So that creation of all of that debt and its financial implications and its economic implications is one force. The second force is the internal conflict, the amount of conflict that's internally largely due to the largest wealth gaps that we've had since the 30s. And that produces populism of the left and the right, particularly when there are financial difficulties. The third force is the rising power, the challenging the existing power largely in the form of China and to some extent Russia. So let's call it the great power conflict because in 1945, you know, there's. There's a cycle, you have a war, then after a war, you have winners, and the winners determine the rules of the game. And then there's this evolution of others becoming more competitive. And then you have a conflict again for who's in control. So we have that dynamic taking place. So those three influences, the financial, the internal conflict, external conflict influences, are having a dominant influence. I learned before that when I was surprised. Often it was because of things that hadn't happened in my lifetime before, but happen in history. Because of that reason, I went back and studied history the last 500 years. On these cycles. There are big cycles that last about 75 years, give or take, about 50 years of rises and declines. And I put that out because I think it's so important people understand that. I put it out in a book called the Changing World Order and in a free video calling the Changing World Order. So when we look at each one of those, they're important. I also learned in studying history that there were two other influences that were very big, and you could see them. The first was acts of nature, such as droughts, floods and pandemics. The changes over time in the evolution over time of people's learning and the technologies they make. So I'd say there are the really five big influences that drive everything, and they are the money, debt, economic influence, the internal conflict, the external conflict, the nature influence, and the, let's call it the technology influence. So as we go now into this, it's important again, I put it out as a free video on YouTube so that people could see it easily. And when we get into whatever we're going to talk about, it'll be certainly in the context of those things. And since they each affect each other, it produces what I call the big cycle.

[Tom Bilyeu]

The animation that you put out in conjunction with your book, Principles for Dealing with a Changing World Order, have influenced my thinking around this moment more than anyone or anything else. It makes it seem so predictable from a historical perspective when you look at that big cycle and you see how it repeats. And so as you went through the last 500 years, one thing that you make very clear in the book is that the rise and fall of empires, the rise and fall of a reserve currency, that they go in this six cycle trend. And the part that I always find unnerving is phase six is basically war and collapse. And so you have that previously dominant power loses its position, loses its status as a reserve currency, and it loses it for pretty predictable reasons in the three Forces that you were talking about in the beginning, discounting the fourth force, which I don't think in every cycle you always had, and correct me if I'm wrong, but you. We didn't always have a pandemic or anything like that, but the fact that we're living in a moment right now where we have all of them. And so we've got, not only is it a moment of massive technological disruption right now, good and bad, but we've got the money printing. The meme on the Internet is money printer go, brrr. So we've got printing because of COVID we've got printing coming off of printing because of the 2008 collapse. And now we're again seeing this cycle repeat itself. So I've heard you say that we're in somewhere in phase five, which is as the empire begins to decline, as you have a rising superpower, as the debt bubble is getting out of control. With that perspective, was what happened with the SVB bank collapse? Was that something that you knew, okay, something like that is coming, or was that a surprise to you?

[Ray Dalio]

No, it was, it was obvious. Look, if just let's. I want to talk about the mechanics. Really, I'm so eager to pass along an understanding of the mechanics so people themselves can do the analysis. So one man's debts are another man's assets. Okay, so what happened? The government had to sell a lot of debt, and when it sold a lot of debt, there were a lot of entities that bought a lot of bonds, government bonds. And money was very easy, which meant that short term interest rates were very low and money was almost being, it was actually being given away because they had interest only loans and interest rates were less than 1% and you didn't have to pay back principal so you could go get money. And so that created a lot of debt, and it created a lot of buying of government bonds. So what happened to Silicon Valley bank is what happened to many, many entities all around the world, not just banks. What does a bank do? A bank takes in deposits typically, or debt in some way, and then it buys debt. It can do that in the form of making a loan, or it could do that in the form of buying a government bond, buying debt. And then when interest rates went up, the value of that debt went down. The money they had to give to depositors became more and more expensive. And also depositors, wanting them to be competitive, looked at money market rates or other rates and withdrew money from the bank because they had better uses. Okay, so what that, that leaves them with. It's a banking problem that has happened literally for thousands of years. That, that what they do is the depositors, you know, want their money back, and they're holding assets that are, in this case, have gone down in value, so they're broke.

