Ray Dalio: Capitalism Needs to Be Reformed

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Bridgewater's Ray Dalio wrote a post about "Why and How Capitalism Needs to be Reformed," claiming that the outcomes of capitalism are no longer consistent with the system's goals. Ray points to today's widening income, wealth, and opportunity gaps, among a wide variety of other data points, and blames them for today's political conflicts.

After you read his why and how, what are your thoughts?

Comments (169)

Apr 5, 2019

I read a decent amount and skimmed through other points that I've heard him touch on before, overall, not really impressed. Capitalism didn't all of a sudden stop working for some people, and it's on a spectrum- not as black and white as he insinuates. I don't like his semantics either, but I assume it's mainly for catching eyeballs considering bashing capitalism is in vogue. You can't "change" capitalism, the word 'unfettered' is in its definition.

His "What I Think Should Be Done" is just a series of platitudes that make him sound like a US senator. In particular, the 'public/ private' partnership is laughable, we already have that, Ray, it's called Crony Capitalism. Government spending continues to go up, and the gap continues to widen, so no, more programs and initiatives aren't going to help. Raising more money from the top won't solve anything, besides, the 1% are already getting clobbered on income taxes. The ultra-wealthy didn't get there via W2 income and as a member of that club, he knows this- so I hope he's implying an overall wealth tax, rather than just income.

Now, his "Looking Ahead" section is good and I agree with a lot of his points. Maybe goes to show why he's a great macro investor and not necessarily a savior in public policy. Looking forward to some other thoughts and discussion.

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Apr 5, 2019
rothbard814:

I read a decent amount and skimmed through other points that I've heard him touch on before, overall, not really impressed. Capitalism didn't all of a sudden stop working for some people, and it's on a spectrum- not as black and white as he insinuates. I don't like his semantics either, but I assume it's mainly for catching eyeballs considering bashing capitalism is in vogue. You can't "change" capitalism, the word 'unfettered' is in its definition.

His "What I Think Should Be Done" is just a series of platitudes that make him sound like a US senator. In particular, the 'public/ private' partnership is laughable, we already have that, Ray, it's called Crony Capitalism. Government spending continues to go up, and the gap continues to widen, so no, more programs and initiatives aren't going to help. Raising more money from the top won't solve anything, besides, the 1% are already getting clobbered on income taxes. The ultra-wealthy didn't get there via W2 income and as a member of that club, he knows this- so I hope he's implying an overall wealth tax, rather than just income.

Now, his "Looking Ahead" section is good and I agree with a lot of his points. Maybe goes to show why he's a great macro investor and not necessarily a savior in public policy. Looking forward to some other thoughts and discussion.

Two things:

  1. He is using a timescale of mid 1900s/post-war to today to show a trend of change
  2. He's providing data analysis comparing different quintiles and arguing that your perspective probably reflects where you fall, generally
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Apr 5, 2019

I understand that he's using data to show a change in trends. He spends the majority of time blasting public schools, mass incarceration (War on Drugs), and medical care. To me, those are failures of government for the most part, not capitalism.

Poor neighborhoods are typically condensed which often leads to a cultural echo-chamber. You have perverse zoning laws, Section 8 dependency, price fixing, guaranteed mortgages, etc. All of these policies skew pricing and supply/ demand and continue to perpetuate the issues we see with housing in poorer communities.

The mass incarceration is due to the War on Drugs and mandatory minimums, look at a chart showing the relationship, it's sickening. Continuing on the point of cultural echo-chambers, prison is arguably the worst. It's no wonder why the prevalence of single-parent households has skyrocketed.

Poverty is a relative term, the poorest of the poor in the US would live like kings in many other parts of the world. That's not to discount the issues we see domestically, it's more so to highlight that there will always be inequality. The quality of life for the poor today is light years better than it was in say, the 1960's.

You'll be hard-pressed to convince me that capitalism is to blame, especially when the entire article is essentially a highlight-reel of shitty policy and government failures. As it has been said for decades, capitalism isn't close to perfect, but if you're going to try to find a better alternative or attempt to make everyone equal- you're going to have a bad time.

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Funniest
Apr 5, 2019

All the Dalio fanboys scrambling frantically to reconcile this post with their past admiration of him

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Apr 5, 2019

We don't have capitalism. We have crony capitalism. Laissez Faire isn't the answer either. Gave us the robber barons and child labor.

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Apr 5, 2019

There are a number of things he's spot on, at least in terms of analysis, while he's missing the point on some, for instance education. I'll see if I can find a platform to write him a reply.

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Apr 5, 2019
neink:

There are a number of things he's spot on, at least in terms of analysis, while he's missing the point on some, for instance education. I'll see if I can find a platform to write him a reply.

Oh.. thnx, glad to know he's wrong on education. I'll take your word that you will get it fixed

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Apr 8, 2019

Well he is wrong. Educational disparities are not the result of capitalism, it is the result of governmental policy and the "unintended" consequences that come from these policies.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

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Most Helpful
Apr 5, 2019

Honestly, I think the real failure is the fall of the church. People who are driven develop their own model on how life should be lived, in an idealistic way. Which means you fall off the wagon, but get yourself back on, and can sustain your pace of life for long periods of time before you fall off again. And then the cycle repeats.

The church is a beautiful model on how people should live life. And it trains people to get back up and get on track again, while also promoting forgiveness to start over when they mess up. This is needed.

