Ray Dalio on AI, Job Loss & the Future of the Economy | #EP 148

35:19And they're right. It's great miraculous company and a great miraculous thing. But the question is how much is a cost and is it expensive? And so what happens is actually if as an investor, you'd be much better off to buy a new company. bad companies at good prices than good companies at bad prices. Yeah. When my mom starts telling me, should I buy this stock or my Uber driver's tires telling me about that, you know, you're in trouble. And so if you look at pricing and who's the owners and so on, I'm not saying we're there, it looks more like maybe 98, but you also have a situation. If you have that together with if you have an interest rate change and we'll get into the interest rate discussion in a minute, I suppose You then have expensive and you have interest rates and then you can have what we had in 2000 You know and pets .com and there's a sword like all you know and and things change and also we we get so used to that the disruptors don't get disrupted.

36:37Like, that's funny, isn't it? I mean, like everybody, they all get disrupted. Of course. It was interesting when Jeff Bezos at one of his earnings call said, yeah, Amazon might not exist in 30 years. I mean, it shocked people for him to say that. But it's like how wake up? like the now 30, you know, go back 30 years, go that back 20 years, you know, they didn't exist. They don't exist any longer and the ones that are on top do exist. And that's the nature of this evolutionary process. I'm still impressed that Microsoft is doing as well as it's done for the last 50 years. It's crazy. Why? For 40 years, yeah.

37:23Let's get into the big debt cycle and the five stages you break it down into. And again, the lens I'm coming at this from is we have a lot of entrepreneurs who are building companies. And when time is good, we just entered a new administration where we've got a pro -technology, pro -MNA mindset, minimized regulation, and just I can vibrantly feel the energy in the biotech world and the AI world. People are building, building, building. Capital is beginning to flow again. And people are not looking at what's likely to be coming in the next two to five years. They're just like the time is good now, borrow, build, go, go, go.

38:25So what's your advice to entrepreneurs right now? And let's do that in the context of your, of the five stages we're in. And I'd like to understand where you think we are in the United States. What's the impact of that Elon's having and doge, you know, can we, can we hold off these dead cycles? Is there any chance for that or is it just too far gone? It's a lot of questions, but let's take it. No, I'll give you my thoughts on them. I want to emphasize before I do that that study that this is the draft of my book and it's free online so that people can read about the cause of fact relationships because the I'm 75 years old.

39:19I'm in a stage in my life that I want to pass along things that are valuable. I'm not earning money and that's not my goal anymore. Any of that. And I want to everything is cause effect relationships as mechanics to it. And if I give you less than I'm able, I'm not in this conversation going to be giving you enough. And so it's free online, go get it and you'll see. I know it's on LinkedIn. Is it just Google? Yeah, you can go. Google how countries go broke the principles. Yeah, yeah. What is so amazing to me because I've experienced stood throughout my life is everyone pays attention to how they feel at the moment and how they feel at the moment and they don't see the changes and the changes, the cycles and everything are so important and and there are certain classic things of euphoria.

40:33And yet the so there are two classic things of euphoria. First, where we are in the economic cycle, there's an economic cycle. There's always been an economic cycle and there always will be an economic cycle. So we are about 65, 70 % through the economic cycle that we're in judging by measures. I won't digress into all of them though I can if you want. But in other words, there are it will, the cycle will go on. And in the political cycle, we are in the classic first hundred day honeymoon of the new administration, which is a time of euphoria and is a time that the the new beginning begins. Okay, so we're at a unusually good moment that if you see it in a cyclical sense, and you say what is likely?

41:43Okay, our aspirations are high because we have capitalism, business, free markets, It's combined with technology to produce that. And the United States is on top of the world. And we should be very optimistic and so on. OK? But first of all, you're not looking at the pricing. OK? So if you look at the pricing of assets in the United States relative to other countries right now, it's expected that that will improve relative to the United States. So there's a hurdle rate. You always have to keep in mind like it's a horse race. You have to keep in mind the handicap. So and then if you take the cycle, I bet you, as we take one, two, three, four, five years, do you think you're not going to have an economic downturn?

42:45Do you think you're not going to have a bear market? Do you think that everybody's going to be as enthusiastic about how things are going with how the government is handling it? Do you think you're not going to have any of those other problems? Really? And it's the, I mean, the challenge of an entrepreneur is you've got to be, especially a moonshot entrepreneur, you've got to be super optimistic even to get into the game. But people are not, don't see the long -term writing on the wall. So how do you properly capitalize yourself, how do you protect against the downside, how do you not over burden yourself with debt or too rapid growth?

