The times ahead will be radically different from those we’ve experienced in our lifetimes, though similar to many times in history. How do I know that? Because they always have been. Over the last 50 or so years, in order to handle my responsibilities well, I have needed to understand the most important factors that go into making countries and their markets succeed and fail. I learned that to anticipate and handle situations that I had never faced before I needed to study as many analogous historical cases as possible to understand the mechanics of how they transpired. That gave me principles for dealing with them well.

A few years ago, I observed the emergence of a number of big developments that hadn’t happened before in my lifetime but had occurred numerous times in history. Most importantly, I was seeing the confluence of huge debts and zero or near-zero interest rates that led to massive printing of money in the world’s three major reserve currencies; big political and social conflicts within countries, especially the US, due to the largest wealth, political, and values gaps in roughly a century; and the rising of a new world power (China) to challenge the existing world power (the US) and the existing world order. The most recent analogous time was the period from 1930 to 1945. This was very concerning to me. I knew that I couldn’t really understand what was happening and deal with what would be coming at me unless I studied past analogous periods, which led to this study of the rises and declines of empires, their reserve currencies, and their markets. In other words, to develop an understanding of what is happening now and might happen over the next few years, I needed to study the mechanics be- hind similar cases in history—e.g., the 1930–45 period, the rise and fall of the Dutch and British empires, the rise and fall of Chinese dynasties, and others. [1] I was in the midst of doing those studies when the COVID-19 pandemic struck, which was another one of those big events that never happened in my lifetime but had happened many times before. Past pandemics became a part of this study and showed me that surprising acts of nature—e.g., diseases, famines, and floods— need to be considered as possibilities because those surprising big acts of nature that rarely come along were by any measure even more impactful than the biggest depressions and wars. As I studied history, I saw that it typically transpires via relatively well-defined life cycles, like those of organisms, that evolve as each generation transitions to the next. In fact, the history and the future of humanity can be seen as just the aggregate of all the individual life stories evolving through time. I saw these stories flow together as one all-encompassing story from the beginning of recorded history up to this moment, with the same things happening over and over again for basically the same reasons, while still evolving. By seeing many interlinking cases evolve together, I could see the patterns and cause/effect relationships that govern them and could imagine the future based on what I learned. These events happened many times throughout history and were parts of a cycle of rises and de- clines of empires and most aspects of empires—e.g., of their education levels, their levels of productivity, their levels of trade with other countries, their militaries, their currencies and other markets, etc. Each of these aspects or powers transpired in cycles, and they were all interrelated. For example, nations’ levels of education affected their levels of productivity, which affected their levels of trade with other countries, which affected the levels of military strength required to protect trade routes, which together affected their currencies and other markets, which affected many other things. Their movements together made up the economic and political cycles that occurred over many years—e.g., a very successful empire or dynasty could have its cycle last 200 or 300 years. ### All the empires and dynasties I studied rose and declined in a classic Big Cycle that has clear markers that allow us to see where we are in it. This Big Cycle produces swings between 1) peaceful and prosperous periods of great creativity and productivity that raise living standards a lot and 2) depression, revolution, and war periods when there is a lot of fighting over wealth and power and a lot of destruction of wealth, life, and other things we cherish. I saw that the peaceful/creative periods lasted much longer than the depression/ revolution/war periods, typically by a ratio of about 5:1, so one could say that the depression/revolution/war periods were transition periods between the normally peaceful/creative periods. While the peaceful/creative periods are certainly more enjoyable for most people, all these realities have their purposes for advancing evolution, so in the broader sense they are neither good nor bad. The depression/revolution/war periods produce a lot of destruction, but like cleansing storms, they also get rid of weaknesses and excesses (such as too much debt) and produce a new beginning in the form of a return to fundamentals on a sounder footing (albeit painfully). After the conflict is resolved, it is clear who has what power, and because most people desperately want peace, there is a resolution that produces new monetary, economic, and political systems—together, a new world order—and fosters the next peaceful/creative period. Within this Big Cycle are other cycles. For example, there are long- term debt cycles that last about 100 years and short-term debt cycles that last about eight years. This short-term cycle also has within it longer, prosperous expansion periods that are interrupted by shorter recession periods, and within these cycles are shorter cycles, and so on. Before I get your head spinning with all this cycle stuff, the main thing I want to convey is that when the cycles align, the tectonic plates of history shift, and the lives of all people change in big ways. These shifts will sometimes be terrible and sometimes terrific. They certainly will happen in the future, and most people will fail to anticipate them. In other words, the swinging of conditions from one extreme to another in a cycle is the norm, not the exception. It was a very rare country in a very rare century that didn’t have at least one boom/harmonious/prosperous period and one depression/ civil war/revolution period, so we should expect both. Yet, most people throughout history have thought (and still think today) that the future will look like a slightly modified version of the recent past. That is because the really big boom periods and the really big bust periods, like many things, come along about once in a lifetime and so they are surprising unless one has studied the patterns of history over many generations. Because the swings between great and terrible times tend to be far apart the future we encounter is likely to be very different from what most people expect. For example, my dad and most of his peers who went through the Great Depression and World War II never imagined the post-war economic boom because it was more different from than similar to what they had experienced. I understand why, given those