During a recent car karaoke session with my family, my mother voiced confidently,

“I know all of the lyrics to Billy Joel’s “We didn’t start the fire”. - Adam’s mother

Adam’s Substack is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Now, I love my mother. I trust my mother. However, in my experience there’s been only one person I’ve heard in my life successfully sing that song without the lyrics. The numbers were not in her favor but I rolled with it. I knew my history. We’ll come back that.

Ok, I believe you Mom. Let’s give it a test. We hit play and the familiar song blared through the speakers. “We didn’t start the fire, it was always burning since the world’s been turning…no we didn’t light it, but we tried to fight it”. Ok, she nailed the chorus. Nice work but the chorus is easy. Moment of truth…here come the lyrics….and there go the lyrics.

She tried, I’ll give her full credit for the attempt, however, the lyrics just weren’t there for her. She did what we all do. We know a bit of the lyrics then we stop for a few measures, then we’re back in. So, in reality, she/we know some of the lyrics to this song and that’s ok. For the one person whom I’ve heard recite these lyrics from memorization, he later admitted to me that he’d been practicing this for years. A lot of work went in to that memorization. A ton of hours. He studied.

How does this remotely relate to Ray Dalio?

I was thinking recently about Ray Dalio’s “Principles for dealing with the changing world order” and how he’s says:

The times ahead will be radically different from those that we’ve experienced in our lifetimes. Though similar to many times before.

How does he know that? Because as Long Island philosopher Billy Joel wrote, “we didn’t start the fire, it was always burning since the world’s been turning.” While we may not know all the lyrics to the song that’s to come, we know some of the lyrics and that’s to be expected. Some of the lyrics we remember, in this example, are in fact very important as they indicate to us what’s probabilistically going to happen in the future.

Stay with me.

Over his 50 years of macro investing, the most important events that surprised Dalio are the ones that didn’t happen in his lifetime. But they had indeed happened before with the ups and downs of the Dutch, British and US empires. And every time they did, it was a sign of the changing world order.

How did Ray Dalio learn to anticipate the future by studying the past that has always been burning since the world’s been turning. Hot stuff, handle with care.

We’re going for the Fully Monty here.

The first principle is that when a central bank prints more money (ideally to get out of a crisis of some sort) than it take in in taxes, make sure to buy stocks, gold and commodities.

Why? If there’s more of a thing in circulation (paper money) it’s value will fall and the assets you buy with said value will rise. Pretty straight forward. This happened in the United States in 2008, and for pandemic relief in 2020. This then leads to his next principle.

To understand what is coming at you, you need to understand what happened before you.

So he goes on to study why the 1920’s bubble led to the 1930’s depression, which allowed him to profit from the 2007 bubble which led to the 2008 bust. Still with me?

He looks to the past to similar situations to handle the future well.

Back to Billy Joel. It got me thinking about the song. Whether my mother was able to memorize the lyrics or not, it seemed that the lyrics she remembered are the times in history that she studied or at least lived through. Myself included. For instance, I always remember the line “Brooklyn’s got a winning team” most likely because my father was a Brooklyn Dodgers fan and I like baseball. I recognize some of the names and events from the rest of the song, however, since I hadn’t studied them or dug a bit deeper, I am unable to learn the lessons from history. Even the Brooklyn Dodgers line. Why did they have a winning team? No clue. So I looked it up. Still no clue, but I’m closer to understanding how successful franchises are built.

It’s this nuanced curiosity that Dalio is speaking about that makes for successfully navigating the future while looking into the past. And this song, and history, is littered with stories that are there to be studied. And it’s ok that I didn’t know exactly who George Santayana was (lyric; Santayana goodbye) but now I do. He was a Spanish and American philosopher, essayist, poet, and novelist. Who knew? Now I’ll inquire, why was he important. Get the gist.

The Changing World Order

It’s all about changing orders and how the fires that we see today have always been burning. From finance to governments and what we see playing out in societies today all around the world. Remember, we didn’t light it, but we tried to fight it.

Here’s what happens according to Dalio:

1. Countries don’t have enough money to pay their debts, even after lowering their interest rates to zero. So, their central banks begin printing lots of money to do so.

2. Big internal conflicts emerge due to growing gaps in wealth and values. This shows up in political populism and polarization between the left, who want to redistributed wealth, and the right who want do defend those holding the wealth.

3. Increasing external conflict between a rising great power and a leading great power. (Happening now with China and the United States)

He’s good right!?

I get that this a bit captain obvious to you dear reader. Adam, we knew this. Study history to understand what’s happening today.

