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

by Ray Dalio

For example, nations’ levels of education affected their levels of productivity, which affected their levels of trade with other countries, which affected the levels of military strength required to protect trade routes, which together affected their currencies and other markets, which affected many other things.

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.

The most important three cycles are the ones I mentioned in the introduction: the long-term debt and capital markets cycle, the internal order and disorder cycle, and the external order and disorder cycle.

money and credit are the biggest influences on how wealth and power rise and decline. If you don’t understand how money and credit work, you can’t understand how the system works, and if you don’t understand how the system works, you can’t understand what’s coming at you.

History has taught us that there are five major types of wars: 1) trade/economic wars, 2) technology wars, 3) geopolitical wars, 4) capital wars, and 5) military wars. To these I would add 6) culture wars and 7) the war with ourselves.

Before we do that, let’s review the specific items that help make a great empire. They are… … leadership that is strong enough and capable enough to provide the essential ingredients for success, which include… … strong education. By strong education I don’t just mean teaching knowledge and skills; I also mean teaching… … strong character, civility, and a strong work ethic, which are typically taught in the family as well as in school. These lead to improved civility that is reflected in factors such as… … low corruption and high respect for rules, such as the rule of law. … People being able to work well together, united behind a common view of how they should be together, is also important. When people have knowledge, skills, good character, and the civility to behave and work well together, and there is… … a good system for allocating resources, which is significantly improved by… … being open to the best global thinking, the country has the most important ingredients in order to succeed. That leads to it gaining… … greater competitiveness in global markets, which brings in revenues that are greater than expenses, which leads the country to have… … strong income growth, which allows it to make… … increased investments to improve infrastructure, education, and research and development, which lead it to have… … rapidly increasing productivity (more valuable output per hour worked). Increasing productivity is what increases wealth and productive capabilities. When the coun...