I’m grateful Ray Dalio has shared his world view and his access to leading thinkers and valuable sources of data, to make me more aware and better prepared for what’s coming. I am also friends with Ray, and I trust him.
This book offers at least two major contributions.
First, the synthesis and integration of economic, social, and geopolitical history that presents a holistic view of how countries rise and fall. Leveraging his relationships with leading thinkers and historians, Ray gives us a way to understand the major forces, cycles, and paradigm shifts that can dramatically change the world around us. You would have to read dozens of well-chosen books to gain such an understanding, and you still may not have a comprehensive theory.
Second, the quantification of each major nation’s economic, cultural, and geopolitical health. With the support of Bridgewater’s multi-hundred-million-dollar research budget and team, Ray presents the key determinants of a country’s strengths and weaknesses through time, and relative to other countries. Seeing the most important long-term trends in charts provide useful perspectives that are unavailable elsewhere.
Here are some of my biggest take-aways.
Disorderly conflict is the pre-cursor to destructive conflict that is likely to be devastating for all of us. Both the winners and the losers of destructive actions are worse off relative to compromise, mutual understanding, and respect. As an American, I should not take for granted that I live in the most powerful country that has seen one of the longest periods of peace, economic growth, and innovation in global history. It’s not the norm, and if we aren’t careful, things could get a lot worse.
Invest in innovation. Both as an investor and as a citizen, innovation has been a powerful force for improving lives and driving economic growth.
We are likely in for a period of high inflation. The easiest way for the government to deal with high levels of debt is by printing money, using stimulus to spur economic growth, and keeping interest rates lower than nominal GDP growth. That is, to inflate their way out of debt. As an investor, he suggests avoiding long term holdings of cash and bonds. Instead, he recommends diversifying with assets that can do well in an inflationary environment, like highly dependable cash generating stocks, some gold (possibly a little cryptocurrency), and other scarce inflation-protected assets.
This book is a major contribution. I strongly recommend reading or listening to it. If you don’t have the time, at least read the first few pages of the introduction, the first chapter “The Big Cycle in a Tiny Nutshell”, chapter 8 "The Last 500 Years in a Tiny Nutshell", and the final chapter called “The Future”. I hope you found this helpful.