Ray Dalio, Founder and Chairman, Bridgewater Associates


[MUSIC] Ray, we are so excited to have
you here tonight at Stanford. Thank you for joining us.>>I’m so excited to be here.>>Well, Ray,
as our little tribute to Bridgewater, we are going to videotape
this conversation.>>Okay, [LAUGH].>>But
I had to veto any of the live scoring, so I’m just not at your level
on handling feedback yet. We’ve got a lot to cover,
your life, your principles, and how you think about the future. But before we start, I want to get
a feel for our audience here tonight. So, please raise your
hand if you have read or are reading Ray’s book, Principles. Wow.
>>Wow.>>Pretty good. Okay, and so the rest of you, how many
of you are planning to read Principles?>>[LAUGH]
>>Yeah, they’re an ambitious group. For anyone else out there, do you at
least have your own moral principles?>>[LAUGH]
>>Yeah, okay, good, good.>>[LAUGH]
>>Let’s start back in the early days on Long Island. Now, you were quite
the capitalist growing up. You were a paper boy, a lawn mower,
a snow shoveler, and a golf caddy. And at the ripe old age of age of 12, you made your first investment
in the stock market. Talk to us about how that even happens.>>Well, everybody was talking about the
stock market, it was no big deal really. [COUGH] At the time in the 60s, the stock market was
the hardest it has ever been. Literally if you got a haircut or anything, everybody would talk
to you about the stock market. And so when I was cutting, they were
talking to me about the stock market, And I had to take my $6 a bag,
I would take my $12. And when I got $50,
I had put it in the stock market. It was just a natural thing to do.>>And
it did pretty well the first investment?>>Yeah, it was the only company that
I ever heard of that was selling for less than $5 a share. So I figured I could buy more shares which
meant if it went up I’d make more money. That was my rationale,
that was a stupid rationale, right? And it was a company that
was about to go broke. But another company acquired it,
it tripled in value and I thought this game is easy,
I can make a lot of money. Games is not easy but
that’s what got me hooked.>>So
you got a bit of a rolling start, but you continue to invest through
high school and university. And you later enrolled
at a business school, one we like to call
the Stanford of the East.>>[LAUGH]
>>Were you met, of course, Joel Peterson.>>Joel was in my head group and
we have good memories.>>Now we’ll talk about those later.>>[LAUGH]
>>Now, Ray, for your summer internship, many of your classmates were
going to Wall Street and they were seeking these glamorous
equity trading positions. You on the other hand sought out
a role in commodities trading, which at the time wasn’t just less
prestigious, it was pretty obscure for an MBA to seek out that kind of a role. So talk to us about what that experience
of going against the grain taught you.>>Well, I figured it had low
margin requirements, right? You only had to basically put
up about 10% of the money. So I figured if you’re going to be right,
you’ll make more money, because of low margin requirements,
so I got hooked on commodity trading. And then there wasn’t anybody who
would go from Harvard Business School. So this was 1972, the summer of 1972, and I went to the director
of commodities and I begged for a job, and he gave me a job. And that was just before the 1973
oil crisis and the oil shock, and then Wall Street went to hall and
commodities became hot. And I was lucky, and so
I went into commodities.>>So you were a hot property by second year and-
>>I never really knew anything about commodities other than the summer job,
but I was then a hot property, because there was no Harvard Business
School type person in commodities.>>I see.
>>So I got a job, which was stupid to hire me, but they did. And then that company
then got into trouble. Then I went to another company and
I did that for about a year, and then started individually.>>I just want to,
you skipped over something there I know. Many of us here in this room, we know you as a master of
thoughtful disagreement, okay? But you didn’t have that concept fully
nailed back in those early days. So talk to us about that disagreement
you had with your boss on New Years Eve.>>Well, I mean we got drunk and then I slugged him,
>>[LAUGH]>>And he was a good guy. What he did, but he drove home,
he totaled his car. His wife chewed him out because
he had missed her party, and he came in with a black eye,
and he didn’t fire me then.>>He didn’t fire you.>>He did not fire me then.>>Okay.
