Ray Dalio: How to embrace conflict

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Hey folks, Jeff Berman here. I am thrilled to share some of the new names who will be joining us at this year's Masters of Scale summit. This may be our biggest stage yet. Reed Hastings, Meredith Whitaker, Van Jones, Amjad Masad, and more. Will be there with us October 20th through 22nd in San Francisco. If you're building something great, or you want to build something great, We want you there with us too.

Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. I was assigned to a match between India And Pakistan.

This game was being televised. I'll guarantee you I didn't sleep the night before. On this one. That's Steve Horgan.

Legendary field hockey umpire for the Olympics, World Cup, and the NCAA. And he's telling us about one of the most memorable games from his decades in the sport. But before we hear about that... You might be trying to remember. Which one is field hockey again?

You might want to take Ice hockey. Mix it with soccer. Add a little bit of lacrosse. That's right.

It's the one that's like soccer. But with sticks. See. I know about sports. In any athletic competition, the umpire is keeper and enforcer of the rules.

But they also play A less visible role. Conflict mediator. And even field hockey. has its share of conflict.

It's not Technically a contact sport. But there is physical contact when people challenge for the ball. Sometimes you'll there'll be a little bit of extra pushing or shoving. I don't wanna say fights erupt,'cause that's very rare in our game.

But people do get a little Annoyed. Players got annoyed. During Steve's most memorable game. as a field hockey umpire.

It was the final day. Leading up to the ninety six Summer Olympics. These players were about to represent their country in front of the world, so emotions were running high. Both of these teams, India and Pakistan.

Mm. When they play hockey Either it can be very difficult to manage and be very conflicting. Or They play beautiful hockey.

And It's just a uh a sight to behold. Steve knew that his mission in this game was to manage the conflict. So fans across the world could witness the elegance. Have a beautiful game.

A field hockey. Steve Blue the Whistle. The game. was underway.

And about thirty seconds into the match. one of the Pakistani guys Went to hit the ball. And when he followed through He hit one of the Indian guys.

and he actually developed a cut. Underneath of the shin guards. That's how hard he got hit. I recognize that as a little bit over aggressive, so gave a green card warning to the Pakistani player.

About thirty seconds later. One of the Indian gentlemen Ran over. one of the Pakistani players kinda pushed him down. So it was like you hit our guy, we're hitting your guy, right?

We gave a green card to the India player as well. For some reason I d I have t still to this day Don't know why I did it. I stopped the time.

and called for the two captains to come meet us. I said gentlemen. Um We haven't started this game very well. You two know that you're responsible.

For your teams. And they both go, yes, sir, we understand. And I said we cannot have this go on any further. I said, it's my understanding. That fifty million people.

Back home. Woke up at four oc in the morning. To watch you boys play hockey. They don't want the game messed up. And neither do we.

Do you understand? They said Yes, sir, we understand. And I said, now would you like a minute to go talk to your teams? And please understand that we are gonna hold you responsible for your teams.

for the rest of the match. They went back, they had a little huddle with their teams. We played excuse me. Sixty nine. Minutes.

Mm. Of absolutely Brilliant hockey. The game ended in a two-two draw. Both teams came up when the match was over.

They were so appreciative of the way we handled the match. It was a sight to see when you can take. Something like that that you're really afraid is going to explode. and bring it down to a comfort level. That the players trusted us. We trusted them.

And sixty nine minutes of hockey was just Brilliant. Stief Horgan took a disaster in the making. And transformed it. and one of the greatest games of field hockey he ever witnessed.

This game stuck in Steve's mind And throat. Пикарин конфлікт. Which threaten a boil over. Was resolved in a way that inspired every athlete.

to play the top of their game. The same is true in business. I believe. Disagreement is the wellspring of great ideas and great companies. But only if

You harness the conflict. Constructively. You gotta have incredible talent at every position. Huge push. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to this is totally gonna be amazing. There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right.

Not ball ten years later and be like, well that's just how you do it. We haven't made it. Just how you do it. This is masters of scale. I'm Reed Hoffman. Co-founder of LinkedIn.

