The Changing World Order

·46 min·4 clips

Ray Dalio says we're most likely in a 1930-1945 style period of huge debt, political divides, and rising powers—how does he know?

The episode begins with the hosts introducing Ray Dalio's book 'The Changing World Order' and his thesis that the current era resembles the volatile 1930-1945 period due to high debt, political divides, and a rising power challenging the existing order. They outline Dalio's multidisciplinary approach, developed over 50 years of investing, which involves studying historical analogies to anticipate unseen events. The hosts detail Dalio's 'big cycle' framework, where empires swing between periods of peace/prosperity and depression/revolution/war over centuries. They explain the eight determinants Dalio uses to measure a country's strength: education, competitiveness, innovation, technology, trade, economic output, military strength, financial center status, and reserve currency status. The rise phase is described as starting with strong leadership that builds systems fostering education, low corruption, and innovation, leading to increased productivity and world trade share. As a country reaches the top, it gains reserve currency status, allowing it to borrow cheaply but also leading to decadence, wealth gaps, and declining competitiveness. The decline phase involves excessive debt, economic downturns, internal conflict, and the rise of populist leaders, often culminating in revolution or war. The hosts apply this framework to historical case studies, starting with the Dutch Empire's rise through inventions like ships and capitalism, its peak with the Dutch guilder as a reserve currency, and its decline due to over-indebtedness and currency collapse. They then cover the British Empire's rise fueled by the Enlightenment and industrial revolution, its peak with the pound dominating global trade, and its decline from inequality and geopolitical challenges like Germany. The episode shifts to the US, noting its post-WWII boom, the move to fiat currency under Nixon, and current signs of demise like wealth gaps and political extremism. Finally, the hosts discuss China as the rising power, highlighting its long-term planning, competitiveness, and potential conflict with the US over Taiwan. They conclude by emphasizing Dalio's view that no system lasts forever and that understanding these cycles can reduce surprise when change occurs.

As heard by us

Ray Dalio's empire-cycle thesis gets a chatty, history-first workout.

What You Will Learn takes Ray Dalio's The Changing World Order and turns it into a conversational, history-led tour of how empires and financial systems rise and wobble.

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Press play if you want Ray Dalio's world-order cycle unpacked by two Adams.

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