The evidence of higher divorce rates, higher single mothers, and higher poverty all point to leaving traditional familial values, which are taught by the church. In turn, people struggle financially, have less disciplinary oversight of their children, more stress, which leads to worse habits, and they fail to promote a better idealistic model for their children.

The economic decline that he's showing isn't a result of capitalism beginning to fail. The reality is, traditional morality is failing, which misaligns our economic model.

In other words, I don't know what the answer is, but it involves trial and error until we find where the new norm actually is.

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Apr 5, 2019
iBankedUp:

Honestly, I think the real failure is the fall of the church. People who are driven develop their own model on how life should be lived, in an idealistic way. Which means you fall off the wagon, but get yourself back on, and can sustain your pace of life for long periods of time before you fall off again. And then the cycle repeats.

The church is a beautiful model on how people should live life. And it trains people to get back up and get on track again, while also promoting forgiveness to start over when they mess up. This is needed.

The evidence of higher divorce rates, higher single mothers, and higher poverty all point to leaving traditional familial values, which are taught by the church. In turn, people struggle financially, have less disciplinary oversight of their children, more stress, which leads to worse habits, and they fail to promote a better idealistic model for their children.

The economic decline that he's showing isn't a result of capitalism beginning to fail. The reality is, traditional morality is failing, which misaligns our economic model.

In other words, I don't know what the answer is, but it involves trial and error until we find where the new norm actually is.

Ahah sorry for the lazy answer. To be more clear, I don't think there isn't a problem with education, but I don't think the main problem is the quality of public education either. The problem in the US is the perpetuation of the classist system, notably parents that effectively run their kids lives because they know what gets them into the Ivy League, while poor parents for the most part do not, simply because they don't know. It's not a matter of how much you learn, but what kind of networking opportunities you get and socialization that's required to get into high paying jobs.

As for the decline of religion you mentioned, I agree with you to a degree. Religion ultimately gives a meaning to most people lives and rules that simplify the complexity of reality and work for most, creating a sense of community, belonging and self-preservation. That's desiderable because it creates a cohese society. The decline of organized religion has ultimately resulted in the rise of modern religions, eg the ''woke'' left, which just like most newly born religions is zealous, aggressive and divisive.

Apr 5, 2019
neink:
iBankedUp:

Honestly, I think the real failure is the fall of the church. People who are driven develop their own model on how life should be lived, in an idealistic way. Which means you fall off the wagon, but get yourself back on, and can sustain your pace of life for long periods of time before you fall off again. And then the cycle repeats.

The church is a beautiful model on how people should live life. And it trains people to get back up and get on track again, while also promoting forgiveness to start over when they mess up. This is needed.

The evidence of higher divorce rates, higher single mothers, and higher poverty all point to leaving traditional familial values, which are taught by the church. In turn, people struggle financially, have less disciplinary oversight of their children, more stress, which leads to worse habits, and they fail to promote a better idealistic model for their children.

The economic decline that he's showing isn't a result of capitalism beginning to fail. The reality is, traditional morality is failing, which misaligns our economic model.

In other words, I don't know what the answer is, but it involves trial and error until we find where the new norm actually is.

Ahah sorry for the lazy answer. To be more clear, I don't think there isn't a problem with education, but I don't think the main problem is the quality of public education either. The problem in the US is the perpetuation of the classist system, notably parents that effectively run their kids lives because they know what gets them into the Ivy League, while poor parents for the most part do not, simply because they don't know. It's not a matter of how much you learn, but what kind of networking opportunities you get and socialization that's required to get into high paying jobs.

As for the decline of religion you mentioned, I agree with you to a degree. Religion ultimately gives a meaning to most people lives and rules that simplify the complexity of reality and work for most, creating a sense of community, belonging and self-preservation. That's desiderable because it creates a cohese society. The decline of organized religion has ultimately resulted in the rise of modern religions, eg the ''woke'' left, which just like most newly born religions is zealous, aggressive and divisive.

Right. Like in Evicted, Desmond talks about the church being involved with providing counsel to drug addicts, a place to borrow money for those who needed it, and even a community for everyone to feel welcome like you said. The church was important in the way people held a sense for who we are, and we know that the Bible is the root of our legal system. It's something that really should've been preserved, but we're not doing that.

And the reason I thought about that, is because Dalio is calling for more funding, again, to poorer schools, but I doubt that kids all have the drive. I think funding is part of the problem, but a lot of kids also need a better sense of themselves, that like you said, I don't think parents are able to provide all the time.

You have to keep in mind, parents in those wealthier areas may come from a different value system than their poorer peers, whether it's from decades of tradition or because they found themselves with a little more drive. It might be the reason they're in those neighborhoods to begin with.

But, to a more on the ground position, we also have a changing jobs landscape that seems to really be morphing into an upside down pyramid, where the bottom of brain functions (more physical, automatic nervous system movements), are declining and becoming the smaller portion of jobs, while higher brain function of reasoning is becoming the greater portion of jobs in the economy.

This creates three issues I see as being potentially problematic:

  1. This reduces diversity of the jobs landscape
  2. This requires greater brain development, that kids are not able to get if parents don't foster this type of environment
  3. A person needs a certain temperament and to be trained with a higher degree of discipline to sit with a less instant gratification

So, I think Dalio is right on education, but, I agree he's not very accurate in terms of why it's a problem. Maybe he purposely did that because the only thing he can do is inject communities with more cash and hope for the best. But the truth is, there is a value system that while it won't negatively impact everyone, it will have a negative pull probably on the average person.

