>> rose: welcome to the program. we begin this evening with the u.n. general assembly, the annual meeting taking place this week here in new york. we talk to john micklethwait, bloomberg editor in cheer and former editor of the economist magazine, also nicholas burns a veteran diplomat now professor at the harvard kennedy school of government. >> the u.n. is not as efficient as we wanted to be, it is a bleeted bureaucracy. it can't resolve some of the big problems on its own, like the syrian civil war and north korea. but it's the only organization we have where 195 nation states come under one roof it was our idea, it's in our most important city. we're the largest contributedder to it. and i think the president in his first meeting in new york at the u.n. at the reform meeting, i think he surprised people. he didn't come with a big tough message. he basically urged reform but didn't say he would walk away. i thought that was positive. >> rose: we conclude with a

conversation with ray dalio, head of bridgewater associates who has written a new book called principles: life and work. >> you try to find your facts but different people even perceive the facts. the key is how do you work yourself through disagreement well by you believe the process is fair. and so this idea meritocratic process allowed us to get through it. most companies, if you look at most companies under the same circumstances, they wouldn't have got through their argument because the individuals involved would probably have said oh that jerk and whatever. and they would have had it. but if you believe that even though you think it's right, that everyone around you thinks that that is wrong and you take a vote, you can get passed the disagreement. >> rose: micklethwait, burns and dalio when we continue. >> funding >> rose: funding for "charlie rose" has been provided by the following:

>> and by bloomberg, a provider of multimedia news and information services worldwide. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: this year's annual united nations general assembly will begin tuesday. this year's official theme is focusing on people, strifing for peace and a decent life for all on a sustainable planet. president trump will address the international organization tuesday morning in a speech that will likely focus on north korea and iran. other key issues on the general assembly's agenda include climate change, peace keeping, refugees and global health. joining me now is nicholas burns of harvard's kennedy school and

john micklethwait, bloomberg editor in chief. >> what should be the agenda for president trump? >> i think charlie president trump has a tough road ahead this week because he arrives not in a very vong position. es, the administration is under investigation by a special counsel and congress. he doesn't have a majority of the american people with him. congress has begun to reassert itself against executive privilege. they voted for the russia sanctions. they're going to vote for a strong date state department budget so they are grabbing some power from president trump. and he arrives where the big issue this week are the north korea nuclear problem, the climate change issue and of course the iran nuclear deal. on two of the three of them the president has imposed a bit of self-exile. he has taken positions that are at var yans on iran and on climate with every other major world leader. >> rose: but the important part is he has withdrawn from the paris accord, but now hr mcmaster was on saying we're thinking about where we are on this. and they don't have to leave and they don't leave for two years. so they are sending a signal, you know, that maybe they're

willing to listen to other ideas on paris. with respect to iran, i'm hearing that in fact there are more and more stories, john, you can speak to this, that they may not want to get out of the iran deal. >> hoping is-- i agree with nick about the idea he is having a rough time in washington it may conceivably be in his mind he may be coming to new york as almost a relief, he is coming here for four days. george w. bush, barack obama, nobody ever came here for that long. >> rose: he does have a home here. >> he came to a place he deriveds a club are people go and talk and putting effort into it. i think on iran he seems to be in an awkward position whereby he seems to be saying some things to israel particularly about the idea that he probably seems like he may not want to-- he may not allow the sanctions-- to stop the current version of the deal. that is one side of it. the other side is that it is very difficult.

the europeans are probably unlakely to come with him if he turns against iran and the idea that the europeans might lead the russians and the chinese seems possibly even further away. so he is in an awkward spot on this. >> rose: how is america's reputation around the world today? >> difficult. >> rose: are you a former diplomat. >> the pe-w poll which is a highly regarded poll says that we are-- our popularity and our credibility are dramically reduced from the time that president obama was in office, except in places like israel, where of course the president has been very well regarded, president trump because of what he is saying. some of the arab country, not all of the arab world but certainly the gulf countries. and you know the president has not really signaled to the rest of the world if he is going to play the role that all of our presidents since tru man has played. leader of the west, leader of the nato alliance, protecter and vindicator and supporter of the european union, he spends a lot of time being publicly critical of alliance government. he saw he accused ten days ago

the south korean government, the south korean government of appeasement, that he would withdraw from the free trade a agreement. the world is not as can tomorrowed to american leaders being tough on allies and embracing oughtokrattic governments all the time. that juxtaposition has been jarring. what he needs to do and i hope we will see an adaptive administration now that general kelly is there and mattis of course is still powerful. he needs to adapt to that leadership style, to embrace our allies, to stand with merkel who we think will be returned next sunday to the german elections, to fortify that nato base. because to be successful on forth korea, in the fight against the islamic state, to participate in the big negotiations over the future of syria and iraq with the kurdish referendum coming, we have to have a strong base and we don't have that right now. >> interesting, actually because what nick says is absolutely right. he shows in sign of being able to do. this but he also president, as we discovered in washington recently, who suddenly is capable out of nowhere of