Fair point. Well, because I’m human and I assume you are too (Sydney can you hear me?) I find myself forgetting this very important lesson from time to time, so I felt it warranted a post to remind myself and you.

Let’s see how Ray phrases it and how this can be helpful for you as an investor and beyond.

What happens during changing world orders?

1. A rising power, due to certain positive market traits, increases its value on the world stage and a financial bubble begins to build.

2. This power now becomes the reserve currency of the world (at that time)

3. A wealth gap emerges between the haves and the have nots.

4. The bubble bursts and and there’s an economic downturn.

5. The central bank steps in to save the day by printing more money and making credit available.

6. Tensions increase internally leading to a revolution (peacefully or via civil war)

Whew, all that’s happening domestically.

Now, what’s happening externally.

1. While the existing power struggles internally, its power diminishes externally relative to other powers on the rise.

2. When a new rising power becomes strong enough to compete with a dominant power having domestic breakdowns (I totally left the toilet seat down!) external conflicts, most typically wars, emerge.

3. Out of these internal and external conflicts new winners and losers emerge.

4. The winners get together to create the new world order.

5. And then, the cycle begins again.

From the Roman Empire to today, the rise and fall of these societies share similarities in their cause and effect relationships.

Think of this at the individual level. We all have certain indicators that will have a cause and effect of our longevity, happiness, et al. Ray looks at age of individuals, say 80 years old. There are some that live shorter and some that live longer. The better way to look at this are health indicators of the individual. What do they do or don’t do that can predict their lifespan, happiness, et al. We get this.

And empires have the same types of indicators or vital signs too.

As he watched the indicators of power change, he was able to see what stage a country is in, which helped to anticipate what was likely to come next.

So, my mother and Ray Dalio are both right. We don’t need to know everything about history to understand what’s likely to come next. We just have to start by pulling out our favorite lyrics (history) and study them, rinse and repeat.

Whether nations, school boards, families, ourselves, on and on. There’s a song playing, relatively speaking, in the background with lyrics that you kind of know. Our challenge is to learn the lyrics more intimately in all areas of our lives.

What’s the song of your life today? Your work? Your school? Your nation? Your world?

How does it rhyme with the songs yesterday?

There’s a lesson in every lyric. And, I’m so excited that I finally get to write this in a piece and have it make complete sense thematically!

“History never repeats itself, but it often does rhyme” - Mark Twain

Adam’s Substack is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

During a recent car karaoke session with my family, my mother voiced confidently,

“I know all of the lyrics to Billy Joel’s “We didn’t start the fire”. - Adam’s mother

Adam’s Substack is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Now, I love my mother. I trust my mother. However, in my experience there’s been only one person I’ve heard in my life successfully sing that song without the lyrics. The numbers were not in her favor but I rolled with it. I knew my history. We’ll come back that.

Ok, I believe you Mom. Let’s give it a test. We hit play and the familiar song blared through the speakers. “We didn’t start the fire, it was always burning since the world’s been turning…no we didn’t light it, but we tried to fight it”. Ok, she nailed the chorus. Nice work but the chorus is easy. Moment of truth…here come the lyrics….and there go the lyrics.

She tried, I’ll give her full credit for the attempt, however, the lyrics just weren’t there for her. She did what we all do. We know a bit of the lyrics then we stop for a few measures, then we’re back in. So, in reality, she/we know some of the lyrics to this song and that’s ok. For the one person whom I’ve heard recite these lyrics from memorization, he later admitted to me that he’d been practicing this for years. A lot of work went in to that memorization. A ton of hours. He studied.

How does this remotely relate to Ray Dalio?

I was thinking recently about Ray Dalio’s “Principles for dealing with the changing world order” and how he’s says:

The times ahead will be radically different from those that we’ve experienced in our lifetimes. Though similar to many times before.

How does he know that? Because as Long Island philosopher Billy Joel wrote, “we didn’t start the fire, it was always burning since the world’s been turning.” While we may not know all the lyrics to the song that’s to come, we know some of the lyrics and that’s to be expected. Some of the lyrics we remember, in this example, are in fact very important as they indicate to us what’s probabilistically going to happen in the future.

Stay with me.

Over his 50 years of macro investing, the most important events that surprised Dalio are the ones that didn’t happen in his lifetime. But they had indeed happened before with the ups and downs of the Dutch, British and US empires. And every time they did, it was a sign of the changing world order.

How did Ray Dalio learn to anticipate the future by studying the past that has always been burning since the world’s been turning. Hot stuff, handle with care.

We’re going for the Fully Monty here.

The first principle is that when a central bank prints more money (ideally to get out of a crisis of some sort) than it take in in taxes, make sure to buy stocks, gold and commodities.