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Apr 8, 2019

"simply because they don't know"?

You think it's an education problem that low income parents do not send their kids to SAT prep classes, expensive ECs & don't pay for private tutors?

Might have to do something with prohibitive cost.

Apr 7, 2019
iBankedUp:

Honestly, I think the real failure is the fall of the church. The church is a beautiful model on how people should live life.

shake head

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Apr 5, 2019

If you are able to objectively apply church teachings (which teaches people like David fought for something as well as turn the other cheek) then, yes, it's an excellent model. Our legal system is based on very similar principles and may have even developed directly from the Bible.

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Apr 8, 2019

I don't think you understand what the "church" is.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

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Apr 8, 2019

I like your post but consider this - what if this failure of traditional morality is cyclical? As the US grew (literally) fat, lazy, and bloated with overindulgence, society became weaker and now completely lacks qualities like grit, discipline, and backbone. Modern day US draws so many parallels to Babylon, Ancient Rome, and Weimar Republic. Our empire is dying because our once unified spirit of self-reliance, hard work, and Christian morality is dead.

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Apr 5, 2019
InVinoVeritas:

I like your post but consider this - what if this failure of traditional morality is cyclical? As the US grew (literally) fat, lazy, and bloated with overindulgence, society became weaker and now completely lacks qualities like grit, discipline, and backbone. Modern day US draws so many parallels to Babylon, Ancient Rome, and Weimar Republic. Our empire is dying because our once unified spirit of self-reliance, hard work, and Christian morality is dead.

Idk about that. I mean if you want to get technical, then you have to consider that the last time society was "weak" was during the Great Depression. The catalyst, which made things better, was WWII then gi bills and other government subsidies to whites returning from the war. The economy started to take off again and here we are after more wars, refulation to deregulation, tax increases to tax decreases. As far as strong men and weak men, I think it's more likely that in recent history, it's been a boom bust cycle catalyzed by change in regime.

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Apr 10, 2019
InVinoVeritas:

I like your post but consider this - what if this failure of traditional morality is cyclical? As the US grew (literally) fat, lazy, and bloated with overindulgence, society became weaker and now completely lacks qualities like grit, discipline, and backbone. Modern day US draws so many parallels to Babylon, Ancient Rome, and Weimar Republic. Our empire is dying because our once unified spirit of self-reliance, hard work, and Christian morality is dead.

I would wager good money you don't know a damn thing about ancient Babylon (I mean, the city existed for well over 2,500 years - are you referring to the Amorite, Akkadian, Babylonian, Assyrian, Kassite, Seleucid, Persian, or Muslim Babylon?). I'd wager you know barely more about ancient Rome.

And even the fact that you're using such examples means that "Christian morality" has nothing to do with it. Babylon in any part of its heyday was never Christian. Under the paradigm you're thinking of (Gibbon, obviously, as every other moron who knows nothing about Classical history is referring to), Christianity is the reason for the decline of Rome.

And by the way, your pictures are off, chronologically. The "good times" seem to be in the 50s and 60s, so the "weak men" in your picture, if age appropriate, should be voting for Reagan, not protesting Trump.

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Apr 9, 2019

Interesting that this took so much grief. I know I'm surrounded by secular/atheist libertarians but this comment merely suggests a void as religion declines and nothing fills that void (save government, which I don't see as a good thing.) I didn't see IBankedUp advocating a particular faith or any at all.

I myself am distant from my church due to heinous shit they continue to coverup. Humans are ducked up, film at 11.

But denying that religious groups (of many types) serve in providing for the poor, give structure and meaning etc is borderline retarded.

Apr 10, 2019
Scott Irish:

Interesting that this took so much grief. I know I'm surrounded by secular/atheist libertarians but this comment merely suggests a void as religion declines and nothing fills that void (save government, which I don't see as a good thing.) I didn't see IBankedUp advocating a particular faith or any at all.

The issue is the extremely pernicious and, frankly, ridiculous notion that religion is the source of morality and that it's decline means there is a void in morality in secular society. I don't need some celestial dictator's confused and contradictory book to tell me not to rape, steal, and kill. And frankly, it's disturbing that folks who subscribe to religion, and the corollary belief that the lack of faith means a lack of morality, are intimating that if they didn't fear hellfire, they'd be out doing those things without restraint.

Live by the Golden Rule, and you'll be fine. You don't need religion for that. Organized religion is nothing more than common human morality, mixed in with a bunch of ways to tell your in-group that they'll all be saved, while the out-groups will burn. It's an excuse to be immoral, not the other way around.

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Apr 9, 2019
iBankedUp:

Honestly, I think the real failure is the fall of the church. People who are driven develop their own model on how life should be lived, in an idealistic way. Which means you fall off the wagon, but get yourself back on, and can sustain your pace of life for long periods of time before you fall off again. And then the cycle repeats.

The church is a beautiful model on how people should live life. And it trains people to get back up and get on track again, while also promoting forgiveness to start over when they mess up. This is needed.

The evidence of higher divorce rates, higher single mothers, and higher poverty all point to leaving traditional familial values, which are taught by the church. In turn, people struggle financially, have less disciplinary oversight of their children, more stress, which leads to worse habits, and they fail to promote a better idealistic model for their children.

The economic decline that he's showing isn't a result of capitalism beginning to fail. The reality is, traditional morality is failing, which misaligns our economic model.

In other words, I don't know what the answer is, but it involves trial and error until we find where the new norm actually is.

