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Brazil Conference 2018 – Jorge Paulo Lemann and Ray Dalio

Brazil Conference at Harvard & MIT 2018 – Jorge Paulo Lemann and Ray Dalio

Brazil Conference
Published on Apr 17, 2018
Saturday, April 7, MIT.

Video and informal transcript below

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Brazil

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special guest mr. Ray Dalio Ray Dalio as a friend I’m a big admirer of his what he has built up in financial markets is incredible he’s the largest hedge fund manager in the world he’s a pioneer he is a creative thinker he has innovated enormously in financial markets the way he looks at financial markets and the way he goes about his analysis and I think that many of the things that he has applied to financial analysis and so the way he runs his businesses is applicable to our lives and to our country and we’re all here basically because we want to improve Brazil this conference is put together by Harvard and MIT students mostly Brazilians we’re all trying to improve Brazil trying to improve Brazil by bringing more
Brazilians together to talk about Brazil and making them have contact with people like Ray who have been very successful and the rules of success are applicable than everything I mean you know good rules of success in business are applicable for countries they’re applicable for your life and Ray thinks a lot about these these principles he has written a book now which is a best-seller at the moment principles which talks about
what he thinks and how businesses should be run and he like myself is very interested in perpetuating his
businesses and making what he has done well continue throughout various generations so I think we have a lot to learn from from Ray welcome ray thank you and thank you to all the the students of MIT and Harvard who put this together and hold it together it’s a lot of work and I think what they what they’re doing is gonna have tremendous effects for Brazil over the coming years and in terms of attracting new people in Brazil who want to do things better who want to do things well and make Brazil a better country thank you for being here and thank you right for coming all right ray is going to make a quick
presentation and then I will ask him some questions and then all of you can send in questions to me and I will pass on those questions to Ray also that’s the so he’s gonna talk for about 15 minutes and make a little presentation and then we’ll have a question session and then there will be questions from the audience thank you for being here and I’m I’m gonna go real fast because I want to try to pack in a lot in my 15 minutes the reason I’m so excited to be here are the reasons I’m so excited to be here is first of all I have an enormous admiration for this man and then at the same time I’ve written down my principles and I’m urging him to write down his principles because the principles are essentially recipes that we’ve learned along the way we want to pass that along and I’m in transition from the second stage of my life to the third stage of my life and what I mean by that as I think life goes on in three stages
in the first stage your children you’re learning you’re dependent on others and then when you graduate and you move on you’re in the second stage of your life in which you’re working and others are dependent on you and you’re trying to be successful so all of you most of you are now entering or in the second stage of your lives
it’s beginning and then you go to the third stage of your life the thirds that you’re transitioning to the third stage and the instincts change no longer is it as much a desire to be successful one self as to help other people be
successful without you so that they do great and you’re free of the obligations and so we both are entering
transitioning from that second stage to the third stage and so in my particular case I did something that I kind of lucked into which was to write down the principles as I was making those decisions and that was very helpful so one of the things that I want to pass along to you is the power of doing that in my case when I would make a trade I would write down the trade and then I would test and how that would have worked over a period of time and then I learned that if I wrote down every one of my decisions when I was making them I could be clear it would crystallize my own way of thinking and then I would be able to share those with other people and have them stress tested and so I would become clear and then I learned that I could turn those into algorithms and actually make the computer make parallel decisions with me and so at the point of transition I had this inventory of principles that I would able to pass along and put in the book and so I would encourage all of you when you are making the decisions when you’re in the moment to pause and to take the time to write down those decision rules that those recipes for making success think about this man and
all of the successes he’s produced and wouldn’t you love to have his recipes so anyway that’s what essentially the book is the important thing I think is for you to have your own principles which are work for you that’s most important what I’m going to do is pass along some of the principles that work for me and tell you a little bit about that to try to get them out on the table and then try to discuss them so okay now the way it look I’m gonna skip this slide in the interest of time okay the way that it looks like for me is that I want to have my audacious goals I want to always wanted to go after the big things and then along the way you encounter your successes and your failures okay and your failures and the failures are so much more important than the successes because on the failures you must be doing something wrong so those are your learning opportunities right but people have an aversion to failures successes means you probably did something right and you’re not gonna learn much from your successes so