43:30I mean, this is the message I want folks to be listening to. Listen, I'm the guy who, not the glasses have full of the glasses overflowing. I'm Mr. Optimism, Mr. Abundance, but I, as I said, reading your book, it's got me thinking a lot. So I want to pass on, I want to pass on. Well, I think, I think, first of all, one of the great things about the United States and our system is that you could fail and you could start again. Yes. It differentiates us from most of the world. That's right. So, okay. Then you think, okay, whose money is it failing? And how does that work? And am I straight and upright and honorable with people?

44:17But, okay, in this world of you, you gotta go for it, you wanna go for it. And then you'll be straight upright and you go for it and you could fail. just now get permanently knocked out of the game. You know, there's a great talk there's a great talk that Bill Gross, not the economic Bill Gross, Bill Gross from my DLAB gives about what's the single most important aspect for a successful company? And it's timing, it's living long enough to live forever. If you can live through the downturn and be there at the upturn. And in my case, I never raised a dollar of debt or a dollar of equity. I built the largest hedge fund in the world and did very well, but I never, and now I'm not saying that's the right thing, but the don't die mantra was my mantra.

45:25And I did certain things like I would always say, is my profitability X relative to that. How much do I have in this way and so on? So I constructed the finances in which it couldn't die. It could contract, but it couldn't die. So now I'm not sure that that's even the smartest way I'm saying, that's how I did it, but I'm not saying it's the smartest because it's Osco sometimes it's okay if you die and people will understand it. and that because of what you're like. So invest in your character. Okay. Your reputation, you can damage. You can kill your reputation. But if the company dies and you do it the right way, that's almost allowed in our system.

46:19But be a good character and be of good capability. It was about 13 years ago, I had my two kids, my two boys, and I remember at that moment in time, I made a decision to double down on my health. Without question, I wanted to see their kids, their grandkids, and really, you know, during this extraordinary time where the space frontier and AI and crypto is all exploding, it was like the most exciting time ever to be alive. And I made a decision to double down on my health. And I've done that in three key areas. The first is going every year for a found upload. You know, found is one of the most advanced diagnostics in therapeutics companies.

47:05I go there, upload myself, digitize myself about 200 gigabytes of data that the AI system is able to look at, to catch disease at inception. You know, look for any cardiovascular and cancer, neurodegenerative disease, any metabolic disease. These things are all going on all the time and you can prevent them if you can find them at inception. So super important. So fountain is one of my keys. I make it available to the CEOs of all my companies, my family members, because you know, I help this in you wealth. But beyond that, we are a collection of 40 trillion human cells and another 100 trillion bacterial cells, fungi, a viral.

47:46And we don't understand how that impacts us. And so I use a company in a product called Viome. And Viome has a technology called Metatranscriptomics. It was actually developed in New Mexico at the same place where the nuclear bomb was developed as a biodefense weapon. And their technology is able to help you understand what's going on in your body to understand and which bacteria are producing which proteins, and as a consequence of that, what foods are your super foods that are best food to eat? Or what food should you avoid? What's going on in your oral microbiome? So I use their testing to understand my foods, understand my medicines, understand my supplements, and viome really helps me understand from a biological and data standpoint, what's best for me?

48:41And then finally, feeling good, being intelligent, moving well is critical, but looking good. When you look yourself in the mirror, saying, I feel great about life is so important. And so a product I use every day twice a day is called one skin, developed by four incredible PhD women that found this 10 amino acid peptide that's able to zap senile cells in your skin and really help you stay youthful in your look and appearance. So for me, these are three technologies I love and I use all the time. I'll have my team link to those in the show notes down below. Please check them out. Anyway, I hope you enjoyed that.

49:25Now back to the episode. Let's get into the big dead cycle and the five stages and give us an understanding of where we are in that process if you would. Okay, so there are these cycles that are, you know, the short -term debt cycle or the business cycle that Like we've broad we know what those look like and then they rise debt keeps rising relative to income Okay um And the income is needed to service the debt Okay, so the way I view it is, after the war, debts are basically written off. You start with clean sheets. Your parents didn't have any debt. They didn't have any much. And then they begin the cycle.

50:27It's almost what we talked about earlier. They didn't want to spend money. You know, they don't want to get and in the early stage of the mark the cycle It's the sound money stage and the sound money stage can be measured by First Does the debt create more income? Then it's needed to pay it back I mean that's it's basic. It's a good use of capital. Right It makes everybody happy. Yes. I got, I led you the money. I got paid back with my interest rates. I'm happy. You borrowed the money. You used the money in a way that allowed you to move forward. You came up with the good ideas and so on. Productivity increases.

