What coronavirus means for the global economy Ray Dalio
Transcriber: Ivana Korom
Reviewer: Krystian Aparta
Corey Hajim: Are you there?
Ray Dalio: Hi.
CH: Thank you so much for being here, Ray.
RD: Do you see me?
CH: I see you.
You look great.
Thank you so much for being here,
we really appreciate it.
RD: My pleasure.
CH: OK, so lay it on us, Ray,
how bad is it, how worried should we be?
RD: Well, I think you could look at this
like a tsunami that’s hit –
the virus itself
and the social distancing.
And then what are the consequences
in terms of the wreckage,
when you look at it?
And I think you have to think of that
as incomes and balance sheets,
you know?
So it was a tremendous income hit.
And then the balance sheets losses.
And who has what savings and so on.
And then how is that dealt with.
In order to understand that,
you have to realize
that there are these holes.
These holes in income,
and the holes in the balance sheets.
And then you have to realize
that there is the production
of money and credit.
And who produces that money and credit.
OK, the money and credit
comes in different flavors.
There is US dollar money and credit.
There is Euro-dollar money and credit.
And so when you look at the world,
and you’re seeing it,
you’re seeing a situation that is the same
as existed, really,
in the 1930 to ‘45 period,
in that now we’re seeing
the production of a lot of debt,
a lot of borrowing by the government.
We’re seeing zero interest rates
and not the traditional
kind of monetary policy.
But the producing
of a lot of money and credit –
so the Federal Reserve
is buying the Treasury’s debt.
And the Treasury is getting that money
to, mostly, Americans,
in some imperfect
but remarkably large way.
And the Europeans are doing the same
in their way.
That bank is a smaller bank,
because the world lives
with about 70 percent dollars,
and only a small percent euro,
and they will produce theirs for theirs,
and there aren’t many banks
around the world.
And so the rest of the world
is going to have gaps,
holes that won’t be filled.
So if you think about that and you say,
“American printing of money
and the borrowing
will leave us with a lot of debt
and monetization,”
that’s something interesting
to talk about,
and we need to talk about that.
Who will pay these bills,
and how will that be shared,
will be something we need to talk about.
But you will know
that you will get that money.
And the Europeans will get
their versions of that money.
But we are in a new world.
And that world is most similar
to the 1930-45 world,
and a lot of the world
will not get that money in credit.
So there will be a big differentiation
as to which entities benefit
and which entities don’t.
And there will be a big collaboration
as to how we will deal with that bill
and who will end up with what.
A big question of wealth distribution,
and all of that.
So that’s the big thing
that’s going to be happening.
CH: How confident are you
that some of that collaboration
can happen right now?
RD: We’re now at one
of those defining moments
that I’ve seen repeatedly.
The 1930-45 period,
if you go back in history,
there’s nothing new to this.
And it’s a defining moment
in terms of how people are
with each other.
So when you look at it,
will people come together
or, when it comes down to it, really,
will there be a taking care of oneself
and what does that define,
and how will that go?
That will be, I think, a defining moment.
So I look at these histories.
If I can take a minute,
I’d like to just paint a template for you
that takes us, you know,
over the last thousand years,
the things that have happened
over and over again.
There was one pattern
that I’d like to convey.
May I take a moment and do that?
CH: Absolutely.
RD: There are four things
that are the driving forces
of our economy
and our lifestyle and wealth.
And the first and most powerful
is productivity,
which comes from people
learning and inventing
and doing things well,
just as Marko [Russiver] described.
OK?
And it grows slowly.
You know, one or two
or three percent a year.
It grows slowly,
and it’s not volatile,
because knowledge isn’t volatile.
But it grows,
and that raises our living standards
over a period of time.
Then there’s the short-term debt cycle.
The short-term debt cycle
is, you know, recessions and expansions
and booms and recessions – that.
They last about eight, ten years.
And then there’s a long-term debt cycle.
And that long-term debt cycle,
which goes on about once
every 50 to 75 years,
is when you begin a new type of money
and a new type of credit.
That began in 1945.
The new world order
at the end of World War II,
and with the Bretton Woods
monetary system,
created a new monetary system
in 1945, a new money.
So they wiped out,
pretty much, the old money,
or they largely disposed of it,
and they began anew.
And that’s the new world order,
which was the American world order,
and we have seen it,
and still, 70 percent of the money
and credit that exists in the economy
is running by dollars,
and what you have, traditionally,
is the breakdown.
And then the fourth influence is politics.
And politics is largely
how we deal with each other.
And there’s internal politics,
and there’s external politics.