>>And then it was another incident that caused him to fire me.>>[LAUGH]
>>But I want to know what got you fired,
can you tell us?>>Anyway the.>>[LAUGH]
>>Anyway, that was the best thing that actually happened to me
because then I was on my own.>>Some of our career advisors around
here we might frame that one as passionate right? And,
>>It was it’s kind of in retrospect, it was a stupid thing to do, right? But it was just what it was
like at the time I guess.>>And so you go ahead and start Bridgewater Associates from your
two bedroom apartment in New York. So you’re 26 years old,
you’re a first time entrepreneur and a professional investor. Now, some things those roles would seem
to have in common is you have a high risk of being wrong and making mistakes. Talk to us about your
relationship with mistakes, and how those lead to your principles.>>Yeah, I think, Just generally as an entrepreneur or
in the markets, you have to think differently
in order to be successful. In the markets whatever the view is
is built into the price because it reflects the consensus And as an
entrepreneur starting out a business you have to think differently, and
there’s a high risk of being wrong. And so what I learned over that period,
you have to be audacious, you have to think differently,
you have to be confident, and then you also experience
a high risk of being wrong. And I think we’re going to go to a clip
of one of the really big mistakes that I made that changed my whole
approach to decision making. So, I in 1980, 81,
I had calculated that American banks had lent a lot more money to foreign
countries, and those countries were going to be able to pay back, and
that we were going to have a debt crisis. And I thought that that would
cause an economic collapse. And in August 1982,
Mexico defaulted on its debt, and I received a lot of attention for
that. And I was asked to speak to
Congress at that time, and I was also on Wall Street Week. And we brought a clip of that,
so you’ll get a sense of that. So Zach, can you hit the button and
show the clip? Mr. Chairman, Mr. Mitchell, it’s a great
pleasure and a great honor to be able to appear before you in examination with
what is going wrong with our economy. The economy is now flat,
teetering on the brink of failure.>>You were recently quoted in an article. You said, I can say this with absolute
certainty because I know how markets work.>>I can say with absolute certainty that
if you look at the liquidity base in the corporations and the world as a whole,
that there’s such a reduced level of liquidity that you can’t return
to an era of static flation.>>Wasn’t I arrogant? Incredibly arrogant. I couldn’t have been more wrong. I was so wrong. That was the exact bottom in
the stock market, August 1982. Mexico defaulted on its debt,
it was the bottom in the stock market. We had a big bull market. And I had then I think like eight people
at Bridgewater, and I had to let them go. And I was so broke that I had to borrow $4,000 from my dad
in order to pay for my family bills. And that was very painful. And it changed my whole approach
to decision making, because it made me think in the future,
how do I know I’m not wrong? How do I know I’m right? It gave me the humility that I needed
to balance with my audacity, and it made me bring in people
that would disagree with me. So I wanted to find the smartest people
that would disagree with me, and I really started to think about how
would I deal with disagreement. And I would say that this is a big thing. It’s such a pleasure to be here,
by the way, because you’re beginning this phase
of your career, you’re just about to, this what I would call
the second phase of your life. First phase of your life is when you’re
dependent on others and you’re learning. Second phase of your life
is when you’re working. And then eventually others
become dependent on you. And in that second phase,
it’s totally different. And I’m going into my third phase. And so to be able to sort of
pass along some things that were helpful to me is a treat. And along those lines, I would say you’re going to keep
having failures as well as successes. And it’s in the failures
that you learn the most. And so my attitude began to change
in terms of making decisions. Most importantly, I would view every failure as a puzzle that would give
me a gem if I could solve the puzzle. And the puzzle was what would I
do differently in the future so that I wouldn’t have that bad outcome? And if I could solve that, that would give
me the gem, and the gem was a principle. And the other thing that I did was write
down all my decision making principles. When I would make a decision,
I would take the time and say, what are my criteria for
making that decision? And that was so invaluable,
I’d want to pass that along to you. You’re going to encounter so
many things in your life, and you’re just going to
make decisions like that. If instead you pause and you think, what
are my criteria for making that decision? You write it down and
then you reflect on it. You’ll start to realize that the same
thing happens over and over again. And when the next one comes along,
you’ll reflect on that principle and you’ll refine it. And it serves the purpose also of
letting you communicate very effectively with others. So when I started my business,
it was great because we would all know what we could expect and
why and that whole process. I mean I think it’s really that
whole notion of the best comes from learning from mistakes and
doing that in a systematic way. Failure is just part of the journey.>>And to get those mistakes, Ray,
and to bring them out into the open, you needed an idea of meritocracy, and
for that you need a radical truth and a radical transparency. Talk to us a little bit
about those two concepts.>>Yeah, I don’t know, Zack,
do you have that diagram? Okay-
>>Zack’s busy today.>>So this is-