turning around and saying hello to the democrats. there is that thing where if you don't seem to believe in very much t has that advantage that you can swivel. the only thing is, the one thing which had been fairly consistent throughout this presidency is the idea of america first, and that is where it makes it terribly difficult with allays. you can see already in the reception the europeans are giving, it is absolutely right. people are cross with trump. they're not sort of, not willing to cut him a break at the moment. >> you wonder whether america will be there when you need them, don't you? isn't that the point? >> i think that's the problem. when you go into brussels and your firs big trip to europe as president trump did and castigate the allies and cast doubt on whether or not we want to be part of this alliance. this is a jarring departure from reality. >> rose: angela merkel said we have to act as if we are on our own. >> she did. and of course we've always wanted the europeans to do more. and president trump is right about one thing. he's right that the europeans need to be more self-sufficient

on defense. they need to spend more on national defense, germany in particular. i think he's right to challenge them. but the way that he has done it has not been terribly productive either with the west europeans or with the south koreans. i think he's done better, frankly with xi jinping. they seem to have developed some kind of way to talk to each other on the phone now that they met a couple of times. and we will need china obviously in the next round of north korea. >> rose: they were in favor of the sanctions most recently? >> they have achieved something. >> rose: did they not support the sanctions most recently. >> they supported one of them. but the previous ones they were more dodgy on. >> rose: the most recent one is the one that seemed to indicate that they wanted to send some signal to the north koreans. >> but i think there is still a basic problem with the europeans. they don't feel as if there is any pressure on them to help trump out. and that's weirdly why iran is interesting, is because this is a classic deal where if you did want to do something with iran, you would perhaps escalate pressure on them.

you would start talking about maybe changing the-- fushing the deal off. the thing which really worries people is the obama deal is meant to end depending on how you read it, somewhere between-- 10, 12 years away. maybe you could put it further away. in order to get that degree of agreement about what to do about iran, you sort of need the europeans on side first. you feed the british and french at a minimum to be sim pathetic to that and maybe you begin to reach out to other people. so this is where all the problems of the previous rhetoric come back to haunt you. it's not impossible. but it's extremely hard. >> macron of france, what role, what will be expecting of him? >> i think there is a relationship where president trump has invested. he made this quick trip to france for bastille day for july 14th. >> rose: and the french had invited him too. >> they did. >> rose: suggesting they too wanted something. >> exactly right. and macron is seen, he's important because he defeated ma

written le pen and the french right wing, the populists, number two the germans need a strong french counterpart to solidify and strengthe the eu. the eu had a bads up could elf years, if merkel is returned and macron can get his labor reforms passed by the french parliament, that will help him both politically and also economicically. and because france has military power, they are in mali, they are very helpful to us in syria, they are involved in the campaign against the islamic state. i think the president add pires that because he tends to judge countries on weather or not they are with you militarily rather than politically. and so macron i think, met today are off to a good start and we ought to want to see that relationship develop. >> rose: bus populism still have momentum? >> yes, it varies from time to place. >> rose: an trump added to it when he added to the idea that populism was on the march. >> even now in the numbers still has some bed rock of support of people who are just fed up with

how it, and they like it when he shakes his fist at itment and you can see that in britain with what happened with bore is johnson over the past few days. he's out there trying to rally the conservative, what i describe as the main anti-eu conservatives by saying look, you know, i can-- this brexit thing has to go through quickly, don't mess around. theresa may isn't doing enough. he would deny he is saying that but that is clarily the message he has been sending. >> rose: china, at daffous we all saw are-- daf os we saw xi jinping come and speak to a world where global poor view was appropriate. does that suggest that china is prepared to exercise more influence in the world and has the app tied for exercising more influence in the world and wants to see the world turn to china in reflection of its increased power in the world? >> it was highly ironic and a little bit hypocritical for xi jinping in dafos to say i'm the

darling of globalization when it is one of the most protectionist nations on earth. but i think in a more serious vein in terms what the chinese want to do they are not intent on global domination. they want a relationship with the united states. on gig issues like climate change i think xi jinping appreciated very much his joint venture with obama that proud the paris agreement of 2015. they know they need a good relationship with our government and our private sector to stabilize the global economy. so i think we're partners with china. but we're also competitors. and we're againing to see that now in east asia because the chinese are pushing out. the south china sea, against five other countries. >> rose: if there is one point they believe they ought to dominate is that region. >> yes. >> i think there is a difference between china wanting to be a world power which is quite likes a chance, it looked very good, you had this vacuum and suddenly xi jinping appears in it. but on the whole i think their priority is very clearly the region and what they can do there. and there are certain ways in which being a more global power