Partner at Greylock. And your host. And I believe disagreement is the well spring. of great ideas and great companies, but only if you harness That conflict.

Constructively. Think for a moment. About the last time you had an argument. Yeah. Mm.

Not a passive aggressive email exchange. But a direct Forthright disagreement. about something fundamental. How long ago was it?

How unusual was it? We all have our own personal threshold of comfort around conflict. Some people thrive on lively debate. Others.

Find it deeply stressful. And that discomfort can extend to organizations as well. If the boss can't be challenged safely. That no one can. But I actually think

It's your job as a leader. To invite good criticism. The advice I always give founders is Don't ask people. What they think about your idea.

Ask them. What's wrong with your idea? Invite them to poke holes in it. Because you want to find those holes. Before you bring your idea.

into the world. And by constructively harnessing Disagreements on your team. You improve ideas and fuel. Great focus work.

I wanted to talk to Ray Dalio about this. Because for more than forty years He's made this kind of constructive disagreement. A bedrock of his company. The legendary hedge fund.

Bridgewater Associates. As founder. Ray Shepherded Bridgewater. From a one man operation working out of his apartment. To the largest hedge fund.

In the world. Managing some hundred and sixty billion dollars. for about three hundred and fifty institutional clients globally. But it wasn't a straight path. And to start the story, I need to take you back to October.

Nineteen eighty two. We're in the halls of the United States Congress. A smart looking young man. In a dark suit. And striped tie.

His testifying. Mr. Chairman, Mr. Mitchell. It's a great pleasure and a great honor to be able to appear before you in examination with what is going wrong with our economy. You can tell.

It's nineteen eighty two because as the young man speaks, One of the lawmakers up on the dias. Lights up a cigarette. You can also tell because of what the young man is saying. The economy is now flat.

Cheatering on the brink of failure. That young man. Is of course Ray Dalio. And he's there before Congress providing expert testimony.

Mexico. Just defaults on its foreign debts, and Ray sees a debt crisis coming. A rolling recession. Even Total economic collapse.

Mind you. Ray isn't the only one calling the future this way. A book called The coming currency collapse sores up the book charts. Internal White House Memos.

advise President Ronald Reagan on how to manage Permanent economic decline. So Ray isn't the only voice. But he's loud and he's confident. And he's bet his own investment portfolio.

On the decline of the economy. He's there to warn us. And I couldn't have been more wrong. That's Ray Dalio Today.

It was the exact bottom in the stock market. And we had began a bull market after that. I lost money for me, my clients. And I only had a small company then, but I had to let everybody in my company go. And I was down to me.

And I had to borrow four thousand dollars from my dad to pay for my family expenses. It was a devastating, humbling loss for Ray and his company. The sort of loss. You might want to put in a vault. And never think about again.

But that's the opposite. Of what Ray has done. Ray tells the story in public. A lot. In speeches.

In the press. If you follow his work. You can probably recite the lines along with him. being laid low by his own hubris taught him something. Foundational.

Pain. is a great teacher. Yes. It gave me the humility I need. It made me think How do I know I'm right?

And that changed my approach. What Ray had been missing before giving that testimony was someone who could challenge his theories. The picture had seemed so clear to him he saw no need for a second opinion. And it almost ruined him. Ray wanted to make sure he would never again.

Derail his company and his life. with an unchecked belief. But how do you do that? By surrounding yourself. With people.

Who aren't afraid to check you. How do I find the smartest people I know who disagree with me? and are willing to disagree with each other, but are really care about your outcome. you learn a tremendous amount, and that raises one's probability of being right. I couldn't agree more.

Whether you're starting a new venture or just going about your life. We tend to seek out agreement. So we can feel secure and supported. But agreement on its own. can lead to confirmation bias.

This is why I believe. and actively encouraging disagreement. I should clarify though that disagreement can take many forms. From gentle note sessions? to vigorous debates over coffee.

Probing sessions. Personally, I tend not to enjoy a debate that feels too much like arm wrestling. And I certainly wouldn't encourage ad hominem attacks. You don't even need to raise your voice.