51:16And debt is not rising fast relative to income. Confidence is high. Financial systems are stable. Yeah. Confidence being high starts to be a red flag. Ah. Okay. You see, so what happens is you're at that stage. And by the way, the monetary systems at that stage are hard. In other words, when we came out of World War II, this is the beginning of the new debt cycle, the new cycle. The gold was there. You couldn't lend more than gold because they had it back. And so on. So you had sound money and sound finances Okay, and then time goes on and I'll want to speak about Bitcoin at some point as a as an alternative to gold, but not right now great and and confidence bills and And everybody, those who are doing it, I'm making money, the prices go from cheap to expensive.

52:32Like I told you, the earnings yield on stocks were twice the bond yield. I mean, like, wow, you could just take the dividends, but everybody was worried of going down. And then it changes. The prices go up, the optimism, you know, they say, Peter, what you're not in the market? Let me come on. What's wrong with you, man? You start feeling through your house and put it in the marketplace. Yeah. Okay. And you go in there. And then you come really to getting invested asset prices become expensive, you borrow money to do it, and so you have a debt bubble. In other words, you get to the point where the income produced doesn't serve us the debt, and then you begin a dynamic, very simple.

53:33Is that where we are today? Okay. As I say, it looks to me like we're in 1998. These all become how extreme. Okay. So I have measures. I have indicators like that give it and it looks like 98. Okay. Which we still have a year and a half of good times ahead. I don't, it's not so precise. It's a thing that goes like this and I know that we're over here. And then what happens is that goes on and you see unsustainable debt growth. Now the unsustainable debt growth that we're seeing right now is particularly the government. The government is going to be in financial trouble. And I'll get into that in a minute.

54:23But what happens is you see that debt growth. And then you see a rise in interest rates, this is the classic, and a tightening of monetary policy, he put some breaks on, and that pops the bubble. And then you go through the debt liquidation phase. And Ray, can I just ask a question? which is the these cycles have been over and over and over again. There are historians and printed books and so forth. Is it the politicians are just unable to make hard decisions in order to keep in political power? Is this just a human nature that we can start with? Both of those things. You're asking why in these cycles, you know, if you look at, let's say, debt to income, it goes like this.

55:38And why do we keep going? Why does this thing exist? And why don't we sort of keep it that income or the same? And there were the reasons, politics and human nature you touched on. that first of all, credit creates buying and stimulation. And everybody wants up. But that's historically because the credit employed people that then consume. When you spend, I mean, the government, when they say, I'm now going to give you money, they're going to give you money in credit. It's mostly credit. They make credit available. And then you go take credit. That's how when they lower interest rates and they make credit more available, you go, that's you get your car, you get your house on credit.

56:47Yeah. Okay. But credit create stat. Yeah. And death. Yeah. Okay. So what happens is every time you get one of these, then a local death. I want to give you credit, but it's like giving an, you know, an alcoholic like a shot or to get them out of the, you know, or an addict. Okay, you give them a dose and, okay, and you get that. And politicians like credit because, credit comes before debt payments. So I give you credit, we get in debt. You love me. You know, that's why they want the Federal Reserve and the Central Government to be separate, you know, to try to do that. But still, what happens is, and that human nature wants the credit, you know?

57:51So that's why debt to incomes go like that, you know? and so, you know, show you in this book.

58:16You know, this is the government, and this is the cycle, and then this is the debt service payments that we're going to have going forward. So, yeah, human nature, we all want up. We're all betting on up. Okay. All the time. Unless you're betting on up. Unless you're betting on up. Unless you're in the house. We borrow to buy things that'll go up. Yes.

58:49So, the party ends. The bubble pops. Yeah, that's right. You have the debt problem. And then, historically, what they would do is then they would give more credit. So, except when you hit it, zero interest rate you had a problem. And, I mean, I found that incredible to get into negative interest rates even. Right. Why do I think that's incredible? No, I said right. Right. Yeah, okay. Yeah. It seems like it was central bankers, you know, on, in that group sort of, and when they had zero interest rate, negative interest rates, and they were calculating, they said, how negative, can we make interest rates?

59:44And they calculated, they estimated for a very short period of time, it could be up to 400 basis points. And the way that they calculated that is by how much paper money that you could store in storage, because your arbitrage, if you had the paper money, you wouldn't have to have a negative rate. You know, that why not hold the paper rather than to hold something that had a negative rate. And so how much negative rate could you have? And that was the essentially the arbitrage. Well anyway, when that happened and it happened in history, by the way, it happened in 1933, same thing. And what they do is then what they do as they print money and they buy the bonds.

