Kind: captions
Language: en
the following is a conversation with ray
dalio his second time on the podcast he
is a legendary investor founder of
bridgewater associates author of a book
i highly recommend called principles and
also a new book called principles for
dealing with a changing world order that
looks at the geopolitics of today
especially us and china to the lens of
history providing a fascinating model
for the rise and fall of empires that
can be applied to the analysis of our
world today
this is the lex friedman podcast to
support it please check out our sponsors
in the description and now here's my
conversation with ray dalio
when you look at the history of the
world as you have done in your new book
principles of dealing with the changing
world order
what is more important more impactful
money or power
they go hand in hand
they support each other and they um
compete with each other
those who have money
have power a certain type of power
um that power
has to do with all that they can buy but
it also
has the ability to influence those with
political power
so
um and and so you see this throughout
history this symbiotic relationship
you know um for example between um
the royal families
the nobility
and the church
so you see that group of people
supporting each other in various ways
and then wrestling around with each
other
for the money and power among that group
so the dynamic that's quite classic is
you could look at
the parties in power
back in you know the
16th 17th centuries you would look at uh
royal families nobles and um and
the church if you're in europe and then
you would look at
agricultural land
and there was a certain dynamic
and that varies over time it changes
as those people get thrown out and
technology changes so when we
evolved when the society evolved so that
it would produce
goods and services
and you have something like the
industrial revolution the first
industrial revolution you have machines
and you have the talent of people that
are off the farms
and then you have a struggling for power
you see that power mix change
and so we don't see that same power mix
anymore but you still see the same
dynamic you see those with money
dealing with those who have
political power
around those assets that are considered
most valuable to particularly the
productive assets that produce money
and political power is usually centered
around nation state
so the major locus there's of power is
the nations
yes in
after 30 years of war
there was
the development of nation states before
then
we had it was really the development of
countries as we know it that there were
borders
and that within those borders uh those
who had control got to control it and
there was not to be intrusions in those
borders and that's how we established
the nation state
and then of course within each country
there is levels
there is a
central level
and then there is a typically a province
or state level down below and then
there's a municipal level so they each
have different levels of power and it's
the coordination
of those that determines how the
country is run
you write that the quote archetypal big
cycle
governs the rising and declining empires
and influences everything about them
including their currencies and markets
the most important three cycles are the
ones
you mentioned in the introduction the
long-term debt and capital market cycle
the internal order and disorder cycle
and the external order and disorder
cycle can you describe this
big cycle
there are two orders
there is an order by a sip order i mean
a system
how the system works
so
there's an internal order
that is the internal governance system
and it's usually set out in a
constitution or some agreements
and then there's the world order
uh how the world system so for example
in 1945
um at the end of a war
which is basically a fight for
determining the world order
um the winners of the fight
got together and created the world
system as we now know it 44 they created
the brenton woods monetary system that
determined the money pretty much
and because the united states won
and had 80 percent of the world's money
gold was money then and had 80 of the
world's gold and it was half the world
economy and it was the great military
power
the
order was built around an american world
order so that the united nations was in
new york the world bank and the imf were
in washington and they built that new
order so classically
you have a war to determine whose rules
we're following and then you have um the
new water beings constructed
after that
there is usually period of extended
peace and
prosperity
uh peace suits prosperity
um and so there's not and the reason you
have the peace is because no one wants
to fight with the
um dominant power you know you're going
to lose you've surrendered there's been
the surrendering they carve up the world
they say what it's going to look like
who's going to control what and then
you come into that period of of peace
and then
prosperity where then there's uh
a working together usually at that point
you've wiped out a lot of the
debt you've wiped out a lot of the
issues the class warfare and so on
and then there's good working together
so those great periods
um such as the industrial revolution in
the late 1800s
or what we've experienced in the
post-world war ii period are peaceful
and prosperous periods
led largely by the dominant world power
over a period of time
since really 1500
and maybe before but really 1500
when the
dutch
invented capitalism and what i mean by
that they invest invented the first
capital markets the first stocks and the
first stock market
um that since then capitalism has been
an effective tool for building wealth
because it got resources into the hands
of inventive people
that's when we moved from agriculture to
the importance of inventiveness of
people they got resources and then they
built that prosperity
in that process of doing that
they create wealth gaps naturally those
who make a lot of money
make a lot more and than those that
don't
and
it also produces opportunity gaps
because uh for example those who earn a
lot of money have that wealth
they have the power to educate their
children in a way that others don't
and
the gaps grow
and also the debts grow at that time