I prefer discourse. That's a little bit more Socratic. The unexamined life is not worth living. The ancient Greek philosopher Socrates

believed in cooperative. Argumentative dialogue to stimulate critical thinking. One thing only I know and that is that I know nothing. The Socratic method was based on one person asking questions and the other answering, and together they would eliminate hypotheses until only one was left. The discussion could get lively.

But both parties understood that their challenging of each other was in service of a greater truth. It's probably worth mentioning that Socrates was put to death for his beliefs, and spreading those beliefs. Too widely to the youth of Athens. So it's safe to say. that challenging established thinking doesn't sit equally well with every person.

But I would argue it is not only a good idea To harness constructive conflict. It's critical. to the decision making process. Ray Dalio made his epic mistake calling the markets in nineteen eighty two, and in retrospect, It's easy to see how he made this mistake.

He had seen a pattern emerging and he thought he had the whole picture. But he had missed something. He had failed to predict that the Fed would loosen monetary policy, which jumpstarted the markets and led to the eighties boom. His mistake was understandable. But it was also avoidable.

Had he consulted anyone but himself, Had he built a system for testing his theories before betting big? He might have been able to hedge his bets. And reduce the company's exposure. What he needed was more opportunity for people to tell him he was wrong.

I've got a principle that it's okay to make mistakes, but it's not okay to not learn from them. Ray clawed his way back from the disaster of nineteen eighty two, and Bridgewater eventually recovered and started to expand. But he was determined Not to make the same mistakes again. So he re envisioned the way his team interacted.

With him? And with each other. I think every organization or every relationship requires people to decide how they're gonna be with each other. I'm gonna be radically truthful with you. and radically transparent and I would expect you to be radically truthful and transparent with me.

Yep. And so that's really how it started. Allow me to draw your attention. To that phrase you just heard. Radically truthful.

And transparent. It's more. than just a bracing way to describe total honesty. Radical transparency. is an organizing principle of Bridgewater.

And for Ray personally. A rigorous Formalized method. That puts the highest premium

On speaking uncompromising truths. The idea behind this formalized radical candor is simple. May the best ideas win. I want to have an idea meritocracy. I want to have a company in which

The best ideas went out wherever they come from. And that I want to be challenged and I want others to be challenged. And then it put me in the position of thinking How do I actually create a real idea meritocracy, not like the way people throw the term around, but a real way where everybody puts their honest opinions on the table.

A word about meritocracy. Ray is right. People do throw this term around a lot. And I believe that meritocracy is an important ideal.

And a dangerous religion. It's important. As founders, as disruptors. And as people To evaluate our ideas with as little ego as possible.

If an idea's good, it's good no matter who gets the credit. If it's bad. You should say it's bad. Even if it's yours. But

Beware looking at meritocracy. as the sole arbiter of success. There are also factors of circumstance at play. Like luck. Where you were born.

What means you had access to? What obstacles you faced. These circumstances are impact success as well. To ignore that fact.

Is to use meritocracy. as a cudgel. Instead of as a goal. Okay. Back to Ray.

How do I actually create a real idea meritocracy? Not like the way people throw the term around, but a real way where everybody puts their honest opinions on the table and works themselves through so that we could have these independent thinkers challenging each other. to raise their probabilities of being right and then also have great relationships. That last part is key. A company practicing radical transparency needs to allow anyone in the organization to be completely honest about their position.

As well as the disagreement. With yours. They also need to encourage those same people to get along at the end of the day. That's easier to do when your company is still small, lean, and scrappy. As the company grows, the

So does the need for formalized structures that let you maintain this type of rapport. When the company started getting larger. I needed or wanted to keep that way of operating together. So whenever and this is a big thing and I would recommend it to like anybody and I wish that you wouldn't do this. And that is that

When you're in a position of making an important decision If you maybe just after you do it. You Take pause and you reflect. And you write down your criteria or your principles for doing it, you write it down.

In your own mind it creates a clarity. Because everything happens over and over again, so that thing's gonna happen again. And then it allows one to communicate that to other people that they're working with or they're living with. So you get a book of your principles, or it's like a book of your recipes. I'd love to have a book of Reed's recipes. Right? Yep. What I would do is I would show the people this, the tapes, the videos, okay, here's the reality happening. Nothing hidden.