[Tom Bilyeu]

Let me put a fine point on that. Sorry. Before you move on, I don't know that people really understand this. Is. Is this a. It seems to be a necessary result of fractional reserve banking, meaning that if you deposit $10 to me, I only need to keep. And I think this is actually accurate, I only need to keep a dollar. And so the other $9 I can actually put to work in terms of loans to other people or investments. And that puts us in a position where, okay, you gave. Technically, you're giving the bank a loan. A deposit isn't just, oh, my money is in a vault somewhere. I've given the bank a loan. The bank is going to go do things with that of varying degrees of risk. In the case of svb, they thought, I'm doing the least risky thing, which is I'm buying government debt. The government is going to back it. The government, especially the US Government, can actually print money if they had to to cover that, which they did in this case. But if a lot of people go to the bank at the same time, known as a bank run, and say, I want all of my money, the bank goes, whoa, whoa, whoa, I don't have that money. And so I have all these assets. And as long as those assets remain liquid and I can liquidate them in a timely fashion, then sure. As long as the requests for people's deposits back are coming at a reasonable rate, all is well. But when you get a lot of people coming at once and you have the investments that they've made have gone down in value, now you get a perfect storm.

Hold tight.

[Podcast Host / Narrator]

We're going to take a quick break.

[Ray Dalio]

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[Podcast Host / Narrator]

And we're back.

[Ray Dalio]

You're allowed to be in the business. Let's call it 1/10. It's actually less than 1/10 is your money.

Whoa.

But let's call it 1/10. You have a certain amount of money up, they give you the deposits, you invest the money within these general guidelines. So, for example, government bonds are safe from default. So you buy the government bonds, you think you're making a spread, and then what happens is the government bonds go down in value at the same time as the people say, hey, I want to go take my money and put it someplace else so you don't have enough money. And central banking works like that, except the government can print the money. So the risk when it's the government is not that you won't get the money back unless, like in this particular case for a bank, it goes down in value. So you ain't going to get that back, you're going to sell it. But anyway, you described it very well. What happens for the economy as a whole is then they print the money because they don't want defaults. There's a tolerable amount of defaults, and then you get past a tolerable amount of defaults and it just crushes everything. And so they print the money. Okay? And so this thing with the bank is not a Silicon Valley bank alone issue. It's not a banking issue. It is a global issue in terms of all around the world. All sorts of entities, pension funds, insurance companies, all around the world. There was a lot of the buying of these government bonds which have gone down in value. And if you then take it and you say, what's the value of those? Those have gone down and the cost of money is high and so the world is leverage.

[Tom Bilyeu]

Long.

[Ray Dalio]

Okay? Long meaning they own stuff and they borrowed money to own it and it's going down in value.

[Tom Bilyeu]

How nightmarish does that scenario become? So you've got your money locked up in something for a long time, but it's declining in value. Is this like a classic moment where we can look at this big cycle and go, oh, we know where this goes? Like the, the music has stopped everybody, or. No, it's a bit harder to judge than that.

[Ray Dalio]

I think it's pretty easy to judge on a, you know, an intermediate or longer term basis because there's a choice, right? The predominant, the big issue is, you know, okay, the government can come in and print the money and give money to anybody they want to give money to, but when they do that, that typically devalues the money. So if, think about it, if you're holding a bond, you know, you got a claim on money, but the claims are too much.

So.

So one way or another, you're either not going to get back that money in full or you're going to get back money that's worth less because they print the money.

[Tom Bilyeu]

I've never heard anybody say it like that. So let me just make sure that I understood that. The government has effectively issued too many bonds. So people have their holding a lot

[Ray Dalio]

of companies and a lot of other things too.

[Tom Bilyeu]

Okay, very good point. So we're not just buying the bonds from the government, we're buying corporate bonds, municipal bonds, like anybody that wants to put some debt out into the market. Government, of course. In fact, I'm actually curious, what's the ratio roughly, if you know this, between corporate debt and government debt?

[Ray Dalio]

Well, right now I couldn't give you the number or exact number off top of my head, but there's household debt, corporate debt and government debt.

[Tom Bilyeu]

Yeah, that. That's terrifying. So even if you took every dollar that our entire country makes, I think it's true globally. If you took every dollar that we made globally and tried to pay off the debt, you wouldn't be able to do it.

