The Changing World Order
This article is a part of my Best Reads of the Month section on my website www.mikegorlon.com. Each month I pick one or two articles or blog posts that I find on the internet which I thought were really insightful, interesting or moving. Then I share them with you. You can view the previous month’s articles by going to: https://www.mikegorlon.com/best-reads-of-the-month
March 2020: The Changing World Order
Ray Dalio is the chief investment officer of Bridgewater which is the largest hedge fund in the world with $160B in assets under management as of 2019. He is also a best-selling author of the book Principles and he has written many informative research papers on his website about the economy and markets.
Most recently, he has been studying empires and how they rise and fall. He just started to publish his ideas into a book that he has been posting on his LinkedIn page chapter by chapter. He aims to publish one chapter a week and so far the introduction and the first chapter have been posted.
Ray sees that there are various factors that affect whether an empire will rise or fall with some of these factors being more important than others. Eight of the factors he finds are education, competitiveness, technology, economic output, share of world trade, military strength, financial center strength and reserve currency with education being a leading indicator and the reserve currency being a lagging indicator. The reason the reserve currency is a lagging indicator is because it is the last indicator to show whether an empire is rising or falling. For example: the United States was rising in all of the other factors throughout the late 1800’s and early 1900’s but it wasn’t until 1944 (after World War II) that the dollar became the reserve currency of the world since the U.S. held 80% of the world’s gold after the war.
As one factor - whether it be education, competitiveness, military strength or any of the others - starts to improve (decay) it can create a flywheel effect for the empire to rise (fall). For example: better education leads to a better understanding of how to manufacturer goods and engineer systems and this leads to better technology and ultimately to a stronger financial center as more countries from abroad want to loan and invest their capital in the country that is rising and has the prospect for greater returns.
Below are links to the introduction and the 1st chapter. In the introduction, Ray introduces what led him to want to do this research and also how he did the research and how it will help him and Bridgewater.
In the first chapter, Ray discusses a lot of the factors that lead a country to rise and fall and he uses examples from the last 3 empires which were the Dutch Empire, the British Empire and the current one which is the United States Empire. He also mentions the current rising empire which is China.
It’s a great read and I look forward to the remaining chapters.
Intro: https://www.linkedin.com/pulse/changing-world-order-ray-dalio-1f
1st Chapter: https://www.linkedin.com/pulse/chapter-1-big-picture-tiny-nutshell-ray-dalio