>>[LAUGH]>>This is the way it worked for me. So in order to be successful,
I needed independent thinkers who would disagree with me, and
that we would disagree with each other. Because otherwise,
it’s that false confidence. How do you stress test each
other to get to the best idea? So I needed independent thinkers
who are also wanting to go for the audacious goals. So if you have independent thinkers, how are you going to get
past the disagreement? You actually have to have a system for
disagreeing well and getting past the disagreement. So I needed an idea meritocracy, in other words an actual process that
organizes disagreement to get past it. And in order to do that,
then I needed to have that principle, I needed to write it down, and we all needed to know what that rules are,
and then we need to make these systems. And then when we did that,
that changed everything, right, that thoughtful disagreement. Because it’s collective
decision making in which you significantly increase the probabilities
of making a right decision. I think the greatest tragedy of people, probably one of the greatest tragedies
of mankind, is people who hold opinions in their mind that they’re attached
to that are wrong that they could so easily stress test and significantly
raise the probability of being right. So we needed to do that. And when we did that we added
our successes and our failures. But the people believed in that idea,
in meritocracy, and it was fair. Because the system, if you have a system
in which you can fight for your arguments and you know that the system’s
going to be fair, you can care more. And so that’s the type of organization
I needed, and that was the key, right. Whatever success I’ve had in my
life has had more to do with my knowing how to deal with what I don’t
know than because of anything I know. And that idea meritocracy,
that triangulation with smart people.>>So Ray, I want to go a layer
deeper on this radical truth and radical transparency. I think for many of us hearing it here, it’s very hard to argue with
the logic of what you’re saying. And yet the culture at Bridgewater feels
quite foreign to what most of us have experienced in our personal or
professional lives. What is it about this concept that is so
difficult for us to embrace?>>By the way,
that’s the competitive edge, right, because if you were to say what’s
the edge, that’s the edge. I think we have ego and blind spots
barriers that stand in our way. And so that notion of attach to what
you know is such a big thing for your ego or your blind spot. And so there’s this subliminal
reaction when somebody disagrees. Rather than producing curiosity, it produces antagonism,
it’s an amygdala reaction. And I think a lot has to do
with the education system too. You’re rewarded for knowing or
you were rewarded for not making mistakes, rather than knowing what
your weaknesses are. So in order to go through that, one has to intellectually go through
it to say it doesn’t makes sense. So let’s say we’re going to
have a relationship]. And you’re now, you’re working there,
you’re my partner.>>Great.>>And I [LAUGH] Yeah? What till you see what it’s like.>>[LAUGH]
>>[LAUGH] But you would say, I would say Do you want me to know,
do you want to know what I really think? Do you want to tell me
what you really think? Do you want to know your weaknesses?>>Mm-hm.>>Do you want me to know my weaknesses? [LAUGH]
>>Intellectually, you would say you would
want to know your weaknesses. Why wouldn’t you want to
know your weaknesses? Emotionally, that can be difficult so
it takes adapting to. So we describe it as there’s two yous. There’s the, and this is correct in terms
of literally, there is a conscious, thoughtful you that might say,
I would like me to do those things. I’d like to know my weaknesses so
I can know how to deal with them. And then there is an emotional
you that’s subliminal. And it’s really the battle with your
two yous that you have with yourself. And once people start to realize that and
they come in that environment, then they see that they’re really more struggling
with themselves than each other. So, that radical truthfulness, so
the right way it is is, in order to have the radical truthfulness, you have to
put what you honestly think on the table. Can you do that? And then, transparency means that
you can get to see everything. So, what I did was put,
everybody could see everything, so that was the main thing. So when I would make decisions I would,
I’d be doing, I’d be very, very radically open about what I was doing and the most
difficult decisions that we would make. And then I would refer
to the principles and then I’d have everybody challenge
me on whether that made sense. And so our intellectual approach
overcame our emotional barriers. But I think it’s like that for physical. You know, I was, H.R. McMaster’s here and he was a great host to me down and
I got to see Ranger School. And I think about those people
pushing themselves, and how they were pushing themselves. And they were doing the physical
equivalent, although the dental was equally important, and that produces that
particular stream, they wanted that. And that’s what is about. But it’s not for everybody, just like some people would
watch out of the Army Rangers. It’s not for everybody, but it’s powerful. Because you build meaningful work and
meaningful relationships. In other words,
I think that that’s the power. If you are committed to your mission,
like you’re excited, we’re going to do this thing together,
maybe a start up or maybe, whatever it is,
you’re on that mission together. And then at the same time
you’re on that mission, you have these meaningful relationships,
which means total honesty. And with that total honesty and that
meaningful relationship, you get a joy out of the relationship as well as
you get a joy about being successful. And it doesn’t have that two-faced nature. It doesn’t have politics behind it. It’s just straightforward, so