[Ray Dalio]

Well, that's right. But it's not expected to pay it off in a year. I want to go back to my main point to make this clear. If you're holding that debt, you are holding something that will money will come back. Let's say if the and the government can print the money. But if the money's hard, if that's going to be good money that's coming back, it's going to be hard for those entities to pay back because it's a lot relative to their income and cash flows to pay it. And that means that the default risk rises. However, because you're holding that, it means that the debt will be bad one way or another. It's either bad because they don't pay it, it needs a haircut for them to pay it, or because they do pay it with money that is going to be printed to come back. So when you look at that, and that problem occurs when there's a lot of debt assets and a lot of debt liabilities. So think of it this way. Just want to make this clear. When there was the position that interest rates got a lot below the inflation rate, you are losing buying power. There's no good reason to own that. And there's a change in psychology because before there was I own bonds, the bonds go up in value as interest rates go down. So I'm getting a price appreciation even though I'm getting, you know, let's say a low interest rate. But inflation isn't a problem. Until it's a problem. Then when it's a problem because they print so much money and they put it out, then inflation goes up and a light bulb goes off. That light bulb used to be okay, how much am I earning? Okay, I'm not earning much, but it's okay. The price of the bond or whatever's gone up and, but anyway I'm holding it and it's safe. And then people realize it's not safe because I'm losing money to inflation. So now you have the central bank wanting to rectify that imbalance by

real

interest rates were minus 1.7%.

[Tom Bilyeu]

Meaning that inflation was chipping away at your buying power.

[Ray Dalio]

Yes.

If I look at inflation index bonds as an indicator or other indicators, I'm losing percentage points to inflation by holding that bond. And then when they, and, and people realize that, well you don't want to do that. And then the other side of it was you want to buy, buy and borrow and buy stuff because you know, money's free. So companies borrow and buy stuff and individuals borrow and buy houses because it interest only loans on the houses. I mean like okay, I can buy a house, I can buy an apartment. And so but that creates the imbalance where it's terrible to be a lender and a creditor and it's good to be a borrower and do that. So that imbalance takes place, it produces inflation. And then when it produces inflation and so on and then you say I don't want to own these things anymore. And also the Federal Reserve says I better fly inflation. They change things. And so by raising interest rates to levels in which it goes from minus 1.7% in inflation index bonds to plus 1.7% and it makes it, and it raises the short term interest rates, real interest rates, much higher. Then lo and behold, all the people who did all those things get hurt. Okay, they borrowed, they bought, bought the bonds, they bought all of those things and all of those debt instruments. And also companies look at the companies that are affected because yields got so low. Tech companies and others, those who have a dream, I'm going, they don't have to necessarily make profits. They're selling a dream and the money's got to be invested. And so you see all of that change radically when those that tightening of monetary policy. So now you sit there and have a lows. So when you're looking at the big picture, you look at, you've got think of it as all like banking. You're holding all these financial assets. What is the value of a financial asset. It has no intrinsic value. Its only value is what it can buy. But there are many, many more financial assets out there. The most financial assets out there that there's ever been relative to the value of stuff to buy. There's too many claims out there. It's. It's like musical chairs. Okay. If everybody says, oh, wait a second, let get. Let me get my stuff, let me convert my debt assets, you know, and I want to. I want to get my stuff. I want to get real stuff. That's. That's a real problem. And so that's the global picture on the first of those five influences. Right. The fact that it's happening with the other influences is very important because they affect each other. So this financial picture, by the way, is the same as in the 1930-45 period and the same as they were throughout history.

[Tom Bilyeu]

Yeah.

For people that don't know, that's World War II just.

[Ray Dalio]

It started with a financial crisis that then caused internal conflict. What do we do about the financial crisis? The populism of the left and populism of the right in this internal fighting. And four countries that were democracies chose not to be democracies because of the conflicts that were existing. And those countries were Germany, Italy, Spain and Japan because there's a lot of internal conflict over wealth. And when you have that. And so that creates a lot of internal disorder, a lot of fighting. Okay. In some ways, almost civil war forms everywhere. Some form of civil war. Who wins the internal war. And of course, that happens also at the same time as there's the external conflict. First of all, everybody's fighting over resources. You have populists come to power, and the populists are not compromisers the way democracies work.

[Tom Bilyeu]

Yeah, let's fight. I'm going to fight for you. This. Don't worry, I'm not in the middle. I'm not going to compromise.

