Ray Dalio sees at least 3 reasons to worry about the future

November 29, 2021, 11:32 AM UTC

Good morning.

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.

Alan Murray



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This edition of CEO Daily was edited by David Meyer.

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