but you will have your failures and the how you approach your failures I think is the most important thing and so I have an expression pain plus reflection equals progress if you have the pain of your failure and you reflect in a quality way then you will probably ask yourself what would I do differently in the future so that the next time it comes along I’ll have a better outcome and so that is where the learning of principles comes we all learn this way we learn those principles and then we change and we change the way we do things and then we improve and then we go after more audacious goals so life looks to me like this looping process that’s shown in the chart and the way that it looks to me is that achieving success is a five-step process you do these five things and you will be successful and those five things is first know your goals so what are the goals that you’re going after you have to be clear you can’t go after
everything
and on the way toward your goals number two is that you will encounter your problems there your obstacles right okay embrace those problems and then you have to diagnose those problems to get at the root cause and often the problems are you or people around you that might have your weaknesses everybody has weaknesses that stand in the way of their successes so you can’t just say I this thing happened to me you have to own that and you have to understand what the
strengths and weaknesses that you have and the people around you have and anyway whatever your problems are you have to diagnose them and get it there accurately get at their root causes and then once you have a design then step four and once you have a diagnosis you can have a design of what do you need to do to get around those things and you come up with a plan to do that thing and then number five you have to do that plan and if you do that over and over again you learn and you move closer to success and you do better and better that’s been my experience I think that’s when a lot of other people and I think that people’s attitudes about failure the aversion to failure it is is a real problem I think sometimes people believe that that because they have failed at something that they’re that they’re failures or that there’s something flawed in them rather than this is just part of the learning process which it really is so anybody who’s been
tremendously successful will tell you and could take you through theirs their failures we don’t talk about them as much as we should I just want to you know give you a story and a you know my failure that changed my whole approach approach I in 1980 and 81 I had
calculated that foreign banks
four American banks had lent more money to emerging countries that those countries were going to be able to pay back and that we were going to have a debt crisis and that that debt crisis would produce a big economic crisis and it was a very controversial point of view here we’re talking about something that could order on being a depression very controversial point of view and I calculated that and in in in August of 1982 Mexico defaulted on its debts and as a result of that I got a lot of attention I was asked to testify to Congress I was asked to be on the show Wall Street week and I won’t tell you couldn’t have been more wrong but I want to give you mr. chairman mr. Mitchell it’s a great pleasure and a great honor to be able to appear before you and examination with what is going wrong with our economy the economy is now flat teetering on the brink of failure you were recently quoted in an article you said I can say this with absolute certainty because I know how markets work I can say with absolute certainty that if you look at the liquidity base in the corporation’s and the world as a whole that there’s such a reduced level of liquidity that you can’t return to an era of stagflation wasn’t I arrogant incredibly arrogant I look back at myself I say oh my god how incredibly arrogant I could not have been more wrong that was the exact bottom of the stock market
and the greatest bull market that we had and I lost money I lost money I
Bridgewater was just a small company then and I lost money for me I lost money for my clients I was so broke that I had to borrow $4,000 from my dad to help to pay for my family bills okay and that painful experience was probably the best experience that happened to my life it was one of them that I guess married my wife and half my kids might
but but that that’s because it changed my attitude about decision-making it it it made me it gave me a humility that I needed a fear of being wrong that I needed to balance with my audacity it made me change my approach it made me want to find the smartest people that I could find who disagreed with me so that I could stress test my thinking and it made me it changed my approach to making mistakes and just if so I went into this from thinking I’m right to asking myself how do I know I’m right and that notion of creating the open-mindedness brought me something that was ended up having an idea meritocracy and I’ll explain to you in a minute
but I think the way it is is there’s knowing what you know yourself and then there’s through humility the ability to draw on the best thinking of other people particularly those who disagree with you so that you can raise your probabilities of being right and so I really do believe that one of the things that I want to pass along to you particularly as you come out of school we’re being right is so rewarded and being wrong and having failures is something that people think that’s a problem and an aversion that rather I want you to think about that this and so you’re probably on a path toward thinking I Nagata no more no more and I want to say that you can also through your humility you can take in more so in order for me to be successful it was I wanted to go after my ideas audacious ideas but I wanted to work with