yeah, that’s what it’s like.>>So that’s really what you’re avoiding. It’s the kind of politics and the gossiping that you might
get in the normal world. Albeit it’s not for everyone,
not everyone can kind of take this.>>It changes the ethic like there is
no talking behind somebody’s back. And the reason it is, first of all
it’s unproductive, if you’re talking behind somebody’s back then you’re not
dealing with the particular issue. And in a place like where we value anybody
speaking up with their point of view, then you can raise it, and
you can then deal with it. But also,
it then becomes sort of an ethic thing. Like don’t you have the guts to
talk about what you’re saying? And so if you have the guts, so it’s almost humiliating to
talk behind somebody’s back. And so
that standard then carries forward and it leads to that kind of radical truth
[INAUDIBLE] radical transparency. So you have some people
who it’s not at all for. And then you have people who couldn’t
work anywhere else because they wouldn’t want to work, they go in
the company and everybody’s smiling and they’re giving high fives and whatever. And they’re all talking
behind each others’ backs, there’s a lot of politics going on,
and that they can’t deal with. So a lot of people wouldn’t
want to work anywhere else, and some people it’s not the right place for.>>So Ray, you’ve built a machine,
really, that supports this culture. And you also have a belief
that humans are machines. I think few companies have done more
than Bridgewater to try and use data to understand their employees, to put their
attributes and their talents into numbers. So I’m curious if you
see attention between this explicit labeling
of a person’s abilities with what Carol Dwight at Stanford
might call this growth mindset. The idea that a person’s abilities,
talents, even intelligence is more fluid and
can change.>>Well I think, I’m just trying to be
as accurate as possible and change, if a change occurs, then it’s reflected in
the numbers and everybody sees the change.>>So it’s a lot of.>>But I think that at any point in time,
you have to be realistic of where you are. And you have to recognize that people
have different strengths and weaknesses. And if you’re not dealing with that,
that’s a particular problem, stands in the way of the growth
of the particular people. And then, also people making choices
about other people there, right? So if I’m your boss over
making that decision, if I’m not open, if I don’t give you
that constant feedback, and also if I’m not collecting data from others
because I’m just not sure that I’m right. So the data kind of helps to speak for itself in terms of understanding
what a person is like. So I think, you know, it’s a good thing. Though it doesn’t mean that you
stand in the way of evolution. It means that to whatever extent
evolution occurs, you get to see it.>>So I think the bigger context here
raised, many of us will be graduating in a few months and
some of us will be making a choice. Do we return to a job and a function
we know how to do that suits us well or do we branch out down a new,
untested path? From what you’ve seen at Bridgewater, what might you advise us
in how we think about that?>>This is the time for your adventure, you;re experimenting,
you’re learning, right? For that experimentation. And I’ll guarantee you that wherever
you’re going to be in five years is going to change. Go for the experience. But I think the most important thing
I would say when you’re going on that adventure is to understand
how to triangulate well. What I mean is find the three or
four smartest people who are dealing with the most important questions that
you’re facing, particularly if they’re willing to disagree with each
other and disagree with you on that. And then with that triangulation, where
there are areas of disagreement that’ll bubble to the surface and you’ll find
out what might be, you’ll learn a lot. And then through that humility, you go through experiences, and
make the most out of your failures. Be adventurous,
make the discovery, go for it.>>All right.>>Right?>>All right, well, we’re done,
thank you very much.>>[LAUGH]
>>Joking, but the other question we face, Ray, is what type of
organization do we join? So-
>>I think culture’s the most important thing. I think who you’re with-
>>Okay.>>And where you are is much
more important than what you do.>>Sorry, let me take you up on that. So let’s assume you’re in our shoes. You’re about to go into the working world,
and you want to work. In an idea meritocracy. Many in this room are going
to join large organizations that have embedded hierarchies,
cultures, and norms. So talk to us in a practical sense about
how we can bring some of these ideas to the workplace.>>Well, you have the choice to get
work at wherever culture you want. The most important thing is,
do you work in the culture? Now you were raised here
in your education and before to try to have the opportunity
to make sense of things. Okay. So I would go into your job and say,
if something doesn’t make sense to me, do I have the right to say it
doesn’t make sense to me and ask you why it makes sense and
to be able to probe you? Or do I not have that right? And I think you should think hard about
whether you want to be in the organization that doesn’t give you that right. So I think the most fundamental
thing is to be in that kind of organization with humility. In other words recognizing that you might
not but you always have the right to make sense of things, and if something doesn’t
make sense, to say it doesn’t make sense. So I would say that that would be the most
important thing for me if you’re going to learn, because otherwise you’re going to
be somebody’s schlep, they’re going to say do these things and you’re just going to
run and follow their instructions and so on, and you’re not going to learn
