Ray Dalio On Bitcoin, Hard Money Martyr

Admittedly, I’m a bit tired of Ray Dalio. I imagine quite a few folks feel the same way.

Ray is, by a few measures anyway, the most successful hedge fund manager in history. Certainly, he’s set himself apart. He’s not identified with the unseemly behavior of his ilk nor does he fit most of the stereotypes associated with his industry.

But at some point, he decided being enormously successful and well-regarded in a business where it’s almost impossible to be both simultaneously, wasn’t enough. So, he set about writing his own Bible.

Against the odds, Ray managed to turn his “principles” into a best-seller, which The New York Times called “significant.” It was “significantly” long, that’s for sure. And the fact that Ray somehow convinced a nation of dimwits with the attention spans of baby squirrels to at least pretend to have read a boulder-heavy, self-help tome written by a hedge fund manager, was a small miracle.

He probably should have stopped there, but even that feat wasn’t enough. Over the past — let’s call it three — years, Dalio has morphed into a kind of self-styled philosopher-historian, to mixed results. His writing is too ambitious, needlessly repetitive, sometimes confused and suffers immensely from Ray’s almost complete disregard for paragraph breaks.

At his best, Dalio is a capable writer, but only considering the scope of what he’s trying to cover. At his worst, Dalio’s missives are excruciating attempts to forcibly fit centuries of human development into simplistic frameworks.

All of that said, I feel bad for criticizing Ray. Because I actually like him. It’s not just that he’s preferable to other hedge fund titans, it’s that he’s a different animal entirely.

But he’s become too predictable. When it comes to the macro, he’s hopelessly lost in his “studies.” Asking him about China or dollar hegemony or any topic that’s amenable to free association, is an invitation for a stream-of-consciousness-style monologue. If he starts with something like, “I study history and there are cycles…” you may as well settle in or else prepare to interrupt him. Because it’s gonna be a while.

When you can get him to focus, he tends to repeat a handful of talking points, one of which is that “cash is trash.” In an interview with CNBC on Wednesday (at SALT), he did it again. While promoting crypto. Only to say that regulators will eventually bury it. Crypto, I mean.

“I think at the end of the day if it’s really successful, they’ll kill it,” he told Andrew Ross Sorkin, of Bitcoin. “And I think they will kill it because they have ways of killing it.”

“I have a certain amount of money in Bitcoin. It’s a small percentage of that which I have in gold, which is a relatively small percentage of what I have in my other asset classes. And so on,” Ray rambled.

When Sorkin mentioned El Salvador and said governments “may take this on,” Dalio (literally) laughed at him. “No, no, no,” he said, leaning forward and speaking as one would to a child (which Sorkin kinda is, in my experience). “You have El Salvador taking it on and you have India and China getting rid of it,” Dalio said, adding that the US is “talking about how to regulate it.”

Invariably, he veered into history. “If you put crypto in the historical perspective,” Ray began.

Not to put too fine a point on it, but that’s precisely what I was trying to convey (above) about Dalio the historian. Saying “If you put crypto in the historical perspective,” is like saying “If you put space ships in the historical perspective.” You can’t put them in “the historical perspective.” That doesn’t make any sense.

To be clear, I’m not advocating a “new technology” excuse for explaining away the bubble in crypto currencies. I’m coming around to Ethereum, but I still think, generally speaking, that all crypto is worthless. What I’m saying is that Ray has seemingly lost the capacity to analyze markets in a way that’s divorced from his “studies.” Much like Jeremy Grantham sees a bubble every time he turns around, Dalio thinks the secret to explaining anything and everything is “cycles,” “empires” and, broadly, history. There’s merit to that approach, but there’s no one key — no perfect lens — that unlocks the secret to understanding reality.

If I’ve learned anything about crypto over the past two (or so) years, it’s that you really need to understand it. With an emphasis on “it.” Dalio alluded to that, but by the time he did, he was talking tulips.

Again: Nothing I’ve learned has materially altered my assessment, but I no longer believe it’s possible to write off crypto by reference to something it’s not. It’s not an asset. That used to be one of my go-to talking points for dismissing it, but eventually it occurred to me that I may want to find out what it actually is. Once I did, I came away equally unconvinced about the merits of putting money into it, but comparing it to tulips or another historical bubble isn’t really the best lens through which to view the situation.

As you’ll discover if you start at the 2:03 timestamp in the video (above), Dalio mostly lost the plot while attempting to make a (very) simple point — namely that Bitcoin has no intrinsic value.

Perhaps sensing he’d drifted off onto the rumble strips, Ray managed to steer himself back into the driving lane. “With a fiat monetary system, where is your hard money?”, Dalio asked Sorkin. “I think that’s the question to be answered.”