TMT - Scene #11

Hello everyone! Welcome to this week's update: Scene #11

Stray

As I surfed the internet mindlessly once again, I came across the story of Grigori Perelman - a Russian mathematician who turned down the field's medal and a million dollars. When questioned about his actions, he said “Emptiness is everywhere and can be calculated, which gives us a great opportunity. I know how to control the universe. So tell me, why should I run for a million?”

This got me thinking and I wondered what happens at the end of pursuit. In life, as you grow older, what is that you are doing with your life if you aren’t in pursuit of something? If you make all the money you ever wanted to make or finish doing all that you had on your wishlist, what’s next? Goals are important but they should be seen as objectives in themselves and not as a means to an end. Knowledge is one of the few things that you can endlessly pursue. Here’s a little quote that I wrote: “Life is never easy, just empty”. The point at which life becomes easy is usually when you are no longer in pursuit of something. Many great authors and speakers talk about “flow” states which lie somewhere between a person’s ability to do something well and simultaneously be challenged to the extent that continuous improvement is required.?

When you are faced with the choice between ease and adversity, you are almost always guaranteed to see better results and improvement when choosing the latter. When life gets tough, we have something to look forward to, when it’s easy, there isn’t much to look forward to.

When you stop facing adversity, all your experiences hit a ceiling and start to lie on the same plane. The gap between your highs and lows comes to a diminishing point, making everything come to a standstill. A large amount of money and material will be required to make your experiences feel marginally better, proving to be unsustainable. Seek knowledge and you will find sustenance.?

Cardinal

This week’s edition of TMT is going to feature a video called “Principles for Dealing with the Changing World Order by Ray Dalio”. The video was released on YouTube about two years ago but I believe that its relevance is evergreen. You can think of this video as an abridged version of the actual book written by Ray Dalio with the same title.

Before we discuss the topic, Let’s get a little insight into who exactly Ray Dalio is. Ray is the founder of the largest hedge fund in the world - Bridgewater Associates. I assume that most of you might have heard the name - Bridgewater, if not for Ray. It is safe to say that Ray is an expert at investing and has some valuable knowledge to impart to us.

As always, I highly recommend reading the full book because reading never goes out of fashion. Ray Dalio has seen great success as an investor and has spent the majority of his life studying and understanding the nature of money, markets, and so on. In this next section, let’s look at what those years of experience in dealing with the markets and the world's economies have taught him.

If you have ever heard the phrase “History repeats itself”, you probably know and admit that there is some truth to that. Most phenomena in life occur in cycles - the calendar year, planets revolving in the solar system, technology, oxygen, and how water behaves in nature too. Just like all of these examples, currency/money also follows a cycle of its own. The only difference here is that like technology, the money cycle is dependent on how people interact with it.?

Time and again, countries all over have spent/printed more money than they have. This means that the money being printed has at some point exceeded the amount of gold reserves available in that country at the time to be exchanged for that money. What Ray has observed is that every time central banks start to print more and more money, the prices of commodities, stocks, and gold all start to go up. One of the main reasons this happens is because the market wants to hedge its risks of the currency losing its value. During times like these, only gold, commodities, and stocks rise in value. That brings us to the first principle outlined in the video - “When central banks print a lot of money, buy stocks, gold, and commodities”.?

Like many times in the past - the 2008 market crash, the financial effects of the Coronavirus, and other such market downturns can all be associated with the above phenomenon. Ray's next principle, which supports the previous one, is “To understand what is coming at you, you need to understand what happened before you.” He then analyzes how three things could be seen repeating themselves in the past during these financial cycles.?

Countries didn’t have enough money to repay their debts even after interest rates were lowered to 0. This led to increased printing of paper currency. (money printing)

Big internal conflicts arose due to the increased gap in wealth distribution further dividing political views between the left and the right. (wealth gap)

Increasing external conflicts between the rising great power and the leading great power. (Rising rival power)

Ray then goes on to explain how these 3 themes have been consistent in the markets which eventually leads to changing world orders. An order is another word for a system that is followed by a country or a group of countries in allyship. A good example of an order is a country’s constitution. With the rise in globalization and shift in economies, the USA came to be the leading world power. Further, the US dollar was established as the world reserve currency.?

Every time history has seen this rise in leading world power, it has been in tandem with changing world orders. In addition, this phenomenon of changing world orders has occurred in cycles of about 250 years. The video goes on to explain in depth what contributes to building a world power.?

As we all know, no leading world power goes down without a fight. I urge all of you to watch this video because it wonderfully explains what the future of the current leading world power might be. The intriguing part about all of this is that these cycles can be tracked to the Roman Empire. What isn’t intriguing is that there is a very clear and logical explanation for these cycles.? Being able to analyze these patterns in changing world orders might just give you a headstart and help identify opportunities to be prepared for the future.?

Lexicon

Zenith - The best point of the situation.

Peripatetic - Another word for nomad.

Epeolatry - The admiration of words.

Eutony - The pleasantness of how a particular word sounds.

Rhythm

Daft Punk - Giorgio by Moroder (Official Audio)