Why? If there’s more of a thing in circulation (paper money) it’s value will fall and the assets you buy with said value will rise. Pretty straight forward. This happened in the United States in 2008, and for pandemic relief in 2020. This then leads to his next principle.

To understand what is coming at you, you need to understand what happened before you.

So he goes on to study why the 1920’s bubble led to the 1930’s depression, which allowed him to profit from the 2007 bubble which led to the 2008 bust. Still with me?

He looks to the past to similar situations to handle the future well.

Back to Billy Joel. It got me thinking about the song. Whether my mother was able to memorize the lyrics or not, it seemed that the lyrics she remembered are the times in history that she studied or at least lived through. Myself included. For instance, I always remember the line “Brooklyn’s got a winning team” most likely because my father was a Brooklyn Dodgers fan and I like baseball. I recognize some of the names and events from the rest of the song, however, since I hadn’t studied them or dug a bit deeper, I am unable to learn the lessons from history. Even the Brooklyn Dodgers line. Why did they have a winning team? No clue. So I looked it up. Still no clue, but I’m closer to understanding how successful franchises are built.

It’s this nuanced curiosity that Dalio is speaking about that makes for successfully navigating the future while looking into the past. And this song, and history, is littered with stories that are there to be studied. And it’s ok that I didn’t know exactly who George Santayana was (lyric; Santayana goodbye) but now I do. He was a Spanish and American philosopher, essayist, poet, and novelist. Who knew? Now I’ll inquire, why was he important. Get the gist.

The Changing World Order

It’s all about changing orders and how the fires that we see today have always been burning. From finance to governments and what we see playing out in societies today all around the world. Remember, we didn’t light it, but we tried to fight it.

Here’s what happens according to Dalio:

1. Countries don’t have enough money to pay their debts, even after lowering their interest rates to zero. So, their central banks begin printing lots of money to do so.

2. Big internal conflicts emerge due to growing gaps in wealth and values. This shows up in political populism and polarization between the left, who want to redistributed wealth, and the right who want do defend those holding the wealth.

3. Increasing external conflict between a rising great power and a leading great power. (Happening now with China and the United States)

He’s good right!?

I get that this a bit captain obvious to you dear reader. Adam, we knew this. Study history to understand what’s happening today.

Fair point. Well, because I’m human and I assume you are too (Sydney can you hear me?) I find myself forgetting this very important lesson from time to time, so I felt it warranted a post to remind myself and you.

Let’s see how Ray phrases it and how this can be helpful for you as an investor and beyond.

What happens during changing world orders?

1. A rising power, due to certain positive market traits, increases its value on the world stage and a financial bubble begins to build.

2. This power now becomes the reserve currency of the world (at that time)

3. A wealth gap emerges between the haves and the have nots.

4. The bubble bursts and and there’s an economic downturn.

5. The central bank steps in to save the day by printing more money and making credit available.

6. Tensions increase internally leading to a revolution (peacefully or via civil war)

Whew, all that’s happening domestically.

Now, what’s happening externally.

1. While the existing power struggles internally, its power diminishes externally relative to other powers on the rise.

2. When a new rising power becomes strong enough to compete with a dominant power having domestic breakdowns (I totally left the toilet seat down!) external conflicts, most typically wars, emerge.

3. Out of these internal and external conflicts new winners and losers emerge.

4. The winners get together to create the new world order.

5. And then, the cycle begins again.

From the Roman Empire to today, the rise and fall of these societies share similarities in their cause and effect relationships.

Think of this at the individual level. We all have certain indicators that will have a cause and effect of our longevity, happiness, et al. Ray looks at age of individuals, say 80 years old. There are some that live shorter and some that live longer. The better way to look at this are health indicators of the individual. What do they do or don’t do that can predict their lifespan, happiness, et al. We get this.

And empires have the same types of indicators or vital signs too.

As he watched the indicators of power change, he was able to see what stage a country is in, which helped to anticipate what was likely to come next.

So, my mother and Ray Dalio are both right. We don’t need to know everything about history to understand what’s likely to come next. We just have to start by pulling out our favorite lyrics (history) and study them, rinse and repeat.

Whether nations, school boards, families, ourselves, on and on. There’s a song playing, relatively speaking, in the background with lyrics that you kind of know. Our challenge is to learn the lyrics more intimately in all areas of our lives.

What’s the song of your life today? Your work? Your school? Your nation? Your world?

How does it rhyme with the songs yesterday?

There’s a lesson in every lyric. And, I’m so excited that I finally get to write this in a piece and have it make complete sense thematically!

“History never repeats itself, but it often does rhyme” - Mark Twain

Adam’s Substack is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.