independent thinkers who would disagree with me well I wanted to create a culture of independent thinkers an idea meritocracy in other words a system in which the best ideas would win out something beyond just that was in my head and in order to do that I had to create a principle
idea of meritocracy we had to go through this we had our successes and our failures but we always went into our learnings and then from those mistakes we would write down those principles that helped us and then we would go on and that’s basically been the journey that I’ve been going through so so I have to have an idea meritocracy and what do I mean by an idea meritocracy I want to pass this along to you it’s not just the organization that you’re in but it’s also the relationships that you have with anybody do you want to have idea meritocratic relationships with people okay so what is an idea
meritocracy you’ve got to do three things to have an idea meritocracy first you have to put your honest thoughts on the table and let other people put their honest thoughts on the table a lot of people don’t do this they don’t share what they’re honestly thinking okay well that’s going to create a lot of
confusion it’s not going to let you cut through it so can you put your honest thoughts on the table and let other people put their honest thoughts on the table second you have to know the art of thoughtful disagreement you have to disagree well you have to be able to take in what people are thinking and with curiosity and fear of being wrong so that you can take in that thinking as well as express yourself articulately you have to make it a joyful experience not an antagonistic experience most people think of in terms of disagreement they can’t they can’t disagree you can go to a restaurant and you know somebody could say I like the food and somebody’s reluctant to say oh I don’t like the food isn’t that silly
so you have to appreciate the art of thoughtful disagreement and then like all relationships you if you have a disagreement that remains you have to have protocols for getting behind past that disagreement and when you have an idea meritocracy you can have better collective decision-making because great collective decision-making is so much more powerful than any individual’s own decision-making so
the other thing is you have to know what people alike you have to know what you’re really like your strengths and weaknesses and you have to know what other people are like can you get at these things so we have a culture in which that’s a very important thing requires a lot of struggle but it’s a very important thing like question do you really want to know what your like your strengths and your weaknesses do you want to be open about what other people’s strengths and weaknesses are that’s very powerful I want to just give you a flavor for what this is like in Bridgewater so I’m going to take you into a meeting that a week after the US election our research team held a meeting to discuss what a trump
presidency would mean for the US economy naturally people had different opinions on the matter and how we were
approaching the discussion the dot collector collects these views it has a list of a few dozen attributes and so whenever someone thinks something about another person’s thinking it’s easy for them to convey that assessment they simply note the attribute and provide a rating from one to ten for example as the meeting began a researcher named Jen rated me a three in other words badly for not showing a good balance of assertiveness and open-mindedness as the meeting transpired Jen’s assessment – so people added up like this others in the room had very different opinions that’s normal different people are always going to have different opinions and who knows who’s right let’s just look at what people thought about how I was doing some people thought I did well others poorly with each of these views we can explore the thinking behind the numbers here’s what Jen and Larry said note that everyone gets to express their thinking including their critical thinking regardless of their position in the company Jen who’s 24 years old and fresh out of college can tell me the CEO of the company then I’m approaching things terribly this tool helps people both express their opinions
and separate themselves from their opinions to see things from a higher level when Jen and others shift their attentions from inputting their opinions to looking down on the whole screen their perspective changes they see their own opinions as just one of many and naturally start to ask themselves how do I know my opinion is right that shift in perspective of going above it and seeing the full range of views shifts the conversation from arguing over
individual opinions to figuring out objective criteria for determining which opinions are best behind the dot collector is a computer that is watching what all these people are thinking correlates it with how they think and communicates back to each of them based on that then it draws the data from the meetings to create a pointillist painting of what people are like and how they think and it does all that guided by algorithms knowing what people are like helps to match them up better with their jobs for example a creative thinker who is unreliable might be matched up with someone who is reliable but not creative knowing what people are like also allows us to decide what responsibilities to give them and to weigh our decisions based on people’s merits we call it their believability here’s an example of a vote that we took where the majority of people felt one way but when we weighed people’s views on the basis of their merits the answer was completely different this process allows us to make decisions not based on democracy and not based on autocracy but based on algorithms that take people’s believability
into consideration yeah we really do that I don’t forget the tools it doesn’t really matter it’s just a commitment to the idea meritocracy is the important thing
and so the real questions