if you’re following their instructions. because you have to think for yourself. I think.>>And you’ve given us plenty
of tools to do that, right? I want to talk a little
bit about your legacy. You’ve accummulated these
principles over 40 years. You’ve decided to share them as
part of what you’re calling this third phase in your life. A question Joel often asks the class is,
what does winning look like to you? You’ve invested huge amounts of your time
and energy in this public facing role. What does winning look
like in this third phase?>>I think that through life it’s all
just a matter of personal evolution and contributing to evolution. For me, you evolve and
there’s an instinctual reaction that I had that what I wanted
to do was pass along the things that are valuable to me so
I can move beyond that. And, My son at 2014 when I
was making this transition gave me this book,
Joseph’s Campbell’s Hero of 1,000 Faces. And he describes these
various phases of our lives. Which I related to and
I won’t take you through them all. But there’s the call to adventure. You go on an adventure. You have your ups and downs. You reflect on them and so on. And then when you get to
this stage in your life, the thing that you want more
is not to be successful. You’ve done it. You don’t want to be more successful. You want to help others be
successful without you. And that’s what I feel. And then when I feel like
if I’ve done that best job, I will have done my best job,
and we’re good. And so that’s my instinctual
reaction at this time.>>Well you’ve given us a lot to start and I know there’s plenty out there
who haven’t read the books so you’re not quite there yet, but.>>I want to say just for everybody and
I’ll mention it maybe later. What I did was, there’s the book and
then I converted the book into an app that has the actual
cases of bridge waters. So you could go into meetings and you can actually see this in action
we call it principles in action. It’d a free app on the Apple store and it’ll take you in to that so that you
get a sense of what the thing is like.>>Plenty more case studies we love those,
Ray. So it’s all good.>>[LAUGH]
>>Now, Ray, we could spend another hour on these
principles but unfortunately you’ve got far too many other perspectives we want to
probe you on, let’s start with history. You’re a student of history, you’ve stated that everything that
happens is just another one of those. So I’m curious when you look at today,
our stage in the economic cycle, our political tensions,
our geopolitical tensions. What’s the historical precedent for
what you see? And what does that tell us
about what happens next?>>Well, I think there
are cause-effect relationships, and then they repeat through history. I think it’s important to not just assume
that because they happen in the past that they’ll happen again but also to
understand the cause effect relationship. So in answering your question,
I’d like to refer to both. One of the things that I learned was that
I was, almost every time I was surprised, I was surprised by things that did
not happen in my life time but happened many times before and
as a result of that, I really found that I really needed to understand
history and why things happened before. And that in 2007, because I studied
what happened in the Great Depression, we were able to anticipate
the 2008 financial crisis. Because of what happened in 1929 and
32, so the period that I think is most analogous
is the late 1930s and I’ll explain why. And this is just the mechanics of it. We had a debt crisis in 1932,
1929 to 1932. And in both of those cases,
interest rates hit zero. Only two times in the century
that that happened. When interest rates hit zero, the central banks had to print money and
buy financial assets. We call that quantitative easing. Those purchases of financial assets
puts financial asset prices up and as a result of pushing that up,
it makes the economy go up. So 1932 to 1937, the economy,
the stock market went up. Everything went up, in much the same
way as it did from 2009 till recently. And then, but because they
bought financial assets, those with financial assets benefited more than
those who didn’t have financial assets. And there were other factors like we have
technology today replacing people and as a result, we have a large wealth gap. So if you look today,
the top one tenth of one percent of the population’s net worth is equal
to the bottom 90% combined and if you take that on a measure like
that the wealth gap is the same as it was in that period of time,
that 1930s period of time. And with a large wealth gap,
and differences in values, then you have populism,
the emergence of populism. Populism of the left and
populism of the right. And if you go through history, if you were
to say when did the last time you had populism in major countries, it was in
that period of time for similar reasons. And with that time also you
had the classic rising of a power to challenge an existing power. In that case it was Germany
rising to challenge the British Empire, and
then Japan and Asia. Like now we have China rising and
there’s a rivalry, a conflict. So the only periods in time that you
could see that was analogous recently, the most recent period of time,
is like that. So I would say,
what are the big issues of the time? The big issues today are that there is a limited ability of central
banks to ease monetary policy. because we have interest rates near
zero most cases around the world. And so the capacity of central
banks fees is limited. We have a very large wealth gap. And with that, we have polarity, a lot of political polarity, democracy
even being challenged by that polarity. And then you have these
conflicts around the world. And so that populism of the left and populism of the right has
big economic implications. What it’ll mean for tax policy and what will it mean for