[Ray Dalio]

And you've got to pick a side. And so the moderates. There's no place for moderates. You've got to pick a side. And the sides are, let's say, internally in the country, the left and the right. And externally, you know, I don't know, the Americans and the Chinese or the Americans. Okay. And you got to pick a side and fight. And so that becomes the dynamic that is these periods of time. And these periods of time have typically lasted about 10 to 15 years. And you. And they have various symptoms to it. So in the book I write out, yeah, there's like a disease, like a Cancer, you see stage 1, 2, 3, 4. If you have these things, you could look at it and you could diagnose. And you see it moving from stage one to two, to three, to four to five and to six, you could see that taking place. And each time you come closer to a bad set of circumstances, bad financial circumstances and bad fighting over things.

[Tom Bilyeu]

Yeah. So this is where this gets really breathtaking. So you've talked a lot about this idea that there are things you even mentioned at the beginning of this episode. There are things that have not happened in our lifetime, but they happen over and over and over. And so it is very easy for me, as somebody born in the 70s, to think, oh, war isn't a thing that happens in the U.S. that's something that happens elsewhere. Populism isn't something that happens in the U.S. it's something that happens elsewhere. But it does happen. We're seeing it ratchet up right now because of that. I heard you once say, and I think this is really important for people to understand about the internal conflict. In fact, you and I bumped into each other in Dubai and I was saying, ray, given everything that's going on, how do I think. How do I think about where to live? Whatever. And you said, tom, the only thing that matters is how people are with each other. And for whatever reason, it really hit me that time what you meant by that. And I understood the importance of this conflict. And what I heard you say previously is that in the French Revolution, it was the moderates that got the guillotine. It's like, you are forced. Because I consider myself very centrist in nature. And you find yourself, as things escalate, being forced to take a side, which the French Revolution one gave me pause. I was like, not how I would want to end up as a moderate really fast. Going back to that. This is a global moment. It's a predictable part of the process. That stage five, the debt is too much, interest rates are now going up to keep inflation from running away. We printed money like crazy. You've got the rise in conflict. Is the. When we printed money, when the Fed printed money to backstop what looked like it was going to be a potential contagion from svb, Obviously, I think there were five banks that ended up failing. Is this now contained or is what the Fed did just going to forestall something that's inevitable.

[Ray Dalio]

The dominoes are beginning to fall. I mean, okay, you know, you know what the next dominoes are. And you can imagine the anonymous. So, for example, they're not going to buy the debt. A lot of them are not. Those who are, who bought the debt and have too much debt and have debt losses on government debt are not going to buy that, buy more of that debt, for example. And therefore when the government sells more of the debt, there's not going to be an adequate number of buyers for that debt. You know that those who are hurting because they have those losses won't make loans. And a lot of those loan loans went to real estate, particularly commercial real estate. And you know that for various reasons in commercial real estate that you're,

[Tom Bilyeu]

we

[Ray Dalio]

don't use it the same way and so on. So you're going to have problems in commercial real estate. You know that this kind of money was also financing venture capital and private equity entities that also have cash flow problems, challenges. And so you know that that funding is not going to be there in the same way, you know, as a result of these things that a number of entities will cut costs and in their various ways. And so depending on the, on that, the job market is changing. And you know, you see it, for example, in tech jobs and, and other, you know, if you're in some of those areas that are getting squeezed and you see the same thing, by and large, you know, happening internationally. So you can see also that if you said what is the value of those assets that are being held? That that value has gone down a lot. And because it was bought on leverage, as you described, because it has bought on leverage, there are bad losses in different places. And then the question is, what are you going to do with those losses? In most cases, quite often they're, you know, don't mark them to the market, meaning don't account for them and recognize those losses, which is kind of, let's say, hiding those losses and hoping in time that they'll just over time, you know, it'll be fine, but that'll produce a squeeze, that'll produce a problem. So I think we know those things. We know those things and, and that's happening at the same time as we have an internal conflict taking place such as the presidential election. So we're going to come into the presidential and, and it's not just presidential election, of course, it's a number of senators, congressmen and so on and who are at each other's throats about this and who are going to fight with each other. Okay. And, and fight to win, not probably respect the rules as much, but fight to win for their side. And that's happening at the same time as we have the situation with China, most importantly China and Russia, in terms of the issues, in terms of their things to fight over. You know, for example, even there's going to be an election in Taiwan that will also have a big bearing on this whole thing. So there's, you know, there we know, I think pretty much that we're going to have financial problems at an economic problems at the same time as we have this internal fighting and this external risky situation.

The most important thing, I think is to know your nature. What is your nature? What is what? What are your strengths and weaknesses and your likes and your dislikes? And once you know that, then you also think, what are the fits? Oh, I would like that job and the job could pay me well. And then you figure out, okay, how do you do it? How do I get to it? But there are different people in different circumstances, so I can't answer them all now.