I think that you you should be thinking of is you know what are the barriers and what do you do about it and the big barrier we always encounter is the emotional barrier of the to you barrier there is an intellectual part of you that won certain things and then there’s an emotional part of you that wants other things so if I ask you to the questions do you want to know your weaknesses do you want to look at your mistakes do you want that your intellect do you want to know what I think of you do you want to know be able to tell me what you think of me intellectually you would say yes I’d like to know my weaknesses I’d like to be able to tell you what I think I’d like to hear what you think and then there’s the emotional component of that and that can be changed with with practice and and I think it’s the biggest question that you all are going to face all human beings face which is when the intellectually the right thing to do stands in the way standard stood in the way by emotional the right thing to do what are you going to let be in control of your of what you’re going to do so just in a you know finish this up so the real question as you go forward I think that I want to pass along to you is do you want these things and to what extent do you want them okay do you want to have an idea meritocratic decision-making I think the greatest tragedy of mankind practically is people who are attached to wrong opinions because they won’t stress test them so do you want to have the best ideas when out or does it has to be the ones that you want second question is do you want to know what people are really like you and others you’re gonna have to make that those decisions do you want to have this radical truthfulness and radical transparency so that you know what’s really going on and there’s less spin it changes relationships it’s difficult at the time button when you go through it and you know that there’s trust and less spin transparency means you know bad things happen in the dark you make things radically transparent like we take
stall meetings for everybody to listen to and get everybody gets to see it firsthand and then another thing is algorithmic decision-making this is a big thing and once you have your principles down and you have them written in English what you can do is you can put them into another language and that’s out in the form of algorithms you could have them programmed in the computer and take in a lot of the data and help you in your decision making so that’s what I wanted to get out now and then to discuss discuss rate you have been very vocal about your principles you have published the book about your principles now you have told all your competitors how you operate how the firm is managed what keeps a whole bunch of more competitors coming up in the market and creating another bridgewater I don’t think that this idea meritocratic decision-making process diminishes anything in terms of reducing it I think that’s like a win-win I think it would be it’s a lot easier for me to deal with other entities if they’re operating in this way then to operate in the indirect politically charged kind of environments in which nobody actually knows what’s true so I you know it’s a win-win okay you told me that you have applied some of this mythology to analyzing how countries are doing and how they will do better in the how they will do in the future or not could you talk a little bit about that
okay um look I I believe that everything that happens happens for reasons and pretty much the same things happen over and over again and that often we don’t see the patterns so that those countries which are successful I think you’re talking about countries the work that we did on countries as a whole
those countries that are successful or those countries that are unsuccessful are successful and unsuccessful for certain reasons in much the same way as if one was to say what is your longevity your longevity maybe a certain amount of DNA but it’s a certain amount of how you’re living and and you could take blood tests and examinations and and in my business which is economics
converting economics into management and and and markets I then went into trying to say what will the 10-year next ten years growth rate be by looking at these various health indicators and so that’s what I did and my how does Brazil look so okay you let me just put that you have to bear with me here why this is this I’m sorry what I wanted to do is I’m just going to read the health index look there’s a cycle you went through a balance of typical balance of payments crisis and that draws a lot of attention up close and then there are the
fundamentals that are the longer-term fundamentals that determine the
longer-term growth rate let’s say the ten years growth rates and if I was to look at this health index and by the way I’ll be happy for I think it may be even on our website I’ll be happy to make sure it’s on our website so that you could see the data directly and you could dig into it and tear it apart as you like it looks at all different countries and where they are and Brazil the most important driver of countries next years ten years growth rate is what the cost of a net of an educated person is not just educated are they are the people well educated but if they’re well educated and they’re expensive it’s very different than if they’re well educated and enix
offensive so that’s a factor the level of indebtedness is a factor that’s it that’s number two factor if more indebted more problems in the future less growth less indebted more growth and then the third factor is very much a cultural factor and it has to do with attitudes about work and approaches and Brazil in these categories if I take the range Falls right now sort of in the middle of those categories in terms of the education per capita and what the education and the costliness of the education and if you were to take the level of indebtedness it’s it’s sort of in the middle and the challenges that have to that exist have to do with measures of cultural measures such as on a scale of let’s say self-sufficiency which is measured by a number of statistics the average hours work the labor force participation rate effective retirement age vacation hours and such Brazil is you’ll you start to see the pattern you lower on the notion of is is it a priority is work a Prabhas work a priority that there’s a category here which is savoring life versus achieving so it’s a number of things like work weeks labor force effective retirement wags questions like hard work leads to success