The internal politics
is, how do you deal with the wealth gap?
How do you deal with the values gap?
Do you have a common mission?
Do we have an American dream
that we can agree on
and that we’re pursuing that together,
or do you fight over wealth, and so on.
And so when you look at history,
that’s what revolutions are
in their various ways.
And there’s always a revolution
in one of these.
Sometimes those are peaceful revolutions
and sometimes they are disruptive.
But it’s a wealth shift
that needs to take place.
Roosevelt shifted policies
and changed taxes and so on in that way.
And then in other countries,
there was the turning over democracy.
Hitler came to power because of that gap.
So how people deal
with each other internally.
There’s also external politics,
so that politics means between countries.
And you have a situation
when there’s a rising power
challenging existing power.
There is competition,
and there is a risk of war.
And so how they deal with each other.
Whether there’s a greater good,
or whether they are fighting
with each other
is the defining moment.
There are always stress tests,
these big stress tests
that come along once every 75 years.
And when they happen –
And this is a stress test.
And I think that what you’re going to see
is how we deal with each other.
There’s enough wealth to go around.
But what do you do
when you’re outside the ring of support?
Let’s say of the US dollar.
And what is that going to be like
for those entities?
Or if you’re within the ring of support,
how will that bill be divided?
And how will we be with each other?
I think we’re going to have to reconsider
who has what,
what is it about education, and so on.
So that’s what we’re in, I think.
CH: And I want to get to –
because you’ve written extensively
about how capitalism needs to change,
and some of the things
that we should be
thinking about and doing,
and I want to definitely
get to that a little bit later on,
but I am curious right now,
just from a practical level,
do you think that we’re headed
into a global depression?
RD: Yes, but I want to be careful
about what I use – the word.
CH: Absolutely.
RD: To be technical.
The word is an evocative word.
And it can be scary and so on.
So what do you mean by a “depression,” OK?
Something like happened in the 1930s,
so just to repeat:
1929 to 1932, there was a fall
in the economy.
And double-digit unemployment rates.
And a magnitude of fall in the economy,
like, about 10 percent.
Do I think we’re in that?
Yes.
How was that dealt with, 1933?
What they did is they printed
a lot of money.
And the government came out
with the same type of programs
that we’re having now.
Yes, OK, same thing.
Interest rates hit zero.
Same thing, OK, same dynamics.
And then, there is –
That money causes an expansion
from that point.
How long does it take for the stock market
to exceed its highs?
Or how long does it take for the economy
to exceed its former highs?
A long time.
OK.
Do I think that’s what we’re in?
Yes, that’s what we’re in.
We’ve seen that happen
repeatedly in history.
Saw it many, many times;
it’s just the most recent one.
And there’s a structure to that.
So yes, this is not a recession.
This is a breakdown,
an operation that I’m just describing
in terms of how it’s dealt with,
the production of money
and credit and all of that.
That’s what we’re in.
CH: And so you’ve talked about,
there are sort of four levers
to recovery after a depression:
cutting spending, also known as austerity;
debt restructuring, or forgiveness;
redistribution of wealth
through taxes, potentially;
and printing of money,
some of these things you’ve mentioned.
Will those things get us
out of this situation,
since, as you feel, it’s happened before?
But how would you think
about balancing these tools right now?
RD: Yeah, those are the tools
since eternity, basically,
since recorded history.
Those are the ones that operated,
and I think what you’re going to see
is a combination you’re seeing,
of printing money and redistribution.
And I think it will last …
These things happen pretty quickly,
they last maybe a couple or three years
in terms of that process.
And then you have a rebuilding.
And they’re dealt with with creativity.
The greatest force, through time,
is inventiveness, human inventiveness,
adaptability.
So you’re going to see
these restructurings happen,
and you’re going to see
the kind of inventiveness
that you just saw from Marko, OK?
And it’s the power of that adaptation
that is the greatest power.
I did a study,
which is on LinkedIn
if anyone wants to see it,
and it goes back 500 years.
And it shows real GDP.
In other words,
the economic activity going back there.
And there’s a line.
And you don’t see these depressions,
as we’re calling them,
even on that line that barely wiggles.
When you go into it
and you look at that piece,
that’s what it looks like.
GDP falls 10 percent,
unemployment goes up,
and it passes.
And because the greatest force
is the force of adaptation
and inventiveness,
if we can operate well together.
So that’s what I think
it’s going to look like
over this period of time.
It will pass,
the world will be very different,
there will be a new world order,
but it will pass,
and we’ll be inventive,
because what we’re dealing with now
is just money and credit.