Yep. And then the principles that I'm using to deal with that situation. So they can consider do those make sense or would you do something differently? And then we could have discussions like, are those sensible principles or not sensible principles? Ray believed so strongly in recording these principles that they became first an internal memo. and then eventually a downloadable compendium. Happily named.

We'll hear all about that right after the break. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity. When to diversify, how to manage tax risk, and how to protect

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I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future, and we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in.

I had this compendium that we did uh I put it uh a PDF online And it was downloaded about three million times and a lot of people Asked me about it and so on. So I felt a little bit more comfortable. I saw that it was helping a lot of people.

And then when I decided that I'm in my transition out of the second phase of m one's life to the third phase in one's life, I decided that I would put it all together and put it out as a book to pass it along. The book became a New York Times bestseller. Then animated videos, and then an iPhone app. The principal's Instagram account has nearly three hundred thousand followers. Who received daily doses of wisdom.

Like Be extremely open. Own your outcomes. Don't pay as much attention to people's conclusions as to the reasoning that led them to their conclusions. And here's the one that jumped out at me.

Especially. Make sure people don't confuse the right to complain, give advice, and openly debate with the right. to make decisions. you may have noticed that the last one has a bit of an edge to it. All of Ray Dalio's principles are

Are meant to be constructive. But not all. are warm and fuzzy. And I wanted to talk about this principle in particular. Because it helps add a little structure and clarity to

To the idea of inviting disagreement. Let's hear it again. Make sure people don't confuse the right to complain, give advice, and openly debate with the right to A common reason.

Some organizations and some people resist inviting open debate to is because we don't want it to result in chaos. Or total lack of boundaries. Imagine a group of friends trying to decide who Where to go out to dinner?

All right, who wants pizza? Seriously? We did pizza last week. In this example, there is presumably no hierarchy between the friends because Each hungry person has equal say. So who's to say when the debate ends or a winner selected? This is what I would call

Unstructured disagreement. And it's only resolved. When someone takes on an additional mantle of responsibility, to be the self appointed leader. or facilitator. in the situation.

Guys, guys, why don't we just choose the place that's closest to us with the highest ratings? In a work environment. you're more likely to encounter A more structured configuration. Organizations.

tend to work on at least some kind of hierarchical system. Their employers. And employees. Managers and team members who Bosses.

And staff. You might be saying to yourself. I want to make sure my company is constantly challenging our own assumptions. But we don't want anarchy. We wanna make sure.

At the end of the day, the leaders whose job it is to make hard decisions can actually make them. In other words, if you want to have disagreement. To lead to action. Instead of more disagreement.

It helps to have an agreed upon structure. In place first. That doesn't prevent someone in the mailroom from challenging an idea from the C suite. It just means it's up to the C suite. to listen.

Another distinction between constructive and destructive conflict is Is that in constructive conflict Each party's end goals are shared, or at least compatible. That goal could be as sweeping as Google's old Don't be evil.

Or as narrow as Let's figure out. how to cut back on manufacturing waste by two percent. If the goal is shared, Each person can trust.

That they're working toward the same end. It's not a zero sum struggle with one winner and one loser. It could be. Two winners. Enjoying a better outcome.

Really the key to success is you don't have to do everything yourself. You don't have to say, I'm the guy who came up with the idea and be possessive about that. You just want the best idea wherever it comes from. And you want to know that, oh, I've got these weaknesses so I can work with these people who have this strength. This is true outside of the business framework as well. A constructive disagreement. could lead to better understanding.

In a friendship. Or a marriage. Or simply Find a good place to eat. Instead of a struggle in which you try to be right and try to prove me wrong.

It's a situation in which we're trying to learn together. Lose sight of that shared goal. And you can find your constructive conflict. Slipping away. destructive conflict can occur for a lot of reasons.

One is not having a mutually advantageous goal in mind. It's an argument for argument's sake. A way to exercise frustrations or air grievances. Another І the parties don't all have a stake.