these are you questions that are given many cases over the last sixty years to a number of countries does hard work leads to success is competition harmful and then the question is is it important to this person to have a good time or is it important to this person to be successful economic and question like economic growth is more
important and the environment countries that will put the environment first will tend to have a higher priority than the environment I’m not saying these are choices that anyone should make by the way I’m not I’m not expressing any thought I’m just saying that there’s a notion of let’s call it savoring life versus achieving and on that Brazil is the third lowest of the of 20 countries in other words the objectives the the objectives are not as much toward the achieving a saving life that is savoring life and and by the way you do all such a fabulous job of savoring life you know it is real it is innovation and
commercialization is it a country in which commercialization is
commercialization is important in other words not that objective versus and is innovation important and on those numbers there you know there are lower numbers and then there’s the corruption index there there’s a negative 52 percent correlation between a country’s corruption rating and its next 10 years growth rating and Brazil could do better on that that so so those are don’t want to digress too much but there’s an index here and you can go through the index and just find where you are but I think that if I was a leader or ally or a tubing leader I would want to look at those benchmarks because those
benchmarks serve to be metrics to what we do is we show you that if you could change that number by a certain amount like changing whether you’re smoking or not or you were to exercise more you could see what impact that would have on the growth rate and so while there are cycles
Durrell’s they’re a balance of payment cycles they come and go there’s the stronger question over that period of time is the question of productivity and then those are the trade-offs that you have to choose for yourself you don’t you know each of us
savor life versus achieving that’s a tough question so and I’m not saying one is better than the other but that’s what it looks like
ray you’ve dedicated a lot of time to finding good people and training great people so of your best finds how would you describe them in three attributes well the most I think the most important quality of a great person is a mixture of curiosity determination and humility I would say those are the those are the elements and traditional IQ it’s a good thing to have but it’s not anywhere near as important as these other things you know how many great people do you have at your organization I think you I guess the question is in relationship to what I think let’s let’s say people are great in different ways right we try to have no not great people but it’s important to realize that a person who pays a lot of attention to detail and is meticulous and then somebody who pays big attention to the big-picture nature made everybody every quality for a reason and the they need each other and so it’s really important to recognize that they’re great in different ways the way that I’ve described Bridgewater and or the qualities that you’re looking for in terms of the greatness I think most of our people are great in that way at least I strive to me and we strive to make sure that that’s and because there’s a culture of doing that then it it does weed people out who were not determined and open-minded and
curious oh you encourage a culture that accepts mistakes
leaving aside unethical behavior which is obviously not acceptable what other mistakes may not be acceptable most importantly is dishonesty and well my definition of dishonesty is totally different than what I mean I think most people think dishonesty means you’re stealing no no I mean you say what you think and that there’s no duality that there’s no integrity means being the same on the outside as the inside so that’s what we strive for in terms of that and so if you have that and you have the willingness to learn from mistakes you have most of what’s required right I’ve read that you meditate every day
how has meditation come into your life and how does it affect your business and your happiness I do Transcendental Meditation I would say it’s probably been the single most important influence on whatever success I’ve had in my life because it has given me an in an equanimity and a creativity the way it works I’ll pet I’d recommend it to everybody the way it works is it’s just an exercise where you repeat a sound a mantra they call it and if the sound doesn’t have any meaning and by
repeating that sound think of it as maybe something like oh and by repeating that sound your mind goes from your thoughts which are jumping around to getting rid of those thoughts it’s it is now on the ohm instead and then
eventually the ohm disappears and then you go into your subconscious mind you’re neither conscious nor on
