How the economy works

Ray DalioRay Dalio is the king of the global hedge fund industry. He founded Bridgewater Associates in his Manhattan apartment in 1975 and it has since grown to become the world’s biggest hedge fund firm with about $150 billion in assets. According to Forbes Dalio is the 31st richest person in America and the 76th richest person in the world with a net worth of $12,9 billion as of September 2013. He has been labelled the Steve Jobs of investing.

In 2012. Dalio appeared on the annual Time 100 list of the 100 most influential people in the world and in 2011 and 2012 he was listed by Bloomberg Markets as one of the 50 Most Influential people.

Being such an influential person, Dalio uses the public attention that is focused on him to do some good. He seems to believe that knowledge of the basic workings of economics should be brought to the publics attention, so he gives speeches, he writes a blog and he produces educational videos such as the one below, which was published on the website recently.

The  video is 30 minutes long, but if you have any interest in the topic then please watch it to the end. It is brilliant and even if you have a bachelor degree or MBA in business, you will become more educated by viewing it.

How The Economic Machine Works by Ray Dalio

There is also a quite extensive (211 pages) paper written by Dalio on the website that goes with the video. The illustration on the right links to the PDF for download. The paper starts:

imageThe economy is like a machine. At the most fundamental level it is a relatively simple machine. But many people don’t understand it – or they don’t agree on how it works – and this has led to a lot of needless economic suffering. I feel a deep sense of responsibility to share my simple but practical economic template, and wrote this piece to describe how I believe it works. My description of how the economy works is different from most economists’. It has worked better, allowing me to anticipate the great deleveraging’s and market changes that most others overlooked. I believe that is because it is more practical. Since I certainly do not want you to blindly believe in my description of how the economic machine works, I have laid it out clearly so that you can assess the value of it yourself. So, let’s begin…

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