1:00:39So like in 2008, excuse me, they did that in starting in 2008. And then in 2020 when there was COVID, they had to send out checks. So the government had to send out checks. The government doesn't get to print money. Where do they get the money to send out the checks? They borrow it. So they sent out the checks and the central bank lends them the money and prints the money and lends them the money. So everybody gets all this money and there's like a surprise that there's inflation. Everybody gets all these checks that all this money and there's a surprise that there's inflation. I mean, there were other things going on too, but disruption and supplies and things like that.

1:01:29But mostly it was the amount of money going in. So there are two things that happen at that deleveraging point.

1:01:40I wanna make that clear. Here are the things that caused the deleveraging.

1:01:54supply demand and debt service. Okay. So let's take the government supply demand. The government is going to have to sell a lot of bonds to owners because there's so much debt around. One man's debt and another man's assets. So because they are all the world is holding all these dead assets that actually for various reasons they don't want to add to it a big way because it's already such a high percentage of their portfolio and there are geopolitical issues going on. Okay, the huge amount that will be sold will likely over species substantially greater than the demand for it. So people start selling their debt?

1:02:46But when they start seeing that, it's going to be bad because they know it can be one of two things. Either you have a problem paying and interest rates go up and you have that dynamic, or the central bank comes in and buys the debt which prints the money and devalues the value of money. Either way, when there's too much debt and a supply and demand imbalance, you don't want to own debt, which is where I think we are. Unless there is a change, it's what I call my 3 % solution, but we won't get into that now, I assume. But there is a path here to deal with this, but if they don't deal with it, you're going to have a supply to man problem, I believe.

1:03:35And then in addition to that, what happens in debt service, when debt service filled, Well, the way I think about it is the credit system is like the circulatory system in our body. And the blood, which is the credit, brings nutrients all through the system. But what happens is that when it accumulates debt, it's like accumulating plaque in the system because you have more and more debt service that constricts that amount that can pass through the system. Like the government debt service payments are growing. And then When you hit a part of it, which in markets is called, and this is usually for private creditors, is called a death spiral, a death spiral.

1:04:36And the death spiral, what happens is, as debt service payments rise so that you have So they pull back and the credit spread rises. And as the credit spread rises, you have to borrow more money. That is the death spiral. And that's when you see that dynamic, that's, and that's close to where we are in the government debt. But for a company that will drive a bankruptcy in the United States that drives what? It drives the central bank to come in and buy the debt and depreciate the value of money. That's what a monetary inflation is. A lot of people think, when I started, I think, why do you have an inflationary depression?

1:05:47In other words, how can you have, when demand is not worth the price, how do you do it? You have money, money production. And then I say, well, why don't they just stop producing the money? Well because if they stop producing the money, the debt, they'll have a, the, the, the stationary debt problem. That's the dynamic. That's the mechanic. And I want, that's why I want to explain these mechanics in this book. Yeah. You know, so people could see it because I show it in the book. And everybody thinks, you know, I'm a genius. My house prices are going, value, my house is going up, the value of my stock portfolio is going up, but it's all in massively inflated dollars.

1:06:27I know, like it's so funny, because people think they get richer if the price of their houses and the price of things that they're owning in a sense go up. But it's the same house. It's the same stuff. Right? When it goes up in price because of inflation, I mean, buying power is what matters. Not price. What kind of dollar? What kind of dollar value today? Which is why I still like the meme, you know, when Bitcoin, equal one Bitcoin. Unfortunately, when dollar does not equal one dollar. Right. Yeah. So we're in this these five stages of the dead cycle and just to wrap this up, we're in the de -leveraging stage.

1:07:19Well, the government, you mean now? Well, no, I'm saying in your five stages. Oh, okay. And then that de -leveraging stage, typically, if the dead is denominated in the currency that the central bank in print, you always get the printing. Yes. And you always get the devaluation of money. And then what happens is, then the debt becomes so cheap that it's easy to pay it off. So if you're watching like Japan is a good example. If you owned a Japanese bond, you would have lost about 80 % of your money relative to something stable like let's say gold and you would have lost about 60 % of your money relative to a US bond because you got 3 % less interest rates and the currency depreciated by almost 4 % a year and that's 7 % of the year is what you would lose and then what happens is if you're an Argentine a take it to the extreme you take that debt and you pay it off because it's worthless.

1:08:25with barrels of pesos or whatever it might be. Where are we in terms, I mean, let me ask the question I started with, which is, we're in this administration, Elon jumps in, the Department of Government Efficiency is created. The goal is cut back government waste, trying to get us more towards a balanced budget. it, I mean, clearly had we not done anything, there is no hope we're heading towards disaster. Is there any, do you think that doge can make an impact on us? I honestly, I honestly don't know the consequences, the realities of that. I can't answer your question. It's too complicated for me.

