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Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail Ray Dalio 2022

Principles for Dealing with the Changing World Order
Author: Ray Dalio

What world are we in?

Ray Dalio’s study of the world order was prompted by three factors that are present in global economics and politics today:

1) high levels of global debt combined with very low-interest rates;

2) a large gap in the well-being of different strata of society within individual countries, combined with political differences between these countries;

3) the growth of the power of China, challenging the current world power – the United States.

The combination of these factors is troubling, but it is also not unique. The current situation is reminiscent of the period from 1930 to 1945: at that time, too, central banks used interest rate cuts to stimulate the economy and printed money to buy financial assets; then, too, there was a significant gap between the poor and the rich, which led to a high level of political tension and the rise of populists to power (Hitler); ambitious Germany and Japan increasingly encroached on the world order, which as a result led to a foreign policy catastrophe – the Second World War. 

Moreover, delving into history, Dalio understood more and more clear that the existence of world powers, be it Britain in the 19th century or the United States today, obeys a certain algorithm and develops according to the logic of a certain political and economic cycle that can be calculated. Now the world is at the end of another cycle, which threatens to revise the entire world order, and hence, major socio-economic upheavals, not excluding a major war. How does the mechanism of world history work?

How powers are born and die

16 success factors

Throughout history, different groups of people, whether small tribes or great powers have sought to acquire as much wealth and power as possible. Having acquired them, these groups turned into a powerful force – in their forest, as was the case in the ancient world, or throughout the globe, as has been happening in recent centuries. 

In the 17th century, the greatest empire was Holland, then it was supplanted by Great Britain, which reached its peak in the 1800s, then the initiative passed to America, which seized world domination after the Second World War. Today, her position has been shaken.

Principles for Dealing with the Changing World Order

For a long time, the main source of power was the land (and the form of power was the feudal monarchy), starting from the 18th century, the industry became it (and the form of power was capitalism). 

  • The monarchical formula for success is simple: products produced on a certain piece of land are distributed in accordance with the established social hierarchy. The authorities, on the one hand, are interested in expanding these lands, on the other hand, in protecting the existing benefits. 
  • The capitalist formula for success is as follows: taking advantage of favorable socio-political conditions, enterprising educated people come up with profitable innovations, receive funding, turn innovations into products that create a product that is useful and beneficial to the largest possible number of people; the state grows stronger and richer.

Capitalism is not perfect: it does not provide everyone with equal opportunities and does not allow the full development of the diverse human abilities. However, a look at world history on the scale of centuries cannot but inspire optimism: people are becoming more entrepreneurial and resourceful. Our ability to adapt to new, including terrible, circumstances is stronger than all the vicissitudes of fate. Adaptability and ingenuity are some of humanity’s most valuable resources.

Principles for Dealing with the Changing World Order

In the first edition of his work, Dalio identified eight factors, the combination of which provides the country with the conditions for development:

1) the level of education in the country;
2) competitiveness;
3) technologies;
4) economic production;
5) share in world trade;
6) military power;
7) financial stability;
8) possession of a reserve currency.

However, he later added eight more factors:

1) infrastructure and production investments that go to its development;
2) the efficiency of the redistribution of resources within the country 1 ;
3) conditions in the labor market, correlation of income growth of the population with the growth of debt;
4) the rule of law in the country;
5) national mentality;
6) a gap in the quality of life among different segments of the population;
7) the geographical position of the country;
8) natural disasters.

All these factors contribute to each other: a competitive economy provides an increase in revenues that go to improve infrastructure, reduce the gap in the quality of life of people, etc.

Stage 1. Consolidation of the new government. A certain political force seizes power in the country and immediately conducts a sweep, eliminating all kinds of competitors. 

This is exactly what the Bolsheviks did when they staged the Red Terror against “class enemies” in 1917-1923. 

Principles for Dealing with the Changing World Order

The leaders at the head of such a movement are ready to pay any price for victory.

