Hedge fund master Ray Dalio has a new book out this week—The Changing World Order—that analyzes patterns in the last 500 years of history and uses them to get a fix on the future. It’s a magnum opus, and I can’t do it justice in 300 words. But it is not encouraging. History, Dalio believes, “typically transpires via relatively well-defined life cycles,” and at least three of those cycles are headed in bad directions:
1) The financial order. “We are creating a lot of debt and money,” he told me recently, “and therefore its value goes down. It produces inflation of everything… History has shown central banks don’t want interest rates to rise, so they print more money and continue the spiral.”
2) The internal order. Dalio described the U.S. situation to me this way: “When the causes that people are behind are more important than the system, the system is in jeopardy, because they will fight rather than adhere to the rules.” The book puts the odds of a “civil-war-type” disruption at 30%.
3) The external order. The rise of China and the relative decline of the U.S. create a pattern ripe for superpower conflict. “When I look at these patterns, it’s like watching a movie for the fifth time,” he said. In the book, he writes the “prospect of mutually assured destruction should prevent military war between the U.S. and China” unless “unexpected technological advantage, like a breakthrough in quantum computing, gives one of these powers an asymmetrical advantage.” Area to watch: Taiwan.
And then there is the risk of climate change. “It is pretty clear to me that humanity and natural evolution are doing great damage to the environment that will be very costly in both money and quality of life.”
I told Dalio he seemed to be painting a dire picture of the future. His response: “I have a principal which is: if you worry, you don’t have to worry. If we are not worried about these things…we are in trouble. If we worry about them, then we can probably avert the bad outcomes.” There’s your reason for optimism this morning.
We’ll be running an excerpt from Dalio’s book on fortune.com tomorrow. More news below.
European markets have recovered slightly from the news of the Omicron variant, and U.S. futures are also looking cautiously upward. The latest news from South Africa (where it was first identified) is that, maybe, Omicron infections could prove relatively mild, with symptoms that are a bit different from Delta's: fatigue and dry cough, but no loss of the sense of smell. As far as the WHO is concerned, however, the COVID strain poses a "very high" global infection risk with "severe consequences" for some areas. Fortune
As for the question of air-travel restrictions, South Africa and many experts say what's happening to the country and its neighbors is unjust punishment, and pointless at that. The COVID variant is already all over the place: in Canada, Australia, Austria, the U.K., Germany, Belgium, Israel, Italy, Portugal, Hong Kong, and most probably the U.S. too. Does that mean it will dominate in all these places? We don't know. Wall Street Journal
Nissan is investing $17.6 billion on the switch to electric over the next five years. By 2030, the Japanese auto giant says it will unveil 23 new models, 15 of which will be electric-powered. Bloomberg
Qatar Airways has grounded 20 Airbus A350s over alleged paint and surface flaws, and Reuters reports the problem goes beyond that fleet. Airbus claims the problems are merely cosmetic. Reuters
AROUND THE WATER COOLER
The clothing designer Virgil Abloh has died of cancer at the age of 41. As Louis Vuitton's menswear artistic director and a regular Ye collaborator, he was one of the fashion industry's top Black executives, touted by some as his generation's Karl Lagerfeld. Fortune
Half of the 2021 IPOs that raised over $1 billion are now trading below their listing price. Examples include Deliveroo, Oatly and Paytm. So who's to blame? Could it be the valuations pumped out by big investors and underwriters? Financial Times
Next year is going to be a big one for direct action by climate activists, both on the streets—where many will be arrested, at least in the U.K.—and within companies, where some predict work stoppages in protest at firms' tardiness in becoming more climate friendly. Fortune
Fortune's Maria Aspan and Emma Hinchliffe have a great piece on female founders who have entered the billionaire club through IPOs, such as Spanx founder Sara Blakeley, Bumble's Whitney Wolfe Herd, and 23aneMe's Anne Wojcicki. "For those who have been working to expand entrepreneurial opportunities for women, the minting of multiple female-founder billionaires this year is a cause for hope," they write. Fortune
This edition of CEO Daily was edited by David Meyer.
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