helps them within that region. but the main priority for the chinese leadership seems to be we want to get the reforms to work at home and we need time to do that. >> rose: i'm interested in what you both think about this. i was at a conference this weekend in which a very important american made this statement. the thing that we need to do is spend a lot mr time focusing on our relationship with india. that is the crucial american relationship to pay attention to. >> i think that person is absolutely right. because here you have the world's largest democracy. soon to be the world's greatest population, they will overtake china in a couple of years it is a rule of law society, imperfect but rule of law. india wants a strategic military partnership. not alliance but a partnership with the united states and japan. dnt want to fight china. but it understands that it needs weight, and japan and the united states especially the united states can give it weight. india has more military exercises per year with the united states in the air and sea

than anybody else. and this is a dramatic departure because for almost all of india's existence its primary supporter has been russia and the soviet union before it. now it's the united states. and we have no-- no bipartisanship in washington except on i hadia where president bush and president obama and now president trump to his credit have recognized the strijic opportunity to the united states and are exercising it. it is very important for him. >> rose: also india is a country having border disputes with china. >> that's right, in the himalaya. >> a huge long border which they still dispute, some indian politicians can be still savage towards journalists who draw the map in the wrong way. i think to some extent if you look at that area through the eyes of kissinger you get a straight forward sort of power game, great power game happening again. you have the world's most populist country at the moment, up against the world's second most populist, about to be the most populist country and you have japan on the other side. and all the ingredients of great

power politics pushing backyards and forwards. with the americans sitting outside, tending to back the indians that very, very nervous about what happens is china. and it's one of those long-term relationship management things which tally, kissinger or-- would devote a huge amount of time and effort to. one problem is the indians themselves often take a very, very short-term approach which the chinese don't. i think he is different from what india had before but he has a good side which is he an economic reformer and a bad side that he is very nationalistic. and the problem that whole region in asia is it is a pit of nationalist emotions. it is not something where you can play things out easily. it's all about what is taught in text books and schools and not just about where lines on maps are. but what the japanese and the their history.different times it's a very nasty history which people keep on pushing forwards and backwards to each other.

if you change that then i think that makes a big difference. >> rose: beyond the obvious tension arising from north korea's dramatic attempt to exercise, to show off its military might and especially how far along it is in developing nuclear weapons that can sit atop of icbm's, what are the other tension places that are under consideration this week? i mean clearly another is qatar and saudi arabia and the emirates. explain that to me. >> well, i think right now you've got four or five areas that are under very close scrutiny by these leaders. you have north korea, you have iran, we talked about that, the nuclear deal, the south and east china sea. >> rose: and also with the saudis too, but the arab states between iran, shia sunni. >> the big ravelry between the shia and the sunni and the middle east and we're seeing that play out in yemen. seeing it play out in syria and iraq and lebanon. the iranians are making a big push for power.

here where president trump has been right is to say that there has to be a coalition forum to israel, the pod rate arab state, sunni states and united states to contain what the iranians can do. the iranians want to establish a he physical con tigious line of control, if you will, or arms supply between tehran, to baghdad, to damascus. of course they have troops on the ground in syria, to bay route. and they want to-- bay root-- bay rut and they want to supply for the next rocket war, if the president comes into the u.n. and says we've got a problem of an uncontained-- uncondition strained iran he will get some support from europe and the arab world. if he goes in saying i will question our involvement in the nuclear deal, will have no support. >> rose: isn't that easy for the president to come in and say i'm going to support the nuclear deal but i will be louder and more vibrant force against iranian behavior in the world. i mean you can do both. >> you can do both and you should do both.

and i think that is where he will get some support from democrats in congress on this. people like me who supported the nuclear deal will support him on the tougher line against iran but conventional part on the iran problem. >> the division between those two things, you have the deal which is very explicitly just about the nuclear version and donald trump perhaps correctly is trying to broaden it saying there are other unacceptable things the iranians are doing including trying to set up this route to the sea. that that for the moment is different. and it is hard for him to get that through which comes back to that thing about he must be able to get allies to sort of trust him to go along to some extent that is where the deficit is. >> rose: is the secretary of state i different kind of secretary of state because he hasn't had diplomatic experience per se. and because of state department is not fully staffed? >> and therefore he is primarily relying on a cod erie of aids he has known before. >> the problems he is encountering are not due to the fact he has never been a

diplomat. he was chairman of exxon global. he knew the world. >> exactly right. the problem i think, former diplomat, foreign service officer is that he's not trusting the foreign service. the civil service, he's not investing in them. he doesn't appear to be connected to the leadership of our career diplomats, people with real capacity and experience. he's proposing a 31% budget cut which would decimate the state department and here's one of those areas where congress, republicans in congress have come out to say no way. we're not going to be party to weakening diplomacy at a time when secretary mattis is saying we need a stronger state department. so moral is very low. and he's got to adapt, rebuild this department but slow confidence in the men and women without can help him. these are career people. they're not political. they'll work as hard for president trump as they worked for president obama if you give them a chance. but that's not happening. >> i would think if you are a foreign leader and looked to the united states and see conflict