Stage 2. Construction of a new regime. The fighting/terror is ending, the old order has been destroyed, and a new political system needs to be built (in other words, a new distribution of the resources received). 

The most important principle that rulers must follow and which they tend to “forget” is that in a successful social system, prosperity must be ensured for the majority of people, and special attention must be paid to the formation of a middle class. The leaders who shone at the first stage are ineffective here. 

So, in China, Mao Zedong proved to be the ideal leader for the first stage, and Deng Xiaoping the ideal leader to strengthen the country.

Principles for Dealing with the Changing World Order

Stage 3. Good times. Wide access to education and employment is provided, production is being restored, and optimism about the future reigns in society. A charismatic leader inspires new feats.

In the USSR, this is the mid-1930s, with a turn from the rationing system and hunger to the construction of a new “consumer society”: “Life has become better, life has become more fun.” Other analogies: Lee Kuan Yew in Singapore in the second half of the 20th century, the United States under John F. Kennedy in the early 1960s. 

Principles for Dealing with the Changing World Order

The longer a country remains at this stage, the longer its “golden age”. True, at the same stage, the gap between social classes may widen in the country, productivity may decline and debt rise and screws may be tightened, as in the USSR of the 1930s. 

There are quite a few rulers in history who would be able to discipline themselves and the nation, giving preference, not to conservation, but to develop and stop at the third stage.

Roman emperor Caesar Augustus and Genghis Khan – rulers after whom prosperity lasted 100-200 years; in modern history, the head of Singapore, Lee Kuan Yew, promises to be such a leader .

Principles for Dealing with the Changing World Order

Stage 4. The financial bubble is inflated. The country is gradually losing its competitive edge, becoming more and more indebted due to the fact that it constantly lends to other countries, spends more on military needs, and invests less efficiently in promising technologies, preferring reliable to profitable ones. The distance between the rich and the poor is growing, which provokes domestic political tension.

Stage 5. Tension rises. The country is entering the stage of a financial crisis: expenses exceed income, and debts exceed liabilities. The government either raises taxes or prints new money, as America is doing now (the latter measure, of course, only delays the crisis for a while, because freshly printed money is cheap without being backed by real assets). A country entering a crisis can ask for a loan from the World Monetary Fund or neighboring countries (as was the case in Russia in the 1990s), but it is important that this money be invested in production and education (which did not happen in Russia in the 1990s). Symptoms of this period: growing social tension, populism.

Stage 6. Civil war/revolution, the collapse of the old order. Social contradictions are resolved in the most painful, but inevitable way at this stage – by blood. Events take an even worse turn if the masses are nevertheless seduced by populist and obviously impracticable slogans like the Bolshevik “Land to the peasants, factories to the workers!”. 

Any change of power gives a chance for a better ruler, but this happens infrequently. At the same time, it must be recognized that there is no universal political system that would be good in all circumstances. Much more important is the ability of society to adapt to changing conditions. The best system is one that has room for reform from within.

Outer Order

At the level of interaction between countries, the same vector of the gradual movement of the social system from disorder to order operates, which, in turn, is fraught with the inflating of an economic bubble and a social explosion. In the last 500 years, there have been three Great Downfalls, when a period of prosperity was followed by a collapse: the Renaissance gave rise to the Thirty Years’ War, the Enlightenment turned into the Napoleonic Wars, the industrial revolution of the 19th century was followed by two world wars.

Countries develop according to their own timetable and are out of sync at every single moment in time. Attempts to create a common centralizing force like the League of Nations or the UN have been more or less futile because there has always been a country more powerful than any of these organizations. 

The state of affairs in the United States or China today has a much greater impact on the world order than the state of affairs in the UN. And when countries start to conflict, they do not turn to the UN judge for help but settle the matter by war. The international order is far more governed by brute force than by diplomacy.

There is one problem with wars, however: they always don’t go as planned, and they always don’t lead to the results that were expected. Hence Dalio’s advice to political leaders: respect authority and use it wisely.

