Transcription
You won't remember this, but when we first met, I said to you, "Are you one of those kids, you know, we picture in their bedroom, gaming, doing all these things that sort of like you would think are stereotypical of the guy that you've become?" And you said, you go, "No, I was a dirt bag. Yeah. I'm just a regular guy who likes to play games. And I got hooked on the investment game. And I learned to look on principles that cause effect relationships, computerize it, and so on. But I'm just still a little bit of a regular dirt bag, you know?"
[laughter]
I'm Harvey Schwarz, CEO of the Carlile Group. I'm Ray Dalio, founder of Bridgewwater and now running my family office, the Dalio family office.
[music]
As we start off here, you and I were both terrible students. Well, if you were terrible, I was way worse than that. But like I think what were you like? You were below average student. I, I barely, I really didn't even. Oh, C minus was aspirational for me. I got into post-college on probation. I didn't get into Rutgers the first time. Somebody had to help me get in.
My situation was, uh, born, I think, at a pretty extraordinary time, 1964, white male in the United States. A period where clearly some really difficult things happened in the world since 1964, but for the most part, an incredibly friendly environment for me. You know, my challenge was both of my parents suffered very severe mental illness. My mother suffered what we would now call bipolar disorder, and my father suffered very severe schizophrenia. And at the time, the treatments, the drugs, quite bad. Um, and the stigma back then created a very, very difficult environment. Uh, my mother died when I was quite young. I was 14. And I think your mom, how old were you? 19, 18. How old were you? 18. And, uh, that was a big turning point.
Notwithstanding her challenges, I kind of really went off the rails in high school. I was a freshman in high school. She passed away. And I was a pretty feral kid. Uh, I guess is the best language. It was not a good environment for me and my dad. Didn't exactly build a lot of self-esteem. I was the, uh, fattest kid, for lack of a better word, in, in, uh, most of my, uh, young years. I sort of ate all my emotions. And so when I, by the time I finished high school, I would say I, I lacked confidence and, uh, hadn't achieved a lot, which was quite difficult. And that's probably the fundamentals that start to build you, you know, for sure. Like you, I mean, didn't you like start out as a caddy, right?
Well, what happened is, I, I hated high school, right? Because it's sort of, um, teachers get in front of the room and they say, "Remember these things." I have a pretty lousy rote memory. And besides, I wasn't interested. Uh, but what I did do is I did odd jobs when I was a kid. I caddied was one of them. And when I would walk around the golf course caddying for people, stock market was hot at the time. So I would talk about stocks with them. I took my caddy money and I put it into the stock market. First stock I bought was the only company I ever heard of that was selling for less than $5 a share. And my logic was, I could buy more shares, so if it went up, I'd make more money, which was [laughter] dumb. And a company was I that I bought was about to go bankrupt, but some other company acquired it, it tripled in value. And I got hooked.
And then when I went to college, that I was lucky to get in on probation, I liked college, okay? Because I could pick the courses I want. I liked the whole routine and I, you know, did well in college. But I, you know, we all had our experiences. Now it's funny. So both my parents were very, very well educated when at a time when that was less common. My father was a PhD, actually worked for Bell Labs. Bell Labs, you may know, was like considered like the, like when I talk to people in correct, and I say, "Oh, my dad worked at Bell Labs." They're like, "Wow, Bell Labs." Like for people that know it. My mother had a master's in education. So I always had a great respect for education because it was just kind of the environment I grew up in. I just was failing at everything.
And so when I, I eventually applied to Rutgers and I got denied. Uh, and a woman named Linda, who I knew, called up the university, complained. And I think she complained so loudly, she was an alumna, that they said, "Hey, [clears throat] just please have the kid write a letter about an essay why he was such a screw-up in high school." And they interviewed me. And somehow Rutgers let me in. And, uh, when I went to those first classes, I had a lot of anxiety about, "Can I even do this?" And that is the moment that I learned that I liked to learn. I really didn't realize that up until then. You know, high school had been kind of like a bunch of emotional battles and feeling uncomfortable with myself and insecure and a lot of bullying. And that was a real turning point for me. So I owe Rutgers and Linda an extraordinary debt.
One of the, uh, joys that I've had is on the other side of this as that I'm an employer and I get to hire people. Um, is that I get to hire the best of the best out of whatever schools I want, the best and the brightest. And what I find quite often is the case is that that student who did really, really well and in remembering all the things that they've learned and so on and hadn't gone through anything like that, may not be the most inventive, may not be the most determined or something. Because you think that's right. In this journey of life, okay, there are these things and it's almost a little bit like sperm to the egg, you know? It's, uh, one of those things where there's a lot of talent out there. There's a lot of people who, uh, are talented in the circumstances where they have barriers and they got past their barriers. That's quite good.