[Tom Bilyeu]

Yeah, I agree with you. So I want to go back one, thank you for the feedback that I was being super vague. I think that's really helpful. So let's start getting really specific as much as we can, knowing that people are going to be sort of at very different places as they're hearing this. But I think this will be helpful. So one, the video that you're talking about, and I'll speak for you and correct me where I go astray, but I watched the video multiple times, think it's really extraordinary. And basically, to put it in a really small nutshell, it's basically go out, try things, fail a lot, learn and keep progressing. And that, that's basically, if I remember right, you have like this sort of circular ascent and it's from the failing and the learning that you ultimately make the progress. But if you put your head down, you don't want to see your mistakes. You don't want to see the flaws in your thinking. You're going to trap yourself at a plateau and you're never going to be able to push beyond that. So you've got to seek out disconfirming evidence. You have to seek out where you're weak. And in fact, one thing I will, I sort of disagree. I get what people mean. So when you say know your nature, I will say by nature.

[Ray Dalio]

Before you get to that second part, let me just on the thing, yes, it's the looping and learning from mistakes, but another part of it is the realization that you don't have to make your decisions in your own own head. Okay. That when you start to realize that you know what you're good at and what you're bad at. That a power comes to you when you start to know, okay, who's the best person to give me the advice? Or who's the best person to lead me through this? Or when you start to know that you can go beyond what you think think and your opinionatedness so that you can triangulate, I call it triangulate with others, so that you find three people who are really capable of giving you good advice, who will argue with each other and argue with you so you can see all sides of it and you work yourself through. So it's not just your eyes looking for the path, but it's other people's eyes looking with the path with you, knowing that you're going to have successes and failures. But that power of that collective learning and triangulate well with humbleness is a great power as you go through that cycle.

[Tom Bilyeu]

I love that. So I'll push that a step further. And I will say this, so I'm going to be super blunt to anybody watching right now. And Ray, if you think that I'm wrong, I trust that you will jump in. No one is coming to save anybody. And that's the hard truth. And if I look at history, and even if I listen, which I have listened to literally every word that you've said on this subject publicly anyway, that this is just going to suck. Like, there is going to be a level of brutality that most of us have not experienced in our lives. Companies are going to go under. People are going to lose their jobs. There are going to be people that are going to struggle to find their next meal. And what I want people to understand is, just like you just said, you can triangulate, you can get people to help you think through. But I want them to understand that they can do that in a book, at a library. They can do that online if they still have access to the Internet, which as of right now, even just going to the library, you can get access to being online. You changed my life before you and I ever met. I read your book. I'd never. I didn't even know who you were at that point. And somebody just said, hey, you've got to read this book. It's got really powerful ideas on trust and creating these hard principles out of all your mistakes. I read it, immediately, recognized that this aligned with what I call the physics of being human. It was so in line with removing my blind spots, getting people acknowledging that other people are better than me at certain things. And so while I take a Little bit of an exception, because I think that you can't say what you're good and bad at until you've been at this for a long time. You've been trying, you've been pushing, you're learning, you're failing. Because by nature, I'm lazy. I am not very bright. I think there are people that can process raw data far faster than I can. But I'm willing to admit when I'm wrong. I'm willing to admit that I don't know. I'm willing to admit when I make a mistake. And because of that, because I go in that cycle that you talk about of making a mistake, looking nakedly at it, not pretending I didn't screw up, asking people to point out my flaws, and then going, and now I'm going to have to do what is called deliberate practice to get better at that thing. And I don't just ask. And I don't think people can afford right now to just say, oh, what do I want to do? For a lot of people, this is going to be Maslow's hierarchy of needs. You need safety, you need security, you need food, shelter. And I think it's going to come to that. And so recognizing there are people out there right now that know more than you, you are going to make a mistake. But those mistakes are huge learning opportunities. You have to admit that you made one. You have to seek people that can help you remove those blind spots, and then you have to put in the work to get better. Does any of that sound crazy?