when they go around the world with their
competitiveness
they
earn a lot of money so for example the
dutch the dutch empire
learned how to build ships
um and that would go around the world a
key ingredient of this improvement in
this cycle
is the improvement of education and by
education i mean the skills that come
from education but also civility the
ability to deal with well together
so the dutch
invented ships that could go around the
world and they had military power but
they were also very inventive society 25
of the world's new inventions came from
the dutch
and so as they went around the world
they also brought their currency
and they brought their military they
needed their the currency they paid for
things um and that currency and then the
more that happens the more that becomes
a reserve currency
and then they have their military so
they need their military strength and so
you see it evolve in all of those ways
but over a period of time
um as they become more successful and
more expensive
um they became they become more
expensive
um
and and
newer countries come along like um the
uk
um
then uh be learned to build ships from a
lot the dutch and could do that less
expensively
and also when they become more
expensive so less competitive and also
the work ethic begins to change they
believe that since they're richer they
can enjoy life more they don't have to
work quite as hard
and so you start to see the tilt
now you start to see the development of
the top and when you have a world
reserve currency
that allows you to borrow a lot of money
because those who want to save
want to hold your money and that means
that they'll lend you money and so those
countries get deeper into debt
so you see that they gradually lose
their competitiveness
and they um and they get themselves into
financial circumstances which are not
good
and they have large wealth gaps
which set the stage for downturns and
when they have downturns
um the first question is do they have
enough money and traditionally you know
uh money is is resources um so you
classically see that the coffers are
bare
that they're spending more money than
their
than they are earning and they run out
of money in the coffers
and their granaries are empty rather
than stocked so that they give them the
buffer
and as that deteriorates that's that
worsens conditions and if they have a
rival power that's also challenging them
they see greater internal conflict over
wealth
and then they have the problems
internally and the problems externally
which usually results in an internal war
or an external war that leads to the
change in the to the new world order
and to you the dutch empire is a good
example that
the british
what are some of the key examples that
you think about in the book
of this process that follow the big
cycle
well the leading reserve currency
empires but it applies to all the
empires
um
were the the dutch the british uh the
american and the chinese
um but um you could follow the same
pattern
um in the book i it was very important
for me to not just use words and
concepts because that's subjective it
was very important for me to use
actual measurements so as you see in the
book you can see every level of this you
can see where is the education level
what is the military power each one of
those and you could see them back going
over the 500 years
and so um you can see the arcs and the
composition of those
arcs and what you see is really in most
countries in most dynasties you can see
that but you also can see through those
numbers
the health um of those countries today
um there are there are statistics that
you could that are in the book that show
what is the level of education what is
the letter level of economic output what
is the level of
um military strength what is the level
of a number of different measures of
strength so that you can then compare
that and i think that because there are
objective measures of strength that you
could see change
that shows the picture of where we are
today and i think one of the most
important things about the book
is that it allows people to monitor how
those things are transpiring i think for
policy makers
um you know are your policy policymakers
doing a good job and there's so much
subjectivity in that but i think it's
very simple if those lines on the chart
are improving if your health index is
improving
then you're moving toward a better life
so that's what the book works like also
it was used to create a model for the
future
in other words there are cause effect
relationships
everything that happens has reasons
causes that preceded it that made it
happen
and so by having all those in numbers
one can see the probabilities of certain
things happening so um that's what
that's what you see in in the book it's
not just
you know rey's interpretation i didn't
want to make it raise interpretation
because i don't know if i'm right yeah
so one of the fascinating things in the
book so you have list these 18 measures
and there's like a little scorecard
for the
countries of the world today so let's
say u.s china and europe
and what it was 20 years ago and looking
at the change from 20 years ago and
that's another indicator to change
itself to see
where things are headed
maybe can you comment on
from a score perspective how is u.s and
china doing
and in the 18 measures what are some
measures that stand out to you is
particularly important to think about
today for the united states for china
well there are a number um
financially
what you see in the united states is
that um
we're borrowing a lot more money
creating a lot of debt
and we're uh printing a lot of money
and our capacity to do that
is very much is limited first of all
because um when you when there's a sale
of a bond when the government
borrows more than it borrows money
because it spends more than it takes in
um you have to sell a bond
and the world right now has a lot of us
dollar denominated bonds because as the
world's reserve currency they sell sold
on them and they have very
bad returns
negative real returns negative real
returns significantly and so on
so that um
means that more bonds has to be sold
than
um are
bought
and that means that the federal reserve
has is faced with the choice of having