I think you can find smart people, you can find hardworking people, you can find highly ethical people. And we're fortunate to work with lots of the best of the best. But I will say the one thing is, uh, I don't think you can teach creativity. Creativity is is something you can, I think, learn to some degree through experience and trial and error and having to problem-solve and look around corners. And that is a little bit about life in many respects. Adaptability. Okay. Adaptability is, I like that word actually. If you look at species, uh, the number one, um, element for success of any species is not intelligence. It's not even how diligent. It is adaptability, the ability to deal with that environment and readapt. And that also helps to contribute to creativity. Yes. Yeah, that's a really good point.
But I think the thing that we want to get across to people here, right, is there are paths and there are obstacles, right? And so the people you're looking around and you're working with, they may not be apparent or even in yourself, but life is a long journey with a lot of obstacles and a lot of things. And how you work yourself through these various obstacles, some of which are even very difficult to talk about, that can give you great power. And so it's not the classic signs of that you're not going to make it. It could be the ingredient that helps you make it.
And, you know, Ray, I owe you, uh, a big debt on two things. You and I had a catch-up, not this dissimilar to this, back in 2017. You mentioned, uh, brain health, mental illness, and issues you've had in your family. And I said, "Oh, I know a lot about that." And I told you about my parents. And what you said, very, uh, off-handed, very casually, you said, "Um, have you ever spoken about it?" And I said, "No." And you said, "You should." And I said, "Okay." Hey. And we went on stage with a couple thousand people. And I remember bringing that up in the course of the dialogue that both my parents had struggled with severe mental illness. And I told you about my, my son Paul. You know, what happened that day was a number of people came up to me and they said to me, "Thank you for talking about that." And I, I got to say, you know, for someone who grew up in that environment, you would think the fact that they were whispering would be something I would completely understand, but I was really taken back by it. And then I thought about it for a while and I thought to myself, well, I know why I didn't talk about my family's issues because my mother had a rule in the house that you cannot talk about the family issues outside of the home. And that was a hard and fast rule. And that's partly because of the tragic stigma. But I realized that day when people were whispering to me, the stigma is still alive and well, and people aren't comfortable talking about all the issues around depression, uh, clinical diagnosis. And so I took it upon myself to talk more about it.
And the other thing you did is, um, you said to me, "You have a pretty stressful job." And I said, "I do." And you said, "Do you meditate?" And I said, "I used to when I was doing the martial arts." You said, "You should meditate again." And I went out and I started doing Transcendental Meditation with your sparring. How long have you been meditating? Since 1969 when the Beatles went to India. And then, you know, I figured I'd try it. When you can calm yourself down and go into your subconscious, in a sense, and gain an equanimity so that whatever it is that's coming at you, you can still be yourself and you don't get hung up on all the things that people get hung up on. And then if you look at, uh, stress or whatever it is that's coming at you, that calmness so that you can approach it like it's like a ninja in a ninja movie, you know? For the ninja, everything sort of seems to slow up and it becomes easier to do those moves. That's what meditation is like. And so it's a big thing, I think, in terms of giving one confidence. Well, not confidence, this equanimity. You know?
Well, you know, people say to me all the time, they're like, "Okay, so you had this background, you must be confident." Now, I think that's an interesting question because for me, like I've always said, I think my core competency is insecurity. Now, that doesn't mean I can't be confident about certain things, but, you know, for me, insecurity, I probably wasn't until I was in my 30s. I finally got past what people might say is like, uh, I don't know, conventional imposter syndrome, you know, where I don't know, I think the technical definition is, uh, a lack of confidence despite evidence of repeated success. I needed a lot of repeated success to escape being the fattest failure that didn't get into college and had a lot of other challenges. It took well into my 30s where I felt some confidence. You know, insecurity allows for curiosity because if you're insecure, you don't think you're the smartest person in the room. You don't mind asking questions and you don't mind, you really feel much better when you're surrounded by smart people because you're not the smartest. Like I inherently know I'm not. And so, um, it opens up a lot of doors to improve the odds of an outcome being more successful than not.
I've learned this, uh, repeatedly, and I've hired the, you know, valedictorians or the best schools and all of this thing. And what happens is they come up to a barrier of what they know, and they come out a little bit confident and arrogant of what you know. And, uh, uh, whatever you know is only a small percentage of what you need to know. And that when they can, in a sense, realize that decision-making is a two-step process. You have to take in before you put out. And for me, failing in, um, crashing has been, um, the great means, the greatest benefit I had. Like I crashed in 1982, and I thought we were going to have an economic, a plunge. And we had, instead of boom, yeah. And I couldn't have been more wrong. And it was very embarrassing. I was so broke, I had to borrow $4,000 from my dad. And, um, but that was one of the best things that ever happened to me because it gave me the humility I needed to balance with my audacity.
