The School of Greatness with Lewis Howes

>> Hi.

I'm Lewis Howes, New York Times best-selling author and entrepreneur.

And welcome to "The School of Greatness," where we interview the most influential minds and leaders in the world to inspire you to live your best life today.

In this episode, we sit down with billionaire investor and best-selling author Ray Dalio.

Today, he shares how to mentally and financially prepare for a world that is always changing, the best and worst ways to invest your money, and why it's so critical to change the way we teach financial education.

I'm so glad you're here today.

So let's dive in and let the class begin.

For most people that, you know, really don't have that much savings yet, you know, maybe they're, again, at the early start of their career, they haven't really saved that much, maybe they're in a little bit of debt even, is now the time to start investing or is it more just save up some reserves for six months to have some cash to live your life before you start investing?

Or is it important to build the discipline and the habit of investing 50 bucks a month, 100 bucks a month in a diversified portfolio no matter how much you're making?

>> I remember going through this because I didn't have any money.

>> [ Laughs ] When was this?

>> Oh, this was 1982, '83.

I didn't -- I had to borrow $4,000 from my dad to help to take care of my family bills.

But so I remember thinking, "How many weeks could I live if I lost my income?"

And I started counting in weeks.

>> Hmm.

>> I think that's the way to do it.

You know, you start to count how many weeks.

Can it be a month?

A year?

Can I get up to a year?

And I didn't like that because of the fact that there's an obligation and it's like, "Oh, if I get..." Then I'm going to be drowning.

I'm trying to keep my head against water.

This is just my own bias.

But anyway, assume that it's buying power over the next number of years can fall by 3% or 4% a year or if you put it in a risky investment like stocks or something... >> Could be gone.

>> ...it could fall by more.

So cut that number maybe in half and have twice as much, because you have to understand that that's your freedom, that is your safety.

So that first band, you must take care of that first band, take care of that.

Once you get past that and you feel, "Okay, I can take care of my family and I can take care of mine in a worst-case scenario," then you have the freedom to then take other kinds of risks.

But when you're building that portfolio, it's the same thing as when you have a lot of portfolio past that.

Just you want to diversify well.

>> Yeah, because a lot of people say, you know, if you want big rewards, you got to take big risks.

But what I'm hearing you say is there... >> That's not true.

>> Then what is the truth then?

>> If you find individual bets that are diversifying, your return will equal the average of those returns, but your risk can be cut by 80%.

>> Were you making individual, I guess, investments or individual "bets" back in the day?

>> By a bet, I mean, like if you say I'm going to invest in the stock market.

>> Yes.

Yes.

>> You can see whatever the bet is.

You can see it.

Look back in history.

It gives you a pretty good idea of how it goes up and down, what your risks are.

Do that by looking at it in inflation-adjusted terms is the best way.

But it goes up and down and you can see how your buying power is.

If you say if the worst case happened, what would that look like?

And I'm telling you, like I'm saying, that could be -- the worst case is when you look at that is something like 60% or 70%.

>> Mm-hmm.

>> However, if you do that with uncorrelated investments, like when commodities go up, bonds go down or, you know, that kind of thing, and you balance things, then you find some part goes up and another part goes down.

And by doing that, you can reduce the risk without reducing the returns.

And I call it the holy grail of investing.

Holy grail means if you follow this path, this will be the key to your riches.

And what that is, is 10 to 15 good uncorrelated return streams.

>> You mentioned debt as well.

What's your view on debt these days?

Because you mentioned how you didn't want debt back in the day, but is it still something you don't want?

>> I always have to think about what's the worst-case scenario?

Can I handle the worst-case scenario?

Whatever that is, right?

Because it's also -- You can be a great investor or you can be great at anything and it'll only be one time that knocks you out.

>> Right.

>> And there's one thing about debt for consumption and debt for investment.

>> Yes.

>> Like debt for consumption is really bad, okay.

Because it goes away, the asset goes away, and you're left with this obligation, and, you know, that's risky and it's stressful.

You know, and it piles up.

You're living above your means.

Don't do that.

It's not a good idea.

Whereas if you have debt for investment, you better be pretty damn sure that the returns on that investment will be higher than you have to give back in money in the form of both interest rates and the principal repayments.

>> What are the best, I guess, investments in your mind to use debt with?