to raise the interest rate
to curtail borrowing
which slows the economy and hurts the
markets or by
filling that difference
and producing money the debt
monetization
which produces an inflation
in goods services and financial assets
so in that regard that's our the united
states's position
in china's case its balance of payments
um is a better
um china has
displaced the united states
as the world's largest trading country
in other words more exports to other
countries and as a result it's
economically competitive
but it doesn't have the world's reserve
currency it's a real blessing so the
united states it has the world's reserve
currency but it is risking it because of
this imbalance so if you look at history
you see that those go slowly but when
they go
eventually they go quickly
so there's a risk of of
of that financially
then there's the issue of uh internal
order
so i'm just giving you the major ones
but i'll get into some of the other ones
too
right now um there's a lot of internal
conflict in the united states
uh which affects its and um
how well it works um in china there's
less internal conflict because it's a
more autocratic
state but also they've created
this bifurcation
of what is political
and what is um economic in terms of
producing that prosperity so if you stay
out of the politics pretty much
um
and then you're seeing um
entrepreneurship you're seeing the
finances of new businesses and so on and
so that internal working
um you know that's subject to different
people's interpretations whether they
like it or not but the internal conflict
in terms of those kinds of measures is
is less sorry to pause on that for a
second so these measures
i guess you don't want to sort of um
romanticize any one measure or something
like that over interpret any one measure
but is internal conflict
always a bad thing is some is this uh
is it a complicated calculation or do
you kind of the way we think about these
measures that you've presented we should
be thinking like
the higher the better the lower worse or
i mean of course depending on well
in many cases
the conflict that produces the
revolution
produces revolutionary changes
that lead to
resolutions
that and lead to new starts
and so
their short term
a short-term civil war
is a hellacious experience
and at the same time it can be um the
transition to a new beginning
um
also there are different types of
conflict
uh competition
which makes things makes everything
better is is a productive
conflict
whereas destructive conflicts
are
not good over the short time
so you know that's how that those go so
within each measure the story
is complicated
yeah but my measures are are sort of
clear meaning
how much political conflict how much
social conflict
in other words you can measure conflict
you can measure fighting you can measure
crime rates you can measure
um
lots of different ways of conflict so
the measures are a composite of
different types of internal conflict
what are some other interesting measures
maybe if you can also mention like for
me in particular interest is education
and innovation yes
the classic cycle the most important
leading indicator
is the quality of education
most importantly
broad-based
education drawn as a
from the largest population because you
can never tell who the talent is going
to be so where they're going to come
from so for example if you look at the
chinese dynasties the great chinese
dynasties um and the confucian approach
it was meritocratic of um
everybody could sit for exams and so on
broad base of drawing in the populations
and you see that if you go across
societies
because that draws on the largest number
of population to get education
and it also um that creates um
a reality and a
perception that the system is fairer
equal opportunity not just one of
privilege and that helps to create
social stability
but education
is not just uh education in
understanding facts and so on it is
education
and um
civility of how to behave together and
so if they're smart
they understand how to be productive
because they work well together and
they're productive and then that leads
to the next stage you could see in the
lines in the charts we i plotted these
so that you could see in a typical cycle
you could see that education is the long
leading
indicator and then you could see as you
mentioned
that you what you see is inventiveness
and technology measures then follow and
you see
then also competitiveness in world
markets follows for example in the early
stages of a cycle the industries that
they go into um
tend to be very basic industry because
they have cheap labor something like
textiles and
simple manufactured goods and so on but
as the education rises then they move up
the value chain to uh tech greater
technologies and so on which raises
incomes and raises productivity so yes
those and and you know as you say there
are 18 different measures like that but
education um
and then civility and the inventiveness
so you see it reflected in
in who's inventing what
um and that corresponds then who's
trading with
who's a big trading country and where's
the value of economic output and what
are per capita incomes they all follow
those arcs
yeah like you said the fascinating thing
about your book so there's philosophy
there's wisdom
uh but there's plots
yeah you can see it
so it's not just your opinion it's kind
of like uh you can interpret it any way
you like uh but you're just giving a lot
of of your own insights along with the
numbers
if you were to look at the american
nation the american empire
and the trajectory is looking into the
future
given these measures
what is the trajectory that leads to the
collapse of the american empire based on
these measures what are the concerning
indicators and if um if those break down
further what does that look like
well all of those indicators
are concerning
um maybe
except for one which is technology
the technology niche
although even in that area the united
states is
improving at a slower rate than is china
for various advantages that they have
there they put out about eight times as
many computer engineers they have free
data and so on but if you look at them
so the financial is a is a concern
the internal order disorder is a concern