So I've got this, this sort of principle that if you worry, you don't need to worry. And if you don't worry, you need to worry. Okay? Because if you don't worry, you're not taking care of the things that you should worry about. It's really worry. Worry with action.
When you think about the world today, what makes you worry? How people are with each other. Political polarity that is almost emerging into a type of civil war. We have a geopolitical breakdown. So in other words, we are going from what was a a multilateral world-based, uh, rules-based order to laws of the jungle and fighting in a way and a a shift in relative power. These are things to worry about. And then technology, which is a, now our technology is so fabulous, but it's also so dangerous in so many ways, dangerous for jobs, dangerous for each other, that the harms that could be done together. And so when I look at those, those are circumstances that brings the pros and cons. And at the same time, if people could deal with each other well, if we could deal with these things, I think again, I go back to, well, you know, again, born in 1964, all the trends, declining interest rates and deflation. Again, there were some horrible things that happened in the world, but generally speaking, the world was more peaceful versus clearly the prior period of time, the orderly American world order and that underpinning, that geopolitical underpinning and cooperation that allowed for an economic model. We had a middle class and we had global poverty come, come down meaningfully, notwithstanding the fact there's a lot of suffering in the world and it has to be acknowledged. And today you're seeing geopolitical splintering, very different, which is really what you're talking about, the lack of geopolitical cooperation. And by the way, the economic cooperation can't unravel itself as quickly as geopolitical cooperation.
We've had a kind of a bit of an unlucky beginning of this century. It's not an unlucky thing. Well, no, I was going to say, I'll tell you why I say it. We had 2008. You might argue that was unlucky. But really, before that, we had 9/11, 2008, and the pandemic. And these are consequential events which have contributed to this shift. Contributed to higher deficits, I would argue, contributed to the wealth gap. The fact that roughly 43 million households in the United States consume $15 trillion a year. That's the size of China. And these are real issues. I'm totally in sync with you that they're real issues. I'm just saying that because I, I'm watching these. I studied the last 500 years of history because to watch the rise and decline of reserve currencies and things like that. And, um, what I learned is, um, that there are these big cycles. And it's not because they're predestined as cycles. It's that what happens is when you have a great conflict, when you have a, a debt problem and you have a great conflict internally and externally and so on, you have a war or you have conflict and you have these great. No, I'm not. I don't. I just think these great cycles are human nature. But human nature is a big part of it. But it's also when you're in a different position, when you have more debt than you didn't have because you wiped it out. So now it's very interesting because every order, we call a system an order. There's a monetary order, there's a domestic political order, and there's an international world order. And through all history, they have come and gone, and they have had conflicts and for the same cause-effect relationship because there's a certain dynamic. For example, uh, one of the great things about capitalism, one of the challenges of capitalism, the great things about that is the inventiveness, the entrepreneurship, and all of that comes up and so on. And then simultaneously, it produces also great wealth gap gaps and and differences that can produce great opportunity gaps. And then we think about what's going on. We've got a great bull market here. Who owns stocks? Who doesn't own stocks? What does that mean in those technologies? Right.
I'm, I'm a chronically glass-half-full optimist. I do agree with you on the, on this, the significance of where we are. And I call it, we're at a pretty meaningful economic global inflection point. I think if you look at history and your cycles, and I think we're at an important part of the cycle. I know you, you're generally an optimistic person. People could hear you as being much less optimistic right now. What do you feel good about? I think if you're, um, realistic. Yeah. You don't have to worry. And if you don't worry, you need to worry. [laughter] Okay? Because there are things we can do. We can manage our budget balances better, okay? We can be better with each other. Totally. Okay? Whether domestically or internationally, we can choose not to fight. And if we worry about some of those things because they are realistic worries, like anybody watching television or living their daily lives must recognize all these things, right? If we can understand the notion of what goes around comes around, do unto others as you would have them do unto you, karma, those types of things. But it takes, uh, giving up, let's say, something of selfishness or whatever it is for the common good, what's good for most of us. And that sounds really idealistic, but I'm just trying to be practical. We used to do it better, you know, 25 years ago. We did a lot better. And a lot of people would would challenge you and say, well, 25 years, the environment was different. The circumstances were different. It allowed people to do it better. And that may be the case, but it doesn't matter. It's not realistic. I'm talking about cause-effect relationships. If you take the industrial revolution, the industrial revolution creates so many fabulous things and it raises living standards. You had the Gilded Age. Yes. And then you had the robber barons. And then you go into the panic of 1907, caused this great clash. World War I and that dynamic, and 1929 and the Great Depression. All these events are these are real. Our economic conditions affect our social conditions. So if we're looking at, let's say, that period, I worry about that period between the midterm elections and the presidential elections for a number of reasons. There are things that come together. Look, I'm not, nobody has the definitive answer on what the future's going to look like, but it is going to come down with how we are with each other, right?
