ray dalio principles for changing world order

The greatest recent disruptor of well-established beliefs was the Digital Revolution. Throughout my roughly 50 years of investing, I have seen a number of well-established beliefs based on both what happened before and what seemed logical at the time be proven wrong (to choose a recent example, the belief that bond yields can’t go negative). My approach is based on my ideas about a) evolution, which causes changes over time, generally toward improvement, such as increasing productivity, b) cycles, which cause rhythmic ups and downs in the economy (like debt bubbles and busts) and bumps along the way (non-rhythmic ups and downs, like acts of nature), and c) indicators that can help us see where we are in the cycles and what might come next. 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 (including their risks and rewards), and know how to spread one’s bets around well. I remember very well how my dad and his friends failed to take advantage of the boom that followed the Great Depression and World War II, as their mindsets had been formed by those awful eras. And having leading indicators of these things, even if they aren’t perfect, puts me in a better position to protect myself than remaining blissfully unaware and unprepared for what might happen.īeing unaware of best-case scenarios can be equally bad. Knowing this, I am constantly looking for leading indicators of the same things happening again. For example, there are numerous examples in history of revolutions, wars, and acts of nature leading to violent events in which virtually all wealth is wiped out or confiscated.

That is a big advantage relative to being unaware. Knowing how things have changed in the past leads me to consider the possibility that something similar might happen in the future.

I have learned to look at the past 1) to determine what’s likely to happen and 2) to protect myself and others I am responsible for against the possibility I am wrong or missing something important. Since I’ve personally experienced it to be true, it has affected how I look at both the future and the past. “He who lives by the crystal ball is destined to eat ground glass” is a market adage I learned when I was about 14.

Ray dalio principles for changing world order