“Respect authority” – because it is a powerful tool, and if you have it in your hands, you can dictate your will without weapons. 

“Use it wisely” means that power is not about coercion and intimidation: the “soft power” of negotiations that take into account the mutual benefit of the parties is always preferable. Don’t rattle your weapons unnecessarily and don’t seek to expand your power beyond the limits set by history: you have to pay a big price for more power (remember the arms race lost by the USSR).

The economy of large cycles

Why is the economic life of countries subject to such cyclicality? Why, having achieved power, do countries nevertheless find themselves in a financial trap? Why is America finally in such debt? It’s the very nature of money. 

Once upon a time, money was not paper bills at all, but gold, grain, or coral necklaces. All of these things had an intrinsic value (that is, were useful in themselves) that was relatively easy to measure. They were reliable both as a medium of exchange and as a means of accumulating wealth. 

But 750 years ago, a young Venetian merchant, Marco Polo, arrives in China and discovers that a much more convenient means of payment has been found there – paper money. Their value is not determined by the cost of the material itself – it is guaranteed solely by the authority of the emperor (such money is called fiat money). At the same time, gold did not disappear anywhere – it lies under a reliable lock in the imperial treasury. But if someone brought several banknotes to the treasury, he was given not gold, but new banknotes.

Of course, governments cannot print as many notes as they want to make everyone happy—such money will depreciate because the number of goods and services that it can buy will remain the same. But still, it is the launch of the printing press many centuries that has remained the main measure to combat the oncoming economic crises, and we all again became convinced of this in the spring of 2020. When the economy grows too fast, the central bank can hold on to the money supply. If economic growth is too low, it can be stimulated by cash injections. This, in turn, affects the condition of goods and various assets. 

Such financial manipulations lead to cyclical increases and decreases in prices and the money supply – Dalio calls these “short-term debt cycles”, specifying that they usually last about 8-10 years, gradually developing into long-term debt cycles. The last of the long-term cycles was launched in 1945 when World War II ended and the American dollar became the protagonist of the global financial scene. 

Having become the world’s leading currency, the dollar was still backed by gold, an ounce of which was traded for $35. Other major US allies, like the Commonwealth countries, had currencies pegged to the dollar. In subsequent years, while financing its frenzy around the world, America spent more than it received, printing and borrowing dollars, again and again, creating more and more debt. An increase in the money supply reduced the debt burden, but inevitably lowered the value of money. In the end, this gigantic money supply was no longer worth any more than the available gold reserves, and on August 15, 1971, President Nixon announced to the world that the dollar was no longer pegged to gold. The fiat money system finally reigned.

While the dollar remains the main reserve currency (it accounts for up to 55% of all international transactions), the euro (about 25% of all international transactions) and the yuan are much less influential. At the same time, the dollar has long been not backed by anything other than America’s foreign policy might. But what if it shakes? The unrest in America after Biden’s November election is troubling. 

However, it’s not about Biden and not about Trump. Almost any government, by its actions, contributes to the build-up of unsecured money supply and the accumulation of debt – all because politicians care about the relatively short period of time they have in the office and do not see the full length of the debt cycle.

The government has three ways to prevent unbacked money from devaluing: 

1) reduce interest rates (this limits the interest income of banks, stimulating them to issue more loans, including to more risky borrowers);

2) print even more money, buying government bonds that become cheaper during a crisis and thereby keeping the economy afloat;

3) to make direct, targeted financial injections – what the governments of different countries did in the spring of 2020, and what President Roosevelt 3 did in the spring of 1933 as part of the fight against the Great Depression. However, Dalio is convinced that even without a pandemic, such a measure was sooner or later inevitable: the first two options have long been involved.

Devaluations are inevitable, the only question is how quickly they come and how long they last. The US dollar has survived two major devaluations (in 1933 and 1971) and several smaller ones, none of which cost it its reserve currency status. But only for now. Another inflated financial bubble in the spring of 2020 will burst four years after the publication of this book, give or take a couple of years.

