Changing World Order

It is fascinating to see how the world is changing profoundly. We are at an inflection point in the world history where a new empire rises at the expense of an existing empire's decline. The question is not one of if but only when.

A few interesting observations from this picture (taken from Ray Dalio's latest book).

- Roman and Greeks while great empires of their times never resurfaced as great powers. The same can be assumed about most great/super powers -- very few of them will become the superpower again even in several centuries.

- The US's power is declining and will continue to do so. The question is again not if but when. How US reacts to this about-to-change world order will determine i) how smooth the decline is (it doesn't have to be ugly), ii) how long it can sustain the super power (or at least #2 power) status.

- China is the only country/nation that has been a super power for more than 1 time (in fact many times). 19th and 20th centuries have been an exception -- also known as a century(ies) of humiliation in China. But there is no doubt China will be the superpower in the coming years or decades (most likely within a decade).

- I don't think US declining and China rising is a bad thing for the US or the world. I personally also think the US should not feel insecure which it does immensely -- it just cannot fathom China (or any other country for that matter) rising above its status. I am sure other powers that "changed hands" also had a similar reaction. A lot of it has to do with country politics and populism.

- I'd like to think I am as neutral as possible when writing this post. Having spent most of my professional life in the US, I am acutely appreciative of several things that perhaps only US could give us -- including freedom of speech, and opportunity to do the best. The same cannot be said of China at least for the foreseeable future. That said, the US has been a super-bully. In the name of democracy it has done immense damage in the world (while doing many goods as well). It has greatly abused its superpower status. Once again, it could have been worse if there was another superpower, we'd never know. Or wouldn't we? I think China will be less of a world-level super bully. It will surely be a bully in its neighborhood and go to all extremes to get what it claims to be its -- for example, Taiwan. When it takes over Taiwan (and its claims on South China Sea), it will be quite telling and reflective of "change of guards".

- Continuing on the above, no matter what you say. China's system largely works. I don't think any other country has the right to continually bully China on its "lack of democracy". China's rise is nothing short of a miracle, and we have not seen even one quarter of it. In our lifetimes, it is probable that it will double (or even quadruple) its GDP (compared to US's). They make plans like a business does and ruthlessly execute it. In fact if anything, democracies around the world (and especially in emerging economies) are struggling with a way forward. Most of their energies are spent on appeasing their voter base at the expense of good governance and execution. China on the other hand is racing ahead with full cylinders.

- So far the highest peak that any empire has achieved has been by US. There is quite a remarkable difference from the peaks of prior superpowers (Netherlands and UK). That's quite an accomplishment. China's will be even higher.

- Reserve currency status is a lagging indicator. At the moment nothing (including Chinese Yuan) comes even barely close to the USD's status as reserve currency. However, this is a "false positive" precisely because reserve currency is the most lagging important indicator of a super power's decline or its rise. Just because Yuan << USD does not mean that China's rise to a superpower status (and US's decline to at best # 2) is similarly far ahead -- it's not. That is, China is going to surpass US as a superpower sooner than most people expect and Yuan (or its CBDC) will eventually become the reserve currency of the world though that will take longer.

- In the meantime, expect turbulence in the years ahead regardless of where you are. I hope that the change of guards is a smooth one and does not entail WW III. What's happening between Russia and Ukraine is a sign of things to come (but I surely hope not).

- The US's rise has a lot to do with its ability and willingness to allow people from anywhere to assimilate well in its system. Most of the Nobel Prize winners, successful entrepreneurs, CEO's of Fortune 500, etc. have been first generation immigrants! What dumbfounds me is that China has been able to achieve so much with their native people (and they have a lot of them so perhaps that partly explains the lack of need or desire to accept immigrants), though for sure it has copied and learnt from many Western technologies and companies (again very typical of a new rising power to copy the superpower and build on it). Will China become more welcoming to immigrants? Don't bet on it.

- It is interesting to to see "Middle East Caliphates" quite high up there (though below China). Personally speaking, I am dad to see though that neither Ottoman Empire(?) nor India made it really big... Ottoman's peak is quite small, actually.

- Mongol Empire's rise and fall is perhaps the steepest. After their decline, they are nowhere to be found (compare its graph with UK's for example -- despite losing the superpower status, it has remained a great power, though it is not clear how long they will stay here or how fast they will decline in the next few decades). Generally speaking any superpower will not always be superpower -- that's a given. The sooner the US digests it the better. What's more important than trying uselessly to retain your superpower status is perhaps to decline smoothly and not decline too much, and stay relevant -- like UK does today to a decent extent.

- From a personal investment perspective, USD is going to be strong (compared to other currencies) for the foreseeable future. That said, its value is declining by day due to heedless money printing (another sign of a super power's decline) and quantitative easing. I do not think it (devaluation) will stop anytime soon. It is as good time as any to invest in commodities, hard assets (like real estate), gold, and even perhaps crypto (though betting which crypto will be the winner can be hard and volatility is huge). Also a great time to borrow as much as you can. The real interest rates (if you account for devaluation) are negative and will remain so for a long time to come.

- From career perspective, I'd highly advise students and people in early phase of their careers that they i) learn Mandarin, ii) go to China for an internship or a job, and ideally live there for a few years! This will put you ahead in your career in ways you can't imagine just yet (can you imagine doing well in your career if you didn't know English for example?).