Yeah. I'll tell you why I'm optimistic. I'm optimistic because while those periods you just highlighted were quite tragic, they gave birth to a period of cooperation, peace, really very sound financial policies. And again, you've talked about these cycles and we're in these cycles and these waves are very long and very powerful. And I like to think of we're in a period now which is a bit of an inflection point reversing a lot of the trends which have driven lots of wonderful things for the past 50 years. Right? I mean, the whole discussion globally has pivoted in the past four years. Whereas you would have talked about things like energy transition. Now you talk about energy diversification because energy is now a national security issue. Japan, Canada, Europe, United States, defense spending going up everywhere in the world. Um, and we sit here with two wars going on simultaneously while we have this nice conversation safely here in the CNN studio. I think, uh, you know, on the other side of the midterms, uh, I'm hoping we get to a point actually where your forecast is wrong. I hope this is more like your earlier forecast and it's not, it's not as violent. Or if it is, the discourse leads us to a place that becomes less. So, if there's not cooperation and collaboration, we're not going to make progress at the pace we could.
Well, neither of us knows what the future's going to hold. You know, hope is a nice thing to have, but I'm every day playing on the board and I have for, you know, 60 years have to put the bets and so on. And I can say then the best thing to do is to know how to diversify well. Okay? Because to know how you deal with your not knowing is more powerful than anything you know. And so if you know how to do that and do that in a way that doesn't lose your returns. Well, I would also say there are times where you can be more certain and times where you're where you're more uncertain. I do think this is a period where uncertainty trades at a premium and diversification is a great, a great protector for that. Okay. So, I'm just saying in terms of myself, you know, I'm sitting in this seat because I played the game and I'm a realistic game player and I could be wrong and therefore I don't want any concentrated bets and I know how to do that. Okay? And there are things going on in the world that are interesting bets that are different from the classic bets of, you know, like the market right now is driving itself to concentration. It's understandable. Okay. The measure of that dynamic is that's volatile and that changes in a certain way. How does one play with that game? Okay, I'm just a player of the game. And when I look at that playing of the game, I know how to engineer and I, I'm going to try on a stage of my life that I want to pass things along. I'm, uh, I want people to understand that they can engineer a safer, uh, portfolio without having that kind of concentration because you have a decision to make. There are issues of bubbles. If anybody's seen a bubble, you understand that there's not precise investing. That because in a bubble, everybody's got to throw all the money in to try to win the game without regard for knowing what the future. Well, there's a lot of new things in the world. FOMO is not new. This is FOMO. But FOMO comes at those moments.
[music]
When you're meeting with young people today, what's the message you leave them with? Non-markets. Now, by and large, life is the opposite of how it's [music] been told to you. And that you what you have to do is understand it's an adventure and you have [music] to understand your nature and you have to find the path that suits your nature and that it's a discovery process.
You know, when I was 24, uh, someone did me a great favor, gave me a job at City Bank. And one of the smartest people I met at that point in my life, certainly. And I said, "Hey, can we have a beer together? I just want some advice." And we [clears throat] sat down. And such a cringy story. And I said, "Um, geez, you know, I would have thought you would have achieved a lot more by now." Maybe he was like 15 years older than me, because you're so smart. I meant it as a compliment, Ray. And, you know, there was a lot taught in the next 60, 90 seconds from this person. The first thing was they were incredibly gracious about my wildly awkward compliment, which was not really a compliment, I guess, in retrospect. Then he said, you know, "You'll realize in life, careers are 50% luck, 50% skill." And I found that to be an exceptionally good summary for the way life does unfold. And this notion that today young people feel like, oh, it can all be managed. It's too random. And your language around just like embracing it. And I do think the 50% luck, like for me, I think it could be 90% luck, 10%, maybe 99-1, because I've just had people come into my life. But the person that was asking that question when I was 25 couldn't have imagined sitting here with you. It wasn't even a consideration. But for a series of lots of random events, yet a bit of hard work and a lot of luck, and you can only manage so much in life. Um, and there are going to be some really hard parts. But I got to tell you, for me, uh, a lot of the grounding is, uh, in just being grateful for the fact that it all worked out. And at one point in time, for many points of time, it didn't feel like it would work out at all. But for the help of a lot of people who intervened in my life who actually didn't have to. And I asked someone once, "Why did you do that for me?" Someone gave me a job who didn't have to give me a job. I was looking for like some sophisticated insight. "Oh, I saw a special thing about you, Harvey, as a kid." He said, "It was the right thing to do." So, you know, sometimes you have mentors, sometimes you have mentors, sometimes you have angels. That [music] was the right thing to do to have that beacon. If everybody can get a little injection of that, yes, we'd be in a much better place, right? Yeah. Great to see you. Right. That's the human nature. It is. If you have angels, we need more angels, buddy. Thanks very much. That's right.