Practice shows that the more time has passed since the explosion of the next bubble, the more careless the owners of debt assets. Meanwhile, assessing the risk-reward ratio is not difficult: it is important to keep track of the amount of debt that needs to be repaid in relation to the amount of hard currency available to pay debts. The expansion of the bubble is accompanied by low interest rates, which is beneficial for the players on the stock exchange. But they should consider: does the amount of interest they pay today offset the devaluation risk they face tomorrow?

Principles for Dealing with the Changing World Order

World Order: Four History Lessons

Consider the mechanics of the rise and fall of countries on the example of the four world powers of the XVII-XXI centuries.

Holland

The golden age of this empire falls in the 17th century when the country achieved independence from Spain during the Eighty Years’ War. The main instrument of success was the Dutch East India Company, founded in 1602. The following year, the Dutch established the first permanent port on the island of Java. Gradually capturing Portuguese ports, the Dutch discovered most of the then undiscovered world: Australia (1606), New Zealand, Tonga, and Fiji (1642-1644). The Dutch were exceptionally good at shipbuilding (historians estimate the total displacement of the Dutch fleet in the 1660s at 600,000 tons – the rest of Europe had so much combined) and building truly capitalist relations: they did not invent property, like trade, but it was the Dutch who managed to build the first well-developed credit system, embodied in the Dutch East India Company and the first stock exchange (1602). And the Dutch guilder became the world’s first reserve currency, circulating in most of the inhabited world. 

But growing wealth inevitably leads to debt burdens, financial sluggishness, and an intensified internal struggle for resources. In addition, the garrisons and warships needed to protect the monopoly in different parts of the world were expensive and did not pay off when the price of rare overseas goods like spices began to fall towards the end of the 17th century. The weakening of the national currency led to an outflow of capital, and this capital flowed to London – as a result, the Dutch economy steadily fell, and at the beginning of the 18th century, its growth stopped altogether.


British Empire

The British took advantage of the military weakness of Holland at the end of the 17th century to seize the initiative, but now it was not just about the distant eastern possessions. Britain became a world power because it was the first to rebuild its economy: instead of betting only on land or on the conquest of distant lands, Britain preferred to develop industrial production, especially textiles, which is then exchanged for goods from abroad. 

As a result, the economic power of Britain grew rapidly, which allowed her not only to win a final victory over the Dutch in the Fourth Anglo-Dutch War (1780-1784) but also to strengthen her omnipotence, becoming the first industrialized country in the world. The British East India Company succeeded the Dutch East India Company, its military force was twice the standing military force of the British government. During the 19th century, the British population more than tripled, and the economy grew even faster, which means that the average standard of living also rose. 

After the defeat of Napoleon, the British had no strong rivals left – the age of their power began. In the second half of the 19th century, Britain proclaimed a course of “brilliant isolation” – the refusal to conclude long-term international alliances: with the world’s strongest fleet and key positions in the world economy, such alliances are useless.

At the same time, the “empire on which the sun never sets” became more and more expensive and less profitable to maintain the enterprise, and other countries became more and more competitive. At the beginning of the 20th century, foreign policy tensions grew, the policy of isolation could not be dispensed with, Britain entered into an alliance with Japan against Russia, and then an alliance with France. A new threat to the 19th-century world order was created by the rise of Japan and the United States, the new maritime powers, and also by the independence movements in India and Ireland. The US gradually emerged as the main rival of the empire, but for the time being adhered to more isolationist principles, while Britain continued to expand and control its lands. 

This tactic turned out to be fatal: if the First World War did not shake the status of the empire (under the terms of the Treaty of Versailles, it even increased by 2 million square miles and 13 million people), then after the Second World War, Great Britain was on the verge of bankruptcy. She was exhausted by a monstrous war, owed too much money, and was uncompetitive at the same time. Bankruptcy was avoided only thanks to a multibillion-dollar American loan.

