How Original is Ray Dalio's New Book 'The Changing World Order'?

Two Books

1.0 First Contact

I first became aware of Ray Dalio’s new book, rather ironically titled ‘Principles For Dealing With The Changing World Order', when I received numerous emails and messages from those that have followed my work since I published my book Breaking The Code Of History in 2009. Many have contacted me to voice their concerns that, to them, it seemed as if Dalio had plagiarised my theories on the cycles of empires. This was placed in stark relief because Breaking The Code Of History is such a unique and ground-breaking book in the way it highlighted human collective behavioural patterns that have shaped our history as viewed through the lens of the past, present and future. This was whilst making numerous predictions, over 13 years ago, that have since unfolded accurately through time, well before others had seen the path ahead.

Naturally, this caught my interest, particularly as Ray Dalio ran Bridgewater, the biggest macro hedge fund in the world. I had managed a macro hedge fund for over two decades, so we shared a common professional arena and my work has been widely disseminated in the hedge fund space for many years. Indeed, I had tried several times in the past to contact Ray Dalio with details of my theories at the request of intermediaries within our sector, alas to no avail.

 

2.0 Similarities Between Breaking The Code Of History and The Changing World Order

I approached reading The Changing World Order from the perspective that any book that highlights human cycles through the identification of historical patterns is a valuable contribution to human evolution and understanding, and therefore, I welcomed it. The validity and exposure of the recognition of human unconscious collective cycles to the public should create increased debate and therefore add value to the discussion on the theme.

My first obstacle was to overcome what felt to me as the rather parochial and imprecise use of the English language and the loose expression of constructs. My second observation was that there were startling similarities in the foundations of Breaking The Code Of History and The Changing World Order in the following areas:

  1. The Changing World Order was dedicated by Ray Dalio ‘to my grandchildren and those of their generation who will be the participants in the continuation of this story; may the force of evolution be with you’. Breaking The Code Of History  (back in 2009) was ‘dedicated to my children Winston, Kai, Horatio and Madelaine and to all of our children’.
  2. The Changing World Order was separated essentially into three sections: past, present and future, just as was Breaking The Code Of History.
  3. The Changing World Order describes a ‘big cycle’ that is almost 95% identical to the Five Stages of Empire if less comprehensive and which most significantly starts at a different and later location.
  4. The Changing World Order describes an internal and external conflict cycle, whilst Breaking The Code Of History describes a very comprehensive interpretation of external and civil wars in The Theory of Warfare.
  5. The Changing World Order has a section on climate change yet it contributes very little to the debate and seems to have been put in because it felt it had to be there, whilst simultaneously failing to assess the real rate of climate change or explain our collective failures to respond to this challenge being based on China's hegemonic challenges of America.
  6. The Changing World Order uses a similar analogy/construct as used in Breaking The Code Of History for the fractal nature of the human lifecycle and empires.
  7. The Changing World Order talks about the concept of polarisation as in Breaking The Code Of History’s extensive Polarisation and the Road to War section.

 

3.0 Fundamental Differences

Having noted the similarities in the foundations of theories, there were numerous fundamental differences in their application, as if Breaking The Code Of History’s complete and very lateral model of human behaviour had been squeezed into a linear interpretation that focused on the financial elements of the cycles of empires, and in the process lost the understanding of the true essence and drivers of empire cycles.

 

4.0 Positives Additions To Breaking The Code Of History

There were three areas that I thought were very interesting:

  1. When a reserve currency collapses, detailing the collapse of the Guilder after the fourth Anglo-Dutch War and Sterling after Suez, are both well worth reading.
  2. The observation concerning the distribution of wealth and power, although I describe this process in terms of the drivers between regional and peak civil wars, I enjoyed the expansion of this theme, i.e., that controlling power controls wealth in a society with links to leaders and shaping rules. A few end up controlling most of the wealth, leading to revolution.
  3. The work on investors' returns over history, especially on page 109, is fascinating.

 

5.0 Debatable Constructs In The Changing World Order

My concerns about The Changing World Order as compared to Breaking The Code Of History are as follows:

