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Hedge fund giant Ray Dalio worries about the health of capitalism

posted onDecember 4, 2018

All financial crises follow a predictable path and policy makers and investors should study the history. That is according to billionaire hedge fund founder Ray Dalio.

Speaking at a summit in Los Angeles last month, Dalio said that capitalism was no longer working for the majority of people, and added that the current U.S. economic and political system was in jeopardy.

Citing a Federal Reserve survey statistic, Connecticut's richest man said that 40 percent of 
the population could not raise $400 in a medical emergency without selling something. 

“We have a wealth gap in which the top one-tenth of 1 percent of the population’s net worth equals the bottom 90 percent” investment publication Barron’s quoted him as saying. “We might not have contact with those people, but that is a reality,” Dalio told the crowd at the ritzy conference held at the Palace Theater. 

The entrepreneur also said that opportunity and wealth inequality are the largest problems in his country.  “The most pressing problem I see right now is the wealth and opportunity polarity gap, that’s the big source of conflict,” he said. 

Nevertheless, Dalio is not a crusader against capitalism. Instead, he thinks the government should consider partnering with private enterprise. 

“American leadership should declare the opportunity gap as a national emergency and find ways to invest in that through public and private partnerships.” 

This is not the first time he warns about a “national emergency”

In July, in a Facebook post, the financier wrote that A.I. and automation are improving productivity but also widen the wealth gap that “a national emergency should be declared."  

“My view is that algorithmic/automated decision making is a two edged sword that is improving total productivity but is also eliminating jobs, leading to big wealth and opportunity gaps and populism, and creating a national emergency.

"Largely as a result of it, capitalism is not working for the majority of Americans and is in jeopardy," he wrote. "Yet no one is seriously examining what to do about it.”

big debt crises

Who is Ray Dalio

Dalio, who has been called both “the Steve Jobs of investing” and “the philosopher king of the financial universe”, was born in 1949 in, New York. According to the New York Magazine, Dalio began investing at age 12, buying shares of Northeast Airlines for $300 and tripling his investment after the airline merged with another company.

He received a bachelor's degree in finance from Long Island University (CW Post) and an MBA from Harvard Business School. After completing his studies, Dalio worked on the floor of the New York Stock Exchange and in 1975, he founded Bridgewater Associates from his two-bedroom New York City apartment. Bridgewater in 2012 became the largest hedge fund in the world and the same year Dalio appeared on Time magazine’s list of the 100 most influential people in the world. 

Dalio attributes Bridgewater’s success to its unique culture. He describes it as “a believability-weighted idea meritocracy” in which the people strive for “meaningful work and meaningful relationships through radical truth and radical transparency.” 

According to Forbes Magazine, Dalio has a net worth of $18 billion.  

He is also the author of "Principles" a book about the unconventional principles that helped him create unique results in life and business and “A Template For Understanding Big Debt Crises”, a book he gives away for free. 

“My hope is that sharing this template will reduce the chances of big debt crises happening and help them be better managed in the future ” he says on his Linkedin page.

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