Ray Dalio- How the Economic Machine Works. Understanding the Economy from a Hedge Fun Guru
My goal here is to help you understand how the economic engine of the United States works. Listen attentively, and take notes.
Your narrator will be none other than the most successful hedge fund manager in the world, Ray Dalio, founder of Bridgewater Associates, net-worth 17 Billion dollars. He came from humble beginnings, invested all the money he earned caddying into the markets, and got hooked on the game.
Self described arrogance caused him to go belly up in 1982, when he incorrectly predicted foreign governments defaulting on massive loans would cause a major market correction. While he wasn't wrong about some of the defaults, he missed other factors that changed the game in the bulls' favor, which lead to one of the greatest stock market runs in history.
Borrowing $4,000 from his jazz musician father, he reset, and built an empire, while developing a more humble outlook, with the central question being, "What is it I don't know?"
Stress testing his hypotheses with other super intelligent people in an idea meritocracy has been the key to his success. All of this is based on Mr. Dalio’s doctrine of “radical transparency.” (Principles: Life and Work ) Linked to the fascinating book on Amazon! The philosophy, prohibits gossip and encourages employees to air their grievances in public.Check it out.
So, the fact that he's been willing to share his years of knowledge and understanding, which by the way allowed his hedge fund to earn money during 2008 (while everyone else got decimated) is a gracious gesture for the rest of us. Afterall, Paul A. Volcker, the former Federal Reserve chairman, stated that Mr. Dalio’s hedge fund, Bridgewater Associates, has “a bigger staff, and produces more relevant statistics and analyses, than the Federal Reserve.”
Takeaways from "How the Economic Machine Works"
In case you want the cliff notes version ... and I still highly recommend watching the video--
Ultimately the only thing that raises standards of living in the world is productivity. That's why with the advances brought to us by the internet and instant communications, have raised the prospects for the entire human race.
It's also why the coming A/I revolution, along with blockchain technologies, will further transform the world for the better. (My 2 cents added in)
In terms of the underlying cause of the 2008 crash. It took time to get there, but gradually Expanding debt, raises spending, which raises incomes, until the debt payments suffocate new spending, causing the economic machine to reverse itself. As asset prices decrease, people have less collateral to put-up, the banks stop lending, and asset prices fall dramatically.
These cycles repeat themselves throughout history, and Dalio avoided the wave down in 2008.
Once again, the true piston of the economic machine is productivity!
Now enjoy the video and/or get Ray Dalio's Principles- get the book today on Amazon. Well worth it. Cheers, leave a comment or question about the subject below!
Principles- get the book today on Amazon. Well worth it