Money and credit is just digital.
I mean, there’s no –
There is real good services,
you know, those are real.
But everything else is just accounting.
And so when you change the digits,
and you work those things out,
and you work yourself through,
that takes, you know,
a couple of years at most, kind of.
And then you come back
into a restructured environment.
And it could be said that it is really
healthy in many ways.
Because it is a stress test.
Because if you look at history,
people have gotten –
sometimes they get weaker,
or they’re not prepared in many ways.
Weaker in terms of,
maybe they don’t build enough savings
and they operate that,
or maybe they emphasize luxuries
over necessities.
It’s a reorienting type of experience
that, in many ways, makes us healthy.
Even appreciating the basics of life.
Chris Anderson: Ray, just popping in here
with a couple of questions
from our online audience.
I mean, the main question early on
was just, how difficult do you think
the days ahead are for the economy.
And you’ve answered that very vigorously.
Like, using that word, “depression,”
that’s a very strong word.
Tell me if I have this right –
it feels to me like
what you just said there
is stronger than most people
in the market seem to believe.
The market is behaving as if,
you know, we’ve had the bad news,
and it sort of, kind of wants to come back
and a lot of people seem to think
that within, I don’t know, a year,
we’ll kind of be back where we are.
You’re saying, no,
it’s going to take longer.
Does that imply that there is basically
sort of some systemic shots
that the market hasn’t yet fully seen,
perhaps to do with the inability
of some players to handle
the extreme levels of debt
that are piling up right now,
as people can’t work?
RD: Yeah, I can’t speak
for what everybody’s thinking out there,
you know, the markets are off,
depending on what market
and depending on what country you’re in,
you know, something in the vicinity
of 25 to 45 or 50 percent,
depending what currency you’re managing.
And so if you’re talking
about emerging markets,
they’re worse,
because they’re not going to get
as much, and so on.
I can describe what I see, OK?
We see something like
20 trillion dollars of losses.
OK, we see –
If you work that through,
and you say you don’t have money,
and you don’t have credit,
your business can fail.
You know this, we see this all around us.
So there can be failures
when there can’t be payments.
And so the question is,
who gets what check
to make those payments and get past it,
but we’re going to have
a giant restructuring of the IOUs
and we’re going to work out.
When hospitals can go broke –
because this is terribly
costly for hospitals,
and they will not fully
recover their losses,
hospitals will go broke,
even though we know that they need them.
So you have to go entity by entity
through this.
And then you’ll go through
the process of who will pay.
So this is not –
You know, some people mistake this as –
There is a virus,
and the virus may come and go, OK?
Maybe we never see it again.
I don’t think that’s likely,
but people tell me, but who knows.
But if it never came back again,
there will be those who are broke
and who will have loss of income.
We’re going to change
how we operate, in a way.
The supply lines are going to change.
In other words, self-sufficiency.
What is self-sufficiency
now going to mean?
Do we have enough of this and that?
We’re going to restructure our economy.
And restructure the financial system
in ways that mean
we are not going to go back
to the way it was.
CA: So do you see systemic threats
to the financial industry
as great or greater than happened in 2008?
RD: Yeah, this is bigger
than what happened in 2008.
I’ll distinguish it.
In 2008, we had banks.
It’s the same thing, meaning,
you have a certain amount of leverage,
things go down,
too much leverage means you’re broke,
in accounting terms.
So then you look around and you say,
who are the systemically important
entities that you don’t want to go broke?
Because, do you want to lose
those banks at this time?
And then you can make up money
and make up credit
and you can keep them alive in some way,
and you did it with banks,
and through the banks,
there were the mortgages,
and that’s what it looked like.
This is more complex than that,
because there are the banks,
and then there are those,
all of those that are beyond banks.
All the little businesses,
all of those in all the different
places that are beyond it.
And it’s a bigger crisis.
And we have a less effective
monetary policy,
because interest rates declines
have reached their limit.
And just buying financial assets
by the central bank
and buying the normal
financial assets won’t work.
They have to buy the debt
of the government
and the government,
or the many governments,
have to be effective in getting
buying power and production
to those who need it around the world.
CA: I have one last question,
and then I’ll be back
at the end of the hour, Corey,
and it’s back to you.
So, given how bleak that is,
people are asking, what kinds
of industries, organizations, companies
have the best prospects
of thriving, going forward?
RD: Well, you see,
that’s the beauty of it.
There are two types, basically.
