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Learn the key ideas of the book by Ray Dalio

The Changing World Order

The history of the world between order and chaos

The times ahead of us are likely to be very different from those any of us have experienced in our lifetime. To be prepared to face them we need to understand how the history of humanity is evolving. In his book Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail, the infamous investor Ray Dalio has condensed a series of insights stemming from his studies on the cause-and-effect relationships underlying all the major changes in the world order over the last 500 years. Dalio has thus been able to provide a clear perspective on the phases that make up the different cycles through which humanity evolves, in order to enable the reader to understand where we are now, and what we should expect from the future.

The Changing World Order
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Looking back at the past can help us ascertain what might happen in the future

The history of humanity is made up of a series of long cycles in which we witness the growth and then the decline of a certain world order. The term order refers to a system of government capable of regulating relations between individuals. There is an internal order, given by governments and based on specific documents, such as the constitution, and an external order, capable of mediating relations between the governments of different countries, and that is based on treaties. These macro cycles last about 250 years, and within them are a set of shorter cycles (called internal cycles) which are generally linked to the power system of individual states or to specific aspects of our society as a whole. For example, the internal cycles of a power system last approximately 100 years, then there are cycles concerning financial debt or periods of recession within long periods of expansion. Between one external cycle and another about 20 years go by, a transition period that usually involves great global conflicts from which a new world order will then be born and, therefore, a new cycle will begin.

Nowadays people live an average of 80 years, and therefore cannot experience everything that happens in a complete cycle first-hand. So when something happens that they have never seen before in their lives, such as a major global financial crisis, a pandemic, or a war in a country where they were not expecting to see one, people tend to feel unprepared. Looking back over our history is the only way to prevent these events from leaving us in complete shock, because analysing something that has already happened allows us to understand the cause-effect relationships at the heart of a pattern that has been repeating itself since the beginning of human civilization.

No world order lasts forever - not even the current one - and, given that the transition from a period of peace to a period of war or vice versa is something that takes place over a very long time, it is likely that our future will be decidedly different from what most people expect. For example, people who went through the Great Depression and World War II did not expect the economic boom of the 1950s and 1960s; in the same way, those who have experienced the recent financial bubble do not in the least expect to go through a period of depression or war in their lifetime.

  

The key ideas of "The Changing World Order"

01.
Looking back at the past can help us ascertain what might happen in the future
02.
Every cycle, whether internal or external, follows a predefined path from prosperity to decline
03.
Studying the history of the various empires over the last 500 years enables us to better understand how evolutions and cycles work
04.
To better understand how these cycles work, we can take a closer look at the cause-effect relationship that determines the passage from order to chaos and vice versa
05.
The downside is that this period of productivity and wellbeing triggers a series of excesses whose negative side-effects come to light, sooner or later
06.
The decline stage begins, and this gentle downturn rapidly becomes an avalanche
07.
Internal cycles work in the same way as external ones but they depend more heavily on the dynamics of power
08.
There are various indicators to measure the health of a given power system
09.
Three things have happened in the last few years that look like the precursors to a possible change in the current micro cycle
10.
Quotes
11.
Take-home message
 
 
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