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

by Ray Dalio

But we can see that a picture drawn from pure extrapolation is not good enough. For example, standing in 1750, it would have been reasonable to believe that it was a timeless and universal truth that monarchies and landowning nobles overseeing peasants with the help of soldiers would be the governance system in the future, that agricultural land would continue to be the most important money-earning asset, that per capita incomes would grow at only around half a percent per year, and that life expectancy would remain steady at about 30 years. That was how it had always been. You would not have imagined capitalism and democracy as we now know it, let alone that there would be a United States and that it would be the leading world power. The big curveballs come when a few really big things cause a paradigm shift that alters the evolutionary rates of change. The paradigm shifts that came in the early 19th century arose from the confluence of the invention of modern tools of finance, machines that could do the work of people, the development of more inclusive societies that broadened opportunities to be inventive and productive, the increased use of books and libraries so knowledge could be more broadly shared, and the application of the scientific method. While these things couldn’t be anticipated, they could have been perceived, understood, and adapted to. That’s why while extrapolating the past is generally a reasonable thing to do, also be prepared to be surprised because t...