There are those that are stable,
meat-and-potatoes,
not-leverage kind of companies,
you know, the Campbell soup equivalent,
you know, everybody’s going to use them
all the time, kind of thing.
And then, there are the innovators.
The innovators like,
we’re talking about Marko.
You had Marko on before.
And that new innovation,
those who can adapt well
and innovate well,
and don’t have balance sheet problems,
in other words,
they have strong balance sheets
so they’re going to be able
to play the game without having that.
They will be great winners.
And so there’s always new inventions,
new creativity,
that is the new adaptation
that becomes a company
and an entrepreneur.
And they’re going to do great,
plus the stuff that we’re
always going to need.
Those are the things
that are going to do great.
CA: Thank you, Ray.
Corey.
CH: Thank you, Chris.
So I guess I’d like to stay
with the market for a minute.
Obviously, it’s something
that interests so many people.
The state of the market
doesn’t always correlate
with what’s going on in the economy.
And the market and its players
have changed so much
over the past, you know, 70 years or so,
70, 90 years.
So many more algorithms,
and machines and passive investing.
And how do you think that affects
how the market is behaving right now,
how it’s going to recover
over the next, you know, few years,
as the economy recovers?
RD: The basic fundamentals
of money credit crisis,
who has what income,
who has what expenses,
who has what balance sheet,
and how do we deal
with money and credit –
those things, which people
often lose sight of,
because they happen only once
in one’s lifetime.
This period, you have to go back
to the 1930s as the last period.
Those fundamentals of what a bank is,
and the associated process,
have existed all through time.
Then it’s, like, technology changes.
Technology evolves.
And so the capacity to take one’s thinking
and to put them in algorithms –
we’ve been doing this for 25 years.
The way we operate is to take a principle,
“How would I deal with that situation,”
and write it down,
put it into an algorithm,
and then, because the capacity to think
has been radically enhanced,
because the human mind
has a capacity problem.
It’s unique in inventing.
But it can only process
so much in so [much] time.
So when worked in partnership
with the computer,
which has the capacity
to take that thinking
and replicate it and do
all of that leverage thinking,
and thinking in advanced way,
that is the advancement of our time.
And so you’re seeing that.
So when you think algorithmic,
you know, you’ve got
to break it down as to what it is.
Is it sensible cause-effect relationships
that are being dealt with?
It all comes back
to “Do you have understanding,
and are you successfully betting
on a cause-effect relationship?”
Because that’s the only way
you’re going to make money.
But the computer can do it,
process that thing,
in a much more advanced way.
So that’s what’s going on.
There will be people
who will make the mistake
of just applying machine learning
to the markets.
And that generally won’t work
because of certain things.
I guess I should explain,
because you asked, so …
On algorithmic decision-making,
there are two ways
you can get your algorithm.
You can specify the instruction
to the computer and have it follow that
and that will enable your thinking.
Or you can have the algorithm
come from putting a lot of data
into the computer,
and asking, “Computer, what would you do,
and what’s your algorithm?”
The key difference between those
is do you have understanding
of the cause-effect relationships?
You must have understanding
of the cause-effect relationships
to know what to believe in.
Because you can’t always
get that in your sample size.
For example, what’s happening now,
you could not have run your computer
and have it in your sample size,
because you would have
to go back to the 1930s
to have an analogous period.
So what you –
It is how you do that,
but the capacity to learn, to invent,
and to get, you know,
that leverage in decision-making,
is greater than ever before.
And that’s the power of our time.
Some will do it well,
some will do it poorly,
but it really comes down
to do you have the understanding
of those cause-effect relationships,
so that you know
how to place the right bet.
CH: But that’s very different
from the passive investment market,
which is such a huge part of it now,
and that’s where most people,
you know, the average person
has their money.
And I know that everything
is changing day-to-day,
but I also know that everyone
is going to have this question
on their minds.
So I’m going to ask you –
I’m not going to ask
for specific investment advice,
but everyone’s thinking
about their 401(k)s.
Do you have any general thoughts
about how people should approach
this time period with that kind of money?
RD: Yeah.
First of all …
an investor must understand
that they probably will not be able
to play the game well.
They probably will not be able
to decide how to move in
and out of things.
In order to be successful in the markets,
it is more difficult than getting
a gold medal in the Olympics.
You wouldn’t think
about competing in the Olympics,
but everybody thinks
they can compete in the markets.
But there’s more money competing.
It’s like a zero-sum game
and there’s more money doing it,
and the worst thing you could do
is think you can time
all of these movements.
I guarantee you, the game is a tough game.
We put hundreds of millions of dollars
into the game every year.