[Ray Dalio]

No, that's totally, totally right. And then it comes from. Once you have a fear that you might be wrong, but you have still the audaciousness and courage to go forward, you're a lot smarter than the person who thinks they know. There's a quote that Jefferson said, he who knows, he knows not, is closer to the truth than he whose mind is filled with falsehoods. And so when you know that and then with your character and your determination, you go forward, the smartest people I know are the most humble. The more you learn, the more you realize, oh, I'm eager to take in. So that's right. But back on your audience, I think your audience ranges from, you know, there's a wide range that you have in your audience, and I would say that there are many people in your audience who can plan for a simple lifestyle that can be wonderful. Sometimes we acquire these needs that aren't anywhere near as big as we make them out to be. Do you have a bed to sleep in, do you have food to eat? Do you have basic health care? Okay, if you start to think, okay, what are my needs that I really need and I'm okay, and how can I make provisions for those needs, then once you've got that in your mind, you're free, okay, you can go beyond that. You may say, listen, oh, I can do that for a year or two years or a month or whatever. But I think we visualize too much the things that we're used to. One of the good things about this exercise is that it brings you back to basics. You can be brought to basics. And like I'm saying, if you have a bed to sleep in and you've got food and so on, and you have those basics and good relationships with people who care about you and basic health care. So if you budget for that and you figure, how do you have it? Maybe it isn't in the luxurious place you're in, maybe it's in the country and so on. Once you visualize that and you get that down in your head and you say, oh, I can get that, then your stress will disappear. Because as you visualize that, in many ways that's a happy life. It doesn't take a lot. There's stimulation, there's nature, there's relationships, these fundamental wonderful things. The most important things can be obtained. And so for many of you, I think if you look at that and you budget for that, I'm seeing a number of people who are going broke, and I've watched this over many years, and really it's just the adjustment process. Once they get to that point where, ah, you know, they have. They get settled, they're fine. It's the ambiguity, it's the worry, it's the stress. So if you do that from the beginning and you have that played out in your head, then you know everything from there you can play with and it's your. It's icing on the cake. So I want to emphasize you can budget for that, you can look at that, find that scenario, find what that looks like so that you know you've got it down, then you know you're safe. Once you've got safe, everything beyond that is luxury.

[Tom Bilyeu]

I forget who the Greek philosopher was. Maybe you remember that used to go. And he would sleep on the streets like once a month or something like that, in shabby clothing because he wanted to remind himself, oh, this is what I'm afraid of, and this thing isn't that bad. I always found that interesting. I take a slightly different approach. I Think that is really powerful and I think that's an important anchor for people. So my wife and I always say to each other because look, we have been dirt poor and we have now been very wealthy and all along the journey we've always said to each other, look, man, if I have you like everything else, I'm good. So literally there are only two things I'm legitimately afraid of. There are things I don't want, but there are two things I am legitimately afraid of. Brain damage. Because then I cannot build my way back. I can't have the level of fulfillment and joy that I want. And losing my wife because a life shared to me is like the highest importance. Now having said that, I'm going to set all that aside and I hope people heard you and I hope that they take it to heart to paint a lifestyle that they can love. And it's beautiful, but it's simple and they don't have all this overhead hanging over them. But I know thyself, as you were saying, know what you're good at, what you're not. I've always told people, if you want a calm, peaceful life, I'm not your guy. There is somebody else for you to go listen to and follow that journey. If you want to be aggressive and you want to build something that matters to you, I don't need it to be big, I don't need it to be a business, whatever. I just. People that want to express themselves, that want to get great, they want to become extraordinary at something. That's what I'm far more interested in. And so the way that I look at it is right now it's a time where economically the chessboard has been flipped over. But in that moment there's going to be opportunity created. And for people that. And this, my central thesis is what I said earlier. Panic is the problem. People cannot allow themselves to panic. Which is why I like what you're saying. Don't, don't worry if you're, if you lose everything, right? As long as you have the things that really matter to you. And I think that's important so people don't panic so they can be clear headed, so they can figure out where the opportunities are and then they get the skill set that they need to capitalize on that opportunity. Which for me is like when I, and that's why I keep saying I'm losing sleep over, like how do we get information out? So that I've worked in the inner cities a lot and to get the information to somebody out There that they can triangulate.

Right.

That. That's not a rich upper class exercise. That's a. The information is out there. It's been put in books, on a website, in a podcast. Like the number of the world's greatest thinkers right now that you could be taking this information from. But you have to be willing to test it, you have to be willing to incorporate it and actually act on it and do something.

[Ray Dalio]

Something. So I'm not clear, what's your question about that?

[Tom Bilyeu]

Not so much a question is I'm presenting what I think are ideas that I want people to run with. Partly, I'm hoping if there is a flaw in my thinking, I want you to point it out. So going back to the need for specificity. So we're talking about there isn't equal opportunity because there's not equal access to education, which I will take as the core of your thesis for generationally moving forward in a useful way. True.

