Ray DalioFounder

We delivered about fifty-three billion USD in cumulative net gains since our founding. We produced roughly a twelve percent annualized return with no significant losses, which was largely uncorrelated with other standard market investments.

It is a very real possibility. Speculative bubbles occur when revolutionary new technologies emerge, prices skyrocket, and investors borrow money to buy assets without considering the actual price. It is a matter of degree, and the indicators are compatible with historical peaks.

When asset prices go up, paper wealth increases. People borrow more money using their inflated assets as collateral, compounding the gains. When the bubble bursts, the process works in reverse: people must sell assets to pay debts, reducing spending and causing economic downturns like the Great Depression.

Bubbles pop when there is an imbalance between money supply and demand, often triggered by central banks raising interest rates to curb inflation. This forces leveraged investors to sell assets to raise cash, pricking the bubble and reversing the wealth compounder.

Wealth is not the same as money. You cannot spend paper wealth; you must sell your assets to get cash to buy goods. When everyone tries to sell their assets simultaneously to raise cash, the price plummets, revealing that the paper wealth was temporary.

When interest rates rise, the cost of servicing debt increases for governments and private borrowers. Borrowers must find cash to cover interest payments, forcing them to sell equities and other assets. This shift in capital flows triggers the pricking of the bubble.

The big cycle is the confluence of three major forces: high levels of debt and printing of money, massive internal political conflict driven by wealth gaps, and external geopolitical conflict as the dominant power is challenged. This cycle typically lasts about eighty years.

Cash feels safe, but inflation eats away its purchasing power. Even if you earn interest, you must pay taxes on those nominal gains. Over a long period, cash deposits guarantee a negative real return after accounting for inflation and taxes.

Investors should hold a balanced mix of uncorrelated assets, including stocks, bonds, gold, real estate, and digital assets. Balancing these based on their relative volatility reduces overall portfolio risk without sacrificing long-term returns.

I allocate about one percent to Bitcoin but prefer gold, which represents five to fifteen percent of my portfolio. Gold is the second largest reserve currency and carries no third-party liability. Governments can easily ban or tax Bitcoin if it threatens their control.

Machines will replace both physical labor and cognitive tasks, which will squeeze out average workers. The share of business revenue going to workers will decline, while the share going to capitalists who own the technology will rise, widening the wealth gap.

Those who produce the technology have a strong incentive to present a positive outlook to avoid political backlash. While previous technological shifts created new industries, AI is unique because it replaces both human muscle and human intellect.

I tell them to find the match between their natural personality and their path, ensuring they make their work and passion the same thing. I also emphasize being adaptable and learning how to maximize AI tools, rather than focusing on a single career name.

The United Kingdom is overindebted and underproductive. Because there is not enough money to finance benefits and services, they experience severe internal political conflict, leading to a constant cycle of replacing prime ministers who cannot deliver on their promises.

You need a strong middle to alienate the political extremes. I recommend establishing a bipartisan commission of experts to design a shared pain plan, restructuring public debt, and focusing on improving public education to boost long-term national productivity.

The future is highly uncertain, so you should not restrict yourself to a single country. A smart rabbit has three holes. Entrepreneurs should base their businesses in vibrant, civil regions that have solid education systems, functioning capital markets, and low debt burdens.

China is now a larger trading partner with most countries than the United States, indicating a major shift in global power. As the economic and military dominance of the United States declines, global power will become more regionalized, ending the American-led world order.