>> The best investments are typically those things that you're closest to, and they fall into two types.

Those that affect your living standards.

Like I think owning a house or an apartment or your residence, it affects your life a lot and the cost of it is not the cost of it, you know?

In other words, you buy it at a certain price.

It's not like the thing that goes away and you consume, so you'll sell it at a certain price and probably you'll modify it over a period of time.

You'll make things and it produces kind of a forced savings that also brings you joy and brings you a better environment.

And then the other thing is things that you might know really, really well, but you could still take the cycle, you know.

Is it your own little business?

>> Mm-hmm.

>> How do you do that?

And then can you ride the cycle?

You know, the cycle, the worst-case scenario.

So those are the two things that I think debt are good for.

And one thing that debt isn't good for is consumption.

>> You've seen a lot in the last 4 or 5 decades of being in this industry and this business and the financial world.

With everything that's happened over the last couple of years, not just the pandemic, but stock market's going up and down, wars, inner conflict of countries, all these different things, cryptocurrencies coming in, the decentralization of money, all these different things, what do you even think is going to happen in the next 10 years with the whole 2030 agenda being talked about?

What do you see happening over the next 10 years?

>> Interestingly, acts of nature in the form of droughts, floods and pandemics have had a bigger impact than the things I've been talking about in terms of cost more lives or toppled more civilizations, those acts of nature.

Over long periods of time -- 10, 15, 20, 30 years -- the most powerful force is man's ability to adapt and invent.

Tremendous capability of adapting and inventing.

So here's a Great Depression and here's a war.

And as you see those things, they look like blips on the chart of life expectancy, per capita income, and so on.

And so there's a tremendous capacity for dealing with all the other stuff if man can adapt to it well, and inventiveness during this period of time should be kind of, I think, really great because what we're using more and more is types of technology, artificial intelligence and so on.

The ability to think and collect data and use the computer to help us with that is a very, very powerful force.

Now, like any forces, it's also a risky force because it can be used for bad as well as for good.

But I think the world will evolve.

We will have these cycles in the world.

So that's what you see.

You see these cycles and then you see evolution through those cycles and adaptation, you know, a lot will be unknown.

But I'm... You know, we have a lot of potential and a lot of things to worry about.

>> If you were, you know, in your -- you've created so much wealth for yourself.

You've been building so much and you're still very busy.

It's not like you're done by any means.

You're still growing.

But if you were in your late 30s, early 40s at this time and you had been building a business and building a team and trying to set yourself up to be healthy in all the different areas of your life, how would you be thinking if you're in your 30s, early 40s, about the next few moves that you should make as an individual?

>> Oh, it's very interesting because there's a life cycle.

In your early years, quite often your happiest years, and the happiest years extend just until you -- a bit past you getting out of school.

So there's three phases.

The first phase is you're dependent on others.

You're trying to learn and be successful, and then you come out of school and you're idealistic.

You can do everything.

You don't have much obligations.

You take on the job and so on, and that's a happy period.

Then you have a work-life balance challenge.

>> Mm-hmm.

>> And life is harder than you expect it to be typically.

And that notion that "I'm going to be just easily, terrifically successful" is difficult.

And so if you take the most, least happy period of life by measures of happiness across most societies, it comes in really something like the 45 to 55 period.

>> Mm-hmm.

>> That's because you have the work-life balance.

Maybe the relationship that you had with your spouse is not or whatever your significant other isn't as wonderful as you'd imagined it would be.

That's when the divorce rates are higher.

You're overstretched.

You're having to take care of your kids and you're having to take care of your parents.

>> Mm-hmm.

>> It's a tough phase.

That's a tough phase.

And then what happens is, as you pass that, it's very interesting.

From 55 until the person approaches whatever that is that's going to kill them is the happiest period of time.

>> Huh.

>> Even happier than the earlier period of time by records.

Because you become free.

You're not so hung up on "Am I the best accomplished?

I'm okay."

You're self-sufficient.

You have the choices, whatever.

And you don't have to take care of your parents.

You don't have to take care of your kids.

The kids are grown up and your parents have passed away and so on.

So that's the pattern.

And so when you think about this in terms of, let's say your question, okay, what's the advice?

My first bit of advice is meditate.

>> Mm.

>> I found that meditation -- I do transcendental meditation.