[Ray Dalio]

It's a core piece. Yeah.

[Tom Bilyeu]

Okay. So what I'm saying is I really hope that that gets addressed and I will certainly do whatever I can. You're obviously doing a massive amount there. But I also want people to not wait for someone to make that change. I want them to realize right now, today, they can go and learn something, they can educate themselves. You said that it's not about college, it's about getting a skill that lets you live a fulfilling, meaningful life with a meaningful career. And so I want to see people take action. But if there is a flaw in that thinking, I want to know.

[Ray Dalio]

No, no, I don't think. Of course I think it's totally right. I think then the issue is going to the next step for the particulars of actually helping somebody. And there's a combination of not only what they can do themselves, but finding others who will help to take them by the hand and help to provide that guidance to be able to do that. Finding a job. Let's say you think, okay, how do you find a job? So you have to be specific. So we could say find a skill. Okay, great. But literally, how do you go about finding that skill?

[Tom Bilyeu]

Let's talk about that. So one thing you've talked about from an investing standpoint is when this begins to happen and monetary policy begins to break down, won't spend a lot of time describing a fiat currency, but essentially money that isn't associated to anything like gold. So you've broken that. So you said that it gets reassociated because gold has intrinsic value or rocks because it's used to build things. So what is looking at the historical perspective, what are things that are safe bets in terms of this job is going to be here in five years, that this is a good place to begin building that skill set.

[Ray Dalio]

You're talking about the skill set, not the investment. I guess.

[Tom Bilyeu]

Yeah, skill set. I think that that's maybe more useful for people if they've just lost their job and they're sort of just trying to, to make ends meet at this point.

[Ray Dalio]

Well, in terms of, I think in terms of any environment, the lessons that we get over and over again is that you can't be sure what the next environment and twists and turns are. What you don't know is greater than anything you do know. So if you were in the airline business or you were in the hospitality business and that was wonderful and you liked it and everything else, all of a sudden that changed in important ways. So the important thing are the more general abilities in terms of investing. What that means is you need to know how to diversify. Well, that's the most important thing in terms of any aspect in life. To know how to deal with what you don't know is more important than anything, you know, because the world is so much more surprising than you can really be sure of. So in a general sense, for skills, I mean, I think, and skills are part of what are your environment, you know, find out those things that are, that are self sufficient and maintain flexibility. You have to know how to maintain flexibility and change. Well, if your career is in one area, you have to know how this, you have to develop the skill for changing a career. And that all comes down to knowing how to find the path to know how to triangulate well with others.

[Tom Bilyeu]

I want to talk about that. You've done such an extraordinary job, Ray. I truly stand in awe of being able to go and learn a new area, a new element of the world. When you announced that you were going to be taking this historical view and that you were going to go backwards, I mean something like a thousand years or however far you went back, how do you begin that research process? So for somebody that's like I want to invest my time wisely, what is sort of a high level way that you approach learning in general?

[Ray Dalio]

Well, for me it's a lot the alignment of the three things that I said before. What is my passion? Then knowing my nature, what is my passion? And can I align my work to my passion? And then does it pay adequately for me to take care of my needs? And for me I do that because it's my passion. And so when you find your passion that's aligned with your work, if you can do that.

[Tom Bilyeu]

But how do you go about learning something new? So when you started researching the historical context of what we're going through now, is it picking a book? Is it?

[Ray Dalio]

Well, for me, you see, I have been. My nature is. I'm extremely curious, okay? And I love my game. My game is to learn about the world, interact with the world and bet on it. And I'm very curious. So it might be whatever your game is. Like you've got a game, okay? That's why you're interviewing me, because that's your passion, that's your game. And if you can line those three things up and you know your nature, because if you know your nature, you can find your role. You want to find the right role for you, right? It's not just go get a job and, you know, it might say, I would like to be an architect. Well, I mean, you have to know your nature and then you can find your role. And so I'm hesitant to say that what is true for me is true for somebody else. So when you ask me, you know, like, okay, those are my big things. Meaningful work and meaningful relationships. Like, relationships matter a huge amount to me. So if I can have a work that feeds my curiosity, that I'm passionate about and that pays me adequately, and I do that with great people, those are the things that feed me. And so you have to know those things that feed you. Like, I like the big picture. Somebody might like details, you know, you have to pick those things that are for your nature and align those things. I'm talking about.