between a president and the national security apparatus, especially cia, and what the relationship is, and then you look at states and see conflict there, you wonder how does america speak for itself. and the president will say i speak for america. but but diplomats know there are many ways that you measure what a country stands for beyond what the president says. >> and one of the problems on north korea is the president has been all furry and turmoil and i am going to get you. and mattis and tillerson have been saying we're on a diplomatic path. we're not going attack north korea. mattis, secretary mattis said we're not even trying to overthrow you but we don't want to you have nuclear weapons. and we ought to deal with you, negotiate. it's a very different message. if you are kim jung-un, you are 34 years old, never out of your part of the world. you don't really understand the americans. the americans are speaking many different voices, at the top of our government, that say problem in di lom-- diplomacy. >> america has so much heart. america has so much hard power

that you forget how useful its soft power has been at different times. you go back to kissinger but you also go back to, a good example, different times america's managed to put pressure on countries like russia, managed to put pressure on other areas of the world and done it not through the use of force. and what is happening i think under tillerson which people really seriously question is whether that ability which was always, you know, was good, and to some extent camouflaged by all that hard power, whether that is still there. there is one group of people who say look look he is playing a very clever, long game and ultimately this will all come through. but with every kind of weak and months it gets harder for his defenders to come, they need to come up with something that he's done. >> rose: finally the u.n. itself. this president criticized the u.n. we have a new secretary general. you can make the case of the relevance of these united nations. >> you sure can. the u.n. is not as efficient as we want it to be. it is a bloated bureaucracy. it can't resolve some of the big

problems on its own like the syrian civil war and north korea. but it's the only organization we have where 195 nation states come under one roof. it was our idea, it's in our most important city. we are the largest contributor to it. and i think the president in his first meeting in new york at the u.n. at the reform meeting, i think he surprised people. he didn't come with a big tough message. he basically urged reform but he didn't say he would walk away. i thought that was positive. >> it's interesting. out of all the things trump really went for, all the dismissed as useless the u.n. was one of them but it is still, to use the old tenison quote t is the closest of a parliament. and the basic fact is if you want to meet a lot of world leaders, hand out with a lot of world leaders which i think the president is quite enjoying, this is the place to come. yet there is a lot of bureaucracy. there are vast mament amounts of the u. in. that people would want to reform that at this precise moment, donald trump trying to re-energize your presidency,

trying to find something to do overseas that begins to give you a little bit more access, the u.n. is a useful thing. he may mess up, but we will-- . >> rose: and it often should be said and is said beyond nation state issues we have these tremendous problems across boundaries whether it is climate, refugees, and issues of slavery, human slavery and a lot of very difficult problems, this is the one forum there is in a sense. >> and the central organizer. it was the u.n. that put the climate change conference together in paris in 2015. it is the u.n. that is leading on mall aria, the drive to eradicatic. global health issues. so increasingly these transnational issues that affect 7.6 billion people, you have to have some place to go. this is the place to go in our country. >> rose: last word to you. >> i was going to say, every single reformer when you look at the institutions of world government and people say the u. flvment is there, it has too many bureaucrats, all these things but when you try and

redesign it you nearly always come back to having some body which is like the u.n. it just makes sense for governments to have somewhere to come and talk. as you say there are always thee transnational problems, you will always need something like the u.n. even if you always try and change it. >> rose: thank you, tbreat to see both of you. we'll be right back. stay with us. >> ray dalio is here. the founder, chairman and cochief investment officer of bridge water associates. he created the firm in 1975 out of his two bedroom apartment. today it is the largest hedge fund in the world with assets of around $160 billion under management. fortune magazine has called bridgewater the fifth most important private company in the u.s. the firm's success is anchored in its unconventional culture which emphasizes values such as radical transparency and radical truth. dalio expands on those ideas and more in principles: life and work. i'm pleased to have him back at this table.

welcome. >> thank you. >> rose: now so tell me the motivating reason to put this together for you. >> why did you want to write this? >> to help others. make decisions better. to help them be more successful. i was originally very reluctant to share some of these principles. they were internal. >> rose: because you thought they had lead to you enormous achievement in the investment world and perhaps personally as well, and therefore you didn't want your competition. >> i don't-- i don't like public attention. i would rather have privacy. but when we made-- we were successful anticipating the financial crisis, we received a lot of attention. and because we operated with such different principles, i had a unique culture t became some what distorted. so i put those principles that we had at the time on, out on, on our website. and they were downloaded three and a half million times. and i received a lot of thank you notes. because it helped people a lot.