In the outcome. Fine like Who disagree with you? and are willing to disagree with each other.

But uh really care about that output, your outcome. Is it possible? For a constructive disagreement. To turn. Destructive.

Absolutely. I'd even argue This makes up. The majority of disagreements. And it has to do with a little thing called

People have feelings about confrontation. Their feelings about challenge. It goes all the way down. To our DNA.

Don't know. Ray Dalio found himself hitting a wall of feelings at Bridgewater. and it took him a little off guard. I remember having a dinner, well, not a dinner. We have this three sixty reviews and different people reviewed me and the people I work with. said to me that some of this radical transparency and this radical truthfulness

is hurting morale. People are feeling bummed out about it and all of that. These good friends who are also I working with took me out to dinner and then we Talked about that. And so I was kind of caught

In this Dilemma Like Should I not let them know what I really think? Should we behave differently and not

to me look like slipping back into that other way of being. That sticks in my mind as a very difficult moment. In an ironic way. The fact that Ray's colleagues were able to tell him this hard truth. And that he listened.

Makes a good argument. For a system of radical candor and constructive disagreement. Rather than him blowing off a criticism of his radical transparency system, Their words genuinely gave him pause. The system worked.

Ray knew he didn't want to go back to the old way in which employees kept their opinions to themselves and Even when they saw problems lurking. But neither did he want radical transparency. To make everyone miserable. He wanted to fix the problem.

But to fix it, he had to understand why it was happening. People aren't robots, of course. We care deeply when we're told we're doing something wrong. And Ray found himself looking at the way most of us learn about right and wrong answers. In school.

I think the problem of our whole system and our educational system is that it teaches you to be right. And you have a possessiveness to be right. And oh now it's embarrassing when you're wrong. It's embarrassing when you have a weakness. No, like everybody's wrong. at at times. Everybody's got weaknesses, okay, by understanding that. and knowing how to deal with it well, individually as well as collectively, that one can be successful.

Ray and I couldn't resist. Taking a tangent. into the educational system. In other words, when a mistake is made Then they get the grade.

That's when the learning begins, not that's the grade and it ends because you got that grade. So now Take that moment and say, okay, this is how life is. You learn it's okay to have mistakes, it's okay to have weaknesses. Everybody's got those. Just figure out what they are and how you work well with others in order to achieve your goal. And I think that could be done from a very early age. Yep. The way I look at that is the speed of the learning curve, and if you're actually not making mistakes. that you're learning from you're not learning fast enough. That's right. In anything. Yes, exactly.

Ray took those ideas. Back to his colleagues at that dinner. The ones would have alerted him to the morale problem. Within the company. I said to the people.

Okay, well let's have a meeting. I d look, I don't wanna do this. I don't wanna make you feel bad. So what should we do about it? And do you not want me to tell you what I really think? Yes. Do you want to be inhibited from telling me what you really think? Yep. How should we do that? And that allowed us. to go really more into our cerebral minds and away from our emotional minds, because they would say, No, no, no, no, no. It's a real benefit that you're telling me what you really think, and it's a good thing that we're having that.

But it's emotionally difficult. And then we shifted to how do you handle the emotional difficulties rather than stop being radically truthful and transparent. How do you handle the emotional difficulties of criticism of disagreement? Well it helps to know. Част хау конфлікт. is experienced in the brain.

I asked neuroscientists. Daniel Amen. Founder of Amen Clinics. What leaders need to know. We have seen over the years

Thousands of couples who are in trouble. Because of conflict. People who get fired from their jobs because they seek conflict. Kids who've had problems at school with conflict, either bullying or They are excitement seeking, almost conflict driven.

For many people. Conflict becomes synonymous. With trouble. Найк-зен the brain hates conflict. is because we become worried we're gonna end up being shunned.

by the group or the other person and that's Неволюшний сервівал. Instinct. So to keep our relationships. and our place in the community intact.

We might learn to avoid conflict. But this depends on who you are. Through brain imaging techniques. Daniel has found that there are three kinds of people. Those who hate conflict.