And it’s tough.
So what the individual
investor needs to do
is know how to diversify well.
So the word that I would –
Know how to diversify well
and in a balanced way.
The greatest mistake of all investors
is to think that what has done well lately
is a better investment,
rather than more expensive.
And what has done worse lately
is the worst investment,
“get me out of it,”
rather than “it’s cheap.”
And unless you know how to deal
with the differences of those,
which most people don’t,
they’re going to be in trouble.
So understand that wealth,
total amount of wealth in the world,
essentially doesn’t change very much, OK?
And that one thing goes up,
another thing goes down.
And to know how to diversify.
To diversify it in asset classes,
to diversify it in countries.
To diversify it in currencies.
To know how to diversify that well,
so that you have wealth
diversification, is important.
Do not think that cash
is a safe investment.
Most people think,
“Look, I just want safety.
And those bonds aren’t giving me
an interest rate,” and so on,
“So where do I get safe?”
Cash is a seductive investment,
because it doesn’t have
as much volatility.
But it taxes you and your buying power
about two percent a year.
And so cash is almost always
the worst investment.
So you have to think about that.
You should think
a little bit unconventionally.
Do you have a little bit of gold?
Do you have a little bit of,
in case this monetary system
breaks down and money is redefined,
do you have a little bit of that?
I can’t get into all the different ways
that one can diversify well.
I try to convey those things in my books,
or posts on LinkedIn, particularly.
But I would say, diversify well,
be humble, don’t market time
and be conscious of the dangers of cash.
CH: Right, that’s great advice.
I want to ask one more,
sort of, big-picture question
before we start getting
into how we should fix capitalism.
We can talk about that in a minute,
tackle that one.
But I have been reading
your series on LinkedIn,
“The Changing World Order.”
It’s really fascinating.
I’m curious what you think about,
there’s been, sort of,
this retreat from globalization
as something we should all get behind,
and I’m curious what you think
about that in terms of our recovery.
This seems like something
that is going to require
a coordinated effort,
you know, financially, spiritually,
in so many different ways.
If we retreat from
globalization right now,
does that make everything
harder going forward?
RD: If we retreat from globalization,
which we certainly will do,
it will certainly make things very hard.
And so we get down to comparing idealism
with reality.
So when you say
globalization, will that –
who will write what checks
to people in countries
that will be outside of their domain?
And there are large numbers
of those people.
You know, my wife and I
are trying to help people in Connecticut.
And you know, I can rattle off
all that is, what a job that is,
and so on.
And so, when you have
congresses and presidents
and they start to say, who will we help,
and how will that be,
and what will that mean,
it gets down to real practical questions.
And the reality is,
a lot of those people won’t be helped.
And then you’ll deal with,
how will they behave for each other?
One country’s vulnerabilities,
another country’s opportunities.
In such times,
this is the case, because –
You know, Graham Allison
wrote a book about the Thucydides trap,
and he reminds us,
over the last 500 years,
there have been 16 countries
in which there’s been a rivalry
of an empire challenging another.
In 12 of those cases,
there have been wars.
Because, at the end of the day,
there’s not even a global legal system.
Power is what is the currency of that.
So when you get into
how do you resolve the dispute
as to who gets what,
that becomes a very complicated question.
So I’m a globalist.
Meaning, I have a dream and a wish
that the best of the best
can operate together
and work together
for that common good and so on.
But it’s dying,
because we’re in an interconnected,
fragmented world.
The fragmentation of this,
“Can I depend on somebody else
to give me something I need?”
Or “Can I depend on them
not taking advantage of me?”
No, you can’t make
those dependencies anymore.
And that exists within countries
as well as between countries.
CH: Yeah, I mean, it seems like,
you talk about productivity
and the importance of productivity
for us all to have a better life,
and it just seems like on a global level,
the same should hold true.
If we’re all focused
on being more productive together,
and in that interconnected way,
we’ll all do better,
as opposed to, kind of, hoarding one asset
or one set of resources.
RD: You’re certainly true.
That has always been true,
but never more true than today.
And at the same time,
read history.
And understand the mechanics
and the issues and the challenges of this.
This separation began before we had
this isolation of the United States
relative to the rest of the world.
This deglobalization
began before we had this
that fosters more of it, right?
And it happened for reasons, OK?
So don’t overlook those reasons,
and don’t overlook the reading of history,
just because we wish it can happen.
If you want to wish it happens,
everything is all dependent
on the behavior of those
who have their hands
on the levers of power.
