Friday, December 17, 2021

#1 : Ray Dalio's latest book is simply... WOW !


Some books are so mind-blowing and powerful that they should quickly be elevated to the level of an investment classic. Ray Dalio's Principles for Dealing with the Changing World Order is so important, that maybe it should be taught in our secondary school history classes. 

This book is important because of an investor's need to cut through the proliferation of books on intellectual masturbation written by academics and political scientists. We know that Ray Dalio has a lot of skin in the game because if he misreads the prospects of the countries he invests in, a lot of his money can be lost.  He also has this wonderful talent of turning really subjective measures like Character/Civility/Determination of a country into a quantitative scoring system. Doing this may give a political science professor a brain aneurysm, but it lends a certain amount of credibility to this analysis. The final reason why you should read this is that he's probably the only western author that is even-handed about China. He has long ties with the Chinese leadership and you will find his writing much less critical than, say, the run of the mill articles on The Economist. 

The part that should be taught in local history classes is that Ray's idea is that there are six phases of a dynastic cycle that repeats itself over and over again. Armed with this model, history students can attempt to figure out which phase a society is in, and they can also predict what is likely to happen next. 

This is light years better than a regurgitation of facts and dates. 

I can summarise the six stages are as follows :

Stage 1 - After a period of chaos, a new order begins and a new leadership consolidates their power. Eg. Singapore on its day of Independence from Malaysia

Stage 2 - The society begins to figure out how to do resource allocation and government bureaucracies are built and refined. Eg. Singapore in the 1970s.

Stage 3 - The society experiences a golden age of peace and prosperity. Eg. Singapore from 1980s till today. 

Stage 4 - The society experiences great excesses in spending and debt and income inequality rises. Singapore has not reached this stage, but the US definitely is at the tail end of this with large debt and income inequality. China may be already in Stage 4. Singapore is ramping up property taxes right now and raising ABSD in a bid to delay entering stage 4. 

Stage 5 - Society experiences bad financial conditions and intense conflict. The US is expected to head to this stage next. It takes one bad recession/event for folks to realise that the wealthy are protected from a lot of disasters compared to the poor. This can trigger class warfare. Polarisation between the political left and right has already started.

Stage 6 - Society collapses from civil war and revolution. This was what happened when the Chinese Communists took over and when the Bolsheviks in Russia toppled their monarchy.   

I think right now, societies do not have a way to extend Stage 3 because some kind of wealth taxes may need to be enacted at the global level to prevent the flight of capital out of any individual country to improve the social mobility of blue-collar workers and the working classes all across the world.

Like a bottle of good wine, this book really pairs well with Marko Papic's book on Geopolitical Alpha. You can read my article on that excellent book by following this link :

Anyway, I am not done with this classic piece of work, I will discuss other aspects of this book in future blog articles.


  1. i look forward ur complete review of this book. looks like a good read. i hope i can find a pdf copy somewhere

  2. His stages aren't new; people have written similar stuff for hundreds of years. The novel stuff is his attempt to quantity & measure the conceptual factors. Perhaps one can do it thru relativism e.g. S'pore having governance of 10 while Somalia's 1.

    Unfortunately the missing link is the specific timeline from one stage to the other. When a country or empire starts showing characteristics of a stage, or has checked a number of factors in that stage -- how long would it take to complete that stage and move on?

    It could be 10 years, or a hundred years.

    The rise & fall of past powers and empires occurred over a huge range of different lengths of time.