just your your very relaxed and their and and but you’re actually you have no thoughts and in that state you’re in your subconscious mind and your what happens in your subconscious mind is that’s where the creativity comes bond it’s like if if you want to be creative you don’t go out there and work hard at being creative it’s more like you take a hot shower and a creative idea comes to you and you want to grab it it comes from your subconscious mind and having that equanimity and that creativity has been valuable so let’s say thoughtful disagreements to avoid the emotional hijackings to be able to be thoughtful to be able to go pain plus reflection eat to do that is something that’s enhanced by meditation you say you set a special time to do it I usually do it for 20 minutes before I have breakfast and then I’ll do it usually in the evening just before dinner and I’ll but if I can’t I’ll do one over I cat I’ve been doing it for well since 1969 so for a long time good can you tell us a little bit about the world how you see the world now and the markets you know you’re one of the most successful investors this last decade and so we’re all interested in learning more about how you see the world at the moment and where it’s going and where there are opportunities in the market I did a little 30 minute video called how the economic machine works that creates a little template and so just to make it simplified there’s productivity over a period of time and productivity is output per man-hour comes from learning and doing things better and we raise our living standards and around that there are two debt cycles to oversimplify there’s a short-term debt cycle which were used to recessions contractions you’ve gone through a balance of payments adjustment which is along those lines so there are these cycles we’re used to they typically go on for you know five to ten years and then there’s also a long-term debt cycle and the long-term debt cycle happens when things change when you want a country like the United States in a reserve country it’s a zero interest rate because normally when you have not an adequate amount of weakness a economy that’s too weak and and you need to stimulate it you lower interest rates and then it changes the capital market structure cash has a lower return than bonds has a lower return and equities and when central banks do that and essentially and those spreads are created that way and they put liquidity into the system it causes financial assets to rise and so on so when we got to the point where we the United States and Europe and Japan the developed countries had hit zero interest rates and we had to go to the printing of money in other words the the purchases and expansions of balance sheets to bring money into that there was 15 trillion dollars of purchases of financial assets and in order to make that work and not 15 trillion dollars it’s a little bit more than that of those purchases men central bank’s bought bonds and the like that sellers of those bonds take the cash they buy other financial assets those assets go up in price liquidity goes to the system and then there’s a certain amount of trickle down and so when I look at the world as a whole that that’s been the main main name cycle that we’ve been through but the trickle down is much less effective than it was in the past for certain economic reasons having to do with technology is replacing people in other words if you look at the economy as a whole you get one picture if you break it into its pieces let’s call it the top
twenty or forty percent of the economy and look at the bottom majority of the economy we have a situation where the conditions for the economy as a whole the majority of people have not worked well those living standards have not risen there’s not been trick there’s technology there’s globalization there are those factors and as a result we have populism so we’re now in a period of time where the wealth gap is very large and and capitalism for the most part is not working for the majority of people if the capitalism doesn’t work for the majority of people and you have that gap and you share a budget and you have an economic downturn you have a set of circumstances that’s unique so if I’m looking at the capital market structure and I could see that central banks can’t lower interest rates much below zero where they are and not much and they can’t raise interest rates much above where the bond yield is or where the equity expected returns are because if they do if you raise interest rates that’s faster than discounted in the markets since that discount rate is carries through all asset prices you will cause the asset prices to go down because all assets are a lump sum payment for a present value cash flow you raise that discount rate so think of the interest rate as being let’s say the bond yield and let’s just call that depending on the country two or three percent or whatever and and now that and we have a leveraging up I think we’re late into the economic cycle
comparatively late we’ve had a
stimulation in the form of a fiscal stimulation that we’re going to have in to concede constraints so the way that I would look at it just going forward from here is that product we’re in the part of the short-term debt cycle economic cycle in which there it’s going to be more and more difficult to get for central banks to get it right and and so whether it’s a year or two where we’ll probably come in to before the next election presidential election in the United States
in the United States the same picture would be broadly true in Europe to some extent in Japan and then we can get into the emerging China’s and interesting case but generally speaking we’re going through a in which I worry about a year or two ahead and having an economic downturn because I think if we have an economic downturn this issue of polarity this issue of popular populism and the conflict between the rich and the poor in that kind of environment could create political disruptions that can make things more difficult in other words these times are these are the great time we’re at the near the peak of the markets we’re in the low point of unemployment rates around the world and so on and we have a lot of tension between those participants and so I would say I you know I’m concerned about that disparity of wealth and where we are in in the cycle rocky road ahead it’ll be interesting I suppose yeah 20 years from now how will you measure your book principle success what would you hope that you to achieve by having written this book and how would you evaluate bridgewater success 20 years from now I think that like anything you pass along things and I think nobody will remember the book and nobody will remember and and it’s like teaching if it has an impact that’s beneficial to people along lines of the idea of meritocracy or those kinds of things then I will have contributed something I guess in terms of in terms of