I would tell you,
like, for example, right now –
I’ve been going to China for a long time,
and the Chinese,
in many ways, are helping,
in many ways, things that are needed
in this crisis and all that.
To even say that
is a politically challenging thing, OK?
Because we’re in a world
that is so fragmented
that even to publicly say “thank you,”
and “thank you” to many people
and many companies –
It’s almost dangerous to say “thank you”
to those who are helping,
because we’re now in an environment
in which there are enemies.
And who is evil?
And do you fall into that category?
And so, the history of these
is there’s demonizations
of different people.
OK?
Now you must see it around you.
It exists.
And so how we come out of this
will be how we behave with each other.
CH: Yeah.
That’s such an important point,
and I think all of us here
would say “thank you”
to, you know, the different people
helping out in this situation.
We do need each other.
I do want to get
to this issue of capitalism.
Because when we talked a few days ago,
you mentioned – and earlier
in this conversation as well –
how, you know, this period of time
we can emerge stronger and better
than before.
And about a year ago, you wrote a piece
about how capitalism needs to be reformed,
focused a lot on the wealth gap,
the growing wealth gap
and the problems that that’s causing.
So what’s our opportunity here,
what changes can we make?
RD: Well, you know, what I was seeing was,
do we want the outcomes
that we’re getting,
that the system is producing?
Do we have –
What is our American dream?
What is that?
We’re not even almost talking about that.
When I was growing up –
So again, I was born 1949,
right after the new
world order was created.
New world order was created 1945.
In 1945.
And that was when there was
the breakdown of the system
and then we had a new world order.
We didn’t have as much debt,
we came back [from] the war,
and there was an environment
of equal opportunity.
And that notion of equal opportunity.
And there was an American dream.
And there was a harmony
and a going through it together.
And by the way, that’s not a one-off.
If you read histories,
you see these periods of collapse
and clash and fighting,
followed by these periods of –
You know, you construct
the balance sheets,
you change the system
and then you begin a new system
and you come back and you work together.
And then I’m seeing, around me,
children in school and education systems
in poor neighborhoods
are sharing –
They don’t have adequate resources.
There’s no excuse.
And so the idea that the profit system
can accomplish everything
is not right.
Because resource allocation
goes to those who have the resource.
And so throughout all history,
you go back hundreds of years,
you see that any system
works for those who tend
to control the system.
So let’s say we have a capitalist system,
and we have entrepreneurs,
and you acquire money, and all that.
And then, working
with those in government,
and they have a symbiotic relationship
and it works well for them.
So it’s self-perpetuating,
because the education
of those who are those,
is better than the education
of those who aren’t those.
So, for example,
in our system, those in the top 40 percent
on average, spend five times as much money
on their children’s education
than those who are
in the bottom 60 percent.
And so it becomes self-perpetuating.
And so when I look at that,
I’m saying, “I’m a capitalist,
please understand, I’m a capitalist,
I believe in the system,
I believe you can increase
the size of the pie
and you can divide it well,
and if we talk about
how to do that effectively,
we need to do it.”
But there comes a time
that there needs reforms.
And those reforms
have to create productivity.
It doesn’t mean just give money away.
It means, how do you make
those people productive,
so that they’re also
psychologically productive
as well as physically productive
and producing output.
You need to do that system.
And so for reasons I wrote on that page,
that post –
it’s on LinkedIn if people want it –
that you need to restructure it.
Now we are restructuring it, OK?
It’s the inevitable consequence
of what we’re doing here.
We will come out of that.
There has been a tremendous
transfer of wealth,
whether people realize it or not,
through the production
of all of that borrowed money.
And all of that producing of money,
that is a big force.
We will come out of here,
and the thing we will talk about
over the next couple of years,
and probably sooner rather than later,
is how we do that restructuring.
And my worry now
is the same as my worry then.
Whether that will be done
in a civil, bipartisan way
that will both increase
the size of the pie
and divide it well,
rather than damage the economy,
because you lose productivity.
There are certain things
that are great investments,
education is a great investment.
The more people you have
that are well-educated,
and you have equal education,
the more people you are going to have
who have the chance
to compete with each other,
and raise that over a period of time.
It’s a hell of an investment.
It will produce more productivity
than it ever will cost,
if it’s done well.
But what happens is,
states and localities
think of it as a budget item.
So they look at expenses.
And they penny-pinch on the education.
Because if you’re in a rich town,
your kids will get a good education.
And if you’re not –
And a large percentage
of the population is losing that.
So that has to be engineered well,
so that they are productive,
as well as divide the pie well,
and everybody believes
that the system is fair.