and so i accumulated more and now i'm at a stage in my life where i'm transitioning from what i will call the secretary stage of my life to the third stage of my life. first stage of my life or ones life i think is when one is depend ent on others and learns. second stage is when we're working and others are depend ent on us. third stage is when they all do well without me, or without us. and so my objective is to try to help others be successful without me. so this is my year of transition from, i wouldn't say from that stage, from the secretary stage to the third stage, i don't want to put everything i had of value in that one book. and so it's a series of recipes, essentially, of what i encountered this or that what i used. i also hope that it will encourage other people to write principles, you know have i been trying to get you to write your principles and each person. because i think if we can have

principled level thinking, you know, when something comes along, what do we do about that? how do you handle that reality? and we're clear on our principles. i think that what be important. i think it's particularly porntd at this time. >> i want to talk about your principles, let me do a little bit of biography. born in queens. >> uh-huh. >> rose: your father was a jazz musician. >> yeah. >> rose: moth sner. >> stay-at-home mom. >> rose: state at home mom. went to liu, long island university. >> that's right. >> rose: went on to harvard business school. was a caddy and had made a little bit of money and invested it successfully on a small scale. but it gave you some great desire to. >> i got hooked on playing the game. >> rose: that's right. and the game was what. >> well, the markets. okay. yeah. i when i was 12 i was candying and the stock market was high. and i took my little candying money and i figured i would buy stock.

and the first company i bought was the only company i ever horde of that was selling for less than $5 a share and i figured i could buy more shares and if it went up i would make more money. that was a dumb strategy, right. but what happened is this company was about to go bankrupt and somebody acquired it and it tripled. and i got hooked on the markets and that began to be something that was-- a game. and it changed my way of thinking completely. it changed my way of thinking because in order to be successful in the markets, you have to have an independent view that is different from the consensus because the consensus is built into the price. so you have to have an independent view different from the consensus. and you're going to be wrong a lot. and that began to influence my way of thinking. >> rose: you were wrong in what was it, 1982 or thereabouts. >> yeah, super wrong. >> rose: you bet that the market was going to go down. >> yeah. >> rose: and the market started on a bull run. >> one of the greatest ever.

>> rose: so you bet against that great-- and went broke? >> and went broke, yeah. i anticipated calculated that countries could not pay their debts back to american banks. and that happened. in august of 1982, mexico defaulted. and a number of countries defaulted. and i thought that was going to cause an economic disaster. and that was the exact bottom in the stock market. and i got a lot of attention. i was on wall street week and all of that. and i couldn't have been more wrong. and i had to let everybody go. these are people i had wonderful relationships. they were like my extended family. and i was so broke that i had to borrow $4,000 from my dad to help may my family bills. and it was one of the most painful mistakes that ever happened to me in my life. and it turned out to be one of the greatest things that happened in my life.

and that was because i went from thinking you know, that i knew, to asking myself how do i know i'm right. how do i know that point of view it gave me the humility that i needed to balance with my audacity. and it really lead to this idea meritocratic way of operating. >> rose: so you wanted to say to everybody who is working with you, because of the lesson of 82 is that let's test every idea i have. let's make sure we're right and let's listen to some tough critics of our idea and let it prove its worth. >> well, it started with me. >> rose: in the world of challenge. >> i didn't have anybody at that time and it started with me thinking you know what could i do to be better. and in particular, i wanted to speak to the smartest people i could who disagreed with me. to try to find out what their perspective was. i wanted to know how to balance my risk and i also wanted to take a look at history in a

different way but the most important thing that it gave me was that need to be among independent thinkers who disagree and to get the most out of that disagreement to develop an idea of a meritocratic way. so to develop a idea merito o crassee by that i mean where the best ideas win out. that they're not just miefnlt because i think one of the greatest tragedies of man kind, of each human is holding on to opinions that are wrong, being so attached to them and not putting them out there and stress testing them. so by putting them out there and stress testing them t was essential. so there are three things that we have to do in order to have an idea, an effective idea of merito crassy, this has been the cree to our success. first everybody has to put their honest thoughts on the table. speak frankly. that's not easy. most people won't do that but that's what we do. second, you have to be, use the

art of thoughtful disagreement, enjoy disagreement. doesn't mean it's conflict. it's an exploration of different points of view so the better ideas can come than those that are just in one's head. and then the third thing you have to do is have a way of getting around disagreements if you still have remaining disagreements, how you get passed those disagreements and move on and find that acceptable. and so we have what we call believe ability weighted decision making. in other words, in most decision making there is either the boss who makes the decision, in a hierarchical way or you have a democracy in which everyone has equal votes. both of those are not the best. in other words, the boss making decision, how do you know the boss is right. and then the-- equal votes that is silly because not everybody is equal good. by being able to weigh each person's point of view-- . >> rose: you way it based on past performance.

