Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

by Ray Dalio

As I studied history, I saw that it typically transpires via relatively well-defined life cycles, like those of organisms, that evolve as each generation transitions to the next.

These shifts will sometimes be terrible and sometimes terrific. They certainly will happen in the future, and most people will fail to anticipate them. In other words, the swinging of conditions from one extreme to another in a cycle is the norm, not the exception.

the really big boom periods and the really big bust periods, like many things, come along about once in a lifetime and so they are surprising unless one has studied the patterns of history over many generations. Because the swings between great and terrible times tend to be far apart the future we encounter is likely to be very different from what most people expect.

Expect the unexpected and/or a new normal.

no system of government, no economic system, no currency, and no empire lasts forever, yet almost everyone is surprised and ruined when they fail.

one’s ability to anticipate and deal well with the future depends on one’s understanding of the cause/effect relationships that make things change, and one’s ability to understand these cause/effect relationships comes from studying how they have changed in the past.

This skill is underappreciated and sorely lacking among the majority of Americans in 2022.

I believe that the reason people typically miss the big moments of evolution coming at them in life is because they experience only tiny pieces of what’s happening. We are like ants preoccupied with our jobs of carrying crumbs in our very brief lifetimes instead of having a broader perspective of the big-picture patterns and cycles, the important interrelated things driving them, where we are within the cycles, and what’s likely to transpire.

History has shown that we shouldn’t rely on governments to protect us financially. On the contrary, we should expect most governments to abuse their privileged positions as the creators and users of money and credit for the same reasons that you might commit those abuses if you were in their shoes. That is because no one policy maker owns the whole cycle.

Stage 3: When There Is Peace and Prosperity I also call this phase “mid-prosperity.” It is the sweet spot of the internal order cycle. It is when people have an abundance of opportunity to be productive, are excited about it, work well together, produce a lot, get rich, and are admired for being successful.

The Loss of Truth in the Public Domain Not knowing what is true because of distortions in the media and propaganda increases as people become more polarized, emotional, and politically motivated.

Still, whether they are fought for good reasons or bad, shooting wars happen. To be clear, while I believe most are tragic and fought for nonsensical reasons, some are worth fighting because the consequences of not fighting them (e.g., the loss of freedom) would be intolerable.

The three most important markers I am watching now are: 1) the rules being disregarded, 2) both sides emotionally attacking each other, and 3) blood being spilled.

The planning horizon that Chinese leaders concern themselves with is well over a century because that’s at least how long a good dynasty lasts. They understand that the typical arc of development has different multidecade phases in it, which they plan for.

Pretty sure that American policy does not think that far ahead.

the core difference between Americans and the Chinese is that Americans hold the individual above all else while the Chinese put the family and the collective above everything.

America is run from the bottom up (e.g., democracy) and optimized for the individual; China is run from the top down and optimized for the collective.

As a result, the Chinese are more humble, respectful, and rules-bound, while Americans are more arrogant, egalitarian, and rules-averse.

I’ve observed that while the Chinese are more interested in asking questions and learning, Americans are more interested in telling you what they think.

This feels true.

the first fiat currency, known as huizi notes, was issued in modest quantities starting in 1160

Huizi notes, huh.

For example, one should accept the fact that when choosing leaders most Chinese believe that having capable, wise leaders make the choices is preferable to having the general population make the choice on a “one person, one vote” basis because they believe that the general population is less informed and less capable.

While history can be told pretty precisely, the future is exactly the opposite. I am not aware of a single case of the future being foretold accurately in any detail.

Whatever success I’ve had has been more due to my knowing how to deal with what I don’t know than anything I know.

This is applicable to many situations in life.

Know all the possibilities, think about the worst-case scenarios, and then find ways to eliminate the intolerable ones.

Boom.

Triangulate among the smartest people possible. I tag along with the smartest people I can find, so I can stress test my thinking and learn from them.