even conflicts between countries? And so
we have that rising power situation. So that period of time looks
most analagous to today.>>You’ve covered a lot
of things there Ray and we’ll try and dive into a few
with the time we have left. On a high level, it’s a pretty
shocking comparison to make and we know how the 1930s ended. Do you believe that on
our current trajectory, we’re heading towards
some sort of conflict?>>Well, we’re certainly heading
to different kinds of conflict. The question I think is how
we’re going to handle them. We certainly are headed
domestically to lots of conflict. If you were to take the polls of, the Republican Party is the most
conservative it has been ever. The Democratic Party is
the most liberal it is ever. The voting according to party lines
is the most it has been ever. 94% of the votes are according
to party lines, and so we certainly have an internal conflict. And that internal conflict has to
do about the combination, I think, of the economic conditions, the left and
the right, or let’s say socialism and capitalism are issues. And then there’s also ways to be together. I would say I don’t know that we’re clear on what principles
bind us together as a country. I think we should go to principles. What principles bind us
together as a country? What do we believe in? What are the principles that divide us? But anyway, we are having more
domestic conflict, I think. And then international conflict. There will be a challenge, a competition, that is going on between the United States
and China and other places, but particularly the United States and
China which is a whole other discussion. That doesn’t have to be a military
conflict though it could be. It depends I think on how
we handle the conflict. So I think there’s
the China-American relation that’s a topic week,
digress into it if you want to cover it. But I think it’s all how are we
going to be with each other. So let say this issue
of the wealth gap and the left and the right, my big fear is that the conflict and then just badly engineered. Policies can cause us to have
worst conditions than we need to. There’s enough resources to go around to move us toward more equal
opportunities in various ways. We can deal with this together. But yeah, I think we’re
an environment in which conflict is going to be more problematic than
we have actually experienced.>>Now, Ray, there’s two issues. There’s the external conflict. There’s the internal
conflict in our own country. You’ve talked about redistribution, and
you’ve recently published a piece having why capitalism needs to be reformed and
a need for greater redistribution. Because it’s tax day, April 15, would you
agree that a person of your resources and your wealth should be taxed more by
the US government to help further this?>>Yes, I believe that it’s
inevitable that we should, yes. But I think the real question
is the most important is, are we striving to have a country,
what is our American dream? Are we striving to have a country that is something along the lines
of equal opportunity? Are we struggling along that? How do we feel when there
are school districts that don’t have anywhere
near adequate resources? It goes to nutrition, there is
nothing approaching equal education. I broke the economy up into two parts so
that I could see it, because it gets lost in the averages. So the top 40% and the bottom
60% because I wanted to see what the majority of people,
bottom 60%, is like. And certain things,
like the average in the top 40%, they will spend five times as much
on their children’s education than in the bottom 60%, and school
districts are starved for resources. And there’s a whole different life,
I can rattle it off. If you want to go see it,
I’d really love you to go see it. It’s a study. That’s on LinkedIn and
it shows the outcomes. So I guess when I’m looking at
that I would say that’s not I think a fair system and
beyond that it’s a system that threatens to destroy us if we
don’t find a way to reform it. Now I’m a capitalist, I do believe in the idea of working
hard and earning and then saving. And what capitalism is, is you buy an
instrument of capitalism, you buy stocks. That’s capitalism. You own a piece of that business. And I believe that that’s fantastic. But like anything, everything has gotta
be improved with time, with reformation. So are we producing
the outcomes that we want? So when you read that, you’ll see if
we’re producing the outcomes we want, I don’t think so. So I’m saying I think
we have to modify that. Now, how we do that is going to,
most importantly, it has to be a good engineering
exercise that I think has to be first. It’s gotta be done in a bipartisan way. Because I think this
division is a problems and I really believe in
thoughtful disagreement. So if you bring together people who
will living in these communities and then you have metrics, I think it
would be great if the leadership, it could be leadership
of the United States, it could be the leadership of the state,
says that this is a critical issue that we have to deal with that they
put metrics on it so they own in it. In other words, numbers and KPIs and
they say, here’s the condition. Is that living standard the same or
is it rising? What are we doing in terms of education? And with those measures, then then work
together in terms of doing sensible engineering I have my own
views of what could be done. But how we get into that,
that’s a whole conversation. I’m not so sure my views should matter. This is just one of other views. But if we don’t do it together and
we don’t treat it as a really important critical issue, I think the most
critical issue of our time right now, I think we’re going to be in trouble. So yes, of course, But there needs
to be redistribution of opportunity. It’s not just redistribution of money,
but get the school books, get the nutrition, get those basic things,
