Wall Street Weighs In On AOC’s Proposed 70% Marginal Tax Hike | Davos 2019

One of the hottest topics at the World Economic Forum in Davos, Switzerland has been Alexandria Ocasio-Cortez’s proposed 70% marginal tax rate on all income above $10 million. There have been many headlines out of Davos with business leaders calling the proposed tax disastrous, scary, and saying it will have a huge impact on the economy. We sat down with three financial heavyweights to find out what they think everyone is missing about this discussion. The general consensus was that while such a hefty tax would hurt the economy, it simply doesn’t effect enough people to be a major issue.

Moelis & Co. founder and CEO Ken Moelis says there isn’t a problem with a high tax on income above $10 million dollars because there isn’t that much income to tax above that level. Marginal tax rates need to start around $250,000 in order to have an impact.  And a 70% tax rate at that level “would crush the economy.”

Guggenheim Partners global CIO Scott Minerd agrees that the amount brought in by a 70% tax above the $10 million income level won’t make enough of a difference even if you assume people will pay it. But Minerd says historically when we have had high marginal tax rates wealthy people have sheltered their income.

Bob Prince, the co-CIO of Bridgewater — the largest hedge fund in the world — says this tax won’t be good because it won’t solve many problems.

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Wall Street Weighs In On AOC’s Proposed 70% Marginal Tax Hike | Davos 2019

Ray Dalio explains the importance of learning from your mistakes

Bridgewater Associates founder Ray Dalio sat down with Business Insider CEO Henry Blodget to discuss his book “Principles: Life and Work.” Here Dalio explains the importance of learning from his mistakes.

“Principles: Life and Work” is the first of two planned books, and includes a short autobiography along with an expanded version of the “Principles” that all Bridgewater employees read when joining the company. Following is a transcript of the video.

Henry Blodget: And one of the other principles that you stress is this idea that you should teach your team to fish rather than giving them fish, but you gotta give ’em room to make mistakes. This is something that Jeff Bezos and many other incredibly innovate entrepreneurs have stressed again and again. We have to get over the fear of mistakes. This seems to be a key part.

Dalio: Well, you learn from mistakes and learn from pain. Like I say, you can scratch the car, but you can’t total the car. Okay. Mistakes is one of the best sources of learning, right. Successes mean you do the same thing over again, and okay, that’s fine, but mistakes that are painful stick. When I look back on my career, I think that the mistakes were the best thing that happened to me.

I remember my mistakes better than I remember my successes. Somehow there must be more of the successes to get me where I am, but I remember all the mistakes, and I remember the lessons. So that’s what I mean by pain plus reflection equals progress. So yeah, it’s okay for you to make mistakes. It’s not okay for you to not learn from those mistakes. That’s a principle in there, right. And so you have a culture that operates this way.

If you don’t have a culture that operates this way, it’s not gonna be self-reinforcing. And so the reason I’m talking about these types of principles rather than my economic and investment principles, which’ll come out in the next book is because these are the most fundamental principles, which are the basis of success. And they’re not just in investment, investment firms principles. It’s not just a hedge funds principles. It’s like life principles and how we’re gonna deal effectively with each other.

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Ray Dalio turned his biggest professional failure into success

Business Insider Editor-in-Chief Henry Blodget spoke with investor Ray Dalio about turning failure into success. Following is a transcript of the video.

Henry Blodget: You had started Bridgewater. You’d had many years of being very successful. You had gotten very confident, and you’ve made this huge controversial bet that we were headed into the next Great Depression and then …

Ray Dalio: Right, the defaults came. Mexico defaulted in August of 1982. I thought, wow, we’re gonna go in this crisis, and everything’s gonna fall apart. That was the exact bottom of the stock market. I couldn’t have been more wrong. And it was painfully wrong because I had built the company until that point. We were a tight group, small group of people. I had to let everybody go. I was so broke, I had to borrow $4,000 from my dad. I had testified to Congress because they asked me to explain this. I had been on Wall Street Week. All of those mistakes, and it was very painful experience. And it turned out to be probably the best experience of my life because it changed my attitude about thinking. In other words, rather than thinking I’m right, I went to thinking how do I know I’m right? And it created this open-mindedness, to be able to then go, fine, the smartest people who disagreed with me, to see how they would think about things, to balance my bets better. It taught me a radical open-mindedness. It taught me what you’re referring to in the beginning of the book that I’m trying to convey, that the power of radical open-mindedness and an idea meritocracy is such a powerful thing.

Blodget: And you talk a lot about how this process of pain, and I can imagine it was just, again, a gut-wrenching experience of having to fire all of your friends. You have to rebuild from zero. You start going forward. You have to look in the mirror and say, hey, I was way too arrogant and confident. I have to effectively relearn. That’s not an easy thing to do.

