34 Quotes from Principles for Dealing with the Changing World Order book by Ray Dalio

Principles for Dealing with the Changing World Order

Hello. This post is a collection of 34 quotes from the book - Principles for Dealing with the Changing World Order by Ray Dalio. I hope you enjoy reading these quotes.

Principles for Dealing with the Changing World Order Quotes

The really big boom periods and the really big bust periods, like many things, come along about once in a lifetime and so they are surprising unless one has studied the patterns of history over many generations.

Anyone who studies history can see that no system of government, no economic system, no currency, and no empire lasts forever, yet almost everyone is surprised and ruined when they fail.

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.

A reserve currency is a currency that is accepted around the world for transactions and savings. The country that gets to print the world’s primary currency is in a very powerful position, and debt that is denominated in the world’s reserve currency is the most fundamental building block for the world’s capital markets and the world’s economies.

The biggest thing affecting most people in most countries through time is the struggle to make, take, and distribute wealth and power, though they also have struggled over other things too, most importantly ideology and religion.

Human productivity is the most important force in causing the world’s total wealth, power, and living standards to rise over time. Productivity—i.e., the output per person, driven by learning, building, and inventiveness.

Throughout time, the formula for success has been a system in which well-educated people, operating civilly with each other, come up with innovations, receive funding through capital markets, and own the means by which their innovations are turned into the production and allocation of resources, allowing them to be rewarded by profit making.

The common reserve currency, just like the world’s common language, tends to stick around after an empire has begun its decline because the habit of usage lasts longer than the strengths that made it so commonly used.

When all of these forces line up—indebtedness, civil war/revolution at home, war abroad, and a loss of faith in the currency—a change in the world order is typically at hand.

While many countries have natural resources that they are able to draw upon, human capital is the most sustainable capital because inherited assets that are drawn down eventually disappear, whereas human capital can exist forever.

To be successful over the long run, a country must earn an amount that is at least equal to what it spends. Those that earn and spend modestly and have a surplus are more sustainably successful than those that earn and spend a lot more and have deficits. History shows that when an individual, organization, country, or empire spends more than what it earns, misery and turbulence are ahead.

In reading history you see over and over how its course has been changed by the uniqueness—sometimes excellence, sometimes terribleness—of a relatively few people in key areas such as the government, the sciences, finance and commerce, the arts, and so on. In each generation, roughly a few hundred people made all the difference.

Over the long run the wealth and buying power you have will be a function of how much you produce. That is because real wealth doesn’t last long and neither do inheritances. That is why being continuously productive is so important.

Humanity’s capacity to invent solutions to its problems and to identify how to make things better has proven to be far more powerful than all of its problems combined.

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.

Most people worry about whether their assets are going up or down; they rarely pay much attention to the value of their currency. Think about it. How worried are you about your currency declining? And how worried are you about how your stocks or your other assets are doing? If you are like most people, you are not nearly as aware of your currency risk as you need to be.

Civil wars inevitably happen, so rather than assuming “it won’t happen here,” which most people in most countries assume after an extended period of not having them, it is better to be wary of them and look for the markers to indicate how close one is.

Civil wars are incredibly brutal because they are fights to the death. Everyone is an extremist because everyone is forced to pick a side and fight.

When powerful countries have disputes, they don’t get their lawyers to plead their cases to judges. Instead, they threaten each other and either reach agreements or fight. The international order follows the law of the jungle much more than it follows international law.

The two things about war that one can be most confident in are 1) that it won’t go as planned and 2) that it will be far worse than imagined.

The financial strength to outspend one’s rivals is one of the most important strengths a country can have.

To handle one’s power wisely, it’s usually best not to show it because it will usually lead others to feel threatened and build their own threatening powers, which will lead to a mutual escalation that threatens both.

In war one’s ability to withstand pain is even more important than one’s ability to inflict pain.

Protecting one’s wealth in times of war is difficult, as normal economic activities are curtailed, traditionally safe investments are not safe, capital mobility is limited, and high taxes are imposed when people and countries are fighting for their survival. Protecting the wealth of those who have it is not a priority relative to the need to redistribute wealth to get it to where it is needed most. As for investing, sell out of all debt and buy gold because wars are financed by borrowing and printing money, which devalues debt and money.

Every world power has its time in the sun, thanks to the uniqueness of their circumstances and the nature of their character and culture, but they all eventually decline. Some do so more gracefully than others, with less trauma, but they nevertheless decline.

Economics and politics have swings between the left and the right in varying extremes as the excesses of each become intolerable and the memories of the problems of the other fade.

The value of assets is the reciprocal of the value of money and credit and the value of money is the reciprocal of the quantity of it in existence, so when central banks are producing a lot of money and credit and making it cheaper, it is wise to be more aggressive in owning assets.

Americans are impulsive and tactical; they fight for what they want in the present. Most Chinese are strategic; they plan for how they can get what they want in the future.

America is run from the bottom up and optimized for the individual; China is run from the top down and optimized for the collective.

Chinese are more interested in asking questions and learning, Americans are more interested in telling you what they think.

Countries’ boundaries have constantly changed over time, they are often in dispute, and international law isn’t worth a hill of beans relative to power in resolving these disputes.

In playing the game of life it pays to do one’s best to understand how the world works, imagine the full range of possibilities, and know how to spread one’s bets around well.

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 aggressively that b) cycles and bumps along the way knock you out of the game.

Betting on the future is betting on probabilities and nothing is certain, not even the probabilities. That’s just the way it is.

Quotes by - Deepak Kundu

Hello, I am Deepak Kundu, an avid book reader and quotes collector. I hope you enjoyed reading the above quotes from Principles for Dealing with the Changing World Order book by Ray Dalio.