I think that’s fundamental.>>Well, Ray,
we’re at least out of time for now. I want to make sure our audience here have
the chance to ask their questions of you. So anyone out there who has a question,
please raise your hand. We’ll find you with the microphone. And then if you’re selected,
please stand up and introduce yourself before
you ask your question.>>Hello, my name is Max, I’m MBA 1. I’m from Russia, so sorry, I don’t know
the local political landscape that well. But my question is having such
a great reputation, knowledge, and leadership experience in this country,
why you are not running for the president of the United States?>>[LAUGH] [APPLAUSE]
>>Because I don’t think me and the political system would get along.>>[LAUGH]
>>I think it’s a very difficult system. I don’t think it would be effective. I think the political system,
even the way it’s structured, where the two parties and
the way they go about it. And I think it’s a challenge
that’s almost impossible to win. And anyway, I’m able, at this moment
in time, this short moment in time, to pass along some thoughts
that others in that position, or any position, could take or leave.>>Thanks for being here. I’m Ida Girma. I’m a first year MBA student. I have two questions. If you want to be fair,
you could just pick one to answer. One is, we understand that you’re really
quite quantitative and systematic, about the way you think about decisions
for investments, for your business, and personal life as well. I’m wondering what you think about this
notion of intuition, do you believe in it, do you use it? And my second question is, I’m quite inspired by how you talk
about equality of opportunity. I think it’s fantastic. I suspect that you have peers and colleagues who may not
think the same things. And how do you have conversations with
them about this thing that you’re so passionate about?>>Yeah, so
what was the first question again?>>[LAUGH]
>>Intuition, yeah, I think decision making is subliminal and
logical. And fabulous ideas come from
subliminal decision making. But you don’t know if they’re great or
not, that you have to reconcile
them with the logic. So yes, intuition can be very,
very valuable. We feel it, you see it, it’s subliminal. The ability to collect thoughts,
connect dots, and see things in that way. Imagination, all of that, some of
the best ideas come in a subliminal way. Like if you’re taking a hot shower, and
these ideas come to you, it’s not like you’re sitting there working hard on those
ideas, they come up, they can be fabulous. I think the key is to
reconcile them with your logic because they could be misleading, too. So yes, I would say they’re at least
as valuable as the logical idea. And the second question was about what?>>[LAUGH]
>>How do you have those conversations with your peers?>>Just the art of
thoughtful disagreement. I love disagreement. I just have to say what I believe,
and others say what they believe, and then we have a conversation about it. And I love it to do that openly. So if you were to sit here and have a
conversation, I would welcome anybody who has a different point of view,
have a thoughtful conversation. That’s easy. I don’t see any reason why there shouldn’t
be good, thoughtful disagreement.>>Hi, Ray,
I’m also a first year MBA student. I know you remember the giving pledge. So I was wondering what principles
you apply to your giving in order to maximize your social return on investment
in the same way you did with your financial returns.>>The saying that it’s tougher to give
away money than it is to make it is actually true. Because when you’re pursuing a profit, you will know whether you’re succeeding or
failing. When you’re giving away money,
it’s very difficult to have those kinds of metrics and weigh one thing or
another, it’s a lot more confusing. But I tend to take the same approach
that I would in my investing. Meaning, I try to think in terms
of return on investment, but I think in terms of double bottom
line return on investment. In other words, what is the social impact? It has to stretch your mind,
because how do you relate what is the value of saving a life,
what is the value of an education? It doesn’t have a common denominator
like return on investment has a number, it’s money, and it’s how that is,
so that becomes a challenge. For me, it’s very important,
though, to try to do that. So we’ll establish key performance
indicators and do that. But also relating to me is the passion. I’ve decided,
how am I going to take that approach? And that approach,
I make it a family activity. My family members,
different in varying degrees, are interested in their
own philanthropic efforts. And each one of them has
their own particular passion. I think that’s great. So I would say that when you get past the
certain point, what you think about is, what do you really want to do? You don’t think about profit as much as
you think about, what do you want to do? And I think maybe as you get older or
you feel more connected, and you also realize
the blessings that I’ve had, because I didn’t have anything,
and then I’ve evolved. And you see what other people are is
that marginal benefit of spending money on yourself and to being able to
help other people makes a big difference. So those things, return on investment,
how do I make it sustainable? How do I measure? How do I judge how good
we are doing as a family? How do I establish principles? We’ve got a whole bunch of principles
that people have to abide by in order to do it well. So it’s similar, but it’s more difficult because of the fact
that you can’t account for it very well. So if you were to think,
what should you give money to? Are you going to be able to measure
whether education here or life? Those are difficult questions to answer,
but you work yourself through it. I joined the Giving Pledge
mostly because I learn a lot. The people in there are in somewhat