1:09:27I'm not at the nitty gritty of being able to say, if you shut this thing off, what are the repercussions of that and how that works, I would need to have a much more, I need to have not only much more detailed, but I would also need to be able to anticipate, you know, there's an action or reaction. And what the reaction is, it's something like the tariffs, you know. But if, but it's very difficult to me to answer your question. Okay, I appreciate it. But you are clear if we're doing nothing, there's a definitive wall we're raising towards. Yes, I'm this goes back to my 3 % solution of It's covered in there Under the existing budget if there's not a rolling forward If there is a rolling forward of the Trump tax cuts from before the size of the deficit will be about 7 and a half percent of GDP you're going to need about 3 % of GDP to stabilize it.

1:10:54So I call this my 3 % three -part solution. Okay, so first get 3 % in your mind. Okay, can we get the deficit down to 3 % of GDP? And there are three things that can do that. We know the first two is spending taxes. And by the way, when I mean taxes, I mean tax revenue, which isn't the same as tax rates. Spending taxes and interest rates. because the interest rate on the debt is such a big factor. Now, I've gone through the calculations and have studied this and in that study you can read it and whatever. If one way or another, I don't care how you do it. That how you do it is almost an ideological question.

1:12:01The fact that you need to do it is important. So it's like, you know, the patient that has too much plaque and they're eating and they're not exercising. I don't care whether you eat greens or you exercise or I don't know, but you've got to get that plaque. You've got to get that going the other way. And so that's the 3 % and you could do it from some mix. Now in my studying these, if you do it with the right mix so that it's not too much of anything, it's not traumatic.

1:12:41And if you do that, you will get a fall in rates naturally, okay? right, because the market will be better off less risk. And if there was any weakness due to the fiscal restraint, the central bank of these monetary policy, that's always been the case. I show I don't know how many cases, like 20 cases, there, around the world. This happened from 1991 to 1998 in the United States. So there's a way, the real issue, like I don't really care, I think the policymakers should make this 3 % pledge, because whoever it is, they're going to argue over the way. And they won't do it. That's my worry. Okay.

1:13:39There's a few high -flying solutions out there, and I want to throw one towards you. You know my passion about longevity and extended health span. Dario, who is the CEO of Anthropic, I don't know if you know Dario, was at Davos and saying something that's been discussed and served by number of other individuals that in the next five to ten years, we will see fundamental breakthroughs in human health span and longevity. that we may see his words not mine a doubling of the human lifespan. You know, we have a $101 million health span X prize going on right now to add 20 healthy years. And so one of the factors I find fascinating is the notion of if people are the vibrant, have the cognition and the fortitude, the vitality to keep functioning so that at 80 or 90 you've got the wherewithal you had in your 50s or 60s.

1:14:56I have to imagine that would have a fundamental impact on the economics here.

1:15:06Here's my confusion. I don't have the answer. A number of those studies, I've seen studies that said that extending lifespan is going to raise the cost. And the cost of health. health. Okay, you would know this better than I, so I'm not, but and and then there becomes the retirement age question, which is very much a political question. So the question is, are you productive or are you a consumer of productivity? Okay, I would say that if If you're watching around the world extending working years, you don't see it. I mean, you see the fight against it, almost political. It's a political non -sort of race trust.

1:16:13It's a source of fight. So you have to ask yourself, does the working years get extended, let's say? And then what I had read was you have more years that you have to take care of that person and so on. So it's not like you go to become young again. Now I'm not arguing that that's the case. I'm saying I don't know the answer. Today in the US, the average lifespan is around 79. The average health span is around 63. Meaning you're spending the last 16, 17 years of your life in some level of pain and decrepitude. And I think the goal is, can we actually change that so that you're healthy initially and then extend the two years?

1:17:08You've got it engineered beautifully. But I suspect longevity, because you are just talking about longevity, not health in those years. I mean, like the one thing we got this baby boom and these people, these old people, my generation. and you got a lot of them living. And then when they die, they're not a burden. Okay, so dying from actuarial tables or financial tables can be good. You remember Logan's run the movie? Oh yeah. Yeah, you were supposed to be, you know, knock yourself off at age 35 and turn yourself into a food supply. Anyway, that's a different story. All right, let's, I believe that if this person is got the energy and the drive and is not in pain and is not restricted by regulation that at the peak of your capability, you're going to want to keep in the game.

1:18:20And that's the hope. That's at least the work. Well, I would say if you actually look at what happens in countries, your hope is not consistent with the realities. In other words, when people come to their working, their retirement age, they will fight in and for that retirement age. We're going to find out soon enough. What I keep on telling people is, you know, we're alive during the 99th level where gameplay and a lot of these questions are going to be alive. I'm with you, keep me alive. I'm a huge figure. I am even if I get to decrepit in my years that I wouldn't have been in life. Tony Robbins, who's a mutual dear friend and I both invite you to come and join us at Fountain Life and let us know.

