Man who predicted 2008 financial crash has worrying new AI prediction for the future
The man who predicted the 2008 financial crisis warns that AI will eventually trigger a similar collapse.
Ray Dalio, the American billionaire investor and philanthropist, is the founder of Bridgewater Associates - the world’s largest hedge fund.
He started Bridgewater from his New York apartment in 1975 and turned it into a 150 billion dollar fund before his exit last year.
During that time, Dalio predicted the 2008 financial crisis by tracking the ‘debt supercycle’, a massive economic wave that peaks every 75 to 100 years.
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In a recent appearance on The Diary Of A CEO, the 76-year-old made a bold prediction about how the ‘AI bubble’ is going to burst.
Investors are going to ‘lose money’ because of AI
“I don't want to jump to conclusions as much as I want to explain reasonings that leads to conclusions,” he said.
“I'm at a stage in my life that I want to help people understand cause/effect relationships.
“What they call a bubble is when the price goes up a lot and companies do very well, and then it collapses.
“That has implications for the economy and for markets, like the 1929 bubble or the 2000 bubble, which was the dot-com bubble.
“Did the 1929 bubble bursting impact people? Yes, the Great Depression followed.”
‘Wealth is not the same as money’
Dalio, who is worth $15.4 billion according to Forbes, referenced ‘the dot-com bubble’ in 2000 which people thought they ‘can bet on that, I'm sure it's going to be successful’.
“Then they bet on it, sometimes they borrow money to bet on it, and they lose sight of the fact that price of it matters, it goes up and up and it's everybody's thing,” he continued.
“Right now we're very excited about AI, and we should be. It's going to bring revolutionary changes. Then at the same time 'I want to buy some of that'.”
Why Dalio thinks the AI bubble will burst
Dalio urged people to not confuse ‘this will change the world’ with ‘this investment can't lose money’.
“Everybody wants to invest in some of that and what they do is they don't pay attention to the price,” he added. “There's a certain mechanics, people will borrow money.
“Wealth is not the same as money. You see a lot of people getting wealthy, but you can't spend the wealth — you have to sell the wealth to get money, because you can only spend money.
“What happens is when they need money for one reason or another, taxes change or interest rates go up and so they have to pay their debt service there is a pricking of the bubble so that what happens is it falls.
“When that happens, people lose money. When they start to lose money the process works in reverse.”
Dalio believes this is what happens during bubbles: people stop asking whether the price makes sense because they're afraid of missing out.
Topics: Technology, AI, Artificial Intelligence
Anish Vij