The Big Cycle: Five Forces That Rise and Fall Empires
Read where a nation sits in its 75-year cycle by tracking five recurring forces
- Difficulty
- Advanced
- Time to result
- ~ongoing to results
- Steps
- 6
- Confidence
- 85%
After observing three things he had never seen in his lifetime, Dalio studied 500 years of history and found a recurring big cycle lasting about 75 years. Five forces drive it: enormous debt creation and the money-printing used to service it; internal conflict fuelled by the largest wealth and values gaps in generations and the rise of populism; the rise of a challenger great power producing international conflict; acts of nature such as droughts, floods and pandemics that topple empires; and technological learning that raises living standards. Because each stage is the logical consequence of the one before, one can study analogous prior periods, understand the cause-effect relationships, and see roughly what comes next. The point is comprehension and preparation, not fatalism.
Origin
Distilled by Ray Dalio from studying the last 500 years of empire rise and decline, published in his book and animated video 'The Changing World Order'.
Core principles
- 01History rhymes because the same cause-effect relationships repeat under similar conditions
- 02The big cycle runs roughly 75 years, give or take about 25
- 03Each stage is the logical consequence of the stage before it
- 04Studying prior analogous periods reveals what typically comes next
- 05Going according to script is not the same as being destined
How to run it
- 1
Notice what is unprecedented in your lifetime
When events surprise you because you have never seen them, treat that as a signal to study history rather than dismiss them as one-offs.
Pro tip Studying the Great Depression let Dalio anticipate the 2008 financial crisis.
- 2
Track debt and money-printing
Watch the accumulation of debt and the printing of money to pay for it, and its effects on inflation and growth.
Watch out Excessive debt eventually forces a choice between hard-money default and inflationary money-printing.
- 3
Track internal conflict
Measure the wealth and values gaps and the rise of populism on both the left and the right, which make compromise and problem-solving harder.
Pro tip Populists fight to win at all costs, so their rise signals reduced ability to compromise.
- 4
Track the great-power challenge
Watch a rising power challenge the incumbent empire, which historically produces great-power conflict, as with China and the United States today.
Watch out The other side losing does not mean your side wins; wars make everyone poorer.
- 5
Add nature and technology
Layer in acts of nature (droughts, floods, pandemics) that have historically toppled empires, and technological learning that raises living standards over time.
- 6
Locate yourself in the cycle
Combine the five forces to work out which stage you are in, since each stage logically follows the last, then prepare accordingly.
Pro tip Knowing the stage tells you what typically comes next, which lets you act early.
Watch out Going according to script is not destiny; the path can still be knocked off track.
In the wild
Dalio identified three forces happening simultaneously that he had not seen in his lifetime but that all occurred during 1930-45: enormous debt creation with money-printing, the largest internal wealth and values gaps with rising populism, and a rising great power challenging the incumbent. He notes four democracies (Germany, Italy, Spain, Japan) chose to become dictatorships in that period in order to fight. Mapping the present against that analogue let him anticipate a war-like environment and the economic strains that followed.
→ His predictions from two years earlier proved, in his words, 'uncomfortably accurate' as events transpired according to script.
Common mistakes
Assuming 'this time is different'
Because a crisis lies outside your own lifetime, you treat it as unique and miss the recurring cause-effect machine that history reveals.
Reading cycles as destiny
The stages are logical consequences, not fixed fate; treating the script as inevitable removes the agency to knock events off track.
Framing rivalry as zero-sum
Assuming a rival's decline is your gain ignores that wars and breakdowns make everyone poorer, and distracts from fixing your own problems.
Is it for you?
Best for
Investors, leaders and citizens trying to anticipate large political-economic shifts over decades.
Not ideal for
Short-term traders needing precise timing, since the cycle spans generations.
From the transcript
“there are three big things that I observed happening that didn't happen in our lifetimes but happened during the 1930 to 45 period”
“these big Cycles take about 75 years and give or take about 50”
“each stage is then The Logical consequence of the stage that preceded it”
From the episode
How To Prepare For The Changing World Order - Ray Dalio - #620
Ray Dalio