# Book Notes: The Changing World Order by Ray Dalio #readingstatus/read Kindle Highlights: None | Legend | | :--------------------------------------------------: | | *text in italics are my thoughts/reflections* | | normal text like this are notes as I read the book | ###### Chapter 5: The Big Cycle of Internal Order and Disorder > *"Even very capable and powerful people are now too afraid of the media to speak up about important matters or run for public office" - page 117* ###### Chapter 11: The Big Cycle Rise And Decline Of The United States And The Dollar - US metrics on Education, Competitiveness and Innovation have been on the decline while other metrics are still holding. This is consistent with how Education is typically a leading metric before other metrics follow suit later down the road > Note: > *Reading this chapter and comparing it to what i'm seeing in the media about various developments in the US left me with a sense that the US is truly on the decline and that it would be unlikely for them to coordinate a decision that would reverse the trend - they've become so polarised as a society and their politics and corporations have been gripped by greed. Economically they seem to also be at the point where they have few options left. Even overseas military conquest as an option would be unlikely because that would be they would have to finance another war they can't afford in the face of their own people's suffering at home being increased.* ###### Chapter 12: The Big Cycle Rise Of China and The Renminbi - Chinese history is rich with examples of various dynasties going through the rise and fall cycles that are consistent with the 18 key metrics Ray Dalio identified in the earlier chapters. > Note: > *One thing that struck me about how China does their long term plans (>100 years) and breaking that down into small more measurable phases is how it's like doing Agile development* > *"Chinese history and philosophy, most importantly Confucian/Taoist/legalist/Marxist philosophies, have a much bigger influence on Chinese thinking than American history and its Judeo-Christian/European philosophical roots have on American thinking." - page 380* >*"Also, as far as the wealth gap goes, I share the view that it has been a big issue throughout history that can threaten all systems. I too believe that conflicts produce struggle and that working through struggle produces progress." - page 397* ###### Chapter 13: US-China Relations and War > page 426 > "**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** > 1) culture wars and > 2) the war with ourselves" > ***page 455*** > *"...stupid wars often happen as a result of a tit-for-tat escalation process in which responding to even small actions of an adversary is more important than being perceived as weak, especially when those on both sides don't really understand the motivations of those on the other side. History shows us that this is especially a problem for declining empires, which tend to fight more than is logical because any retreat is seen as a defeat."* ###### Chapter 14: The Future > ***page 472*** > "... in the markets and in life, to be successful one should bet on the upside that comes from > a) evolution that leads to productivity improvements, > but not so aggresively that > b) cycles and bumps along the way knock you out of the game. > > In other words, betting on things being better - e.g. real earnings being greater - is pretty much a sure bet. But betting too much on that so that a bump along the way can ruin you is bad. That's why having quality indicators helps a lot." ###### 18 Key Determinants to measure the Power of a Nation > ###### Determinant vs Cycle > a determinant is a factor(e.g. supply of money) while > > a cycle is a series of self-reinforcing determinants that lead to events transpiring a certain way > E.g. central banks making lots of money and credit available eventually leads to strong economic growth, inflation, and bubbles, which then prompts central banks to reduce money supply, which produces market and economic downturns, which then lead the central banks to increase the money supply to...etc. > > So cycles themselves are determinants that are a collection of complementary forces that interact in a process to produce the same result over and over again ##### 3 Big Cycles - Debt/Money/Capital Markets/Economic Cycle (Healthy vs Unhealthy) - Internal Order vs Disorder (Order vs Disorder) - External Order vs Disorder (Peace vs War) ##### 8 Determinants of Wealth & Power - Education (High vs Low) - Competitiveness (Strong vs Weak) - Innovation & Technology (High vs Low) - Economic Output (High vs Low) - Share of the World Trade (Favourable vs Unfavourable) - Milltary Strength (Strong vs Weak) - Financial Center Strength (Strong vs Weak) - Reserve Currency Status (Strong vs Weak) ##### Additional Determinants - Geology (Favourable vs Unfavourable) - Resource Allocation Efficiency (Efficient vs Poor) - Acts of Nature (Beneficial vs Disruptive) - Infrastructure & Investment (High vs Low) - Character/Civility/Determination (Strong vs Weak) - Governance/Rule of Law (Strong vs Weak) - Gaps in Wealth, Opportunities & Values (Small vs Large) --- related: To have a conversation with me about this note, email me at [email protected] To understand why I chose to use email over comments, [[Why I'm using email instead of comments|read this]].