USA

World War II marked a change in the world order. Why did the US come out on top? This is the only country that emerged from the war with minimal losses and maximum economic balance. The US-owned about two-thirds of the world’s gold. They turned out to be the main creditor who could come to the aid of the distressed powers: they received huge financial tranches under the Marshall plan. Not only did Europe have no money, but it also had nothing to sell after the war, it only had to buy American goods with American dollars. 

America’s failure to peg the dollar to gold in 1971 led to a major wave of inflation that continued until the early 1980s. It was followed by three major crashes: 

1) the bursting of the dot-com bubble in 2001 4 ; 2) the bursting real estate bubble that triggered the 2008 global crisis; 3) the monetary expansion of 2009–2019, which created an investment bubble on the eve of the 2020 pandemic. 
 
 

Each of these crises increased America’s debt obligations. In the 1940s, the United States did not have a large external debt – in 2020 the country owes $23 trillion. Fortunately for Americans, this debt is denominated in US dollars. Meanwhile, a new powerful competitor has appeared on the horizon…

China

China is a country with a long and confusing history, during which there were ups and downs, but since 600 AD. e. and to this day it has remained one of the most powerful world empires.  With one notable exception, from 1840 until about 1950, when China entered a slump. The subsequent rise of the country can be divided into three phases.

  • The first is the period of Mao’s rule (1949-1976), revolution, consolidation of power, laying the foundation for state institutions, management systems, and infrastructure. 
  • The second is the creation of a rich, powerful and integral state that does not threaten the global superpower of the United States, the period of the reign of Deng Xiaoping and his successors (1976-2013), up to Xi Jinping. At this time, Deng Xiaoping established full diplomatic relations with the United States, which was consistent with his strategy to open China to the world and carry out reforms.
  • The third phase, based on the achievements, advances China towards its goal of becoming by 2049 (the centenary of the PRC) “a country of advanced socialism, prosperous, strong, democratic, cultural and harmonious.” By that time, China’s share of the world economy could be twice that of the United States. 

Xi Jinping, who came to power in 2013, took over the reins of an already very rich and powerful China, which, however, has a large internal debt and is in a state of growing conflict with the United States. Xi has taken on the difficult task of quelling debt growth while reforming the economy at an accelerated pace. He supported the development of technology and took the position of a politician acting to prevent problems in the financial sector.

China and the USA: a bad peace or a good quarrel?

In the scheme described by Dalio, the United States is in the fifth stage of the internal historical cycle, while China is in the third. These are the biggest players on the world stage, and there is a very tense relationship between them.

1. Economic conflict. Today, China’s share in world trade already exceeds that of the United States, and numerous Chinese workers have become the main productive force on the planet. Now it is not America offering its goods to the world, but China selling cheap goods to America. And then he lends her own dollars: China owns more than a trillion dollars in US Treasury bonds. Both countries are trying to strengthen their domestic markets by becoming more independent and at the same time constantly chiding each other for this. At the same time, neither the US nor China cut off the most important import ties, such as the presence in China of Apple or General Motors (which sells more cars in China than in the US).

2. Technology conflict. The US is the world’s technological leader, quickly losing ground to China. China is investing heavily in the development of artificial intelligence, 5G communications, and quantum computing, while it is easier than any other country to collect data from which AI learns. China is the leader in the mobile payment market. Let’s add here the top-secret technologies that probably exist and about which the intelligence services of other countries know nothing. At the same time, China’s technological production depends on American imports (for example, rare earth metals), and if access to them is closed, this will mean a sharp aggravation of relations up to the war. The United States will probably not agree to this, which means that it remains for them to observe the technological success of a competitor.

3. Geopolitical conflict. The main subject of controversy in Taiwan is whether China wants to return under its protection. Any attempts by the Americans to prevent this are perceived in China very painfully. China itself is unlikely to have Napoleonic ambitions to expand the lands that did not belong to it, at least by military means, it acts differently: it puts small states in financial dependence. China’s relations with Russia are curious, in which the anti-American motive is important. In general, the closest attention should be paid precisely to which countries are friends against each other: in foreign policy conflicts, it is not individual states that win, but alliances.