then if you look at education levels
the united states
is in many way is is losing its
educational advantage if you were to
look at compare it with china
if you take general public education in
the united states
it's deteriorated tremendously even in
comparison to developed countries
there are scores pieces scores and so on
and it's you know something like 38th in
the world or something and that was a
big plunge average public education if
you look at the best universities in the
world the united states is unique in
having the best universities in the
world so there are these privileged
spots
um that are you know excellent
uniquely excellent so when you look at
the comparison education in china
is improving rapidly
and it and the quantity
is a quantity of educated people in the
areas that they're moving in are is is
greater
and the resources that they're putting
behind it is greater and so you see the
results are greater
um but um
it's sort of along the lines that i'm
i'm dealing with if you were to follow
through
in terms of um
actual productions i i think uh you you
know in terms of technologies um there
are some areas that the united states is
in a lead at the moment there's some
areas that china's in a lead but china's
gaining
very quickly when i first went to china
i would bring 10 calculators and i gave
them away as gifts to high ranking
people and they thought they were
miracle devices
um
right now in terms of areas like quantum
computing and a.i and
and
you know many areas
you have a race going on and so if you
take the trajectory of the
competitiveness not just look at the
current level you have a situation where
they're improving at a much faster rate
this is all good for the world if the
world can get along
and the main thing i think is
um
in just
how do you have a healthy world and how
do you have a strong economy and how do
you have a strong situation is be strong
the united states is war is with itself
that's the main war you know it's very
simple in history
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be financially sound earn more than you
spend
um
and be strong in these ways
and pretty much everything will take
care of itself
but you make it sound simple of course
because there's a momentum when things
degrade when the education system
degrades when you start borrowing
when um i mean all of these indicators
once once they start going down it's uh
there's a momentum to it right so it's
hard to reverse it right and there are
circumstances that you're then in
uh for example
indebtedness
you know it's politically
desirable for those in
to borrow money and spend
because their constituencies only look
at what they get
and when they get a lot they don't pay
attention to the balance sheet and how
much debt is on the books so it's always
better to
borrow spend
and then leave the cleanup to the next
guy
and so you inherit a lot
you inherited as
a new president enters in or new
legislators they have a lot of debt
they have a broken down infrastructure
um they don't have enough money to fix
that
and so that's the lay of the land that
the prior generations put you in
and there you are and so that's right
um it's difficult because when you start
to think okay what's healthy well spend
earn more than you spend well that's not
so easy
because
you know what does that mean go earn
more i mean okay that's not so easy
spend less
that isn't going to work
so now what do you do okay you have this
debt that you then monetize and that's
why it's classic so yes that's why these
cycles occur because what has created
before put
what happened before created the lay of
the land that is then increasingly
difficult to deal with
so what can great leaders do in this
moment i mean maybe um
my sense is leadership is crucial here
so for example to do very large projects
that invest in the education system that
sort of try to
fix the fundamentals or maybe
invest more and more into the innovation
and the develop development of new
technologies and so on
it feels like that just doesn't happen
organically
so you have to have strong
leaders that
convince the populace of the importance
of these ideas
well i completely agree with your list
what we have is a situation where
everybody
has their opinions and they have to sort
of get them exactly right and they all
fight with each other about whether
their opinions so the most important
thing
is that we are become bipartisan so that
we don't
and we get over our differences i would
have a bipartisan cabinet
i would draw upon
um
both members of both parties the the
moderates who are going to be able to
work together
so as then we have one country
and then we deal with those in
a means that works for the majority of
the people in the middle rather than the
polarity
i think our greatest risk is in not
being able to do that so i would say
that's
a paramount importance
because we have the resources
you know um
wealth real wealth and and science and
everything has never been better than it
is
but the notion is that it has to work
for the majority of people
and we
have to keep it being productive so that
that group has got to calmly and
knowledgeably work together so that they
increase the size of the pie and they
create broad-based prosperity
so that is a paramount importance
whatever they do if they do it that way
i can say i'm happy about because that
other alternative is the really scary
alternative
the
the scary alternative
the different ways it has evolved
throughout history
some of it has led to wars
what are the future trajectories that
lead to a potential war with china
cold war
or hot war is this something you think
about is this something you're worried
about
yeah i'd like to talk about both wars so
the war with china
as i say there are five kinds of wars
there's a trade war tech um technology
war
geopolitical influence war
um capital war
and military war
i um as far as military war goes i only
i think it's only a taiwan issue
um but that's a big issue
and we could talk about that for a
minute
but those others there'll be uh rough
competitions
and we'll have that type of evolution
over a period of time that's what
that war looks like
taiwan has been
for a long time
a sovereignty issue to china
and it has its roots in what's called