1:19:09Well, you know, I will. Thank you. I appreciate that. Let's talk to Bitcoin. Let's talk about Bitcoin a second. I know you're a Bitcoin holder, but you're still more excited about gold. if I remember correctly. How do you think about Bitcoin? You know, Mike Seller was my roommate for turning brother at MIT and he's probably one of the most outspoken individuals. I'm sure you've heard Michael speak about Bitcoin. Are you sold by his vision? Let me tell you what I think about it. because I'll speak for myself and I think these things are accurate. First thing is we agree on anti -money. We agree on anti -dead.

1:20:02Okay, that's important. When you say, money, defined anti money, please? That there are two pericet purposes of money. And that is as a storehold of wealth and medium of exchange, medium of exchange, it'll exist, storehold of wealth. You store it in a bond. Okay, you're, yeah, money and debt are the same thing because when, So when you're holding money, you're holding it in a debt instrument.

1:20:41Anything you're going to put your money, your dollars, you're going to be in debt instrument. Otherwise, you lose 5 % a year or something. And so money and debt are the same because debt is a promise to get the money. So they're the same. We have a supply -demand problem with this money and debt. Okay, so I don't want to own money and debt. And so we're aligned. Anybody who's going to want to say it as a storehold of wealth is because the quantity of it cannot be increased other than through the mining activity, you know, without that restrictions. Okay. And that's that. that. So the first thing I want to emphasize is, are you there?

1:21:28Is that part of you're there? And then how much should be in your portfolio of that thing or those things? So I may kind of those things guide that prefers gold for the reasons I'm going to explain. Okay, but I have a bit coin, but I've got much more gold. And the amount that I think is a prudent amount, if you look at correlations in the systems and all sorts of things, the least risk amount to have in terms of maintaining your mind power is somewhere between 10 and 15 percent of a portfolio. So I think they should be Bitcoin or gold. and I money. And you're putting the two together in that bucket.

1:22:18Okay, yeah. Now on the Bitcoin versus gold, here's the thing, Bitcoin is not a private asset. The government's watch it. They know what you're going to have. They know where you are. They can tax it. They can take money away from it. It exists, at their pleasure and they can do anything they want with you. Their comfort of you being in Bitcoin is better than their comfort you being in gold, let's say. Well, I agree the fact that it's that it can be monitored. The movement of it can be monitored as but it doesn't exist at their pleasure. Are you saying that the government could shake them? They could if they wanted to underagulation and so on.

1:23:10Tax you. Yes, as a matter of fact like I was saying I was with the central bankers who said the reason that we When negative interest rates how much could it if they had a digital currency There was no floor on the negative interest rates because they could tax you Okay, so okay, they you don't have the privacy you can get taxed and so on where as the saying of gold is, it's the only asset that you can have that's not somebody else's liability, meaning you have it in your possession and that's somewhat different. The second thing is central banks holding it as reserves. Watching the periods of conflict and so on, They go to gold even in terms of their enemies because like What governments do in periods of conflict or whatever is they print money they make bonds and That's not good.

1:24:22They don't want to hold each other's bonds nobody wants to hold the bonds and And that's why they hold gold. They don't trust each other and That wouldn't work that way for Bitcoin because governments can control it. We do inflate gold every year. What percentage is mined every year? Infant... It's a pittance. I don't know, like 1 % or so of the stock of gold. Yes.

1:25:00And consumption for jewelry and that's it. Anyway, it has been for thousands of years in all different places.

1:25:17Another thing is, I can understand price changes in gold.

1:25:26In other words, if prices change, if this changes in that change, I can make sense of why the gold price change that way. I have a problem doing that with Bitcoin. It's still very much moves in a way that it wouldn't be necessary. It's a supply -demand speculative market. That's tough for me to nail that. Yeah, I am curious. By the way, I just asked and throw up a cure and it's we inflate gold about 1 .5 to 2 % per year. Yeah, that may be it. The, you know, I am still, I would expect Bitcoin to go up when there is international strife or instability or, you know, difficulty predicting what's coming next, but we're seeing swings that are not related to anything that's really explainable today.

1:26:21That's right. So when I go down that list of things, I say I favor gold for that reason. Those reasons. Could you imagine changing your mind? If some, sure, if some thing came along that tell me why. I also, some people have said, and I'm not sure if this is right, it's been quite amazing, but that with quantum computing and so on, there's a good chance that you can break it. I don't know if that's true. I'm not an expert. I'm just throwing another thing in there. I'll give you another answer to that, Ray, just so you have it in your quiver. If quantum computing were to allow us to break encryption on Bitcoin, we have a lot bigger problems.