4. Conflict of values. Chinese collectivism and American individualism are irreconcilable, besides, as history shows, nations usually do not seek to understand each other, preferring to solve the matter by war.

5. Military conflict? Is a war between China and the US possible? We can predict the most obvious reason for it (Taiwan), the most beneficial strategies for both countries (the US will probably lose the fighting in the East China Sea, but it is many times stronger outside this region). But it is difficult to say how other countries will behave in this conflict and what technologies will be used in this war. Since it is more profitable to attack a weakened state, it is in China’s interests to wait another 5-10 years, when its military potential will be many times stronger, and the socio-political situation in the United States may be weaker. One thing is clear: the big war will become the Third World War, and its consequences will be monstrous. Fortunately, both sides are aware of this.

The truth that the leaders of China and the United States (and all other heads of state) must understand is that the most dangerous enemy must be sought not outside state borders, internal contradictions are most dangerous. America’s main enemy is America: its populist policies, public debt, growing credit bubble. The main enemy of China is China: its closeness, problems with disputed territories like Taiwan and Tibet. So, our main enemy is ourselves. This applies to both people and states. Any leader can evaluate the state of affairs in his country according to the 16 criteria that Dalio gave, and conclude how good or bad everything is in his country.

Principles for Dealing with the Changing World Order

What’s next?

Five factors that will determine the future

Comparing the periods of domination of world powers from the Netherlands to the USA, it is easy to see that the period of prosperity lasted an average of 40–80 years, while the period of the crisis took a couple of decades. Even allowing for all sorts of unpredictability (after all, we are talking about history, not mathematics), the term a world power is a century, and the last change in the global order took place in 1945. 75 years have passed, and we are close to the end of the cycle.

What’s next for us? Five factors will play a key role.

Factor 1. Innovation. Advances in artificial intelligence, quantum computing, blockchain, and other technologies will dramatically change many areas of life from leisure to medicine. The pace of invention will only accelerate. Whoever wins the technological race will become the economic and military leader. As already mentioned, here China is stepping on the heels of America, and it has a very serious chance of success.

Factor 2. Capital market. The dollar will remain the key world currency in the coming years, the US will continue to print money to service its debts, which means that its currency will continue to become cheaper. And this is not only America’s problem but also the problem of its partners, who will own depreciating debt assets.  The risk of devaluation is higher than the risk of default. However, the economy does not exist by itself, and the state of affairs directly depends on other factors.

Factor 3. Internal conflicts of countries. The probability of the US moving to the sixth, and fatal, stage of the historical cycle over the next 10 years, according to Dalio, is about 30%. Enough to take America’s internal problems seriously and keep these embers from flaring up. 

At the same time, the United States has an important social safety net – its constitutional system, which by default is supported by the majority of citizens. Yes, from the fifth stage of the cycle it is impossible to return to the fourth, the expenses of Americans still exceed incomes, and debt obligations exceed assets. Therefore, America should think about how to prevent the situation from worsening. How efficiently does the capitalist system allocate resources? How to modify capitalism so that it leads to both increased productivity and more equitable management of resources? Is it worth doing it at all? Maybe Americans should spend less? 

All these issues require systematic thoughtful development, especially against the backdrop of growing automation of production. The demand for a solution to these problems is huge, but so far it is expressed in spontaneous riots like the storming of the Capitol in January 2021.

Factor 4. Foreign policy order. The biggest threat to him is the escalation of the conflict between the US and China. Countries are actually at war with each other on the economic, technological, socio-cultural, and geopolitical fronts. As the experience of history, including the events of 1930-1945, shows, these four types of conflicts precede the real war by about 5-10 years. 

The accelerator of war can be an unexpected technological advantage achieved by one of the rivals. It is worth taking a very close interest in the events in Taiwan – so far this is the only real reason for starting a big war between the US and China. It is important to monitor the actions of the allies: while China is gaining them, the United States is losing them.