experiences, they wouldn’t think of borrowing and putting their hard-earned savings into the stock market, so it’s understandable that they missed out on profiting from the boom. Similarly, I understand why, decades later, those who only experienced debt-financed booms and never experienced depression and war would borrow a lot in order to speculate and would consider depression and war implausible. The same is true with money: money used to be “hard” (i.e., linked to gold) after World War II until governments made money “soft” (i.e., fiat) to accommodate borrowing and prevent entities from going broke in the 1970s. As a result, most people at the moment of my writing this book believe that they should borrow more, even though borrowing and debt-financed booms have historically led to depressions and internal and external conflicts. Understanding history in this way also raises questions whose answers provide us with valuable clues on what the future will be like. For example, throughout my life, the dollar has been the world’s re- serve currency, monetary policy has been an effective tool for stimulating economies, and democracy and capitalism have been widely regarded as the superior political and economic systems. Anyone who studies history can see that no system of government, no economic system, no currency, and no empire lasts forever, yet almost everyone is surprised and ruined when they fail. Naturally I asked myself how would I and the people I care about know when we are entering one of these depression/revolution/war periods and how would we know how to navigate them well. Because my professional responsibility is to preserve wealth regardless of the environment, I needed to develop an understanding and strategy that would have worked throughout history, including through these sorts of devastating times. The purpose of this book is to pass along what I learned that has helped me and that I believe might help you. I present it for your consideration. ### HOW I LEARNED TO ANTICIPATE THE FUTURE BY STUDYING THE PAST While it might seem odd that an investment manager who is required to make investment decisions on short time frames would pay so much attention to long-term history, through my experiences I have learned that I need this perspective. My approach isn’t an academic one created for scholarly purposes; it is a very practical one that I follow in order to do my job well. The game I play requires me to understand what is likely to happen to economies better than the competition does, so I have spent roughly 50 years closely observing most major economies and their markets—as well as their political conditions, since those affect both—trying to understand what is happening well enough to bet on it. From my years of wrestling with the markets and trying to come up with principles for doing it well, I’ve learned that one’s ability to anticipate and deal well with the future depends on one’s understanding of the cause/effect relationships that make things change, and one’s ability to understand these cause/effect relationships comes from studying how they have changed in the past****. I arrived at this approach after the painful learning that the big- gest mistakes in my career came from missing big market moves that hadn’t happened in my lifetime but had happened many times before. The first of these big surprises for me came in 1971 when I was 22 years old and clerking on the floor of the New York Stock Exchange as a summer job. I loved it because it was a fast-pasted game of making and losing money played on a trading floor with people who liked to have a blast with each other—so much so that traders used to have water pistol fights right on the trading floor. I was engrossed in this game of watching the big developments in the world and betting on how they would drive the markets. Sometimes it could be dramatic. On a Sunday night—August 15, 1971—President Richard Nixon announced that the US would renege on its promise to allow paper dollars to be turned in for gold. As I listened to Nixon speak, I realized that the US government had defaulted on a promise and that money as we knew it had ceased to exist. That couldn’t be good, I thought. So on Monday morning I walked onto the floor of the ex- change expecting pandemonium as stocks took a dive. There was pandemonium all right, but not the sort I expected. Instead of falling, the stock market jumped about 4 percent as the dollar plummeted. I was shocked. That’s because I hadn’t experienced a currency devaluation before. In the days that followed, I dug into history and saw that there were many cases of currency devaluations that had had similar effects on stock markets. By studying further, I figured out why, and I learned something valuable that would help me many times in my future. It took a few more of those painful surprises to beat the realization into my head that I needed to understand all the big economic and market moves that had happened in the last 100-plus years and in all major countries. In other words, if some big and important event had happened in the past (like the Great Depression), I couldn’t say for sure that it wouldn’t happen to me, so I had to figure out how it worked and be pre- pared to deal with it. Through my research I saw that there were many cases of the same types of things happening (e.g., depressions) and that by studying them just like a doctor studies many cases of a particular type of disease, I could gain a deeper understanding of how they work. I studied these qualitatively and quantitatively through my experiences, by speaking with preeminent experts, reading great books, and digging into statistics and archives with my great research team. From that learning came a visualization of an archetypical sequence of how rises and declines in wealth and power typically happen. The archetype helps me see the cause/effect relationships that drive how these cases typically progress. With that archetypical template specified, I can study deviations from it to try to explain them. Then I put these mental models into algorithms both to monitor conditions relative to my archetypes and to help me make decisions based on them. This process helps me refine my understanding of the cause/ effect relationships to the point where I can create decision-making rules—i.e., principles for dealing with my realities—in the form of “if/then” statements—i.e., if X happens, then make Y bet. Then I watch actual events transpire relative to that template and what we are expecting. I do these things in a very systematic way with my partners at Bridgewater Associates. If events are on track, we continue to bet on what typically comes next; if events start to deviate from our template, we try to understand why and course correct. This process has helped me both understand the big cause/effect sequences that typically drive their progressions and gain a lot of humility. I do this continuously and will continue to do it until I die, so what you are reading is a work in progress. [2] ### THIS APPROACH AFFECTS HOW I SEE EVERYTHING Seeing events in this way helped shift my perspective from being caught in the blizzard of things coming at me to stepping above them to see their patterns through time.