Just look to the Middle Ages as proof that a strong religious sector brings happiness and prosperity for all
/s

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Apr 7, 2019
YungMonc:

Just look to the Middle Ages as proof that a strong religious sector brings happiness and prosperity for all

Around then is also when people generally stopped referring to all religion as "The Church"

Apr 9, 2019

I can't tell if this is a joke or not.

Apr 12, 2019

Amen. Couldn't have said it better myself. Thank you.

Remember, always be kind-hearted.

Apr 16, 2019

delete

"Work ethic, work ethic" - Vince Vaughn
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Apr 5, 2019
Yankee Doodle:

delete

I insult that orange oaf on nearly a daily basis. I'm not surprised that the guy matters to people who don't even know what GDP is, but for financial professionals, it's pretty pathetic.

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Apr 5, 2019

Overall, I believe capitalism is messier than biology, every bit as cruel as biology but not nearly as fair as biology. If Carl Icahn was immortal he would eventually control all wealth on the planet. Even biology with Darwinism and mass extinctions and carnivores is more balanced than that. Let's face it, our mortality is the only reason the system works, otherwise it is un-throttled. And as globalization and technology and finance clash, there are insane riches to be made and sheltered. Also, as globalization and technology and finance clash, there are people and communities getting ripped apart in our rust belt and globally. Longer lifetimes just accelerate this disparity. Capitalism has to be throttled or taxed. I prefer taxed.

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Apr 7, 2019
Distressed Industrial Buyer:

Overall, I believe capitalism is messier than biology, every bit as cruel as biology but not nearly as fair as biology.

As a biologist in a former life (molecular medicine, cancer genetics, and developmental cellular signaling pathways, to be exact)-- **I agree with this 100%. **
Finance (in the broadest sense of the term) is so much more difficult to grasp. It is infinitely complex.
(But, that's also what attracted me to it.)

There are many parellels, in terms of concepts and ways of critical and abstract thinking, how systems work... but markets also have this strong vein of chaos not found elsewhere in the natural universe.

Nature is much more predictable and adherent. There are laws, generally speaking.
There is competition, but it's much more cooperative and symbiotic.

And fundamentally these checks and balances in nature, would not allow the Ray Dalios of the world to exist. (Because if money is a resource, quantified energy, like food, self-made HF billionaires would become so engorged they would quickly explode like Verruka Salt.)

I like the guy, sometimes.. His thoughts on investment have been useful to me, but his Great Wisdom and platitudes about life are a bit eye-roll inducing. I think he is short-sighted and a little too self-aggrandizing to realize that success in one field does not necessarily convey to another.

He is criticizing the exact system which took him out of Queens and gave him a platform on which to speak on the world stage, which, to me personally seems a bit hypocritical.

It's easy to point out the problems in society (just ask Karl Marx), but creating solutions is much more difficult.

Scientist: Molecular Cancer Genetics.

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Apr 9, 2019
Counterpoint:

He is criticizing the exact system which took him out of Queens and gave him a platform on which to speak on the world stage, which, to me personally seems a bit hypocritical.

He is actually not criticizing the system that took him out of Queens. He is advocating, essentially, to make some reforms to allow for greater equality of opportunity - to ensure that others have access to the opportunities he had.

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Apr 6, 2019

Eh this is okay but I stopped when he started comparing the US to other "developed countries", which is invariably Western Europe + Japan. These comparisons always make things seem worse than they are.

I see the US compared to these countries all the time and don't think it really makes sense. The "central tendency" of life in these countries is much closer than it is in larger more diverse ones. There is typically one large-ish city which serves as the de jure and de facto economic and government capital. The majority of people have the same identity. The country population is typically small to medium (save japan). Relatively low immigration (especially for citizenship).

It's not really surprising when we see a larger % of people born into the bottom 25th percentile end up in the 75th percentile - the absolute difference isn't as large as it is for other countries. For example, I imagine the bottom 25th percentile in China is something like $8k and the top 75th is something like $40k. I also imagine for the Netherlands it's something like $25k for bottom and $60k for the top - much harder to increase income 5x than ~2x. No idea what actual numbers are but you get the picture.

It just seems like larger countries such as India, China, the US, Brazil, Mexico, Russia, Indonesia, Nigeria etc., have an inherently much harder time creating positive outcomes for large swaths of their population. Interestingly the US is head and shoulders above this group which I think is a fairer peer group than small to medium size nation states in Western Europe.

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Apr 6, 2019
PeterMBA2018:

Eh this is okay but I stopped when he started comparing the US to other "developed countries", which is invariably Western Europe + Japan. These comparisons always make things seem worse than they are.

Even if you ignore the cross-sectional comparisons for the whatever reason, he does plenty of longitudinal comparisons to show that the US was doing much better previously on pretty much every inequality metric.

The evidence section of the article is very well researched and thought through, so there is very little critique one can offer there. So far I have not seen any articles that would argue the opposite that were based on sound evidence and reasoning. I'd be surprised if it was otherwise - after all, he runs a large and successful evidence-based business.

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Apr 6, 2019

A longitudinal comparison would be even more flawed as the US was one of the few functional powers after WWII, so its relative status is increasingly looking like an anomaly

Apr 9, 2019
PeterMBA2018:

Eh this is okay but I stopped when he started comparing the US to other "developed countries", which is invariably Western Europe + Japan.

C'mon man. You can do it. You can read the full thing so we can have a legitimate discussion.