[Tom Bilyeu]

And how did you specifically go about starting this big research project? Did it start with a book? Did it start with reaching out to historians?

[Ray Dalio]

No, no, it's. I mean, in a sense, the journey started out when I was 12 years old and I caddied and then I took my caddying money and I had newspaper route and I did a number of things like that. I took my odds and ends and I put it in the stock market and I got hooked on the game.

[Tom Bilyeu]

Do you ever think about the nature of questions in that process? I think it was Tony Robbins that said if you ask a better question, then you're going to get a better answer and basically questions are going to control the outcome. Do you focus on what question you're asking and trying to answer or is it something completely different than that?

[Ray Dalio]

Questions, questions. That's right. It's the hunger to know you'll notice it different in people. There will be people who. Wow, you listen. Good question, good question, good question. Then there will be people who can't ask questions that they're just telling you what they think. They almost. You think they're acting smart. They think they're acting smart. And they're the stupid ones. The smart ones are. Oh, question now, how do I go? I have to find the answer to the question. Next question. Because the questions and the power and the pull to answer those questions and so on is the thing that drags you forward and it's excitement. Do you have a pull? Okay, what's your pull? You know, so, yeah, it's all in question. I think it's all in a journey. Life is a journey, an adventure. That's why I'm trying to say in Principles for Success, or you can get, by the way, principles of any of these principles are also Principles in Action is an app that's available on the Isore, and it's free and it has all of these things in it. But, but so I don't, you know, because we'll separate. I think people might like that. But, you know, have to know your pull. And then along the way, you're going to have your adventure and you're going to learn. And then you go through your phases of life and each phase is different. Like you talked about your phase, you're in the middle of your phase in life. You talked about your wife and your relationship with her. Okay, that is a phase of life. And when you go and by putting it in perspective, it's helpful. In the back of that book, Principles for Success, there's a life arc chart. And if you know where you are on that life arc and you know what the next 10 years is typically like, and you know what the people you care about are on their life arc, you can almost know what's coming at you. And then you could start to think about it. So it's at that level of knowing yourself and knowing how these things happen over and over again that you can achieve your path. Don't be surprised. Most life is the same things that happen over and over again. You're born, you probably have parents to take care of you. Maybe you have one, maybe you have two, but somebody does. They teach you. You have your first phase of your life where you're dependent on them and you're learning. Then you come out to your second phase of your life, and then you're working and others are dependent on you, and then you have that. So these Things happen over and over again and you just have to know that path and know how to approach it.

[Tom Bilyeu]

So really fast, before I let you go, you're working on a new book, the New World Order, which I find very fascinating, and you've been publishing some of the chapters on LinkedIn. What do you think the odds are? Just to really go back to the finance side of this, what do you think the odds are that America remains the reserve bank and the reserve currency? And if it's not us, who do you think it will be?

[Ray Dalio]

Well, all currencies eventually die and all empires eventually diminish in their other empires. And the question is essentially the pace of how that happens. I think that. But for most of your listeners, it's most likely going to happen in a way that's tolerable, if you can manage it. Well, think about the decline of the British Empire and you see people who are living in London and so on. It's not that the world blows up, it's that they have to readapt and they know how to readapt. And so I think that we're going to come through more difficult times. I think the next three to five years will be difficult times in ways that haven't existed in their lifetime but has existed in other periods of time like the 1930-45 period. So to be able to adapt well, to invent yourself again, to adapt and to navigate that maybe with a perspective of knowing what those other times were like is the best thing to do. So the reason I'm doing that series on LinkedIn is to help people understand what those times are like and then help them prepare. The reason I wrote the book Principles is so that it's a particular approach because the same things happen over and over again for basically the same reasons. And once you get that and you have the self discipline to know how to play the game well, then you'll be fine.

[Tom Bilyeu]

So one, where can people connect with you right now? And then I have one last question that I want to ask.

[Ray Dalio]

Well, I'm, as I say, I'm on social media and we, and I'll interact with people on social media, the standards, you know, LinkedIn, Twitter, Facebook and Instagram, by and large. But the most valuable stuff is if you go to principles.com, you can get the whole pile, or I would say so, of those places.

[Tom Bilyeu]

So as this next three to five year part of the cycle hits us, what is one thing that people can do that you know, from the historical perspective will most insulate them? From the probably emotional and maybe financial damage. Whatever you think is more important.

[Ray Dalio]

Well, the things that I thought about, some of the things I mentioned earlier, the plan for the worst case scenario and make it terrific is one of the things.

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