  1. It misses the fundamental driver of empires which Breaking The Code Of History argues is demographics. Rather, The Changing World Order tries to argue that it is all about money and finance, and the dynamics of power, which I would argue is but a product of the core five-stage self-organising cycles of empire, and not its fundamental driver.
  2. Wars are the clocks of empire and yet The Changing World Order fails to recognise this key relationship. Instead, it focuses on money as the primary impulse. Indeed, Dalio’s theories on conflict as expressed in the ‘internal and external order and disorder cycle’ feel like a weak rendition of The Theory of Warfare. A good example is the lack of understanding in explaining the timing of the onset of WW1 (which was, in reality, linked to the K wave and rise of Russian military power and, similarly, the drivers that started WW2).
  3. Types of war: the claim that there are many types of war is incorrect. Whilst there are many types of strategic competition, from economic to currency to even grey zone activities, war is defined by kinetic action that kills other human beings. Only once that point has been passed should the term be used to describe the different types of war, as described in The Theory of Warfare.
  4. Lateral versus linear: The Changing World Order construct fails to understand the delineation between the creative and destructive cycles, and the critical role of right-brained (lateral) leadership versus left (linear).
  5. The understanding of debt and credit cycles are two glaring failures as they were not linked to inflation driven by the commodity cycle in the K wave. The Changing World Order failed to recognise two distinct empires' debt cycles. The first is in the phase of expansion where they borrow from themselves and create a USP that, if successful, allows them to pay back the debt. The second is in the phase of overextension where they borrow from the world (leveraging reserves status) to fund a lack of competitiveness and productivity which almost always is when they go bust! However, I did like the quote about an empire running out of lenders in decline.
  6. The examples of the cycles of reserve currencies were the Dutch, British and American Empires, which are valuable additions to our understanding of reserve currencies and empires and their rise and fall. However, The Changing World Order fails to make the connection that they were all global maritime empires. This omitted the Portuguese, who were the first global maritime system and then the Spanish, whilst ignoring the role of the French and Germans who were essentially continental powers and thus had an inferior resource-gathering capability in times of conflict, which ultimately killed their hegemonic challenges/status and affected the very nature of their financial systems. It is a mechanism that I explain with my construct of the Western Christian Super Empire.
  7. Quantification: As a physicist by training, I loved the attempt to quantify the cycle of an empire using data. However, The Changing World Order’s conclusion that the American Empire exceeded the heights of the British Empire’s power is – for anyone with a grasp of history – blatantly incorrect. This suggests that there has to be considerable optimisation of The Changing World Order’s algorithms and sub-indexes to create historical accuracy. In addition, the accuracy of the extrapolated data needs to be considered for an error assessment of the outputs. It is a factor that becomes more important as one goes back in time. These loose factors cast dispersions on many of The Changing World Order’s conclusions. However, this is an exciting area of the future study of empire cycles and the ongoing monitoring of current nations and their health. The area that may need the greatest revision in terms of indexing is the military power balance of empires, as it has so many unquantifiable elements, and yet it is the very definition of the power of an empire.
  8. The failure to identify that Britain is in an expanding phase of the cycle. Rather The Changing World Order just assumed it was in decline, so something is missing in his algorithm!

 

6.0 Predictive Power

Theories such as those expressed in Breaking The Code Of History and now The Changing World Order are only valuable if they can predict history and events before they happen. Where Breaking the Code of History is now widely considered prophetic, having successfully predicted the course of the past 13 years, The Changing World Order is just an extrapolation of what is now largely obvious to everyone.

 

7.0 Concerns Around Dalio's Connection With The CCP

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ray in china

One of the five key messages of Breaking the Code of History was to warn our liberal Western world that the autocratic Chinese Communist Party (CCP) would seek to dominate and erase its very existence within a matter of two decades, a warning that had been frighteningly prescient. Thus, it is Dalio's treatment of the rise and current status of China as the hegemonic challenger that is the most-concerning element of The Changing World Order. The narrative is that the cycles of empires are used to predict the inevitable rise of China to hegemonic status, arguing that it is unstoppable and the implication is that it is pointless to resist the inevitable and resistance is futile, much like the Borg in Star Trek.

The shocking sanitisation of Chinese history, glossing over its aggressive action, could easily lull the ill-informed into thinking that the CCP is a benign force that the West should not fear. As such, The Changing World Order comes across as a pro-CCP propaganda exercise, which reminds one of the articles in the Lancet that appeared in April 2020 (the Lancet had received funding from China) written by scientists who were also being funded by China, stating that the origins of the pandemic were zoonotic, which has now been disproved by the very lack of proof of an intermediate host.                                       

  1. The flaws in The Changing World Order’s big cycle become very clear with the statement that the current China cycle started in 1949, at the end of the Chinese Civil War. However, using the Five Stages of Empire, the actual starting point for the current cycles was 1902, and the Boxer Rebellion which was followed by the stage of regionalisation up to 1949, and that civil war was a war of regionalisation. This may seem like historical semantics but it is critical to locate the starting point of an empire cycle to accurately predict its past.
  2. The Changing World Order algorithmic output in graphic form (p.193) places China’s empire status today on a par with the British Empire, which is blatantly incorrect but still below America as it declines. However, I would argue that, as the hegemonic challenger, China is as yet unproven until they win WW3.
  3. The section on Chinese history and its empires is conceptually an excellent addition to this body of work; one which I have already written about, which gives me an objective basis to compare the two treatises. Without a doubt, this section is the most alarming. It reads well and is engaging, but it is only at the end when one compares reality to fiction that it dawned on me that it omits all the aggressive and expansive history of the Chinese, especially post-1949 after the end of its civil war, and tries to argue that the Chinese have never been expansive and have always preferred tribute to occupation and violence. As such, this is a very subtle and dangerous piece of CCP propaganda.