I find that that gives me a calmness and an equanimity to deal with my realities that are coming at me.

Okay.

Life is just a matter of choices.

And I found, generally speaking, when things are at odds and there's this conflict, if you step back with a clear head, you can get most of each that you think is at odds.

For example, on this work-life balance, most people think, "Well, do I take more free time and take it away from work or do I take work and take it away from the free time?"

and so on.

But the real answer to the question is "How am I going to be efficient so I get more out of a day or more out of an hour?"

And with equanimity, you look at your circumstances and you say, "Okay, how can I get more?"

Then you can put more life into life.

>> Yes.

>> Because you reduce that, but you have to have that equanimity, not a sense that stress and these things are happening to me and I'm angry and I'm upset.

Okay?

Because that will hurt you physically.

Stress is a killer, and it also won't make your best decisions.

So I'm trying to give an equanimity, you know, and again, pain plus reflection equals progress, reflection, quality reflection, not just yourself, but even asking people and looking for principles of other people who are in that same situation.

It's not like this is the first time you've gone through this or anybody's gone through it.

>> Right.

>> So when you ask others, "Well, how do you deal with work-life balance or the other things?

", you know, you'll find interesting things and you'll be able to deal with it.

>> Okay.

So meditation would be one thing.

>> And that equanimity and look at it and realize it's just your choices.

It's not the world picking on you.

But, you know, it's the world.

It's life.

>> The world is happening, yes.

>> It's reality.

>> Yeah.

>> And, you know, that kind of a -- It's an approach to life.

>> Yeah.

Were you always a meditator?

>> I started in 1969.

So I've been pretty much -- you know, I forgot what I was at the time, whatever that is, you know.

>> What, two years old then?

>> No, like 18 or something, 20 or whatever, 22, I don't remember.

>> One question about your thoughts on decentralizing, you know, money with the dollar and the euro and all these things losing its value with the what seems like hysteria of crypto, NFT, the metaverse, you know, money in the metaverse type of conversation.

I kind of include all that.

What do you see happening there in the future with crypto?

I think I read somewhere that you own some of crypto.

I'm not sure how much, but you've done some of it.

>> Yeah, a little bit, just a little bit.

>> What's your thoughts about the crypto space, Bitcoin, Ethereum, kind of all of that in the future?

>> I think we're in an era of -- that money as we know it, which is a fiat money, is being devalued and it's going to change.

>> Yeah.

>> The dollar's role is going to change and that alternatives are going to compete with that.

So like I wouldn't want to own money when you own a dollar or let's say is in the form of a debt instrument, so you're going to get paid back in that, and I think it'll have a negative real rate and a negative buying power and so on in almost any currency.

And they're all competing.

So they'll all -- they're all devaluing essentially.

And so money is about the medium of exchange and a storehold of wealth that is portable and works in most countries.

And now we'll find out what those things are.

I mean, gold is an example of one of those and crypto is an example of those.

And, you know, maybe NFTs are and who knows?

I think we're in a kind of a "who knows?"

kind of phase.

New things come along and then there'll be that and I think they'll compete.

And I think that people will start to think about "How do I have a portfolio of those things that I can take from that are widely accepted that I can trans and that maintain buying power?"

Now there's challenges to that, like when you have a lot of volatility in it, it means that, "Oh, my God, my owning it is more volatile."

>> Right.

>> You know, is more risky than my not owning it.

>> Uh-huh.

>> And so that drives money into sort of other things.

But anyway, we're going to struggle with that and you're going to see digital currencies and different countries and so on.

And I honestly don't know.

I don't think one thing wins out.

I do think that a lot of the crypto, you know, they go -- like all markets, they go through phases and there's kind of the bubble phase where, you know, it goes up a lot and everybody believes it and the story believes it and everybody's bought in it.

And then you have the adjustments and so on.

I think there's too much emphasis in it because the total value, you know, of Bitcoin or even the cryptocurrency is not much is -- comparable to the value of Microsoft.

So one has to think when one thinks of assets, I would rather think of the whole array of assets than to think about, you know, just, "Oh, is it going to be that crypto Bitcoin one?"

I think people could be too concentrated on that and I think that could be dangerous.

>> Right.

>> So I don't know the answer.

I do know there are lots of storeholds in wealth that you can be in.

>> Diversification is your key.

