Ray Dalio Answers Q&A

There was a new post, so I'll summarize only the parts that caught my attention.
It's mostly machine translation, but with some modifications in places.

Q: Technology generally has both deflationary and inflationary aspects, while simultaneously decreasing the value of currency.
Do you think the inflation of the 70s and the current inflation could have been avoided if the US had maintained the gold standard?
(And without diluting the amount of gold backing one dollar)
Furthermore, with more and more jobs being taken by technology, including AI, what should all the displaced workers do? Theoretically, I think we are at a turning point where the amount of work will significantly shrink relative to the population. Coupled with inflation, this is the worst-case scenario in my opinion.

A: If the US had remained on the gold standard, there would have been a deflationary depression. Let's look at the debt cycle and what it is.
When spending is greater than income, debt is created.
One person's debt asset is another person's liability. When debts and debt assets become too large for debtors to pay, or when debt assets do not provide adequate returns against inflation, a collapse occurs, and debt restructuring is required. That debt restructuring can occur by:
a) Debt impairment or default (creditors fail, debtors and creditors fail, and deflation occurs because things are not bought and sold)
b) Printing money and buying depreciated money debt. If there is a link to gold, printed money is converted into gold until the gold runs out or the government refuses to convert depreciated money into gold. For a complete study of this and a full consideration of past cases, please refer to Principles for Navigating Big Debt Crises.
It is available as a free PDF here
https://www.principles.com/big-debt-crises (or in print, at bookstores)
Also, refer to Chapter 3 "The Big Cycles of Money, Credit, Debt, and Economic Activity" and Chapter 4 "The Changing Value of Money" in Principles for Dealing with the Changing World Order.

Q: Your books show that history tends to repeat in similar patterns, and there are indicators that can be observed to utilize principles for predicting changes in the macro environment. Regarding the current macro environment, how do you expect the current world order to change in the next 5 years? Specifically, regarding US-China relations?

Thank you very much. I look forward to your thoughtful response.

A: Regarding US-China relations, I believe we are on the brink of a disastrous economic and military war. The leaders of both countries know this and will not want to back down.
Where we go beyond the brink depends on our ability to exercise restraint while appearing aggressive.
Every country has leaders who want to fight and leaders who don't, and there are internal and external conflicts surrounding a US-China war. Therefore, this is an unstable situation where the possibility of war is too close to call.

Q: My question is about globalization. While not an entirely new concept, it heralds an improvement in living standards in certain major powers (two specific economic blocs come to mind), but not all economies have improved. Do you think a change in the world order means that the benefits of globalization will be distributed to all countries?

A: In my opinion, countries are increasingly falling into one of two categories:

1. Increasingly nationalistic, anti-global, and trapped in internal and external conflicts, or
2. Increasingly globalized and not trapped in internal and external conflicts.
   While "1)" suffers, "2)" prospers. We are seeing that happen now. We can see the smartest people and the best technology moving from "1)" type countries to "2)" type countries, and "1)" type countries suffering while "2)" type countries prosper.

-↑Indeed...↑
This balance feels like a truly remarkable balance.

Q: I love both of your books. Both have made me see the world differently. Thank you.
I have a question about Bridgewater's reorganized hiring principles. It relates to how you changed your hiring methods. How did the people around you react to the new ways of recruiting and developing talent? Did you lose people in the company who opposed your methods?

A: Being abnormal leads to one abnormal outcome, which can be abnormally good and/or abnormally bad.
How each person reacts is up to each person.
When I ran Bridgewater, this was very true of our culture.
People who liked "tough love," who liked being challenged to find their weaknesses to overcome them, and who liked radical truth and radical transparency loved the culture, and those who didn't, didn't.
In fact, a small group disliked it and was unhappy. This process produced very capable people who had been there for decades and couldn't work anywhere else, and people for whom the opposite was true. I don't know if it was too radical, but I can say that it was why we had spectacular success in our work and in many relationships.
Control of Bridgewater has been passed to me, so my successors will tinker with the options to balance things as they like. Hopefully, they will do better than me. In any case, I can learn in reverse by seeing how their processes and track records compare.

Q: How do you think economic fluidity will evolve in the coming decades?

A: I believe that the capacity for learning and thinking to create economic fluidity will be greatly enhanced by new technologies, and the ability to be mentally healthy enough to make the most of this and achieve possible economic fluidity will be further promoted.
Above all, by the quality of early childhood development. Parental guidance, a healthy environment, and adequate nutrition are essential, I believe. Currently, we are making too many failures in delivering these things.
This is unfair and turns these children into adults who are liabilities to society rather than assets.

Q: Do you actually think inflation is "transitory"?

A: I have limited space to answer your question in the way I would like. That is, to explain what I believe to be cause-effect relationships, so that I can help you learn how to fish rather than just giving you a fish.
Therefore, I recommend you read my two-part update.
These articles briefly review how cause-effect relationships work and how the machine works, and from these relationships, they explain what is happening now and what could happen. They are available here:

Part 1: https://linkedin.com/pulse/two-part-look-1-principles-navigating-big-debt-crises-ray-dalio/

Part 2: https://linkedin.com/pulse/part-2-two-part-look-1-principles-navigating-big-debt-ray-dalio/

Also, remember that even if you think something is likely to happen, there's a significant chance (about one-third) that you could be wrong (which is why you need 15 diversified or uncorrelated good bets). This is because even if the evidence shows you have a good understanding of cause-effect relationships, there is a lot of uncertainty about how these relationships combine and when they will occur.
For example, I knew pandemics would happen and have a big impact, but I didn't anticipate the last one (though diversification and risk management mitigated the damage from this error). Remember that what I don't know is far greater than what I do know, and whatever success I've had is more due to dealing with what I don't know well than what I do know.

Q: How can the US realistically recover from a debt spiral?

A: The way to recover from a debt spiral is to restructure debt and increase productivity by investing in areas that create both increased productivity and opportunities and fairness for people (such as investments in education and infrastructure).

Q: I wanted to thank you for writing life-changing books.
I wanted to ask, in your books, you explain that in the context of the universe, we are only of slight importance.
You have worked incredibly hard. What made that "slight importance" so compelling to you?

A: My work is not work to me. I am excited to evolve as fast and as much as I can and to contribute to evolution. At this stage of my life, sharing what I've learned and exchanging views with people about what is true and how to deal with it is most exciting.
So, thank you for giving your role in our relationship.

Q: Based on what is happening now, what historical moment are you most focused on?

A: The period from 1930 to 1945.

-↑It's terrifying that he's comparing now not to the 1970s, which is often used as a comparison, but to the period from 1930 to 1945. I'm sure you all know what happened then...