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Apr 7, 2019

Investing in COCAINE AND HOOKERS > investing in public school education

SB if you agree bois

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Apr 9, 2019

that #YachtCocaineProstitute money

Apr 7, 2019

So is this the thread where everyone has all the answers? I've been looking for this for quite some time.

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Apr 7, 2019

I agree with most of what he said, but don't agree with any of the solutions.

You can't fix this...we can just ride it out. I recommend doing nothing until it gets really worse.

Ty

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Apr 7, 2019

After a cursory glance at the article, I was going to do a long post but don't have the energy on this topic anymore. Few things that are wrong w/ this line of thought.

(i) The fundamental problem w/ the "the economy needs to be reformed" argument is that the United States in 2019 is the most prosperous society in the history of the world. There are minor tweaks that could be made (generally de-regulation), but the headline is "Most Economically Prosperous Society in Human History."

(ii) A lot of talk about how wages have been stagnant over the last ~30 years and no talk about how much cheaper consumer goods have become. The poor in this country have refrigerators, microwaves, smart-phones, I-pads, etc. Turns out that quality of life has increased dramatically while wages have been stagnant, meaning that wages aren't the be all end all yardstick by which to measure prosperity.

(iii) Unless the haves are unjustly enriching themselves and suppressing the have-nots, wealth inequality is not a real issue, which means that wealth inequality is not a real issue in this country. I grew up as a "have-not" and will live my adult years as a "have" because it never occurred to me that I was because I was being screwed over by the "haves." Not being a lemming allowed me to realize that my parents, while great ppl, weren't good w/ money and didn't pursue lucrative careers. I decided to pursue a lucrative career and educate myself on how to invest, save, and grow my money - at no point did rich folks hop out of their Scrooge McDuck money bins and try to impede me. Turns out that America is a great country and there's still tremendous income mobility.

(iv) Folks getting "left behind" in industry towns is not the problem that ppl (now primarily on the right) try to make it out to be. Sure it's a problem, but there's nothing that the government can do to fix it. Only the ppl in those towns can address the problem by (i) moving out of the dead/dying town(s), (ii) developing skills that are marketable in the current job market, and (iii) implementing those skills in a new and different job. I come from one of these towns and misallocating capital and/or impeding the growth of AI/automation is not going to cure the ills of these towns. So long as these folks are not willing to pick up stakes, leave, and better their lot in life, the problems in these places will persist.

There's just is not a serious intrinsic problem w/ the structure of the American economy. Again, if you could pick a time and place to live from purely an economic prosperity standpoint, you would pick America in 2019.

I come from down in the Valley, where Mr. when you're young, they bring you up to do like your daddy done.

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Apr 5, 2019
BBA18:

The poor in this country have refrigerators, microwaves, smart-phones, I-pads, etc. Turns out that quality of life has increased dramatically while wages have been stagnant, meaning that wages aren't the be all end all yardstick by which to measure prosperity.

Yes, the poor has iPads, but can barely afford food and especially without government assistance.

And, your assumption on wages is just directly conflicting with the type of ideology underlying your "America is the most prosperous in human history stance", which is probably some quantitative measurement like GDP. If wages are not increasing, GDP is not increasing.

This blind and subjective belief in America's economy just works, is exactly the problem at the core of this debate Dalio proposes. That, essentially, if you were born in a certain position or had a great college time and successful job post graduation, you see the economy through exactly the lens you just painted. It's so subjective, and validates every person who wants socialism, handouts, and a redistribution model.

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Apr 7, 2019

(i) The poor being able to afford iPads, smartphones, TVs, internet, cable, etc., but not food doesn't follow at all. First of all, fewer ppl are starving today in the U.S than virtually anywhere at any time in the history of the world (at a time when global poverty has been halved over the last ~20 years). If you can find me the starving masses in this country, you'll then have to explain to me how they are making good decisions w/ their money if they are buying iPads, etc., in lieu of food. You'll also have to explain to me what structural impediments there are to those masses which are preventing them from bettering their lot and how the existence of those impediments is congruent w/ the fact that while the percentage of folks in the middle class decreased by ~10% since the '70s, the percentage of folks in the upper-middle class increased by 50% from 14% of the population to 21% of the population over the same period of time - meaning that 70% of the folks who left the middle-class got wealthier in terms of income over the same period of time that the prices of goods dropped precipitously.

The quantitative measurements used to quantify prosperity are measurements like the rate of absolute poverty, starvation, quality life measurements, life expectancy, and consumption. Over the same period of time that wages have been stagnant (which doesn't take into account that employee non-wage benefits have increased by up to 30-40%), consumption by the marginal American has increased. Which is a better measure of prosperity, wages or how much you can consume w/ your wages? IMO, it's very clearly the latter and what ppl can consume more w/ their wages is more now than ever before. If you don't believe this, look at what percentage of homes had TVs, stoves, microwaves, air conditioning, ovens, etc. now vs in the 1970s and look at the fact that the cost of all of them has decreased by over 50% since the 1970s.

My argument doesn't at at all play into the hands of the socialists because (i) socialism is a moral abomination, (ii) the industries where prices have gone up over the last 30-40 years are invariably the most heavily regulated (healthcare, housing, financial services, education), and, most importantly (iii) my argument is not at all what you characterized it as - it's essentially the opposite. I never said that if you grew up in a certain place/had a good college experience, the world is your oyster. I said that I grew up in a dead industry town, in a family that scraped by to pay bill, worked and paid my way through college, and no one stood in my way. Also, my argument isn't predicated on subjective perceptions (I've given plenty of data). The argument that the middle class is disappearing and that folks can't get by because all of the wealth is concentrated at the top is subjective. It's necessarily subjective because there's not evidence of it.

