by Frank Muller
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Linked above is a video that Ray Dalio has produced that relates in an accessible form some great principals of Global Macro and Thematic investing. There is little dispute that Mr. Dalio stands, perhaps preeminently, amongst the most legendary investors of all time and it is a great credit to Mr. Dalio who charitably shares many of his insights to the world.
This video is approximately 45 minutes long and I recommend watching and rewatching it in order to familiarize for ourselves but more importantly to share with our friends and families. It should also be noted that though Mr. Dalio has created this video and his referenced book this view of the cycles of empires and cultures has been discussed, researched, debated for millennia so Mr. Dalio is simply updating this long tradition of seeing life both micro and from a macro perspective as a one of seasons.
In this missive I will leave aside the pointlessness of trying to predict the “timing” as not even Mr. Dalio tries that nonsense. Nor will I or Mr. Dalio engage in speculations of amplitude and magnitude of the potential outcomes. Instead, I would like to draw your attention to the eight factors Mr. Dalio in my view correctly identifies as indicators of the rise or fall of an empire.
Dalio measures the wealth and power of an empire through 8 factors of roughly equal average weighting: “1) education, 2) competitiveness, 3) technology, 4) economic output, 5) share of world trade, 6) military strength, 7) financial center strength, and 8) reserve currency.”
I would like to focus on the first three factors and suggest how we can as individuals and families begin the process of reversing their decline. Of these eight total factors, I will implicitly argue that it is the first three that are determinative and the other five simply consequential or reflective of the primary factors decline.
Let us start with education. In other missives I have posited that the great progressive reformation of the Western Civilization education model has been the causal factor behind our decay. Simply said, we now virtually without exception teach our children what to think, not how to think. Let us not confuse ourselves for one second to think that this “progressive” reform is a left only cause. No, it is astonishing to see the right embracing standardized testing which is an acute form of testing what you know, not how well you can think.
Though this process starting many decades ago it should be clear to all that the capstone of this process was under President George W. Bush’s administration who took his education reforms from the State of Texas and nationalized the approach. The consequences of teachers teaching to the test have been devastating upon our children and now economic incentives are given to teachers to improve those test scores thus having the corresponding incentive of placing what to think over how to think as the highest educational goal.
When a population loses the ability to think, it will lose its’ ability to do anything well for the long haul. Further, when one loses (or never even gains) critical thinking skills then one cannot rightly order a life. Thus, what suffers is more than just cognitive and future technological abilities but with it the natural law reasoning of Faith, Morals, Dogma, Obedience, Law, Justice, and the entire plethora of virtues.
Further, when we supplant knowledge for information then we become subject to manipulation and propaganda which will destroy a free press and political discourse. As the foundation of a society (which are these virtues and reason) are undermined what must fill the vacuum?
This is where we turn to materialism and capitalism. We as spiritual creatures need to have spiritual nourishment. When the moral law is undermined, we must find new gods. Who are those new gods? Money, possessions, luxuries, entertainment, idleness, experiences …. Thus, a culture is undermined by its’ loss of education, resulting in a loss of morality amongst both its’ capitalist class and its’ worker class and worse yet the foundational building block of a society is the family, and its’ cohesiveness is destroyed.
This leads to the second factor which is the decline of competitiveness. Workers so undermined begin to prefer working less and less productively in favor of comfort. Resentment grows as the worker class demands more money and time off and the capitalist class demands lower wages and higher productivity. This leads to labor productivity declines and the capitalist class pursues profits at all costs over the balancing of long-term interests. Both sins stem from the loss of virtue and reason equally applied to capitalist and worker.
This leads to the long-term decline in technological advances because those advances over the long haul are correlated once again to the increase or decrease of people who are able to think independently and critically and then have the pool of skilled workers who can affect those advancements.
What then do we do? First off, we must prioritize knowledge over information and each of us can begin that process today. When difficult questions arise that demand careful examination so often the response of people is to avoid the question because it may cause the possibility of admitting that we may be wrong and that disrupts our old order that we have relied upon. One can stop this today by embracing the tough questions and working to understand the causal factors and long-term picture (as Mr. Dalio has done) even if the result is at some point, we must accept the learned Truth.
For our children, seriously consider moving our children to places where they are taught how to think. This is particularly acute for our disadvantaged communities where the best way out of that is to invest in educating our children to think which is the highest and best commodity on the planet. If that public school is teaching to the test and not teaching to think, do whatever you can and get them out of that school as soon as possible and into a place that help build them up. For my mind, send our children to great Catholic schools or charter schools though certainly there are other good choices.
Virtues. We must examine our lives and return to learning and practicing the virtues. Make no mistake, as one seeks to become virtuous and to proclaim moral truth, we will not be met with acceptance but in fact resistance (either passive or active). One should wear that as a badge of honor. Learn and speak boldly but always in the end remain cheerful and kind and recognizing that we are all on this same journey.
Turn off the Propaganda. Listen, view and read only that which enlightens and is good and seeks Truth. Everything else is a poison and a trap set by another to capture our attention and our money and our belief. Treat our minds and hearts as cities built on a hill and strengthen them both through Reason and Faith guided by Virtues. All of those things come from Love. And love, well love comes from the Creator and that is why all things are well ordered if ordered to the Creator and the created.
May Peace be with us all.