1:27:14I'd say that same quantum decryption would give us the nuclear codes would allow anybody to enter your bank accounts Allow us We you know, we need to go to some island paradise you know like It was so funny. I I was in I was in Bali in this paradise and Then I fly up to China and you know, in Bali there was this spot off the grid and they have this food plot. I'm like, I didn't even know how much land produces how much food. And I didn't realize that you can have a plot of land that's not very big and you could live, you know, want to play in everybody's in peace and they're going to their meditation and they're doing this and they'll enjoy life.

1:28:20And I get up and I go fly to Beijing and I go and I'm with leaders in Beijing and then I go to there and they're fighting for control of the world.

1:28:34You know, and I, you know, and you're under the first place. I don't want to get the grid and they're going to get me and they'll take my phone and they'll You know, I'm almost you know, I mean we do have to you know reflect on some of these things Let's two final subjects If you've got the I know it's getting late there, but I want to talk about China and I want to talk about what your 2025 predictions might look like so So there's a lot of conversation right now about China versus US. We've got a new administration coming in. My concern, of course, is we've seen recently with deep seek. We've seen nuclear fusion.

1:29:24While the US is vibrant in terms of an entrepreneurial and technology ecosystem and engine, China should never be misjudged as someone who is pushing across the board. How do you think about China? How should an entrepreneur think about China? We are at war with China, and it is a, it hasn't turned to a military war, but it's actually turned to very much a subversive war in which each with overthrow the government and do all sorts of stuff. And it's not going to go back. It's going to be that way. The two countries fight wars differently. a leader in China, one of the top leaders in China was describing the Chinese way of fighting war and the western way, which equals the Mediterranean way of fighting war.

1:30:33The Mediterranean way is that you go in and you fight and you fight to win and you kill each other and you do that. The Chinese way of fighting is so that your opponent doesn't even know you're there fighting you win if you're not smart enough to win the war without actually fighting you won't stop be very smart. So it's a war of deception, it's a war of anyway. So there are these different wars going on, the different mentalities. And so that's where we are. I think, and then there's this desire to have these separate parallel universes in technology. I don't believe that you're going to be able to maintain control of intellectual property.

1:31:27That is something that is publicly used. I mean, maybe if you go inside your spot and you have sandboxing and whatever it is and you never bring it out and you never look at it, then maybe you can intellectually protect it. And that's sort of how the atomic bomb was built. You know, and maybe you can do some of that. And by the way, both countries are trying to secretly build the weapon that the other one can't fight against because if they show the way you will, they win is you build the weapon that the other one can't fight against secretly. You show it to them. They find out that they can't win and then you win without fighting.

1:32:14That's the best way. and so but we've changed the world order and it's been very clear by Donald Trump that we have gone from a multination, multilateral environment to a unilateral each country for their own, might as right kind of environment. And so we are in that unilateral, might as right, if I can exert pressure on you to get what I want to, you know, that's the way it is, which is historically what most of history has been like. And so, and we have actually done that because we've had a few wars, we had the Ukraine -Russia War, which I think will come to some kind of a ceasefire,

1:33:25which You've had the Israeli Iran and proxies, Iran's proxies, war that Israel won. Okay. And you've had a conflict between the United States and China that the United States did much better and China did much worse than they would have expected. And particularly let's say the Chinese and the Chinese have domestic issues. We have domestic issues. We will have our domestic issues, but they have domestic issues. And I think it's like you've you've gotten you've banged things around and you're so surprised that the Chinese probably are a bit and nobody wants to go to worst war. So I think that probably over the near term you're going to have this behind the scenes subversive kind of war.

1:34:36You're going to, but in terms of economics and technologies, look, the winner of the technology, you cannot lose the war in the technology war. And by the way, that's also something that's economically like I think in terms of let's say the super scalers and you must win the technology, not only countries must win the technology war, those companies must have been the, and profit may not be the number one thing. And I think the opportunities are in the applications and the usage of it. By the way, and China is doing a lot better than that in terms of actual applications. We're doing, we're advanced on the chips, and you know, by how much, but in terms of actual usage of it and betting on Chinese, so we have this dynamic going on and China has its own set of issues.

1:35:34So I think that probably over the near term, you'll have a lot of pushing the edge and that kind of stuff, but probably not going over the edge. And so, but that's not a permanent set of circumstances, but that would be my take. Yeah. You said a few things I think are really important to hit on here. Number one, any kind of restrictions we put on China for AI, like ships for Menvitya and so forth. All that does is force them to basically start building capabilities internally, and with Huawei ships right now. The second thing that forces them to do is to become a lot more efficient. So deep seek was an example of, okay, we don't have the chip resources, so how do we change the algorithms and just do it a lot more efficiently.