I come from down in the Valley, where Mr. when you're young, they bring you up to do like your daddy done.

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Apr 7, 2019

Robotic "conservatives", more akin to libertarians, with this mindset are becoming more and more of a joke. Meaning and purpose in life aren't achieved thorough lower cost microwaves, iPads, and cheap plastic shit from China. People want jobs that make them feel like a contributing member of society, their community, and afford them the opportunity to raise and support a modest sized family. When these things are unavailable to large sections of the populace, which is where we are now at, things can get messy really fast. Not everyone is meant to, or even should, go to college, and instead of finding better ways to utilize this sub-105 IQ section of the population we basically discarded them, told them "learn to code and move 2000 miles away from everyone and everything you've ever known," or sent them to Afghanistan to get their legs blown off.

I don't care how many times you scream "but muh GDP!!!", it's simply unsustainable and obtuse thinking at this point.

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Apr 7, 2019

Who is saying that lower cost goods convey meaning and purpose? We agree that not everyone should go to college, I've said that most ppl would be much better off going to trade school and making a good living practicing a trade. Kudos to you for going out on a limb and advocating against ppl getting their legs blown off in foreign lands, but what are you actually proposing to fix what you perceive to be the problem?

I come from down in the Valley, where Mr. when you're young, they bring you up to do like your daddy done.

Apr 30, 2019

not sure why you got so many downvotes...

This is common sense.

Apr 30, 2019
Pmc2ghy:

Robotic "conservatives", more akin to libertarians, with this mindset are becoming more and more of a joke. Meaning and purpose in life aren't achieved thorough lower cost microwaves, iPads, and cheap plastic shit from China. People want jobs that make them feel like a contributing member of society, their community, and afford them the opportunity to raise and support a modest sized family. When these things are unavailable to large sections of the populace, which is where we are now at, things can get messy really fast. Not everyone is meant to, or even should, go to college, and instead of finding better ways to utilize this sub-105 IQ section of the population we basically discarded them, told them "learn to code and move 2000 miles away from everyone and everything you've ever known," or sent them to Afghanistan to get their legs blown off.

I don't care how many times you scream "but muh GDP!!!", it's simply unsustainable and obtuse thinking at this point.

I agree with your premise--that libertarians are woefully off base assuming that cheap crap will produce meaning and purpose and life quality--but I reject the notion that our system has failed to produce working opportunities. I just don't see any evidence of that. The only evidence is dead or dying towns, but this has been true since time immemorial. People need to get a bus ticket to the next town over with opportunity.

We used to have to take a boat trip across the Atlantic, and if we couldn't afford it we'd have to literally enslave ourselves for 7 years to pay for our passage. I utterly reject this notion of entitlement--that we are entitled to a job in the town where we grew up.

Apr 8, 2019
BBA18:

(iii) Unless the haves are unjustly enriching themselves and suppressing the have-nots, wealth inequality is not a real issue, which means that wealth inequality is not a real issue in this country. I grew up as a "have-not" and will live my adult years as a "have" because it never occurred to me that I was because I was being screwed over by the "haves." Not being a lemming allowed me to realize that my parents, while great ppl, weren't good w/ money and didn't pursue lucrative careers. I decided to pursue a lucrative career and educate myself on how to invest, save, and grow my money - at no point did rich folks hop out of their Scrooge McDuck money bins and try to impede me. Turns out that America is a great country and there's still tremendous income mobility.

My friend, this is what we need from everyone in America. The game is not really rigged at all, soldier on

Cash and cash equivalents: $7,286
Financial instruments and other inventory positions owned: $313,129

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Apr 8, 2019

This is the best comment in the thread. To add to your post, I'll share a discussion I had last week with someone about the growing disdain in the U.S. for those who are born with "unfair privilege". Before we get to that I will qualify this post by saying there are certainly inherent disadvantages facing many Americans today due to discrimination, but that isn't the fault of capitalism (racism, sexism, etc exist in all economic models, not just in the U.S.), so my post isn't to say that "pull yourself up by the bootstraps" is the be-all-end-all given that it isn't always immediately possible.

Going back to my recent discussion, I was expressing to a friend how there is a lot of vitriol in public discourse towards those who have economic privilege in the U.S., and that people believe we should do all that we can to level the playing field because current income and wealth inequality is "unjust and unfair". My response is a thought experiment:

Imagine a single parent from a poor family with no education and a low income in 2019. They are struggling to make ends meet, and although they and their family have made poor decisions in life that exacerbated the disadvantages they face, the parent in question decides one day to turn their life around. They continue to work hard in their job, save some money, and send their child to a state school for college. The child does well and gets a middle class job. They then get married, have kids, make good life choices, and in turn their children have even better opportunities and capitalize on them. Over time the family climbs the socioeconomic ladder and reaches the American Dream. Those who advocate for the poor would applaud this family, saying that despite all odds stacked against them, they put their nose down and rose up through the evil capitalist system to give their families better chance. Well done!