the hundred years of humiliation
from the 1840s to 1949
foreign powers came in took advantage of
china
they had the opium wars and such times
and
and that represented the 100 years of
humiliation
and
taiwan
represents is
their sovereignty and
their important thing and
50 years ago starting 50 years ago there
was an agreement that there is one china
and
taiwan is part of china
and that there would be
peaceful reunification
the
the peaceful reunification hasn't
happened and in their view
that's a very big issue and so it's a
big contentious issue
and that uh could produce a military war
um could produce a military accident
could produce a it's a very tense
situation and if we had a military war
god help us
because of the capacity in all different
new ways to inflict um harm on each
other but anyway that's that's that if
you don't have that military war you'll
have the competition between
those other kinds of wars and whoever is
strongest in those areas will um win
where do you put cyber war within the
five
well cyber war is a military war i'm
assuming the type of cyber war that
you're using you're referring to is that
which it's used to inflict pain on the
other party through cyber so cyber wars
you'll see cyber war
you could see space war
you can see drone warfare
you um new types of warfare not just
the traditional and nuclear type of
warfare but you could see any of the
above
what are the defining characteristics
what are the interesting things about xi
jinping the president of china
as a leader on the world stage
his father was a
early
leader he was himself
[Music]
in the cultural revolution at times
treated
brutally
um and during that period of time it was
very very difficult
and he came up
you know through the ranks and he's a
very
intelligent man
when he first came to power they as you
know they have two five-year terms
and we're now coming to the end of the
second of those five-year terms when he
first came to power
he felt that there should be a lot of
reform
and reform meant moving to much more of
a market an open economy
when
that happened in him coming in
i had some contact with economic
policymakers but and the circumstances
then were that five major banks
lent to state-owned enterprises and
local governments with implied
government guarantees
and so there was not control of that and
they and the movement to aim more of a
market economy and the development of
markets uh was a primary and also the
dealing with the corruption issue there
was a lot of corruption
prior to that and that was viewed as an
existential threat to the system so that
became the primary objective
and then as time progressed
over those 10 years
there was a
a lot of changing
in the world finance their financial
circumstances opening many many other
markets
they particularly getting money to small
and medium-sized enterprises and
developing a lending system and then
establishing controls on it so right now
um
there's
a vibrant
um
capital markets um you can raise capital
you can be an entrepreneur you can
become a billionaire
um in the capital markets and they
develop the markets to be the second
largest capital markets
at the same time um
they had to deal with their um rising
debt issue
which they began to deal with uh really
about four years ago
when the second
term began
and the um
and then uh lu huh became um
the vice premier um responsible for that
and to um and deal with uh those issues
so you see right now that what's
happening is uh the dealing with the
real estate bubble there was a
development in real estate a bubble
which produced um a lot of unproductive
lending and xi ping said
you know
houses are meant to live in not to
speculate on and so that was wasteful so
they established what they call three
red lines which are financial ratios
that the property developers had to live
within and that is then causing the
adjustments that are going on now which
in my view are very healthy because um
whenever there's uh bankruptcies and so
on the most in the public think okay
that's a problem it's in many cases
really a cleaning up of bad debts and
bad practices and so um that's what's
going on so that's let's say
economically at the same time there is
the changing relationships the changing
world order the changing relationships
with the united states and other
countries which is becoming um much less
cooperative and much more war-like much
more confrontational
um those two things the
the domestic debt problem and domestic
has led to
um what's called core what they call
core leadership which means
a leadership more around him
that
is less
challenging
because they believe in history
that during very difficult times
um a more centrally controlled
decision-making process lends itself
better than to a more fragmented
political contentious project and that's
basically what's
going on now
you said it very eloquently
but you mean
the leadership is surrounded by yes men
and there's a lot of
centralized control
that characterization
is view is much more black and white
than it really is
uh but it leans towards that direction
they're like for example of the standing
members of the polar bureau four are
more eligi allied him
three or less so
you have to understand that it's kind of
a collective leadership at the top
and then of course there's just
jockeying for power um you know in a
highly political sense
um at the top uh but no one leader can
be successful against the uh all those
powers at the top so it's very
politically negotiating it's you know
it's very much more like if you put
um in the united states the democrats
and the republicans and they had to be
in the same government and they work it
out uh it's kind of something like that
and then so that's that struggle but
it's an internal struggle
where do you put the importance of some
of these
ideas at the founding of the united
states
when then
now we're talking about at the context
of china the freedom of speech freedoms
what china is doing with the central
management of a lot of things it's
enabling a lot of growth
but it's also limiting
people on the very basic level in terms
of freedom the kind of freedom that
i think can lead to entrepreneurship to
starting new businesses to having big
dreams and chasing those dreams and then