Looking back over 500 years of history, one can see that open clashes between powers occurred about once every 10 years. Much more time has passed since the last great war, World War II. The probability of a major war in the next 10 years is 35%, a dangerously high risk. 

The best tactic on the eve of the war, which, by the way, the Chinese understand much better than the Americans, is to demonstrate their strength so that the enemy is simply afraid to fight and accepts the required conditions. This is probably the direction China will move in the coming years

Principles for Dealing with the Changing World Order

Factor 5. Natural disasters. Global warming is becoming an increasingly dangerous and inevitable problem 5. The world community is taking steps in this direction (say, the decision to achieve carbon neutrality by 2050), but so far too slowly, and it is unlikely that the pace will accelerate in the near future.

Four rules to help you in the future

Summarizing what has been said, Dalio concludes that perhaps the next big redistribution of the world order will come in about 5-7 years, but there is nothing unconditional in such terms. Historians’ predictions are similar to forecasters’ predictions: they know where and when the next typhoon will happen, closely follow the development of events, and constantly make clarifications, but they cannot give an exact answer. A bet on the future is a bet on probability, and nothing more.

In this situation, it is much more important to be aware that you do not know much more than you know. Understanding your ignorance is power. Hence the four rules of Ray Dalio, help him operate as efficiently as possible in the most uncertain circumstances.

1. Keep in mind the full range of possibilities, work through bad scenarios and try to prevent the worst.
2. Diversify not only stocks but also any vital assets. As the Chinese proverb says, a cunning hare always has three holes.
3. Value delayed gratification over immediate pleasures. Impatience is not a virtue.
4. Connect with the most intelligent and knowledgeable people in your environment: learn from them, test your ideas in conversations with them

Top 10 Thoughts

1. Any country goes from order to chaos, but it can linger in the middle of the way, and then it is guaranteed a golden age. This requires a smart leader, like Lee Kuan Yew in Singapore, or a strong legal system, like in the United States.

2. Whoever becomes the technological leader in the coming years will receive maximum power. The main contender is China.

3. Probability of American Civil War and World War – 30-35%: high enough not to tease the geese.

4. Since fiat money has ruled the world, financial bubbles are inevitable. The next one arose in the spring of 2020 and will burst in five years.

5. Assessing geopolitics, it is worth paying attention not only to the behavior of the strongest players, but also to which countries are friends against each other: in foreign policy conflicts, it is not individual states that win, but alliances.

6. The future will always be unpredictable enough to surprise us. Whatever data we may have, it is much more important to understand that we do not know much more than we know.

7. Keep in mind the full range of possibilities, work through bad scenarios and try to prevent the worst.

8. Diversify not only stocks but also any vital assets. As the Chinese proverb says, a cunning hare always has three holes.

9. Value delayed gratification over immediate pleasures. Impatience is not a virtue.

10. Talk to the most intelligent and knowledgeable people in your environment: learn from them, and test your ideas in conversations with them.


1.  Read the summary of the book by Andrey Movchan and Alexey Mitrov  “Damned economies”.

2.  Read the summary of Lee Kuan Yew’s book “From the Third World to the First. A History of Singapore (1965-2000)”  and Carmen Reinhart and Kenneth Rogoff’s book This Time Will Be Different. Eight centuries of financial madness”.

3.  In March 1933, Roosevelt announced a four-day bank holiday and ordered an additional $2 billion to be printed to support the population.

4.  The dot-com bubble is an economic phenomenon that existed in the second half of the 1990s: when many businessmen bet on the Internet as a means of obtaining a quick income, the shares of their companies soared in price. At the same time, not all business models on the World Wide Web turned out to be effective, and there was nothing to repay loans taken for a new business – this provoked a wave of bankruptcies by 2001.

5.  Read the summary of Bill Gates  ‘ book How to Avoid a Climate Catastrophe. The solutions we have and the breakthroughs we need.

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