Now imagine a similar family, but rather than this starting in 2019, they made the initial steps of their socioeconomic ascent in 1910. Using my ancestors as an example, they moved from a poor European country with no money and didn't speak English. They worked hard and built a stable family, had kids and encouraged them to work hard as well. That 2nd generation then had families of their own and encouraged their kids to study hard, go to college, and find good jobs. That 3rd generation repeated the cycle and led to my generation, improving their socioeconomic position and giving me, the 4th generation, what liberals consider "unfair privilege". But what is the difference between our stories other than WHEN the ascent started? Can liberals not acknowledge that all privilege had to have been formed through a series of chain reactions? I wasn't born with privilege through luck, I was born to a family that had worked hard for that privilege for 90 years. It can't happen overnight. Furthermore, it is the CHOICES that people make that determine their future. As taboo as it is to say in 2019, getting married, having children in wedlock (or partnership), saving money, staying off drugs, etc...is critical to establishing success. It is not the "evil" capitalist system that forces people into poor choices, they do it to themselves, and in turn it negatively impacts their ascent.

As I said before, privilege is won through a series of good decisions and hard work. Those who have privilege today have it because somewhere along the line their parents, grandparents, and so on made the conscious decision to do better. It is unfair to THEM and their CHOICES to try to take that away from their descendants. The ascent isn't always easy, but it is only through capitalism that it becomes possible.

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Apr 29, 2019
BBA18:

After a cursory glance at the article, I was going to do a long post but don't have the energy on this topic anymore. Few things that are wrong w/ this line of thought.

(i) The fundamental problem w/ the "the economy needs to be reformed" argument is that the United States in 2019 is the most prosperous society in the history of the world. There are minor tweaks that could be made (generally de-regulation), but the headline is "Most Economically Prosperous Society in Human History."

(ii) A lot of talk about how wages have been stagnant over the last ~30 years and no talk about how much cheaper consumer goods have become. The poor in this country have refrigerators, microwaves, smart-phones, I-pads, etc. Turns out that quality of life has increased dramatically while wages have been stagnant, meaning that wages aren't the be all end all yardstick by which to measure prosperity.

(iii) Unless the haves are unjustly enriching themselves and suppressing the have-nots, wealth inequality is not a real issue, which means that wealth inequality is not a real issue in this country. I grew up as a "have-not" and will live my adult years as a "have" because it never occurred to me that I was because I was being screwed over by the "haves." Not being a lemming allowed me to realize that my parents, while great ppl, weren't good w/ money and didn't pursue lucrative careers. I decided to pursue a lucrative career and educate myself on how to invest, save, and grow my money - at no point did rich folks hop out of their Scrooge McDuck money bins and try to impede me. Turns out that America is a great country and there's still tremendous income mobility.

(iv) Folks getting "left behind" in industry towns is not the problem that ppl (now primarily on the right) try to make it out to be. Sure it's a problem, but there's nothing that the government can do to fix it. Only the ppl in those towns can address the problem by (i) moving out of the dead/dying town(s), (ii) developing skills that are marketable in the current job market, and (iii) implementing those skills in a new and different job. I come from one of these towns and misallocating capital and/or impeding the growth of AI/automation is not going to cure the ills of these towns. So long as these folks are not willing to pick up stakes, leave, and better their lot in life, the problems in these places will persist.

There's just is not a serious intrinsic problem w/ the structure of the American economy. Again, if you could pick a time and place to live from purely an economic prosperity standpoint, you would pick America in 2019.

This is your "short" post?

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Apr 8, 2019

Income tax is ILLEGAL

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Apr 8, 2019

This is just part of his guilty conscience press tour for running a gigantic Ponzi scheme.

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Apr 8, 2019

The "poor outcomes" situation we are in today (GDP growth has detached from real wage growth over the past 3+ decades) is primarily due to these different drivers:

  1. Artificial interest-rate compression and asset price inflation due to Central Bank QE
  2. Massive unskilled immigration to the United States leading to a lower natural wage equilibrium than is healthy (real wage growth should scale with GDP growth to provide better outcomes)
  3. Systematic offshoring of US manufacturing which gutted vast regions of the country enriching F500 corporations at the expense of small business
  4. Dramatic medical, education, and housing inflation which depresses middle-class consumption and disincentivizes child births, lowering the birth replacement rate

I guarantee that most of these problems will worsen in the near future due to continued government interference in the free market. Some of the banks we work with are pricing floating-rate construction loans at a going-in rate above the fixed-rate option because these lenders are expecting LIBOR to go DOWN. The Federal Reserve already halted rate hikes signaling their numbers show the system cannot take the interest shock (obvious to those that still believe in traditional economics).

We direly need a systematic reset which reallocates capital out of urban coastal cities across the United States, otherwise serious social unrest is inevitable.

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Apr 8, 2019

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Apr 5, 2019

OMG immigrant numbers rise like an ibanker's forward projections.

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Apr 30, 2019

+SB

Kudos for being the only one on this site I've seen bringing this issue up...even though it's already too late

Apr 7, 2019

Great post! I was going to make a similar one in measure and tone, but you beat me to it. I agree with all four points, and I would add that abuses in the legal immigration system (H-1B) have also disincentives employers from the apprenticeship and on-the-job training model that was previously seen in this country.

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Apr 8, 2019

Yes, good point. All has served to shift way more leverage over to capital, which always inevitably causes societal turmoil.

There is a balance of equilibrium between capital and labor that must co-exist to maintain harmony. The pendulum has swung way too far one way.