We can get there.
Am I optimistic that we will get there?
You know, I don’t know.
I would say, I’m 60-40 pessimistic
that we’ll be good enough
with each other to do that.
But there’s that possibility.
This is our test.
This is our stress test.
CA: Ray, there’s so much
interest in this question
of how we emerge from this,
whether it’s genuinely possible
to rebuild the economy
in a way that’s fairer.
I just want to read one last question,
this one’s from my Twitter feed.
“Do you think that the current crisis
is showing that low-paid
and/or unskilled workers
are what holds countries together,
even more so than banks and hedge funds?
And if so, as part of the rebuilding,
can we build an economy
that raises their interest higher?”
RD: Those –
The heroes are those kind of people.
OK, really.
But it takes everyone, OK?
It takes the efficient
allocation of resources for –
As you probably have seen
behind the scenes,
we see those who control
a lot of resources
being able to make contributions.
We’re giving 60,000 computers
to poor students,
so that they can learn.
You know, the difference
between a rich and a poor student
is having a computer
and having the ability to learn.
And I want to thank
those who would be embarrassed
and almost afraid to hear it
of how they contributed to that process.
And at the same time, those other people,
who are every day serving in so many ways,
so it’s good character and it’s that –
You know, when people came back from war,
they built the greatest generation.
It’s that type of character
that brings our country together,
but each has to recognize
their roles in doing that.
So there’s a CEO
and then there’s somebody
who’s really a great hero
on the front lines,
and they better damn
work well together, so yeah.
And then, they have to have usefulness.
And we’ve got to appreciate them.
We have to establish –
just the reality, I think –
that there is a level of basics.
Basic education,
basic health care –
Basics that you cannot fall below.
OK?
Otherwise, when you go below that level,
there is no opportunity,
and actually, the costliness of it,
in the form of crimes and incarceration.
Like, to bring it personal,
our mission is to help high school kids
who dropped out of high school
and can have jobs,
to get them in that high school
and through that, in jobs.
And we believe that we can do that
and save a lot of money,
because the average cost of incarceration,
it goes from about 40,000 dollars a year
up to 120,000 dollars a year,
depending on the form.
And if you get them in
and move them into a job,
you’re going to save a lot of money,
and we could do that cost-effectively.
But philanthropists can’t do this alone.
The amount of money is enormous.
So if our country did those
kinds of things, I think …
I think it would be great.
CA: Wow, thank you for that, Ray.
Corey, what do you think?
Have you got any other questions there
before we wrap up?
CH: No, I think we’re good,
I mean, I think
we’re going to get through it,
I guess is what we’re saying,
but we also have an opportunity here
to make some changes and do better
and emerge stronger.
And as you said,
take a look at things
and the structures that we have in place
and see where we can improve,
but it’s going to take
a collective action and cooperation.
CA: Yeah, Ray, I’m definitely inspired
by the actions that you’re taking
as a philanthropist
in this moment.
And some of your peers,
you know, there are amazing
stories out there.
I was really struck by Jack Dorsey’s
announcement yesterday
of his huge philanthropic contribution.
And, I mean, that’s awesome,
but equally important, I was –
RD: But it’s not nearly enough.
CA: Exactly, and I’m –
CH: It would be good to see more.
CA: I’m kind of dismayed, in a way,
to hear you say that you’re 60/40
leaning pessimistic,
like, it feels like your voice
in these conversations that are going on
in the corridors of power
and you know, where the big money is,
around whether this turns
into fundamentally, cooperation
between countries and between companies
and between, you know,
big-money controllers,
or whether it turns into a fistfight,
is so important.
And hearing you talk about the gratitude
we should be feeling towards
some aspects, let’s say,
of what China has done,
the extent –
Do you find yourself in conversations,
like, raising this,
trying to take the view that,
“No, no, no, you’re needlessly
sparking friction here,
take a more generous view”?
Because it feels to me
like there’s so much at stake
between how many people
are trying to nudge
that type of conversation
versus the hostile, fearful conversation.
RD: I think there’s a general
mistaken belief –
I communicate a lot with the people
that you’re saying,
people in positions of power,
whether they’re both in government
or other places, and so on.
I think what you basically have to realize
is that very few people
are making decisions
based on the quality of the argument.
That most people are –
Most of those are in a war of some kind
or have a particular objective.
And that the information that comes out,
even in the media –
you know, you could almost see
which side each media outlet
or each person is on.
How many people do you really believe
don’t have a side?
Almost everybody has –
they’re on one side or another side.