>> past performance, assessments of each other, tests. so there are points. literally somebody has a certain amount of believe ability points on different expertise. it may be is it an economic question, is it a legal question, is it requiring different attributes? somebody might be a big picture thinker. but be lousy a details. or somebody might be really per feblght at details and you know, the opposite. and so when we think about that, our goal is idea meritocratic thinking. because if you can make great collective decision making and you can then write those decision making criteria down in principles, and then we've converted those to algorithms that make computer decisions in parallel, that's been our formula for success. >> rose: so it's-- that's the formula, not one you, not one individual but the process is what has prevailed, the process. >> that's right. >> rose: a bit more about the company because some people have

come to you and you talk about this, and basically said you know, you're a jerk and you, you know, you don't know how much you are offending people and hurting people by your conduct. >> yeah, there was a time, i think it was 1993, people, i'm working with a small group and they told me that, which is great. and then, i said i don't want to hurt people's feelings. i don't want to do that. but i want to speak, frankly and i want them to speak equally frankly with me. so is with in a dilemma. could i be 100 percent straight forward with them and was that going to work. or would they not want me to do that? so i, that is the made dilemma made me think how am i going to deal with that situation. and then i realized i should have conversations with them and ask how do you want me to be with you. do you want me to tell you what i think and hear from you what you are thinking. and can we work that through or should i keep that to myself.

and should we have a culture. in which those things are held behind the scenes. which would mean a political culture, you know, that kind of thing. and so that began a process. in which we said we would write down how we should be with each other. so these rules, the rules, these principles became how to develop an idea meritocratic process through that radical transparency. let me be clear, this is not for everybody. this is, this is not for everybody. people encounter that one way or another that they, some people wouldn't want it any other way. that radical straight forwardness. and some people love it. so we go through that process. and you know, that was an example. and i think that such a good example that i wouldn't know that if people didn't speak up like that. and there are so many things in my life that i probably would have been clueless too. >> i will come back to more of

your life. but let me ask you this, in 2007 and 8 when everybody else was losing money, you made money. you made it big time. and it gave you a huge reputation. in the financial world. global financial world. was it the process that you believe enabled you to make the right decisions and the right calls? >> yes. because whatever idea you had, you wanted it tested in every possible way. >> yes. >> rose: without concern for feelings or emotions, just a merito crassee of the idea, the investment idea that was controlling where you placed your funds. >> yes. >> rose: because it was a kind of a crazy view. i mean meaning it was, when i say crazy, what i mean is it was a view that nobody had. it was a bubble. and rather than a bubble, it looked like enormous prosperity and i'm talking about a bust. and how do i know i'm right? i'm still not sure i'm right. and how do we have that independent thinking so that we

can step aside from the crowd. and make a bet that's opposite the crowd. and know how to manage that successfully. so i need independent thinker bhos are going to stress test each other. >> wherever the greatest, smartest, disagreement is. >> then there is the case of greg jensen. all right, here you were at late 60s. and you make a decision about a person who you work closely with, is the right person for this next job. >> yeah. >> correct? >> yeah. >> you made a mistake. >> this how did you make the perfect process and come to the wrong conclusion. >> that's the process. >> in other words, i think explained. >> how failure is such an important part of process, the learning process. i don't know what the right decision is. and the ability to frankly, i think almost in any case that i haven't done something before, i

think there's a high prob able that i'm not going to do it right so when we started out we said that this could be up to a ten year plan because i knew that i didn't know necessarily how to do that. and so we undertook that process. and we learned about different things. learned about mistakes that i made in terms of making the choice and putting so much on-- you know one person under those circumstances. in this particular case t was a situation that because the business had grown upnd me i was both an investor and running a business. and i gave something that was too big bots mlgt and investment, i gave something that is too big, even was getting too big with me with experience, i gave that to greg. and then we want through that. and what we saw was of course there was disagreement as to what should be done and how to do it. and one of the great things that we saw was that because we had this idea of meritocratic system that we believed in, that we

could get work ourselves through that even though we pit have thot differences, if you don't have a system for getting past your disagreements, you will have a problem. president about it with the presidential election. we have somebody without wins the popular election. another person wins the electoral college, okay. if we didn't have rules that we respected about how to get passed our disagreements, we would have a civil war. but because-- . >> rose: that's why when people talk about not respecting the rule of law, if you don't have rules and i'm not going to accept this result, then you have a real problem and a real breakdown. >> that's right. that's why human of law is so important. and those rules, though, have to be perceived as being fair, that everybody says its tea fair. >> rose: an you have to believe in what the fact is and what truth is. >> well, and but also knowing you may not know truth.

you may not know what is true. >> but you have to know facts within you try to find your facts. but different people even perceive the facts. the key is how do you work yourself through disagreement well by you believe the process is fair. this ideas of meritocratic process allow us to get through it. most companies, if you look at most companies under the same s, they wouldn't have got through their argument because the individuals involved would probably have said oh that jerk, and whatever and they would have had it. but if you believe that even though you think it's right, that everyone around you thinks that that is wrong and you take a vote, you can get passed the disagreement. that's a very big power of an idea meritocratic process. >> in this case that was your decision and your decision alone. >> no, no, no. >> so there as was a committee. >> that's right, almost like a jury. >> literally like a jury, okay. there were cases, theres with a group of about 15 people, senior

people, that's how it works. there was a group of about 15 senior people, senior management people and a group that we call stakeholders committee which is like a board. and we all are a comeumentd together. and so we all got together and we heard the different positions. and then we went through that. and we took a vote and we decided what should be done. and everybody thought it was fair. >> rose: what was the end result? >> that we would make a transition at the time, to great working as a chief investment officer. he is a brilliant, fantastic chief investment officer, part of that process. and that the management responsibilities for a year would come back to me. and that we made that transition, and i did that for a year. and then we went on to have david mckormic and eileen murray be coc.e.o.s. he stepped back into a chairman role and i'm doing the investment, i will always do the investment part. >> rose: will you always do the investment part. >> it is pie game.