Those who seek it. Really rigid. Personally. I'm probably conflict hating.

Having been taught. The value of conflict. And become By teaching Conflict seeking.

But whatever your leanings. Neuroscience shows that self knowledge And trust. Are your two best tools for harnessing constructive conflict? So for example, if you're a CEO and you can't fire people, what you do is you end up with a team that is not as competent.

as they could be. On the other side If you're sort of an because you can't filter the impulsive stupid thoughts you have in your head. Well, you're not gonna have a great executive team because people don't like to be abused. And so it's really having

a balanced brain And then working on trust because If I trust you, I'll let you say hard things to me. If I don't trust you, I'm probably not going to let you do that. And so I think of trust as the number one currency. of uh being able to have healthy conflict.

As doctor Daniel Ayman just shared, the Underlying trust. is essential. For harnessing constructive conflict. But as Ray is quick to tell you,

You're also going to need Some process. Well, I have another principle which is Whenever you're having a disagreement with somebody or some difficult time with somebody Pause it.

and then go above it and agree, how should you be with each other? What are your protocols? What are the rules? And then once you can agree on that, then you can go back down into your disagreement and navigate it in the agreed upon way. At Bridgewater. There are protocols in place. To help navigate. Constructive conflict.

And harness its benefits. We have a two-minute rule, we have mediators, we do certain things, to have the protocols to be able to have that disagreement. And then to go beyond that disagreement. And also to show that failure or being wrong is not any way bad. Well, you want to learn from it.

And Ray also has some good general advice on how to approach disagreement. In a constructive mindset. Relish. The conflict Have curiosity be a motivator, like if you're seeing something different than I'm seeing.

one of us be wrong and I don't know who that might be. Maybe it's me. Another way to find grace in conflict is Find ways. To let go of ego. And trade it for a more centered mindset.

Some people Can do this with just a few cleansing breaths. For others, it's a lifelong struggle. Some Like Ray.

Turn to deep focusing practices like meditation. Which he has been committed to for years. I know how deeply in a transcendental meditation you are. I learned how to meditate in my freshman or sophomore year, freshman year in college, I think. Whatever success I've had in life has been more due to meditation, I think, than anything else. Maybe my curiosity.

Because It gives one an equanimity and a creativity. That's really, really great. Whether it's meditation. or any other focusing practice.

Anything that helps you achieve Focused. Evil Estate. Will serve you well. The goal is to find a balance.

that let you lay any ulterior motives to rest. What's left is a desire to find the best answers. For the good of a shark. Before we close out this episode. I can't resist sharing one more jewel from my interview with Ray.

As many of you know, we end our long form interviews with a lightning round of questions. I'm going to share a couple of Ray's answers with you. As one of them stood out. Amongst nearly all the other answers I've ever gotten to this question. What follows is some honest to goodness.

Disagreement. Was it constructive? Free of ego. Did it serve our coexisting end goals? You

Be the judge. Lightning round? Lightning ray. What's something that's in your pocket beside your phone? Well my money uh my let's see, my money uh it's just I think my money and then a pad that I when I've very spontaneous ideas.

occur to me. Um that I Scribble those ideas down. So that I don't lose them. Yep. I I actually have uh I always carry a pad with me too for the exact same reason. Best movie ever.

Ooh, um The big Lebowski. Uh huh. Yep. That's an excellent one. Mine is Hudsucker Proxy, which is another Call Brothers. Artificial intelligence. Fills you with hope or dread, pick one.

Dread. Your fate. You can't. I'm a guy who has Um

found that making algorithms has been so Fabulous. in my decision making and I really believe it's totally great, right? But I have a A belief, a principle.

That If you have decision rules in your app or however that you don't have deep understanding about. And The world is different in the future than in the past.

You're gonna crash. Mm. And I think in the desire to move a along very quickly.

the speed of I'm going to use algorithms to make quick bets on these things will probably at some time make very important decisions. be very major mistakes. And since we're all connected. That scares me. So by the way, in in radical transparency, I actually have hope

And unfortunately just'cause of time,'cause I do want to get through the lightning round questions. But let me ask you the question. Do you agree with the principle I just said? In other words, if So I'm just we let's just chat a bit, because this is invaluable because I'd love to do it. Um, I'm saying if you apply AI

And A it doesn't give you understanding. And the future is different from the past. Do you agree that's dangerous? Well the question is is it more dangerous than the norm of human behavior?

