The history of the rise and fall of empires written by one of the world's great investors. Think this will be the most important book to understanding the next decade. Expect a lot more turmoil going forward and Dalio lays out why based on the patterns of history.
Rating: 5/5
Time’s ahead will be different than those experienced in our lifetimes, though similar to many times in history
Big cycle moves between peace and prosperous periods to depression/revolution/war
When cycles align, tectonic plates of history shift and lives of all people change in big ways
The swinging of conditions b/w one extreme to another is the norm, not the exception
The future we encounter is likely to be very different than what most expect
No system of government, economic system, currency or empire lasts forever yet almost everyone is surprised when they fail
Currency devaluations can increase stock markets
We are like ants pre-occupied with our jobs of comparing crumbs in our brief lifetimes instead of having a broader perspective on big picture patterns and cycles, how they interrelate, where we are in the cycle and what comes next
3 major forces: end of long term debt cycle and printing money, internal and external disorder and rising power (China)
When wealth and value gaps are large and there is an economic crisis, it is likely there will be a lot of conflict on how to divide the pie
To see the big picture, you can’t focus on the details
The people who have wealth own the means to wealth production and work with people in political power to set the rules
All turbulent times are produced by conflicts (wars/revolutions) or severe acts of nature (drought, flood, pandemics)
Humanity’s power to adapt and get to higher levels of well being is greater than the bad stuff thrown at us
Key 8 strengths: education, competitiveness, innovation/technology, economic output, share of world trade, military strength, financial centre strength, reserve currency status
Rise starts with a strong education system
When there is an economic downturn, the country can default on its debts or print money
Poor economic conditions cause more fighting for wealth and power which leads to war
Bad periods of destruction typically take 10-20 years
2 other major forces: pace of innovation and technological development and acts of nature like draughts, floods and disease
Real wealth (real goods) does not equal financial wealth
Wealth = power but wealth decline = power decline
To be successful, one must earn an amount equal to what one spends
The degree of inventiveness and innovation in a society is the main driver of its productivity
Societies that draw on people for their merits instead of privilege are more successfully sustaining
If you don’t understand how money and credit works, you don’t know how the system works
All entities deal with the same basic financial realities and always have
Debt eats equity
Biggest problem now is debts for most people are very large relative to their assets
Crises that occur during long term debt cycles happen once in a lifetime
When currency devalues, stocks go up as you need more currency to buy the same asset
All currencies devalue or die and when that happens, cash and bond holders are wiped out
Risk in holding lots of cash in currencies at the end of the long term debt cycles
To be successful, the system has to work for most people including the large middle class
Toxic mix: people/country in bad financial shape, large income/wealth/values gaps and an economic crisis (America?)
Signs of decline: populism, class warfare, loss of truth in public domain
Watch for rogue police forces as sign of massive decline
When in doubt, get out
Civil wars inevitably happen, be aware
People who lead revolutions are middle class intellectuals from good backgrounds
Almost all civil wars have foreign interference in them
International relations is driven by raw power dynamics
War won’t go as planned and will be far worse than imagined
Have power, respect power and use it wisely
During periods of economic distress and large wealth gaps, there are typically revolutionary large redistributions of wealth
In war, one’s ability to withstand pain is even more important than one’s ability to inflict pain
All markets are driven by four determinants: growth, inflation, risk premiums and discount rates
3 risks investors face: portfolios won’t provide returns needed to meet their spending, their portfolios could be ruined and large share of wealth taken (higher taxes)
The Dutch invented capitalism as we know it. Great for the Dutch and world but brought potentially deadly consequences
Before all-out wars begin, there is usually a decade of skirmishing
Transactions b/w countries are different than those within countries
The value of assets is reciprocal of the value of money and credit (if money is cheap, assets are expensive)
Wealth and income gaps are largest since the 1930s
Growing inequality of fiscal problems are critical drivers of empires’ decline
If you see capital controls in a certain currency, run from that currency
Conflicts produce struggle but struggle means progress
During crises, autocratic instead of democratic leaders are preferred
The technology war b/w the US and China is the most important
Our greatest war is with ourselves because we have the most control over how strong or weak we are
The future will be much different than you expect it to be
All empires decline and new ones rise to replace them
Next big risk point around 5 years from now
Know all the possibilities, think about the worst case scenario and find ways to eliminate the intolerable ones
Put deferred gratification ahead of immediate gratification so you will be better in the future
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