i want-- i love to play the game. i will for the rest of my life play the game. now in terms of making other people successful, i never want to be depended on. in other words, i want to make the other people around me successful some of i will do the game but in a way where i'm making their success of par mount importance. in other words to teach the man how to fish. >> rose: when people say this sounds like like-- a cult, does that offend you? >> it's just a misunderstanding. >> rose: you have cameras and microphones that are taping what everybody says so everything is on the record and therefore there is no. >> yeah. >> rose: there is no avoiding what you have said because somewhere, somebody has recorded it or taken a picture. >> yeah, just so everybody understands, that is so everybody can see everything, right. >> rose: so you speak from the same page. >> you can't have an idea

merit-- if i don't let to you see something, then you can't have an opinion on it. those who control information are the people who are going to be in control. so in order to have an idea merito crassee, this isn't for spicing on people or anything like this. this is for the neglects that anybody could see it first hand and then make opinions of it and judge it. is to have an ideat this isone meritocracy in which the goals are equally to have meaningful work and meaningful relationships, to be excellent work and excellent relationships, and to do that through radical truthfulness, you request talk about anything, and radical transparency. so you can see everything. that is the basis of our idea meritocracy. and it's worked. >> you also think that this is what could be applied to almost all the big questions of our time. if we use this kind of rigorous process, we would come to a much better understanding of all the complex issues, whether it is

climate change or whatever if might be. >> of course. if we're stuck with-- . >> rose: fighting terrorism. >> whatever the issue is. >> making decisions about investment. >> the process is equally valid, right. in other words, let's put our thoughts on the table, three things, put our thoughts on the table. know the art of thoughtful disagreement, so that we can pull that together and get passed those disagreements in an idea meritocratic way, yes. and i think you can have good relationships. it's a personal relationship thing too. in other words, how are you going to work with each other. can i be truthful. >> this would apply to marriages as well? >> yeah. it applies to any relationship that you better establish what your principles are and how are you being to deal with each other. you don't have to follow an idea meritocratic way. there are two things i require from people, in any relationship i have. and that is to be reasonable and to be considerate.

and i will be very reasonable, and i will be very consider at a. so i know that we will have to have that thoughtful disagreement. and ways of getting passed that thoughtful disagreement, regardless of our relationships, in a marriage, in any relationship that i have, that say personal belief and that is what served me well. i have been married happily for 40 years and that worked out. >> rose: also what served you well is your curiosity. the whole sense of wanting to know things, learn as much as you can. along the way, you have talked about this. you have had, and shared the friendship of some extraordinary people. there is a man on the standing committee in china named wong shishong, known as one of the most influential people in china, one of the people that you admire the most because you think hess mind is in total pursuit of understanding how everything is connected, a kind of theory of everything. tell me more.

>> i admire him. i admire i will qunogu, paul volcker, i admire many people because of the ability to go above things and look down on the reality as-- the world as a reality machine. and to think how does that reality machine work. and to recognize that everything happens over and over again. the same things happen over and over again. everything. >> history has patterns. >> yes, everything is another one of those. and so when you start to think about how does reality work and what are the principles for dealing with reality. and that applies to everything. we can talk about principles to skiing, principles for parenting, and so on. so he thinks of human nature. it's basically almost that there are a limited number of personality types. maybe there are 20 personality types. i couldn't tell you the number. and there is a limited number of

situations. and these things keep happening over and over again. and when you start to see the patterns or look for the patterns, it's almost like you can see the universallal theory of reality. and he's strifing to do that. and he looks at the world that way. it's intelligent, it's not emotionally carried away. he appreciates the beauty of reality. even though the harsh reality. so i admire him for that. >> by i assume are you in constant pursuit of a greater understanding too. because the principles are continueium, i just opened it to one thing, the bad worry about appearing good, good worry about achieving the goal, bad, make your decisions on first order consequences, good make your decisions on the basis of first, second, and third order consequences, so this book is full of that. but you are constantly adding to principles, you started with ten, now you have 200. >> well, what happens is as i learn something, have i gotten into the habit of taking the

time and writing down what is my principle for dealing with that thing. and i am constantly learning. by the way it's the best habit. i recommend it for everybody. whenever something is happening, and you are making a decision, write down your criteria for making a decision. and when you do that, you can also communicate it to others. and you can refine it over time. and what has been magical for us is also we found that we can convert that, into algorithms so that he with can also have computers run in parallel making those decisions with us. this is happening. this is the type of thing that is the key to success, to be able to think, what are my rules so that when another one of those comes along, i handle it well. >> rose: are you saying that you are teaching machines how to make the kind of investment decisions that only human beings have been making at bridgewater.

