This is Wall Street week. I'm David Westin, however you measure
it, the economic relationship between the United States and China is the most
important in the world. Bridgewater founder Ray D'Alessio has
been an important observer of and participant in that relationship as
China has emerged to become the global economic superpower that it is today
with tensions rising. This week we spent some time with Ray at
Bloomberg Invest and talked with him about where U.S.
China relations are today and where they are headed right now.
There are. Aren't there irreconcilable differences
on a number of topics Taiwan, Russia, reverse if he is chips and so on.
They're kind of at the edge and that there's an inability to talk.
So there's quite a bit of brinksmanship and we are also heading into a political
year here in which there's going to be more pressing pressure.
Both sides are very worried about this. So I think you're going to see
restraint.
I don't think it's going to lead to a terrible situation in terms of.
But it is leading. You're going to see restraint in and in
a period of time where you're going to see more debt tensions.
There's the Mike Gallagher's commission and so on, more pressure with chips and
so on and so forth. I don't think that that's going to cross
the line. But it is going to raise tensions.
You will see also more attempts. Tony Blinken is going over.
You'll see more attempts to try to smooth things out because both sides are
afraid of where we are. In any case, while it'll be that kind of
brinksmanship, most likely there is a building of self-sufficiency.
In other words, efficiency was not was the game before everything was global.
You produce it in wherever the cheapest place was most cost effective, and we
became very intertwined with each other. Now, in this global world, there's the
worry about being cut off, cut off in all sorts of things.
And so you're having that dynamic play a negative role in economics and inflation
and thinking about the U.S. relationship with China, which I think
is part of the most important geopolitical economic relationship for
the next generation. I would I would venture to say many
people have made much of the fact that China is going to overtake the United
States in terms of the size of its economy.
The strength is China. There are some questions about that now.
Where are you on that question? And if, in fact, China is not as strong
as we have thought it is economically, I'm talking right now.
How does that affect the relationship? I think I think it's almost like
splitting hairs. There are two great powers.
And, you know, the the difference of overtake
if you take purchasing power parity the size of GDP.
They have slightly overtaken us. If you take the other one, who knows
they're going to. The main thing is their comparable
powers in many ways. Having strains that they can do, a lot
of they have a lot of dependency with each other and they can do a lot of
harm. So the most important thing I think is
how we take care of ourselves. Can we get strong?
Can we raise productivity? Can we be politically and economically
cohesive so that we can be efficient, effective and strong?
Because, you know, you can't rule out China.
Since I started to go to China, not yet. Or nineteen eighty four per capita
income increased by 28 times. It's a power and that's a smart power.
So it's gonna be it's gonna be like that.
No, there's not a winner or a loser. There are only you, you're going to have
both winners or you're going to have both losers.
When you founded Bridgewater and for I have read about Bridgewater, I mean, you
put a great emphasis on the systems involved, the mechanics of all the
engine, it seems to me, without knowing about it, having done this for 25 years
or so, that I might apply to that fairly easily.
Is that your sense where we're going with artificial light?
Yeah. I'm so excited because as you say, for
twenty five years I would always write down my investment principles, all my
principles, and then I would convert them to algorithms which became decision
rules, which became systems and everything would run.
And they would like setting up a computer chess game.
It would play I would play next to it and we would then reconcile differences
and we would learn together. Now, what's happening with generative
A.I. is that I can one can take all of that
knowledge and have it there and then go beyond that to have it as a partner, a
thought partner, because the intelligence has capacities that the
human mind doesn't have. We don't know the ability to process so
much and everything at the same time. So I'm extremely excited.
I think that this is a the greatest revolution bigger than the Internet
revolution. And that like technology, it really
depends. The problem isn't with the technology.
The problem is with the people who use the technology.
Will that technology be used to raise humanity's living standards?
Or will that be used for war in a sense for hurting each other?
And so but anyway, we're going to cut it.
If you take those five, we're going to go through a time warp.
If if we take the next five to 10 years, in the next five to 10 years, it's I'm
going to go through a time warp. We're going to come out the other side
and you're going to see it very completely different world.
Ray D'Alessio always puts his analysis of finance, markets and the economy into
a broader historical perspective. And so we asked noted economic historian
Niall Ferguson, senior fellow at the Hoover Institution and Bloomberg opinion
columnist, for his reaction to raise analysis.
There are certainly irreconcilable differences and there's certainly not
enough communication going on. Ray Dalio talked about there being
restraints. I think that's pretty clear on the US
side right now because there's been quite a diplomatic charm offensive by
Jake Sullivan. Tony Blinken is going to China after
they had to reschedule his last trip because of the balloon over Montana.
But I'm not sure just how receptive or how restrained the Chinese side is
being. Neil, do you share Ray Dow Jones view
about the ultimate resolution of this conflict?
Call it Cold War Two, as you have called it.
He said one side will not win and the other lose either.
Both sides will win or both sides will lose.
Do you share that view? No, and I don't understand it, to be
perfectly honest. In Cold War one, I don't think there's
any controversy that one side won the United States and its allies and the
other side lost the Soviet Union, which, of course, disintegrated in 1991.
And why shouldn't there be a similar outcome to a second Cold War?
No, I'm not saying there's any guarantee that the United States is the side that
wins Cold War to. China's a much more formidable opponent
than the Soviet Union was. And I sometimes think that the United
States isn't in the same kind of domestic internal shape that it was in
Cold War one. But I think the key points about a Cold
War to remember is that if it stays cold, it doesn't escalate into a hot
war, at least not at the global level. You can have hot wars in spaces like,
say, Ukraine, but if it doesn't escalate into World War Three, then the United
States and its allies are probably better placed to win.
Neal, we are told and radar seems to subscribe to this view that genera of
artificial intelligence will change the entire world literally as we know it in
ways that we can't even anticipate now. Do you have any thoughts about what
general A.I. might mean for the U.S.
China relationship? Could it help?
Could it hurt, whereas it likely to leave?
Well, it's certainly true that this is an extraordinary breakthrough.
Technologically, we're seeing A.I. systems, large language models
performing in ways that five years ago seemed very unlikely to be achieved.
And I don't doubt that this is going to transform a wide range of economic and
scientific activities. And in some ways, I'm more impressed by
the work that Deep Mind has done on the structures of proteins alphaville than I
am by chat G.P.S., which seems to be a toy that's quite good at pretending to
generate human text. But it's all the attention is on GP T GP
G4 is a pretty powerful system and the Chinese seem able to come up with
comparably powerful systems themselves. Now what does this signify?
I think Ray Dalio is formula. This is as big, if not bigger than the
internet. Sure.
But let's remember that the Internet originated as a way of trying to make
American communications less centralized so that in the events of World War 3,
the US would not go dark. That's really the origin of the internet
and its goal was decentralization of communications.
Well, I I don't think has necessarily the same implications, if anything is
clear at the moment. It's really that the A.I.
will be developed by a very small number of companies in just two countries, the
US and China. And unlike the Internet, which had
ultimately a defensive conception at its origin, AOL can be used for offensive
purposes.