Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail
by Ray Dalio
In "Principles for Dealing with the Changing World Order," Ray Dalio explores the cyclical nature of history, emphasizing that nations rise and fall through well-defined life cycles influenced by economic, political, and social factors. A central theme is the prelude to war, often marked by economic tensions that can escalate into military conflicts, as seen in the current U.S.-China dynamics. Dalio highlights that civil unrest frequently arises from financial instability and widening wealth gaps, warning against governmental overreach in fiscal matters. The book asserts that no government or economic system is permanent; historical patterns reveal that reliance on a reserve currency can lead to its eventual decline due to over-borrowing and inflation. Education and technological innovation are presented as critical drivers for national strength, while a society’s ethical standards and resilience are paramount for stability and success. Dalio draws parallels between historical events and today's geopolitical landscape, suggesting that understanding past cycles is crucial for navigating future challenges. He underscores the importance of civic responsibility and unity, noting that nations thrive when their citizens prioritize collective well-being over individualism. Ultimately, Dalio calls for a broader perspective on history, urging readers to recognize and adapt to the inevitable cycles of change that shape the world order.
12 popular highlights from this book
Key Insights & Memorable Quotes
Below are the most popular and impactful highlights and quotes from Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail:
no system of government, no economic system, no currency, and no empire lasts forever, yet almost everyone is surprised and ruined when they fail.
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.
Having a reserve currency is great while it lasts because it gives a country exceptional borrowing and spending power and significant power over who else in the world gets the money and credit needed to buy and sell internationally. However, having a reserve currency typically sows the seeds of a country ceasing to be a reserve currency country. That is because it allows the country to borrow more than it could otherwise afford to borrow, and the creation of lots of money and credit to service the debt debases the value of the currency and causes the loss of its status as a reserve currency. The loss of its reserve currency status is a terrible thing because having a reserve currency is one of the greatest powers a country can have because it gives the country enormous buying power and geopolitical power.
History has shown that we shouldn’t rely on governments to protect us financially.
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.
when people are willing to die for their country, their country will be more likely to be protected than if the individual self is more important, in which case individuals will run from deadly combat.
debt eats equity but central banks can feed debt by printing money instead.
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.
stronger education leads to stronger technological innovation, which leads to increased productivity and increased shares of trade, greater wealth, more military power, and eventually the establishment of a reserve currency. Further, having strong leaders, a population that is well-educated and civil with each other, a system that efficiently allocates capital and other resources, access to natural resources, and favorable geography all help a lot, and when they decline, they tend to decline together.
the decline of China from around 1840 to 1949, known as the “Century of Humiliation,” came about because the Western powers and Japan exploited China.
Adolf Hitler, the leading populist/fascist, tapped into the mood of national humiliation to build a nationalistic furor, casting the Treaty of Versailles and the countries that imposed it as the enemy. He created a 25-point nationalistic program and rallied support around it.
Taoism teaches that it is of paramount importance to live in harmony with the laws of nature.