>> no, we have been doing this for 25 years. >> rose: but you also have a huge investment in artificial intelligence. >> yes, well, yes, in all gor rit-- all gor ritimmic decision t is a language, an algorithm is just like writing, if you think of the brain, as you know, the brain is 89 billion neurons that and so those are a little computers with. >> interesting slip of tongue. from neurons to euros. >> but they're little computers. and they are programmed, literally that way. and then data comes in. and that is how we make decisions. and now adays we can take our criteria and we can specify those. and we can have computers make decisions in parallel with us. it's like using a gps, that is

what it is like. >> so where does intuition, instinct hunch play in all of this. >> it's critical. and it's also by the way what the computer can't do well. in other words, it's the subconscience. as you know, man, although it's only 200,000 years old, the brain is much older. and we came programmed with many of these things in our brain, intuition and those things. and they're in our subconscience. and so by opening up one's conscience so they come up, you know, creativity comes from not working hard at it. it comes from relaxation. it bubbles up from the subconscience. >> that is why you believe in transindental medication-- meditation. >> it has been invaluable to me because it helps to do that. but that creativity, man is still unique to being able to do those things. >> so you let that bubble up but you have to reconcile it with your logic. so when the subconscience creativity and intuition comes

up and replicate it with your logic, it's fabulous. but then you take what you learned and you just don't-- you do something with it. our converting it into algorithms and realizing that has been invaluable because the computer can process a whole lot more information, a lot quicker and a lot less emotionally so it contributes. but you don't have to do that to have an idea merit o crassee. i want to be clear. anybody in any relationship can have an idea meritocracy. >> where is the global economy headed? >> i want to put it in perspective to give everybody a framework. i did a 30 minute video that i know you saw on how the economic machine works. >> the economic machine. >> right, so there are, if i can make this clear, i think anybody can understand that. there are three main forces. there is productivity, in other words, we learn, we invent, our living standards rise. and then will are two big cycles around that. there is the short term debt

cycle which we call the business cycle. that lasts for about ten years, maybe. and then there is a long-term cycle, a long-term debt cycle. which this accumulates and you build up a lot of obligations for the future and that is a burden on the future. right now we productivity is rising, although it's much difficult to measure. but i won't get into that too much. we have when part of the cycle which is when the economy is not too hot and not too cold and inflation isn't too high and not too low, it is worldwide jebly speaking. we're in that part of the cycle it is a good part of the cycle, okayment but we have an enormous number of liabilities. they're not just in the form of debts. although there are a lot of debts. they're also in the form of tension obligations. >> aren't they debt. >> they are a type of debt, they are an obligation. and then there's also the health

care obligations. and we have a demographic that's changing. and so that's changing. and then as a back drop, we have really two different economies, okay. there is the economy which i'll call for the bottom 60%. and then there is the top 40%. or you can make it the top 20% and the bottom 80%. two different economies. two different worlds. that disparity in wealth and circumstances is the greatest since the 1935 to 40 period. the top one/tenth. >> which you think is a most interesting comparable period. >> which i think is the most interesting, comparable period,ness. >> rose: correct? >> that's right. the top 1 percent of top ten% of the population has a net worth equal to the bottom-- if you look at the economy 60%, it is a miserable economy, a miserable set of circumstances, there has not been growth it is, death rates are rising.

suicides, open yad-- opiates and so on it is a miserable economy. and so we are in a period that is a nal lus-- analogous to that period where there is a gap. so when we talk about the economy we should really start to think about the two economies. and that we need to deal with that other economy. there is technology that is is wonderful but it is at the same time replacing people. and so when we deal with algorithm are-- algorithmic digs making and deal with that process, you can expect that that is going to increase the wealth gap and increase that. and so the biggest economic, social and political issue of our time is that split and how to deal with it. >> rose: can our society survive if it doesn't do somethings about that spliet. >> i believe that's right. >> rose: that is the question. >> that's the question. >> rose: the book is called principles by ray dalio, bill gates knows something about these ideas, ray dalio provided me with invaluable guidance and insights that are now available to you in principles, which is

in fact the point here. the pont here is ray dalio wants you to understand what he has discovered in life and share it with you. thanks for being here. >> thank you so much, a pleasure. >> rose: it's always a pleasure. >> thank you. >> rose: thank you for joining us, see you next time. for more about this program and earlier episodes visit us online at pbs.org and charlie rose.com. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

>> rose: funding for "charlie rose" has been provided by: >> and by bloomberg, a provider of multimedia news and information services worldwide.

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