bridgewater you know it’s it’s like going from one generation to another we have children that are about the same age and who are adults and when we look at them well I think we judge them by will they will they be happy and healthy if they’re happy and healthy
and we have contributed to an
environment in some way so that they’re happy and healthy to get the things that they want not the things that I want then I think that we will have done a good job in our roles ray I’m gonna move on to the questions from the audience now I haven’t seen them so uh when you fail how do you access that your diagnostic is correct largely by largely by triangulating with others and so I do a few things I try to go back and I try to study history the same things happening before if I can it depends whether it’s economic history it’s my personal failure but the most important way I do is I find the smartest people I know who I disagree with me and I try to take it in and I need the feedback we never can view ourselves I can’t view myself objectively and other people can’t because we have those blindnesses so if I get the triangulation going out and saying you know what uh what do you think I’m weak at what do you think I’m doing wrong and if I get triangulation of people I admire it helps me this is from Carlos Acosta how much of a challenge does the rising wealth gap pose to the stability of democracy especially the United States a lot a lot if you look at the the 1930s I think is a very good period for major countries chose to go from democracies to
dictatorships or autocratic leadership s– Germany Italy Japan and Spain because they were at a stage where there was the same wealth gap there was a large wealth gap today in the United States the one-tenth the top one-tenth of one percent of the populations net worth
is equal to the bottom 90% combined so just as a general principle if you have a large disparity and you’re sharing a budget how to divide the pie and you have an economic downturn you are going to have anger and when that anger becomes almost dysfunctional this has been through the history you could see it particularly in the 30s when that anger makes situations countries less efficient the dip the democracy itself can become a very chaotic
decision-making vehicle somebody says will somebody get control of this place and there’s a real pressure to move toward autocratic leadership so as to bring about control and order to a chaotic situation and I think that that’s a problem now so I think it’s a problem because democracy’s not
capitalism isn’t working for the majority and I think that there’s a lot of disorder and I think it would get worse if we have an economic downturn so yes and you will go through history Plato’s Republic shows the cycle you know they start off with the benevolent despot in other words a benevolent leader who’s autocratic and they have the leadership and then then the ideas and with time not all what leaders are either benevolent or capable and then you have corruption or you have whatever it is then you have a revolution then the revolution leads to democracy and then democracy goes on and it becomes disorderly and then you have a
revolution and then these things happen so we can’t if we have a longer-term perspective we can’t take for granted democracy democracy can be dysfunctional itself particularly in chaotic
situations so yeah I think that there are risks what do you think of the Chinese meritocratic system I actually think it’s pretty good ok so I’ve had it’s very interesting I’ve
had a lot of contact with in the system and operating it runs more like a big corporation than it runs like a like we think of ironically there’s a there’s a succession pipeline and and different points of view within it and then these people work themselves up like a corporation quite like your company and they work themselves up they get meritocracy and so on and then there’s conflict within it okay so it works like so the main thing is that they would say that a democracy one man one vote in is is a different story their perspective is very much a family perspective if it’s been pointed out to me by one of the leaders that the characters for country is state family that’s what the two characters together make that and so the way they think of it is kind of a family gnosis every system has its back that good and bad but we’re seeing in China now the development also very market oriented economy very good rule of law in terms of the improvement in the element of the rule of law and so we’re seeing orderliness improve the likelihood that that runs out of control I think would be less and and the capability people I’ve had the you know the pleasure and honor to know the leaders and I would say there’s I rarely find somebody who’s not very capable or very devoted to the mission so by and large I think it’s not what people think it is most people think of it as being something very different it’s not communism as we know communism okay so edits so it’s a it’s a it’s a very generally speaking effective decision now there’s a cultural issue in terms of debate and openness and how you can so I would say you know it certainly is it doesn’t have that same element except if it’s done
in private so conversations I found my ability to say whatever I want is appreciated and taken in in a way that is probably not widely recognized so by and large I think it’s much more effective much less likely to become disorderly yqp dia calls you a