And the idea of being able
to see things from both sides
and come together,
is, in this time and through history,
perceived as almost being weak
or a threat.
Because you’ve got to get
on one side or the other side
and so on.
And so it’s not easy to just say –
Like, all the people,
and China for example, I would say,
“Thank you very much,”
you know how many respirators
and masks and all these things
that have come?
But almost that’s politically challenging.
Because there will be people out there,
and threatening, why am I doing this?
People will be out there
and they will say,
“OK, he’s a China lover”
or “he’s an enemy,”
“he goes on the other side.”
Because there will be people
on the other sides, and those people –
And so I think I’ll turn to you, Chris.
You have a forum.
Bring in the other sides, OK?
Bring in those that are those who,
let’s say, have the most
offensive policies that you think
that are in positions of power.
And have that together,
so that you can have
thoughtful disagreement.
I’m a believer in thoughtful disagreement.
Open, thoughtful disagreement
to try to get at the right answer
and have collectiveness.
But it isn’t easy in this world.
CA: Well, that’s a good challenge to us,
and I’m also a believer
in [thoughtful] disagreement,
I think, Corey,
we’re passionate disbelievers
in the spreading of irrational hatred.
Like, instinctual irrational hatred
and I feel like the stakes
are so high right now, that if –
RD: But will you fight for that?
In other words,
when somebody’s going to punch back –
Because this is what’s needed.
If somebody’s going to punch back
because you’re saying
something that’s true
and controversial,
that will be the test –
Can you punch back
for collective, you know,
decision-making comment,
decision making and then punch back?
CA: I’m not going to say punch,
I’m going to say fight back, absolutely.
RD: OK, fight back, that’s good.
CA: With every fiber we have.
If it means that we look weak
or we’re a threat, so damn well be it,
because you know, this is the moment.
I mean, everyone
is impacting everyone else.
We have a shot to nudge each other
to be our better selves.
And to look at the stories of inspiration,
the stories of humans
reaching out to humans,
of companies doing incredible things,
letting go of the profit
motive for a moment,
of countries trying to help each other –
there are stories about that.
I think we need to amplify
some of those stories more.
And we’re certainly down to do that.
We’re trying to do that every day.
And Ray, I loved hearing you
talk about some of the good things
that China is doing, all the rest of it.
Thank you for your voice
and for spending this time
and for being, you know,
honest and vigorous with us.
And thank you, everyone, for listening.
RD: I appreciate it.
CA: A big damn deal.
If you’re listening, it sounded like
you just got a warning
that this could be a multiyear
recession, depression.
That’s scary, and more than ever,
we need to be in this together,
as we’ve said again and again.
RD: Well, in conclusion, –
I know we’re wrapping up –
yes, I believe this is a defining moment,
we will get through it fine,
we will be restructured in important ways.
So that’s fine.
And thank you for, you know,
sharing ideas worth considering, you know.
CA: Thank you, Ray.
Thanks so much, everyone, for listening.
Corey, we’ve still got
more days to the week.
There’s an amazing program tomorrow,
we’re going to take
a much more global look there
that I’m superexcited about.
We have a report
from the head of LabourNet,
which is an organization in India
looking at mobile workers
who just are facing this
horrific situation right now,
where they’re having to, in the lockdown,
having to maybe walk home
hundreds of miles,
or face police action.
We’ve got a report
right from the front lines there
as to what that’s like
in a country with a very different
set of trade-offs
they’re having to make between lockdown
and giving the most impoverished a chance.
And then, a wide-ranging discussion
with Fareed Zakaria,
who, you know, has this global view –
you will have seen him on CNN –
he’s got this very
broad-ranging global view
as to how to think about this thing.
And to compare the different responses
of different countries.
I think it’s going to be
an amazing conversation,
I urge you to come back for that.
CH: It’s so amazing –
you know, we were talking about this
in a meeting this morning –
this is a crisis that the whole world
is going through together,
and I think that’s
what’s so unusual about it
and there’s so much to dig into,
so much to learn about how it’s affecting
everybody in different ways.
So I’m glad we’re continuing.
CA: Thank you, everyone. Thank you, Ray.
And you can see a recording of this,
if you didn’t [see] the whole thing,
by going, I think it’s to
go.ted.com/tedconnects.
And if you want to look
at Ray’s work on this,
just google Ray Dalio LinkedIn,
and there’s a whole series
of resources there.
That’s “Dalio” with one “L.”
Ray, thank you so much for this.
This was really, really,
really interesting.
Thank you so much. Thanks, all.
CH: Thank you.