similar circumstances, and they brainstorm well,and
it’s a learning process.>>All right, Reuben Arnold, MBA 2. So I know you’ve tried to transition out
of the company and transitioned controlled the company several times last year as
you’re moving into this third phase. I was wondering if you could speak a
little bit to the dynamics that might have made that transition difficult.>>Well, I fortunately had this principle. Here’s the background. Something like nine years ago,
I decided that I wanted to transition It was important thing and I didn’t
know how long it was going to take me. I thought it would take me about two
years, because I was working with the people for a number of years and
I thought it was going to be great. But then on the other hand, I learned
never to believe what I think is a theory. If I haven’t done something
before successfully then I can’t assume that
I know how to do it. So I said then,
it maybe could take up to ten years. I think it took me about eight and
a half years, in order to do that well. So you go down a journey,
I didn’t know anything about governance. I had just run the company and
with this idea of meritocracy that I put myself in a position that I would
report to this management committee. They can hire, fire me. They could operate that way. So that I had myself held accountable
to this idea of meritocracy. And I thought this thing was going to
work, I made the transition. And then I, with a difficulty,
realized that it wouldn’t work. And we all agreed that it wasn’t working. And then we set up a governance system,
the proper board. And I realized, I learned a lot about
governance, and I learned about how to pass those responsibilities along
to others and then we work that out and it’s been about a year and
a half since I transitioned out of that. So I think the lesson is, I have a saying,
if you haven’t done something three times before successfully, don’t assume you can
do it and that was really helpful to me. So through that trial and
error was part of the learning process. So I think that’s the saying,
I guess that would be the principle. If you haven’t done something
successfully three times before, don’t assume you know how to do it.>>Hi, Alyssa, I’m an MBA 1. And when people talk about
economic opportunity, a lot of the times, we talk about
children of the poor becoming rich. But we rarely talk about children of
the rich making room for other people. And so I was wondering if your
emphasis on equal opportunity affected the way that you parent.>>Well, yes, see, but I think I had
an experience because, and I think my kids were lucky because I didn’t have,
I had the most important things. I should say I didn’t have anything. I had parents who loved me. I had adequate nutrition,
I was well taken care of, I went to a public high school but
I didn’t have much more than that. And then, for most of my life,
my kids didn’t have much more than that, so they know the difference,
they know what the marginal utility of having a lot is relative to that,
not very much. And then you start to
create that sense of value. So my own experience
affected my reaction to it. I don’t know what it would
be like to be born rich and then find out what that’s like,
I don’t know what that would be like. It must be much more
difficult in terms of that. So my experience, naturally,
told me the differences. And I think that it’s important to
understand there’s been a number of studies on happiness around the world. Probably Stanford got their professors
who are the ones study happiness. And the one thing is that
they found that there’s no correlation past the basic
level of money and happiness. But the one thing that is,
the most important thing that seems to have crossed communities
is the sense of community. Your relationships,
your personal relationships. And so I think that that’s
affected my approach but I wouldn’t know how to do it if I
didn’t experience it, I don’t think.>>Maybe time for one more question?>>Hi, I’m David. And I’m a third year undergrad. In your interviews and your book, you talked about some great leaders
like Steve Jobs and Lee Kuan Yew. Could you talk about some of your
favorite stories of great character from people like that?>>Great character?>>Stories of great character.>>Stories of great character. Well, different qualities
in those two people. But, I think Lee Kuan Yew was a person who was wise and balanced and self sacrificing. A great leader who had the vision and
the common sense and the wisdom to also suffer the slings and arrows of his position to make
Singapore a very special place and I had the opportunity
to know him a little. And he was remarkable people. But I think that there were,
if you read Joseph Campbell’s book, Hero of a Thousand Faces, you can
almost say what are the archetypical characteristics of great leaders. And there’s this evolution
that’s described in that book, in which people with the sense
of adventure and caring, they go out on their adventure,
and then they are on a mission. And they succeed and they fail. And they do it with other people. And that the mission and the other people eventually becomes more important
to them than themselves. And then they start to rise in
terms of seeing things different. Which I think is the essence
of what spirituality is. Spirituality, I don’t mean religion. I mean, the sense of connectedness
to others in a whole. And when that becomes more
important to them then themselves, they become,
that’s what constitutes being a hero. And so people like Lee Kuan Yew and
such people had those particular qualities and
made, and did what they did. So there are many, many, many cases. I mean I’m saying this man over here,
HR McMasters, is for me a hero for me. And so I see it all around me and I think it is those qualities
that make a person a hero.>>Well, Ray,
we’ve got a few minutes left. You talked about connectedness in
touchy feely l