Ray Dalio, the founder of Bridgewater Associates, discusses risk management strategies, asset allocation, corporate governance, and AI amid economic and political turmoil.

Forbes editor Manita Huja interviewed Ray Dalio, founder of Bridgewater Associates, at the Nasdaq Stock Exchange. Dalio shared his views on the current global economic and political situation, discussing major risks that may arise in the future and strategies to cope with them. Dalio believes the world is in a Warring States period, with countries facing trade wars, technology wars, capital wars, and fierce competition arising from geopolitical influences. He emphasized that these wars are not just diplomatic or economic issues but involve deep structural changes related to global order and the rise and fall of nations. His new book this year, How Countries Go Broke: The Big Cycle, topped the New York Times bestseller list, attempting to explain why countries go bankrupt and breakeven strategies. Below are the key points from the video translation.

The world is in a tumultuous turning point.

Dalio believes that the world is facing structural turmoil and turning points. The world is experiencing multiple conflicts in trade, technology, capital flows, and geopolitics, which are not isolated events but signs of overall order changes. He emphasizes that the current situation is different from the past peaceful and stable globalization era, and behind the current chaos lies the collapse of the old order and the brewing of a new order. These changes will profoundly impact the next decade and even longer.

The U.S. fiscal deficit is like a chronic disease.

Speaking about the fiscal situation in the United States, Dalio described the current fiscal deficit issue as a chronic illness that continues to worsen without proper treatment. He pointed out that the U.S. government spends far beyond its income, leading to a rapid increase in debt and causing pressure on funding sources. To make up for the deficit, the government needs to continuously issue bonds, but capital demand keeps rising, making it difficult to lower interest rates. He believes that this unhealthy fiscal situation will ultimately limit policy choices and could even trigger an economic crisis. Without reform, the deficit will only enter a vicious cycle.

He pointed out that the U.S. government has long faced a fiscal deficit where expenditures far exceed revenues, leading to an increase in debt, which has now reached six times the national income, creating structural pressure. Dalio stated that the government spends about $7 trillion each year, while revenues are only about $5 trillion, resulting in a massive deficit, and interest payments are rising rapidly, which has put pressure on the overall economy. He also mentioned that the role of the Federal Reserve has become increasingly difficult, facing a dilemma between controlling inflation and maintaining the attractiveness of bonds.

Dalio pointed out that the Federal Reserve is in a dilemma. On one hand, it must suppress inflation, while on the other hand, it needs to ensure that the government can smoothly issue bonds to attract capital. If interest rates are too low, it may lead to capital outflows and a depreciation of the dollar; if interest rates are too high, it will compress the economy and increase the government's debt repayment burden. He emphasized that the Federal Reserve's room for maneuver has been severely constricted by political and structural fiscal issues. The result is that both raising and lowering interest rates come with risks, making policy tools fragile. This is a typical "dilemma."

The political deadlock makes it difficult to promote reforms.

Even though financial issues are imminent, the political sphere in the United States struggles to reach a consensus to push for reforms. Dalio stated that there is a lack of effective dialogue and cooperation between the Republican and Democratic parties, and necessary measures such as tax increases and spending cuts are avoided due to political risks. He proposed a "three-step" plan, advocating to control the deficit within 3% of GDP within three years, but admitted that it is nearly impossible to achieve under the current political reality. He predicts that if the status quo continues, the U.S. deficit will increase by another $25 trillion over the next decade. This trend poses significant risks to financial markets and the overall economy.

The government may turn to dangerous policy shortcuts.

Faced with the predicament, the government may adopt radical but highly risky policies in the future. For example, increasing tariffs, strengthening capital controls, or attracting foreign investment to fill the fiscal gap. Dalio warns that these short-term measures, while capable of temporarily alleviating pressure, will undermine the long-term economic structure and trust. He points out that similar "shortcut policies" in past history have mostly led to catastrophic consequences. If policies only focus on political survival and short-term votes, they will cause deep harm to the overall system. He calls for addressing issues with a long-term perspective.

The five forces in history are converging.

Dalio proposed five driving forces he observed in historical changes: debt and financial pressure, internal social division, international conflict, natural disasters (such as climate change), and technological innovation. He pointed out that these forces have previously influenced different periods, but now they are emerging simultaneously and intertwining with each other. He specifically warned that this is a typical signal of significant changes in history. When all pressures accumulate at the same time, society is prone to instability and extreme choices. He believes that the next five to ten years will determine the direction of humanity.

The current situation is the same as in the last century.

Dalio compares the current situation to the similarities with the 1930s, a time when the world experienced the Great Depression, the opposition between democracy and authoritarianism, and the escalation of conflicts between major powers. Dalio points out that we are facing the same economic imbalances and ideological divisions, with the difference being that social media and technology have made extreme emotions easier to spread. He believes that if we cannot learn from history, we may repeat the same mistakes.

In the face of risks, asset allocation must be more cautious.

In terms of personal asset strategy, Dalio emphasizes that the principle of "diversified investment" is more important than ever. He advises investors not to overly concentrate on a single market or currency, especially in the current unstable global situation. He specifically points out that gold should be a part of the asset portfolio, as he believes gold serves as a hedge against inflation, political risk, and currency depreciation. Additionally, he also mentions that Bitcoin can be considered as a small allocation asset, which, while it will not replace fiat currency, holds certain value storage functions.

Give grandson coins to cultivate financial literacy.

When discussing asset allocation and investment strategies, Dalio emphasizes that in such a highly uncertain environment, the most important thing is the diversification of assets. He suggests that investors should build a balanced investment portfolio, particularly recommending to keep 10 to 15 percent in gold as a tool for wealth preservation. He uses his example of giving his grandson a gold coin every year on his birthday and at Christmas, allowing them to realize that many toys and things will gradually disappear as they grow up, but the gold coin remains until they need to sell it in an emergency, helping them understand the stability of gold's value. Additionally, he also mentions the potential of emerging assets such as Bitcoin, not believing it will become a central bank reserve currency, but still as a small proportion investment tool to participate.

Leadership and Organizational Culture: Principles Over Individuals

Speaking of business management, Dalio shares his leadership philosophy at Bridgewater Associates. He emphasizes that meaningful work and interpersonal relationships are at the core of building an outstanding organization. He is committed to creating a culture of transparency, honesty, and sustainable learning, highlighting institutionalized decision-making principles rather than relying on personal intuition. These principles not only enhance efficiency but also allow the organization to continuously evolve. He believes that business leaders should internalize organizational wisdom into systems, reducing the interference of emotions and biases. This way of thinking also signals a new direction for future management.

Artificial intelligence will reshape leadership and decision-making.

Finally, Dalio discussed the profound impact of artificial intelligence on the future of corporate management. He believes that business leaders will collaborate with AI to transform human experience into algorithms and artificial intelligence systems. He began early on to translate Bridgewater's decision principles into computable logic, foreseeing that this is the foundation for AI-assisted decision-making. He believes that future competitiveness will stem from the ability to effectively utilize AI to make faster, more accurate, and rational decisions.

In this article, Ray Dalio, the founder of Bridgewater Associates, discusses risk management, asset allocation, corporate management, and AI amidst economic and political turmoil. It first appeared in Chain News ABMedia.