creating totally new things in whatever
the space maybe in technology
in business and whatever
what how important is that as a metric
for society well they have a view which
is the idea of a dialectic which means
that two things are at obvious that
everything comes with pros and cons and
two opposites exist
and you want the benefits of those two
opposites and how do you deal with the
benefits of those two opposites right so
let's say you want the capital markets
because it gets uh money into the hands
of the entrepreneurs who are motivated
they build fortunes and that drives an
economy to do very well and at the same
time um it produces uh the other
problems the wealth gaps the other
problems then the debt cycle that we're
talking about and so on and deng
xiaoping you know how do you reconcile
communism
and
um the market economy and the capital
markets and he uh famously said um
and if it doesn't matter if it's a white
cat or a black cat just as long as it
catches mice in other words if it if it
works in making the country richer
then that becomes the objective and then
they move that along so there are these
conflicts
um and um
one of the leaders
described it to me as follows because
it's confusion and it goes back over a
period of time
there's a a hierarchy and it's an
extension of uh the family he described
it and he said the united states is a
country
of individuals and individualism
and that is its vibrancy that um
we see
the individual
rights to speak up the individual
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protection of the individual individual
property rights and all of those things
as of uh paramount importance and we
build our organization that's why
democracy is from the bottom up or even
a company we'll get together and we'll
be partners to proper prosper together
that is the american approach
um he was describing
that in china it's an extension of the
confucian family essentially and so it's
almost like um um you know there's a
hierarchy and so what they think about
is the common good
uh not the individualism
so for example if they want a high-speed
rail to go from one place to another and
that's best in the common good
then the individual protections that
would stand in the way of doing that
would be of secondary concern
so that notion of uh controlling so it
it for example
um the what what they're doing with uh
video games
um
they um control
uh what type of video games and how
many hours a day kids can be on video
games
um
operating in that way because they
believe that that's good for the society
and that's very controlling
in the united states i i think probably
most parents would say leave it to me
and it's it's a matter between me and my
kids the same thing has to do with data
in other words in the united states who
controls the data
does the company control the data do you
individually control the data and so the
inclination would be to figure that out
but nobody would say that the government
is going to control the data because of
our inclination of really
anti-government control
in china it would be that the government
will control the data
because that's going to be best for the
society and it depends who you trust but
that's
so that difference in philosophy is very
much at the um you know at the heart of
that as far as um your question in terms
of
effectiveness it really is in china's
case it's how you balance the things
right so what they're attempting to do
is to create a lot of freedom and
creativity um in areas that are not
uh political let's say
and
and so you see on a lot of
entrepreneurship
you see a lot of product development you
see a lot of creativity
um happening in that way so the
stereotype that you don't see creativity
happening is is an old stereotype
where's a lot of creativity certainly
happening and the system can work well
if they can achieve that kind of balance
it's proven to have worked well since i
started going there in 1984 per capita
income real per capita income has
increased by 26 times the um longevity
rate has
increased by 10 years the poverty rate
has fallen from 88
to less than 1 in terms of you know
basics like starvation and things and if
you read history
plato's republic you know he talks about
the cycles
democracy
you know an autocratic and the
benevolent
despot and all of that
each has
their own vulnerability
the vulnerability of democracy which has
been a remarkable remarkable system and
i don't have to extol the benefits of it
um but the vulnerability of it
has always been uh the um internal
conflict that produces itself as anarchy
um in world war ii
uh four democracies
chose to be
autocracies
um because there was internal disorder
and there was this is the belief will
somebody bring about order and get
control of the situation you know that
was in um germany italy uh japan and
spain um they were parliamentary dictat
systems that uh turned themselves over
to that so both systems um have
vulnerabilities um
i think the main thing now that we need
to think about
is those vulnerabilities democracy is an
amazing system because it requ
the the adherence to the rules and the
system and the checks and balances is
quite amazing and it gives it a
flexibility to change without civil wars
um um
but there has to be the respect of the
rules and when you see something like
that they will not
accept
elections or they will not accept rules
and history has shown when the causes
that people are behind are more
important to them than the system the
system is in jeopardy so we have a
situation that's very much like that
in terms of
let's say the 2024 elections
i believe that there's a very high
chance that neither side will accept
losing
for example and so we um
we have that kind of a situation so
one would hope that one could rise above
the disagreements
and rely on the system uh for resolving
disagreements because if if that doesn't
happen then we have our own uh chaos
so the kind of the trend that started in
2020 this or i mean i mean i suppose
it's been there
it's been growing
a rep one representation of this
internal disorder has been the growing
trend of being skeptical about the
results of the election
well it started before that
there was the emergence of populism