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Apr 8, 2019

Agree with all of your points. But I think the real question is how do we help the masses to obtain the knowledge to accumulate wealth and build a sustainable income that most of us have learned early on?. The real issue here is not in a system that is rigged against the poor. As much do Warren and Bernie preach the narrative of rich people keeping the poor down, we all know there is no evil committee plotting against the poor. How do we even address the problem of the wealth-building knowledge gap between the haves and the have not?

Cash and cash equivalents: $7,286
Financial instruments and other inventory positions owned: $313,129

Apr 7, 2019

This is generally a human-nature that education probably won't ever change. Tom Sowell has a great line on this, "When ppl are presented w/ the alternatives of hating themselves for their failures or hating others for their success, they seldom choose to hate themselves." That's always going to be true for a significant portion of the population.

The most effective thing that advocates of the free market can do is advocate for the free market on the basis of morality rather than on the basis of efficacy. It happens to be the most effective economic system in human history, but it's also a requisite to a free and decent society. Some of the best free market advocates, folks like Friedman & Hayek, have taken the "socialism is a great idea in theory, but it just doesn't work" route. IMO, this is completely incorrect. In theory (never in practice), socialism could work in a small society for a short period of time, but it's intrinsically covetous, coercive, restrictive, and confiscatory. Ppl are lied to too much to realize that this is the case and that, alternatively, the virtues promoted by capitalism (if you want to be successful over a long period of time) are honesty, fair-dealing, work-ethic, dependability, and mastery of your particular craft. Frankly, I don't know any supporters of capitalism who think that it's an immoral system, but support it despite of that because they think it's just too effective not to. The rub is that that they, for whatever reason, never talk about why they support it morally, or even worse, they cede the moral ground to the socialists and default to "Yeah, but socialism has never worked" tact.

I come from down in the Valley, where Mr. when you're young, they bring you up to do like your daddy done.

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Apr 8, 2019

Great post. The key is to enforce the principals of meritocracy and free competition at all costs. There will always be winners and losers, but those winners should be those who provide better service/goods or cheaper service/goods at equal quality. This is what propels civilization forward, continuous improvement gains through competition.

Competition cannot be eliminated, it is the very basis of modern civilization. The Marxist left in America wants to eliminate competition and act as the omnipotent arbiter/regulator which chooses winners, whether it be motivated by genuine compassion, pure lust for power, or corruption. This impedes improvement and causes regression.

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Apr 8, 2019

The TARP bailout was the epitome of privatized gains and socialized losses. There were countless felony level actors whose staggering amount of fraud and lack of fiduciary responsibility hurt so many average Americans who did nothing to contribute to the crisis. None of these individuals were jailed. As a culture, we have normalized the acceptance of corruption and fraud setting a precedent for the average everyday American taxpayer to bail out the bad actors who rinse repeat and do it again.

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Apr 9, 2019

How much money did we lose because of TARP?

Apr 8, 2019

dalio stalio

heister:

Look at all these wannabe richies hating on an expensive salad.

Apr 9, 2019

The problem with socialism is socialism. The problem with capitalism is capitalists.

Apr 10, 2019

Reminds me of this:

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Apr 9, 2019

It may not seem like it, but everybody on both sides in that video and Dalio are arguing for the same thing - promoting opportunity.

May 6, 2019

Absolutely agree.

Apr 10, 2019

Ah yes, socialism , that panacea for all societal ills. Everybody slaving away in some giant factory (smash the robots, they are capitalist oppressor means of production) for a mandated allocation of food stamps overseen by Commissar for Public Labor Ocasio-Cortez, sounds ideal.

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Apr 9, 2019

You clearly didn't read the article. Do you always talk without knowing any of the context?

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Apr 10, 2019

I think the transition to asset light technology platforms with immense operating leverage - e.g. Netflix has a mere 8,000 employees yet services c. 128 million subscribers (and growing rapidly...) - is a disruptive force in society. Think of all the jobs that would have been wiped out by those 128 million people spending all their time on watching Netflix as opposed to other activities. Yet the economic benefits flow to 8,000 Netflix employees.

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Apr 11, 2019

Considering that Pension funds of UK University Lecturer, USS, and endowments are invested in stocks such as tobacco and oil - where the negative impact of these businesses on society are clear; justified by many as "Fiduciary duty" - I completely agree with Ray Dalio. For too long we have taken an ill-considered approach to business and financial decision - rarely considering the wider ESG impacts. As a result we are faced with failures on Climate Change, Society (Populism) and Old Age (Pension under-funding) - and another Ray Dalio highlighted - poorer educational standards. As Ray Dalio alludes to, Capitalism as a system is rather effective relative to bartering and communism, however, without adequate regulation and policies to ensure we can deliver on equality in opportunity and fundamental human rights - the system has to be re-evaluated

Apr 30, 2019

The populist right and the populist left both do this--they make victims out of people who aren't victims. Today is the most prosperous day in the history of mankind. Tomorrow will be more prosperous. The day after will be more prosperous. There has never been more opportunity and a higher quality of life in American or world history than today. The West's poor are obese. Those in poverty have conveniences that the richest people on planet Earth couldn't even fathom 100 years ago.

Frankly, it's immoral to tell people that things are bad and that things are bad because of capitalism--capitalism! Capitalism, which has liberated billions of people from grinding poverty!

Apr 12, 2019

I would've thought this is common sense?

Apr 16, 2019

Who wants to bet he's prepping for a run for office in 2020?

Edit: Seems other people have reached this conclusion too

"Work ethic, work ethic" - Vince Vaughn
Apr 29, 2019
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Apr 29, 2019