Yeah.

>> Diversification is my key.

Yeah.

>> There's a great quote that I like and I'm going to butcher it, but it goes something like this.

I think it's from Jim Carrey where he says, "I wish everyone had the ability to become rich and famous and realize that that's not the answer."

>> [ Laughs ] That's a great quote.

That's so good.

>> If you could give people the -- what it feels like to be, you know, one of the richest people in the world and what a lot of money means, what does it actually mean if you could kind of share that for people?

>> I can describe what it means for me.

It might be different things for other people.

Let me start off by -- and I acquired it by an accident because it's the game that I happened to fall in love with.

If you learn to play the game well, it pays well.

>> Right.

>> Okay, and a lot of people -- I think that's true with a lot of people who are coming up with ideas and building businesses and so on.

They got excited about it.

It does.

It works well.

And then it pays well.

To me it's a serious mistake that thinking that success is measured in such things because money has no intrinsic value.

Okay.

What does money get you?

And what do you need?

Now, what I want, well, what I want is freedom and the ability to be creative and do that.

That's what I want.

And money helps me get that.

It helps me help other people.

It helps me have the impact.

I like those things about it.

But more importantly, I like my game.

I like to play my game.

>> Mm-hmm.

>> Not more important, but anyway, comparably important.

I think that success is having the life that you want to have.

As long as you're earning more money than you spend.

>> Mm-hmm.

>> And that can be spending very little and having a wonderfully luxurious life.

Like, I watch a lot of people who don't have much money and of different ages, sometimes young, sometimes older.

They travel around the world, they backpack, they go to different cultures and different places.

They can live in a tent or in the most beautiful -- not -- you can -- the most beautiful nature is available to you.

It can be.

Or you can be in a hostel.

Or you can be in so many different ways.

>> Couch surfing.

>> And have freedom and so on.

I think everybody should almost experience that to know that they can have their -- a great deal of freedom without a great deal of money.

And that also -- So, and that status thing is a silly thing.

Okay.

That's like being hung up on living your life for approvals and so... And so don't get on the track and lose sight that okay, what is it that you really want in your life?

What is a successful life for you?

It's not measured by how much money you have or how much status you have or almost that other stuff.

It's measured in, you know, like I would say, again, meaningful work and meaningful relationships.

If you have something as your work that you're into and your craft and it's the thing you love and you have meaningful relationships, I think those are the most important things to make a rich life.

>> So this question is called the Three Truths.

Hypothetical scenario -- Imagine it's your last day on Earth many years away and you get to live as long as you want and achieve and live the life you want with everything.

But for whatever reason, you've got to take all of your written, audio, or video work with you so no one has access to your messages anymore.

This interview is gone.

It's all gone.

But you get to leave behind three lessons to the world, three things you know to be true that you would share behind.

What would you say are those Three Truths for you?

>> You know, evolve well.

And contribute to evolution because it's all about evolution.

Our instincts, everything.

Everything that's happening is about evolution.

>> Yeah.

>> Meaningful work and meaningful relationships are the most important things.

Radical open-mindedness so that you can take in all that's available for you.

Don't make the mistake that the best ideas have to come from you and realize that how you deal with what you don't know is even more important than anything you know.

>> My final question is what is your definition of greatness?

>> Again, how you're evolving and contributing to evolution.

You know, in other words, you're part of the evolutionary system and how you do that with, and that means other people and your environment.

>> Awesome.

Right.

Thank you so much for your time.

I appreciate it.

>> My pleasure.

Thank you, Lewis.

>> We hope you enjoyed this episode and found it valuable.

Stay tuned for more from "The School of Greatness" coming soon on public television.

Again, I'm Lewis Howes.

And if no one has told you lately, I want to remind you that you are loved, you are worthy, and you matter.

Now it's time to go out there and do something great.

If you'd like to continue on the journey of greatness with me, please check out my website lewishowes.com, where you'll find over 1,000 episodes of "The School of Greatness" show, as well as tools and resources to support you in living your best life.

>> The online course Find Your Greatness is available for $19.

Drawn from the lessons Lewis Howes shares in "The School of Greatness," this interactive course will guide you through a step-by-step process to discover your strengths, connect to your passion and purpose, and help create your own blueprint for greatness.

To order, go to lewishowes.com/tv.