where before uh president uh trump was
elected
he was basically elected
as a populist because there was a large
percentage of the population
that felt that the system didn't work
for them
and he tapped into that and he was
largely elected as a populist leader
first populous leader in a developed
country
um and so populism began that then
and that was a battle of one group
against the other group and so since
then it's been like that and it
continued to grow
you've mentioned
the vulnerability of democracy that
internal disorder is the vulnerability
of democracy what's the vulnerability of
a system like china maybe one way to say
is put china aside and look at history
like a soviet union what's the
vulnerability of a communist
type system
well i'll call it both communist
and
autocratic sure
depending on how much autocracy
is that it lacks flexibility
it it lacks um the ability
so but i should deal with them
differently um in other words there's
the economic system
the economic system um threatens
motivation
and productivity so communism or
socialism
uh has to be done in a way where
um you can threaten productivity
capitalism has
and what i mean by that i mean free
markets and capital markets
i have been an effective way of
allocating resources
and also creating the
the incentives
and the resources providing the
resources for the inventiveness of new
ideas and so if i compare that
what the chinese have done to a large
extent is to recognize that and have
made a move
that's why the uh seeming
dialectic or the conflict between those
two things exists but anyway that's it
as far as an autocratic system
rather than um one man one vote from the
population up
the risks of the autocratic system
is that there's enough discontent that
arises
that the system doesn't have the
flexibility
and that rather than bending um it
breaks
um that's that's the big risk um the
notion of trying to control a
um if there's that rather than giving it
the flexibility
um so that's the that would be the big
risk of the autocratic system what's the
human
uh
because you mentioned like the top gets
bigger with empires
and you start taking things for granted
is the some of this just human nature
so the concern with with china
with autocratic nations
the concern with the
the third reich
the soviet union
was that
fundamentally at the individual level
the humans involved at the top
they start becoming they're starting to
lose touch with reality
in a way that
no longer makes them i guess that's the
representation of the flexibility that
you're referring to well i'm i mean in a
democracy
you could change you can go as far left
or as far right you can change the
leaders easily and so the people don't
become
um you know they pretty much only have
themselves to blame uh yeah you know and
one of the problems of that is they may
not choose the best leaders
but they
they have that flexibility so if vote
and
you get what you wanted
in the case of the autocratic let's say
leaders and then the movement from
democracies to autocracies
what you
see normally that movement is that one
of the systems is it is not working
let's say the democracy is not
effectively everybody's arguing with
each other and nobody's getting anything
done and
you know like mussolini the trains are
not running on time and that would be
the example jesus this place has gotten
chaotic will somebody get into control
and then they then you get the
autocratic um and then he's autocratic
enough to boss people around and um and
then you follow those kinds of orders
and it's like a maybe a ceo in a
powerful company ordering around and
that could work well or it could work
badly you know most
um companies
are run as um
like autocracies in a sense you know
there's the hierarchy and you the
command economy and that kind of thing
and now that can work well or not um but
then what quite often when you get the
populist autocratic their personality is
something that they want to fight
and they become more nationalistic
and they tend to become more
militaristic and human nature at that
stage
lends itself to fighting there's an arc
here that when we think
it's we think of a country
um and we say we when we think of a
country
um it's not true it's not like that
there are individuals who change
one generation dies and another
generation comes along
and one of those arcs is that um
the ones who have been through war
don't want to go to war
and are more happily you know willing to
um abide by whatever the rules are
as you get farther along into that cycle
and you get a new generation and they
forget about wars and the horrors of
wars then they um
then they want to uh uh fight and so
you're seeing right now
the emergent of fight for right and and
what that means is you see it internally
uh fight
where are you and fight for that thing
and they mean fight
and then into externally fight are you
going to be uh the strong one who will
fight and win and that develops on both
sides this fight and win and each side
is cheering each other on into uh a war
but that's comes by those who really
have not experienced war because it
comes in their part of their lifetime
humans are fascinating
humans are fascinating and by the way
human nature has not changed
over the
thousands of years so it's the it's so
interesting because like in doing this
study and it comes across in the study
it's like watching the same movie over
and over again
you you know you see the ark and you see
it happen over and over again the only
things that seem to change are the
clothes people wear and the technologies
uh
yeah and then somebody probably will
disagree with you about the clothes
maybe there's also cycles within
fashions maybe we're not even creative
there
uh what do you um
make of uh russia and vladimir putin
what do you think about putin as a
leader as a human being on this world
stage within the context
of the cycles of empires that you think
about
well
putin came to power
at the failure of
russia's last order so there was there
was the end of communism
and there was the development of the
market economy the collapse of the
soviet union
and at that time
he
was appointed by yeltsin
who was an alcoholic and had problems
managing
and was put into power and the
conditions in the russian were the work