So take for example a subset of it. Like s I actually think that within ten years we will strongly want a world in which it's only autonomous vehicles on the road and not human beings. Sure. Right. So that would be an instance of within a domain And that doesn't mean that everything on the road is all known. But I think you what you're doing is dis Your Failing to reply to my

Principle. Okay. So I'm with you at the car. Okay. Yep. Now the question is if something important that you don't have understanding and you're going to but rely on the algorithm.

you're gonna be in trouble, right? Well, except what I'm saying is that there's a set of domains I agree on the set of domains. Yes. But I think when I'm saying When you're looking at that set, isn't that set What I've just described, meaning the when it has happened in the past. No, not necessarily.

There will be driving situations that will happen in the future. That have not happened in the past. Right. Some combination of You know, electrical storm, uh certain way that a

an animal or a kid is crossing a highway, et cetera, and there will be some kinds of sets of consequences around that. But the comparison set is not Will an AI system in that situation. Be perfect.

The comparison set was will the AI s device Decision making, etc. be comparable to human performance that would be confronted in a similar situation. Absolutely. And I'm saying I think in that particular case that the AI would perform significantly worse than the human.

So I don't think that's necessarily the case. I think the the there's a certain bit of the necessarily. Well because it's domain. So for example, if you said Would I want to take AI technology today and put them in charge. of a military put them in charge of the government абсолютно Right, the AI systems are not there. Uh and that's the reason why I say select the domains. So the question is, where do the domains? And I think that the reason I would say uh an answer of hope.

is I think the number of domains that we can rely upon an AI system to give us human level or better competence and refining it. Which I totally agree with. Doesn't get to the other statement of why the domain in the army So and I agree with your prior principle. Your prior principle was what is it in comparison to the alternative? Yes. But then

If you have a domain like that and you think you're gonna do army, you're gonna commit do that command and you're gonna get to the right answer versus the human, that's a very dangerous thing to do. And so I'm saying it's the understanding relative to the human understanding. Can we agree on that? Well, so it depends on where the AI systems go in terms of ultimately creating understanding. Yeah, but I'm creating the universal law. You're you're responding to me in a way that is basically says it depends, which I agree with that it's depends, but what is the universal law

So if you don't have understanding and you have human thinking, let's call that, okay, that will define the domains. So we could take those other domains that where there's better human understanding that would mean that we're saying the same thing, I think. I I think we are with maybe the caveat of We're finding it surprising the number of things that we can apply a classifier AI system which

generally thinking you don't have understanding, it just does classification. But it can encompass a lot more domains than we would have previously thought ten years ago. You're not doing that should be done. is to try to say

Which of the ones that it can do? What's the universal truth of the ones that it is and didn't like you do you want the uh AI to raise your kids? Oh no. Not yet. Okay. Do you want and I could start as a tutor, maybe. Oh okay. Right. No, but I'm saying now let's list all of those. I think the common element that you

Will have із whether the human intelligence is going to be able to be better than the machine intelligence, the AI intelligence. And I'm calling that understanding. Okay. So the one thing I would say is I don't think any AI system today has anything approaching understanding whatsoever. But I I'm saying I think what Волли абдерни. is what the human has just to keep it in our terms.

that the computer doesn't have. That's when the human is superior. Yeah. So um We'll come back to the U.S. Alright, uh Lightning Round. Lightning Round.

Your favorite place to think big. To be clear, our shar in this discussion wasn't to determine the morality of AI. Or even Yeah. Our shared goal.

In a way that might give us both new perspectives. If you actively find opportunities for this kind of positive conflict. You'll constantly open. New avenues for growth.

I'm Reed Hoffman. Thank you for listening. Masters of Scale is a Waitewater original. The show is recorded on site in California. And produced at the studio inside SY Partners in New York.

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