One of the world's most successful hedge funds lost its co-chief investment officer on Tuesday.
He will remain on the board as a mentor.
"Hopefully until I die, I will continue to be a mentor, an investor, and board member at Bridgewater, because I and they love doing those things together," he wrote on the social networking site.
The finance world has had conversations about the economy and capitalism that were unconventional. There was a conversation with Insider in 2021. He made a call to transform capitalism and address inequality.
He said that inequality is at a tipping point that will fuel more hate and violence.
He said before he left the meeting that he was not trying to frighten people. I don't want to deal with histrionics. I'm trying to educate them about history.
The article was published in February. The interview has been edited to make it clear.
In your essay, "Why and how capitalism needs to be reformed," you describe the state of capitalism as a machine that needs fixing. When you wrote that piece a year and a half ago, are you more worried now?
I am more worried. There are irreconcilable differences among us. When the causes that people are behind are what they are willing to fight for, the system is in danger.
I've seen a lot of history. I've been studying for a long time. Civil wars and revolutions have happened to me. Structural changes are needed. Big changes should be made to make it work better at the same time as they are done peacefully. I don't know if we are there.
It doesn't work, that's what I mean. If history repeats itself, I'm a capitalist and that can be dangerous.
What do the objectives of the system look like? Most people want the system to work well. Does it give equal opportunity? Equal opportunity may not be equal results. Is it possible to create a productive society?
Benchmarks are measures of that. We don't have those outcomes. The situation we're in is what we're feeling. We now have the greatest divides in wealth, incomes, values, and political positions that we have had since the 1800's and the 1930's.
We know that it isn't working. Structural reasons are why it is not working. I don't believe we have the will to work it out.
Is anything specific making you more concerned?
We're going down that classic path to irreconcilable differences and fighting. I believe it is clear.
The Changing World Order is a piece I wrote on the professional networking site. When we had the Washington issues, I wrote that before. Keeping with that is what they're doing. We are going down that path.
What is happening at this point? On a global scale, what is happening?
Since the 1930's, there have not been three big things happening at the same time. They're connected. The creation of debt and money with the zero-interest-rate environment, the printing of a lot of money for the debt are three things.
The system is not working for a lot of people and that's why there are gaps.
The rise of a great power to challenge an existing great power is one of the three.
It's difficult to imagine a cohesive resolution to the story because it's playing according to script and I've watched it play out.
You're making a noise. Today's capitalism is a feedback loop that widens the income and wealth gap and is threatening the American dream. How do we stop?
To be afraid of what the alternative is, you have to be aware of history and know what the types of conflicts are. People should know the stories about history. The system has to be looked at.
Smart and bipartisan people are what you need. If it's possible for bipartisan and smart people to do something like a Manhattan Project, in which they engineer something that both sides agree is smart and will be bipartisan, we can save ourselves.
So that we don't kill each other, each of the people who were on the left and the right took care of their own people. It would be great.
History has shown that the only other option is a swing power that seeks to produce peace. It could be a third party. It is possible for the presidency to be difficult, but not impossible for the House and the Senate to have a third party of moderates who will put moderation back into it. It could be a policy.
The American dream needs to be redefined. "This is what we want" is what we need to say. It requires us to agree on it. We have to have metrics that show how we are doing against those metrics. People need to believe that the system is fair to get it. The system would be similar to a legal one.
You have a legal system that allows you to resolve disputes, but it isn't perfect, but people buy into it. You believe in the system if you stick that way. We have to fix that because they want to kill each other. According to a recent survey, 15% of the Republicans and 20% of the Democrats wish the other members of the party were dead. Some people don't want their children to marry people from the other party.
People in blue states are seeing the movement even though they are in red states. It's not just a tax thing, but there's a sense that this ideology is more my ideology than the one I've been living in. State and federal conflicts are going to be seen. What is the federal government's right to tell the states what to do? I think you'll see more of that. Either that is dealt with or not.
Is it possible to work with the Biden-Harris administration to form a group that would help reform capitalism?
I won't answer that question because of privacy reasons.
Is the uproar over racial inequity a turning point for capitalism? Is it possible that things will return to normal?
We are past the point of reconcilable differences. I'm afraid of that. I hope people don't fear that.
I think I have a principle. You don't need to worry. You have to worry if you don't. You will deal with that worry if you worry. You could get in trouble if you don't worry.
We are in that situation right now. To make sure that doesn't happen, you need to be scared like that when you look at where we're going. To make sure it doesn't happen, people need to be afraid.
Finding an agreed-upon solution isn't the same as identifying a problem.
What advice would you give to a business leader who wants to address inequality?
The first thing they have to do is reconcile what they're doing with those that they report to, the shareholders and investors.
CEOs work for people who work for everybody else. They need to be clear on the need to move in that direction.
The problem is that the people who want to kill them or tear them down will not be satisfied if that change is not enough. It's not the only answer and they also have to be productive.
To be productive, they have to restructure. We're entering an environment in which a lot of people will be replaced by robot. From their perspective, people can be problematic. Maybe it is carbon dioxide. The people will not work, the people will get angry, and the robot will not get angry, but it's cheaper. The CEO is going to be in a tough position.
If you want to have a competitive advantage, you need to have companies in the structural system, where profit is a bottom line, and not in the robotic system, where profit is a top line. It needs to be dealt with at a higher level. While increasing the productivity, while increasing the benefit of who are the beneficiaries, because you can't redistribute wealth and have that work for long. Productivity is the difference between wealth and wealth.