Dalio: Right, I have a saying. Pain plus reflection equals progress, right. And I began to develop this knee-jerk reaction. If pain is a signal that something is wrong, that you did something, if you make those mistakes, and then to take that pain and to calm oneself down and think what would I have done differently in the future? So my instincts changed. I view those experiences now like solving puzzles that’ll give me gems. The puzzle is, what would I do differently in the future so I would get a better result? The gem is the principle that I would write down as I learned it, so literally by writing down the principle, when this one comes along, what do I do with it? Everything is another one of those. Like, we have a million of those. If you start to say, when one of those comes along, how should I better steer with it, and you write down that recipe. Those are the principles. So I found that exercise to be great, and I also found that I could turn those principles into algorithms. So let’s say our investment process, those criteria are built into literally algorithms and data can come in. So I found that process of encountering pain to produce reflection to produce better ways of doing it to produce principles and then carrying that forward to the decision-making has been invaluable and to do that with people who are gonna disagree with me and to know how to do that well. That’s been the key to success.

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RAY DALIO: US economy looks like 1937 and we need to be careful

Business Insider CEO Henry Blodget spoke with Bridgewater’s Ray Dalio about the current circumstances of the US economy.

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Business Insider is the fastest growing business news site in the US. Our mission: to tell you all you need to know about the big world around you. The BI Video team focuses on technology, strategy and science with an emphasis on unique storytelling and data that appeals to the next generation of leaders – the digital generation.

RAY DALIO: You have to bet against the consensus and be right to be successful in the markets

Business Insider CEO Henry Blodget speaks with Ray Dalio, the founder of Bridgewater Associates, the world’s biggest hedge fund. Dalio breaks down one of the fundamental tenets of his investment approach: that you have to bet against the consensus and also be right. He argues that the following the consensus isn’t viable, because it’s already reflected in the price of an asset. Dalio thinks that, based strictly on an odds basis, a person has better odds of being successful in the Olympics than in the market. He says that, in general, investors buy high and sell low, and uses that as evidence to show that the average man shouldn’t be playing the proverbial game. Following is a transcript of the video.

Henry Blodget: You said something else about investing that I think is very profound and simple that I think a lot of people don’t understand, which is to be successful as an investor, you have to bet against the consensus and be right. First of all, why? Why can’t we just buy stocks we think are gonna go up.

Ray Dalio: Well, the consensus is built into the price. So because the consensus is built into the price. And assets price themselves in a way that they’re all compete, and they’re all of equal value in a certain sense. There’s risk premium of equities over cash and bonds will have that over whatever, but basically, they’re all priced that way. So like think of it as going to betting on a sports team or in other words, or horse racing.

Okay, there’s handicapping that’s going on. So in order to be successful, you’re betting against the consensus, and you have to be right. That’s the game.

Blodget: And you describe your first trade when you were a teenager. You bought a stock. It tripled. You thought, hey, this is easy. But you convey very effectively that in fact, it is extremely difficult even though it seemed so simple.

Dalio: Being successful in the markets is more difficult than being successful in competing in the Olympics. Your odds are higher to be successful competing in the Olympics because you have more people trying to do it. You have more resources. We put hundreds of millions of dollars. We have at Bridgewater, 1,500 people. We’re now competing against other teams, and that’s the kind of resources that are going into playing that particular game. So think about that in terms of handicapping it. It’s not an easy thing to do. What you can do is achieve balance. To know how to hold a balanced portfolio, and to receive something that is a return that is much better than cash achieving balance is something that you can do, and I think that that, but figure. If you’re going to enter the game, since value added is a zero sum game, you have to ask. Who are you playing against? Who are you going into the poker game with? Do you want to do that?

Blodget: And as you talk to people in the real world, is your sense that people understand what they’re up against when they might buy a stock or try to time the market?

Dalio: Institutional investors who are smart by and large understand that. The average man tends to be much more reactive if you look at the purchases and sales that they make. When something goes up, they’re more likely to buy it. They think, ah, that’s a good investment. They don’t know how to measure that in terms of oh, is that a much more expensive investment that’s more likely to go down?

So that’s why, you know, you put in ads in newspapers, and they say, ah, that’s what had that return. That’s what they’re attracted to. They tend to buy high and sell low, and so an average man should not be playing this game in that way. They should be playing the game, or humility. If you think that you’re good at playing the game, just make sure, it’s like going to the poker table or going to the race track. Do it with a little bit of money, and watch it. And get the best advice that you can to know that you’re gonna be able to take money out of the system rather than put it in.

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Business Insider is the fastest growing business news site in the US. Our mission: to tell you all you need to know about the big world around you. The BI Video team focuses on technology, strategy and science with an emphasis on unique storytelling and data that appeals to the next generation of leaders – the digital generation.

Ray Dalio on Bridgewater’s culture and how to bet on the future

Bridgewater Associates founder Ray Dalio sat down with Business Insider EIC Henry Blodget to discuss his book “Principles: Life and Work,” the culture of Bridgewater, and his outlook for the future.

“Principles: Life and Work” is the first of two planned books, and includes a short autobiography along with an expanded version of the “Principles” that all Bridgewater employees read when joining the company.

————————————————–

Follow BI Video on Twitter: http://bit.ly/1oS68Zs
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Business Insider is the fastest growing business news site in the US. Our mission: to tell you all you need to know about the big world around you. The BI Video team focuses on technology, strategy and science with an emphasis on unique storytelling and data that appeals to the next generation of leaders – the digital generation.