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by
Ray Dalio
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April 6 - June 13, 2023
It’s only when the forces that produce internal disorder and instability align with an external challenge that the entire world order can change.
At this time, humanity is evolving its ways of thinking and increasing productivity in more dramatic ways than ever before—even more dramatically than the discovery and usage of the scientific method. We are doing this through the development of artificial intelligence, which is an alternative way of thinking via an alternative brain that can make discoveries and process them into instructions of what should be done. Humanity is essentially creating an alternative species that has enormous capacity to see past patterns and process many different ideas very quickly, has little or no common
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Those that earn and spend modestly and have a surplus are more sustainably successful than those that earn and spend a lot more and have deficits.
that archetypical cycle typically takes 100 years, give or take a lot. Within each cycle there are similar, smaller cycles. For example, there is a short-term debt cycle that leads to bubbles and recessions that come along roughly every eight years, there are political cycles that move political control between the right and the left that come along with roughly equal frequency, etc. Every country is now going through them, and many of them are in different stages.
Which stages countries are in versus other countries affects the relations between countries and is the primary determinant of the world order.
Martin Baron, then executive editor of The Washington Post, said, “If you have a society where people can’t agree on the basic facts, how do you have a functioning democracy?” This dynamic is impeding free speech since people are afraid to speak up because of how they will be attacked in both traditional and social media by distortions that are meant to bring them down.
Even very capable and powerful people are now too afraid of the media to speak up about important matters or run for public office.
Since most high-profile people are torn down, most everyone I speak with agrees that it is dangerous to be a high-profile, vocal person who fights for truth and justice, especially if one offen...
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When powerful countries have disputes, they don’t get their lawyers to plead their cases to judges. Instead, they threaten each other and either reach agreements or fight. The international order follows the law of the jungle much more than it follows international law.
complexes. They also believed that they had the greater willingness to endure pain and die for their country, which is a big driver of which side wins. In war one’s ability to withstand pain is even more important than one’s ability to inflict pain.
What is especially interesting to me is seeing how far back in history the patterns of the archetypical Big Cycle go, since China’s history is both so ancient and so well-documented.
Probably the most important thing I gained from studying the history of so many countries is the ability to see the big patterns of causes and effects.
it allowed me to see contours that I couldn’t see before and how the same stories play out over and over again for basically the same reasons.
there is a tech decoupling going on that is part of the greater decoupling of China and the US, which will have a huge impact on what the world will look like in five years.
As history has shown, one of the biggest risks in a conflict is that access to one’s money/capital can be shut off. This can happen by a) the moves of one’s opponents and/or b) self-inflicted harmful actions (e.g., getting into too much debt and devaluing one’s money) that lead those who provide capital to not want to provide it.
if China’s economic and technological improvements continue to outpace those of the United States.
Some people imagine that China could achieve broad military superiority in five to 10 years.
Strong economy fueled by technological advances creates pathway to stronger military forces.
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. Most believe that the general population will choose the leaders on whims and based on what those seeking to be elected will give them in order to buy their support rather than what’s best for them. Also, they believe—like Plato believed and as has happened in a number of
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Getting people involved in the democratic process and greater voter education is what we need more of.
while extrapolating the past is generally a reasonable thing to do, also be prepared to be surprised because the future will be much different than you expect it to be.
The future will always be surprising and different than you expect it to be because advances in technology and changes in social norms are some of the factors that will always make the past different than anything that will happen in the future
Remember that whoever wins the technology war usually wins the economic and military wars.
The pathway to maintaining a strong country is education and technological advancement.
While the United States looks like it is in the precarious Stage 5 of the cycle, it also has the longest-lasting and most widely admired internal order (its constitutional system).
Never forgetting our basic building blocks, our Constitution, is what will make the difference. Our country’s Constitution is our strength.
The most reliable signs of an escalation to civil war are 1) the rules being disregarded, 2) both sides emotionally attacking each other, and 3) blood being spilled.
At the same time, in its 245-year history the US has shown a great capacity to bend without breaking. The greatest challenges it faces are internal ones: can it remain strong and united, or will it continue to allow division and internal struggles to lead to decline?
All empires decline and new ones rise to replace them. Understanding when that change might happen requires watching all of the indicators and tracking the relative conditions of countries.
five major types of wars that have existed throughout history: 1) trade/economic wars, 2) technology wars, 3) capital wars, 4) geopolitical wars, and 5) military wars.
the greatest conflict is between the US and China, the two greatest powers in the world that have comparable amounts of power—more than enough to make a war between them the most devastating in history.
the United States and China are clearly in four types of war (trade/economic war, technology war, capital war, and geopolitical war), though not intensely but they are intensifying. They are not yet in the fifth type of war (military war).
these four types of wars precede military wars by about five to 10 years.
for the foreseeable future China and the US will be powerful enough to inflict unacceptable harm on each other the prospect of mutually assured destruction should prevent military war, though there almost certainly will be dangerous skirmishes. I expect this to be true unless some unexpected technological breakthrough, like dramatic advances in quantum computing, gives one of these powers such an asymmetrical advantage that mutually assured destruction would cease to exist.
wealth and income inequality (e.g., how much does the top 1 percent have versus the rest) and b) political conflict (e.g., how split
Wealth and income gaps coupled with increasingly defined political conflict are some weaknesses to the fiber of the US
India, the US, and China score worst because of very large wealth and income gaps (and in the case of the US also significant political gaps).
European nations and Japan, which generally speaking have lower income ...
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the United States appears to be a strong power (No. 1 among major countries today) in gradual decline.
As shown in the table, the key strengths of the United States that put it in this position are its strong capital markets and financial center, its innovation/technology, its high level of education, its strong military, its reserve currency status, and its high economic output. Its weaknesses are its unfavorable economic/financial position and its large domestic conflicts.
To understand a country, we start by looking at the big cycles, as well as measures of power that both reflect and drive the rise and fall of a country.