Dalio stated in The Changing World Order that he has been travelling to China for 37 years and further alluded to a personal friendship with a top leader, that we assume is Xi. Such a friendship could have potentially served the purpose to benefit the CCP’s ambitions, initially by encouraging the flow of Western capital in the post-2000 era to build a Chinese manufacturing base, but also to provide connections and, most damagingly, insight into the Western mindset (much as Marco Polo did) to maximise the CCP’s plan of hegemonic confrontation. This would be consistent with the art of war and learning to understand America as one's enemy. If such a long exposure existed, it would have been entirely consensual. What is notable is that Dalio has taken such a pro-CCP position in public, despite the clear evidence of the heinous nature of the CCP regime that has been exposed in the Western public domain with multiple crimes, not least of which is the genocide of the Uyghurs. This was subsequently confirmed by Dalio's recent comments about China on CNBC, claiming that human rights policies/breaches were akin to those of a strict parent.

In conclusion, it does seem to me that some of The Changing World Order’s arguments are blatantly incorrect. Foremost of which is the conclusion concerning the relative sizes of the British Empire compared to that of America at its height and China today. This is fundamentally incorrect, as America at its recent peak and China today are a long way below the absolute power wielded by the British Empire at its peak. By making this false assumption, it portrays China as more powerful than in reality, with all the psychological corrosive implications on the American reader therein. Almost as important is Ray Dalio’s implied proximity to the CCP and his real underlying agenda behind writing The Changing World Order, and implying that America is the aggressor by seeking to contain the CCP’s influence and preserve its position in the global hegemony that is defined by its democracy.

 

Summary

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dalio

Any book that highlights human cycles through the identification of historical patterns is a valuable contribution to human evolution and understanding. As such, the validity and exposure to the public of this work should create more open debate. However, I would argue that Ray Dalio exhibits some major gaps in his understanding of global history and empires, reducing the validity of his constructs, whilst his financial focus makes its value limiting in terms of understanding the essence of empire cycles. As for the power of his predictions, where Breaking the Code of History was prophetic, Dalio’s book is an extrapolation of what is now obvious. The Changing World Order is riven with contradiction as Dalio claims he wants to pass on his knowledge to make a better future, but has been working with the CCP, which represents the very opposite outcome. His subliminal message is that we, in the West, should accept the inevitable rise of China and the CCP, as we have nothing to fear, and that America is the aggressor as it seeks to contain China and preserve its position as the global hegemony.

In the end, I am reminded of a quote by Ronald Regan: There is no limit to the amount you can do if you don’t care who gets the credit.’

 

A Personal Challenge To Ray Dalio

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Vidio

Ray Dalio – if my critique of your work seems harsh, I would welcome a public, televised debate on our different viewpoints, to further the collective understanding of human cycles that have shaped our history and that will unconsciously shape our future.

 

Other Perspectives on The Changing World Order

Mr Varadarajan stated in his recent Wall Street Journal article (20th November 2021), 'Trouble Ahead, As Usual':

‘In Mr. Dalio’s view, if you don’t see the big picture you won’t see the Big Cycle. 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.” While most investors are “like ants” who take a crumb-level view of the world, Mr. Dalio proclaims that his approach is “different”: It enlists centuries of history in the cause of wealth-creation. He believes that no one else is like him. “There are no investors I know and no senior economic policy makers I know—and I know many and I know the best—who have any excellent understandings of what happened in the past and why.” Although Mr. Dalio doesn’t state explicitly that he is the man with such “excellent understandings,” few readers will doubt that he intends to shine a light on himself.

Mr. Dalio strains much too hard to persuade us that he’s not just a wildly successful businessman. He craves recognition as a polymath who has constructed a model for how the world works and as an all-American Renaissance man in the age of Xi Jinping.’

 

Wall street journal https://www.wsj.com/articles/principles-for-dealing-with-the-changing-world-order-book-review-ray-dalio-trouble-ahead-as-usual-11637335545?reflink=share_mobilewebshare

Forbes https://www.forbes.com/profile/ray-dalio/

New York Times https://www.nytimes.com/2021/11/20/business/dealbook/ray-dalio.html

 

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