philanthropist could you explain what you have been doing in that area well I like your yourself you get to a point where you have enough resources and basically my own view is I just want to go do what I want to do and in many cases the going to have a beneficial impact on others or the environment or something is something that I want to do so my own approach to it has been very family oriented my family’s very important to me so the way that I’ve done it is we make it a family activity and I think it should be for myself passion driven we each have our own passions and so we have our you know I’ve got four sons two daughter-in-laws and I’m perhaps a third on the way and I’m in a position where we say we have the family activities and we have so we have a very eclectic philanthropic approach because everybody has different passions and that’s the way we’ve approached philanthropy and the way we again were the way we look at it is we almost don’t think of it as
philanthropies per se like we’re giving away it’s like what do you want to do because everything is in profit motive and so you can get a joy out of being able to have certain impacts and that’s that’s how we each do it now
we set up our rules there is a
governance structure how much can somebody give how do you track it back there’s it being fluent doing
philanthropy well is as difficult or maybe more difficult as being successful in your business how do you train people to be good at
filled disagreements the first is to get them to say do you intellectually want it in other words if we’re going to have a relationship how are we going to be with each other is that your
responsibility do you want to be able to take in and communicate and if you take in then I can take in and so what are our terms of engagements intellectually so by first intellectually wanting it then they go into the experience of it and when they then have disagreement then they can reflect on themselves by being able to reflect on oneself in that moment okay am i calm then we have rules of engagement and in the book I’ve listed a little number of rules of engagement like a two-minute rule okay I’m I’ll impose my two-minute rule that means you’d be quiet and for two minutes I’m going to convey this concept in real-time it but will but you’ll listen for two minutes so that there are certain protocols but you have to want it and then you will observe yourself struggling with it and that’s okay and then you get better at it there’s a good one would you invest in Brazil now yet we have invested in Brazil now do you know we move a lot rather cold
transparency worked very well for you if it’s that efficient shouldn’t we expect more companies to adopt it shouldn’t it be the standard why isn’t it I think it will McGee answers to the first two questions are yes yes and I think it will increasingly be at the standard because just because of evolution what’s going to happen first of all is that nowadays everybody can see what
everybody’s doing and no
everybody’s like pretty much because everybody’s leaving fingerprints of themselves all over the place okay so there’s the data okay and it is an evolutionary reality that great
collective decision-making is better than individual decision-making and so we can do this with algorithms and then also I really do believe it will be perceived as a right like I would say that the most important thing for a lot of you people as you’re going into the company is to say is to believe that you have the right to make sense of things if you are dealing where whoever your boss is and whatever your country the company is or country and you’re saying I it doesn’t make sense to me and I want to ask questions as to why it makes sense and you’re being denied that right then recognize that you will never be able to adequately develop
intellectually you will never be able to be in a position where you know you can adequately develop and if we were to hold people back when they genuinely want to make sense of it and we’re not letting them speak up that bottling it up and that lack of development will stunt their growth and I believe that you’re gonna want that and you’re gonna carry it and I believe organizations will find it easier to attract you if they offer that and so I think it’ll make better decision-making and I think it’ll make it better environments that will attract people so I believe that evolution will drive it in that
direction we’ve run out of time so there’s one last question here yeah did you have time at the Harvard Business School to learn many of the principles you have now adopted or not did they did something come from there or did you learn them later I learned the most of late but Harvard Business School was was was great in that up into my education for the most part it was what learned what other people were teaching you know they would tell me remember these things and then the tests would be did you remember these things and in Harvard Business School it was the first
of a bright spot in basically saying here’s a situation and now you’re in that situation and what do you think and so it moved more to her thinking experience so that was better than the traditional remember this and I’ll grade you on how you L while you remembered it but I would say my my my learning began when I moved from that’s first phase of my life of being a student and getting prepared to do to actually going out there and doing in encountering those realities and then reflecting on it oh well there’s about a hundred questions here I’m sorry I can’t do them all I last one from my friend Veronica she’s right there so she wants to know what your next big challenge is well my my challenge is now to pass along the things that have been helpful and I think I’ll do that probably for about another year and then I’ll be done with that and then increasingly it’s the joy of just the excitement’s without obligations and you know like I love I have ocean exploration is the thing that’s exciting to me you know my family making sure that my family is great spending time with my families of joy but basically to be totally
obligation-free and to feel to make everything just the joy you know alright thank you very much I

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