1:36:37So in telling it, bringing a new sort of Darwinian evolution, you have a constraint, evolution will find a way around it. So I think we've been seeing, we see that. Also, I'm a bit concerned, I'm curious what your thoughts are. You mentioned that 60 % of the US doesn't read above the sixth grade level, which is kind of shocking. We do have a leveling of the education playing field happening very soon when this device becomes a polymath in your pocket right where in a conversation with your AI agent, you're able to deduce or learn or create or serve anything that you need both in China and the US.

1:37:27I mean, so we've got an augmented population. You don't think so? Well, I just go back to my experience. I happen to have a son whose passion is ed tech. And he's gone into the third world and gone to the poorest areas to make this connected to making it like computers and all of that. And the original theory was and the expectation was why shouldn't they not only get educated by this and he founded, he made a device so that it's, it's connects to TVs and makes computers and all of that. And why shouldn't they do that? And then if they do, not only do you educate those, but you have them have different kinds of jobs that they can do remotely and so on.

1:38:25And so when I look at the wealth gaps or the, these gaps and so on, I was surprised that that didn't happen. So I'm hesitant to leap to the notion, you know, a lot has to do with parenting, a lot has to do with, you know, who's getting the guidance, you know, what is it like, you know, and we have an issue of parenting even. We have an issue, you know, okay, why does the 60 % of the population have less than a sixth grade education. That there's almost a leap that those people are going to take this and they're going to be productive and so on and so forth. Well, I was surprised that it didn't happen and I can kind of see maybe why it might not happen is at least I'm not assuming it necessarily will.

1:39:24Fair enough. of 2025, year ahead, what are you seeing? What are your predictions for the best we're going to see this year? Right? Obviously, 2025 is a year of great, greater, great uncertainty. I think that, I think honestly, the first big issue that we're going to deal with is the budget issue. Right now, it's not the issue. and everybody thinks of it, not as the issue. In the first half of the year, it's gonna be the issue. And how they deal with that is very important to me in terms of the supply demand because let's remember that the treasury market is the basis of all markets, okay? It's the foundation of all markets.

1:40:16And if you create a reverberation for supply demand, then it changes all that capital raising and that's funding this thing or that, I mean the world gets disrupted. Okay, so it's very important. So that's the first thing that I'm so okay. Then we're going to actually see the first 100 days of a new administration is a time of great optimism and also is a time when you have what priorities have it got to be. It's got a, you know, it's real -world time now, okay? It's game time. So the theories are going to be put to the test and the consequences. You know, does, you know, does the cost cutting happen?

1:41:08Does that, is that realistic? You know, how many numbers can you do that? And not only because of, you know, its secondary consequences, but, and then there has to be prioritization. I think the prioritization is also going to be on, sparkly, on energy for data centers and the building of AI and so on to win because the techno, whoever wins the tech war is going of one of the military war, you know, with China and so on. And so, but how that game goes, it's going to be a tough game. So when I look at that, I think we're not going to be as happy a year from now as we think we're going to be. And because also there's that cycle.

1:42:07things are pretty expensive. If you have interest rates rising, you know, there are these issues we can't get so ignoring those that we begin the face of the AI thing. And then you have to do it within two years and it's got a stick because midterm elections will swing on are going to be harder for the Republicans because because they have more seats up. So it's going to be interesting. You're an entrepreneur or I'm an entrepreneur. You're your advice looking forward thinking about you know, planning your business for the next year or two years. What's your wisdom? You're at a time of relatively good capital markets.

1:43:15Credit spreads are narrow. There's a lot of money.

1:43:25plan on surviving droughts as well as the difficult, you know, the good times. Hill, your equity coffers? Yeah. Don't take it on too much debt. that plan for realistic growth.

1:43:54And make great partners with the investors that are in it. Ultimately, it's gonna be, and not only your numbers, but it's gonna be your character. And you know, don't be overly greedy, but so have the relationships as well as the money that is your foundation. Yeah, I think that's beautiful wisdom. Ray, grateful for you. Thank you for making your research available and writing these books. And I sure wish we humans were a bit more intelligent or a bit more, had longer memories. You know, I do wonder sometimes whether AI can help us get out of these repeated cycles and support us in more logical planning and growth.

1:44:59I guess we're gonna find out. Maybe if we ask it the right questions. Oh, good to see you, my friend. Thank you again for your time. It's always a pleasure. Thank you Peter. Thank you.

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