there was anarchy
um there was no money it was it had the
classic end of cycle ingredients it was
broke it was people were fighting with
each other was the anarchy and that's
when he
came to power
and um there were not
institutions
the whole thing had collapsed and it was
not effective ministry of education
ministry of anything
and so the idea
was that they needed 25 years of
stability and they needed a democracy
and they needed
the the improvement of capital markets
um so he's been in that position
as a um as
i guess i would call him
um a semi-autocratic leader in that
from all indications he would respect
the democracy
um and he's very popular he's won
democratic elections because he's been a
strong leader and he's brought uh peace
and stability to the soviet u to to
russia after the breakup of the soviet
union
and um
he's a strong leader
in pursuit of
the
the country's interests
in um a way where
russia is not
a significant economic power
and but it is a significant military
power
um so um the issues and then there's a
strong alliance between russia and china
now
um so that's kind of the lay of the land
and then there are sensitivities the
ukraine issue
is uh a sensitivity um because of
there are a lot of russians who live in
the ukraine
and there's also the issue of nato on it
on their border
um so there are those kinds of things
and he has military power and he has a
strong alliance with china
um and i guess that's my best summary of
um what his position is
strong leader um popular
um
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these are not subjective interpretations
these are uh objective interpretations
yeah it's interesting just in this
conversation you're not
sort of um
doing the usual criticism of any one
particular system you're looking at
these systems from the perspective of
history you're just describing how they
work
it's often times when you talk about
what russia is today or what the soviet
union was or what china is today is you
start to criticize well they they do
this kind of censorship or they do this
kind of they limit freedoms in this kind
of way
but you're just kind of describing this
as a nation
with ideas what they think is right
this is how they hope to get it to work
this is why it's working this is what's
not working here's metrics that show
that it's not working i think that's a
refreshing way to think about it it's
easy though i mean you got some
criticism um
saying that i think china's a strict
parent
um
you know some people criticize these
countries for doing
uh so for violating human rights i
suppose there's some
people that criticize the united states
violating human rights but what are your
thoughts
on the world stage today
about some of the
behaviors of this government in terms of
respecting the rights the basic rights
of human beings you described accurately
how i
just try to look at things in an um a
non
i don't want to impute my values yes on
anybody um
i mean there are intolerable things so
i'm not saying there aren't intolerable
things but um one of the great things of
being an american here is that i grew up
with all different nationalities having
all different points of view and all
different religions and all different
ways of operating
and i've come to treasure the fact that
that is
you know what's their business is their
business and then the question is where
do you cross the line under what
circumstances that that others have got
to do it my way and then when you do it
internationally
uh the ob the issue of what is a
sovereign state you know which um as i
say in the piece of west failure and you
have borders and you then when do you
cross the line that um
my way of doing things has got to be
their way of doing things or what are
the various rights and so that's a very
uh delicate question or a very difficult
question
and we all have responsibilities to
different parties and we all have
different levels of knowledge about
those particular things so um so for
example
as an international investor i have a
responsibility to my investors
those who run companies have a
responsibility to theirs of how do they
run that so if you're taking
nike or
stinkers and so on and americans can
decide whether they want to buy product
chinese products or not buy chinese
products we are all faced with those
types of choices
so you have what do you want to do in
your constituency and you have your
choices and then beyond that in many
cases the issues are quite complex like
there are geopolitical questions that
enter into it so um uh and then i i
believe that if if you
disconnected if all those
if entities like myself the businesses
uh doing business with china
disconnected i think that that would be
disastrous economically disastrous and
it would also be um reduce
um the the understanding that comes from
working together that helps to reduce
wars and so these are all complicated so
what we do
is uh
and and who makes it my opinion matters
the most why should it be my opinion
that matters the most in making that
decision so i largely look at the guide
the government guidance that i get not
only from my own government but from the
other governments and i follow the rules
i'm in 40 we invest in 40 countries
and we want to do that in the best way
to provide the diversified portfolio and
we sort of need that
every one of those countries has
similar complexities there are always
one issue or another and then and
there's only so much that we really
understand about all of those issues so
we rely largely on the guidance that we
you have get
empathize and show respect to the the
culture of the place the way things are
done
you don't necessarily um
the way you heal
relationships between nations is like
like you said you work together and that
requires
kind of um
to listen maybe more than you talk
and i think people in the public sphere
uh
talk a lot about china without really
listening without understanding much
about china without one of the things
that makes me really sad because i know
how to speak russian
and i can i know how much is lost in
translation
it makes me sad that i'll never really
get to know the chinese culture because
like i'll never really get to know the
language the literature the
just ta