This week, we speak with Ray Dalio, founder, Co-Chair and Co-CIO of Bridgwater Associates, author of Principles: Life and Work. His new book, Principles for Navigating Big Debt Crises was just published (free PDF here). Dalio’s prior MIB appearance is here.
Dalio describes how 48 of the greatest financial crises look so very similar from a structural perspective. He describes a 6 step process that every single one of theses financial disasters runs through:
- Early cycle
- Bubble / Top
- Depression
- Beautiful deleveraging
- Pushing on a string
- Normalization
from the build up to the bubble peak to the collapse to the subsequent government rescue. These steps are readily predictable: “the same basic structure repeats over and over again.”
He created a template for future crises, giving policy makers and investors a roadmap for the next time this happens. And as history has shown us, this sort of crisis will inevitably occur again. Dalio also shows the parallels between today and 1937 — from an economic, societal and political perspectives.
Dalio has observed that “Capitalism is not working for the majority of Americans” — the bottom 60% is worse off than they were a few decades ago, with no real wage gains, rising death rate, loss of middle class, and disenfranchisement across the board. Big progress on this division can be made, but it requires measuring the problem and tracking how well repairs are going. We currently do very little of that. What is needed, says Dalio, is a significant effort from both government and the private sector – a public/private partnership.
His favorite books are here; transcript of our conversation is posted here.
You can stream/download the full conversation, including the podcast extras on iTunes, Bloomberg, Overcast, and Stitcher. Our earlier podcasts can all be found at iTunes, Stitcher, Overcast, and Bloomberg.
Next week, we speak with Scott Adams, creator of Dilbert, and author of How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life, and most recently of Win Bigly: Persuasion in a World Where Facts Don’t Matter.
Ray Dalio’s books
Big Debt Crises by Ray Dalio
Principles: Life and Work by Ray Dalio
Dalio’s recommended books
The Hero with a Thousand Faces (The Collected Works of Joseph Campbell) by Joseph Campbell
The Lessons of History by Will Durant
River Out of Eden: A Darwinian View of Life by Richard Dawkins