Making more debt and printing more money doesn't make you rich. It doesn't make more money. It makes the assets go up in value because there is more money chasing them, but it doesn't make more wealth. If you want to make more real wealth, you have to be productive and distribute it well, so that it works for most people. An engineering exercise is required. I don't think going for more green programs will satisfy a lot of people. They are put in difficult situations. There needs to be deep thought about how this will work.
You are a lifelong learner. Have you read any books recently that made you understand this moment?
Over the last two years or so, I've been reading a lot of books in doing research. I'm very fortunate that I can speak with anyone about any of these topics. There are different kinds of books. There are books and perspectives.
The books of Henry Kissinger are excellent. There are Kissinger's books as well as economic- history books. I revisit the original newspapers and data. I have a great research team that does that kind of examination.
Do you like Kissinger's work?
You could just read Henry Kissinger's books and you would know what he was talking about. He puts himself in positions when he's clear about what he's thinking. He's more of an empath than an ideological one. He describes the characters and sees the world the same way he sees it.
The human-rights issue in China will be a big issue for the Biden administration in the US. That's an issue of Chinese sovereignty. After the Thirty Years' War, there was a definition of what a country is and the sovereignty of a country.
What goes on in each other's borders is controlled by who. He described the Chinese perspective as a sovereignty issue. You don't meddle in our internal business. He would understand that the Biden administration and the Chinese have different opinions on how that should be done.
He is a practitioners. He has been in those shoes for a long time. The man is not being theoretical. He isn't a study of history. It was necessary for him to be in the middle of it. He knew the people and had heard what it was like to be in their shoes. You don't get many people who have lived history as a practical decision maker and are clear and articulate.
I've talked to economists who say the US needs a "New New Deal," where we go back to the policies of the FDR era. What do you think about the matter?
That's a good way to go. Any path that raises productivity is something I'm in favor of. On a bipartisan basis, I believe we need to restructure some form.
The US path ended up being similar to the British path, one that had revolutionary changes, radical changes in tax rates, and so many other things. We entered a war.
The United States, the British and the democracies of the 1930's were the good stories. Four democracies became autocratic governments because things got out of control. Germany, Italy, Japan, and Spain are included.
Can this restructuring of some form be done in a way that is productive and satisfying for most of the people? I don't care how we do it, as long as we do it together. We do it in a way that's productive.
The distribution of wealth has been thrown off by easy lending conditions. What do you think is going to happen? The end game is something that I don't know.
History and mechanics are what I use to describe it.
There are two types of wealth: real wealth and financial wealth. The things you buy is what I'm talking about. You could buy a house, a car, or a video- streaming service. The real stuff is what you buy. One believes that you can sell your stocks and bonds in order to get cash in order to buy the things you want to buy.
A lot of financial wealth has been produced over the course of history. It is possible to measure it in the total value of financial assets relative to production. That is what makes a bubble. People should be given money and debt If those people really want to spend it, they won't be able to because the claims are so high.
You can see that happening through history. We have to send out checks to people because of the production. If you don't send out checks to people, you will have a revolution, and their conditions could be intolerable, so you have to send out the checks.
We have a chronic situation that is going to go on for a long time. The checks will have to be sent. Where do the government get the money when it's sent out? They can either get the money from taxing it and taking it away from some people or they can print the money and buy it.
We've seen it before, and it was the same thing that happened on April 8 of last year. If you go back to August 15, 1971, when Nixon did it, you'll see that all of those were to create a lot of debt. "I don't want to hold the debt" is what you're seeing.
Debt is a promise of currency that someone is going to print. It gives a very low interest rate, a negative 1% real interest rate, a small nominal interest rate in the US, and less in Europe and Japan.
It takes a long time to get back what you've given. Imagine that trade I'm going to have money to buy things. I'm giving it to you. I don't know how long it will take for me to break even. I might have to wait 75 years for my buying power to return. There are a lot of claims on goods and services that people can't sell to actually get that. It's a problem with these cycles. You have that as well. The returns are going to be a little bit low.
How did low returns turn out to be high returns? How did bonds have low returns while stocks and bonds had high returns? You put more money in order to lower the interest rate. When you buy something, that means you bid up the price, but it lowers the expected returns. That is what is happening now. In the course of history, it continued. Money going to get goods and services is not a good thing. We're in the cycle there.
The purpose of a corporation has changed over the past 50 years from serving its shareholders to serving all communities. Do you agree with the concept of stakeholder capitalism?
It's difficult for people who are sitting in that situation to understand what that means. There aren't clear rules and laws. You will be a stakeholder capitalist. That means what?
That could mean something different in Europe. It's possible that the labor- union representatives have seats on the board. They do it that way. The question is whether those are pros or cons. There is actual engineering of how that happens. We haven't engineered that kind of thing yet.
What does "Oh, we should" mean in terms of actual behaviors?
We have an option. Either you are on the other side or on the other side. Either you are in a war or you can find a way to be productive. Whatever is going to get us to be productive is going to be better than that war. Major changes are going to have to happen. We're going to have a problem of both productivity and being at each other's throats if we don't do something about it.
Did you want to add something?
I'll end with this. Money credit, financial and economic force, printing money, and financing it back are the three main forces that affect the economy.
The second one is related to values and politics. The rise of China to challenge the United States in that competition has shown to be a problem in the past.
It's even riskier when you have all three together. I'm not trying to frighten anyone. I don't want to deal with histrionics. I'm trying to get them to understand history and how it works so that they can decide if they want to fight about it or not.
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