Ray Dalio: Principles For Dealing With The Changing World Order

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Principles For Dealing With The Changing World Order By Ray Dalio, #1 New York Times Bestselling Author and Founder and Builder of the World’s Largest Hedge Fund, Bridgewater Associates

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The Changing World Order is a Practical Guide for Understanding Today and Anticipating the Future Based on the Patterns and Cause-Effect Relationships of the Past 500 Years

“Ray Dalio has a special talent for identifying the key questions of our time.

His sweeping new book is both a serious contribution and an urgent warning.” Henry Kissinger, Former United States Secretary of State

“History is too important to leave to historians. Only Ray Dalio would have brilliant audacity to attempt such a synthesis of the financial economic and political history of the world. Agree or disagree Dalio’s book is essential reading to understand our times.” – Larry Summers, Former U.S. Treasury Secretary and Former president of Harvard University.

“When Ray Dalio talks, I listen. His new book is remarkable in its scope – shedding new light on the biggest reasons nations win in the global economic and political arenas and applying it to China and the US today. After reading this book, you probably won’t see the world the same again.” – Hank Paulson, Former U.S. Treasury Secretary

“An audacious, practical guide to the rise and fall of empires over the last five hundred years of history—with important lessons for the U.S. and China today.” Graham Allison, Renowned American Political Scientist and Professor of Government at Harvard University’s Kennedy School

“Ray does an astounding job of giving us an inspiring and thought-provoking experience by looking at the rises and declines of empires, showing how economics, culture, military prowess, innovation, inequality and other elements interact. He leaves us with an improved perspective for thinking about very vexing issues such as the state of America versus China.” Jamie Dimon, Chairman and CEO of JPMorgan Chase

Ray Dalio's Principles

NEW YORK, NY – October 27th, 2021 – A few years ago, legendary investor Ray Dalio observed a confluence of three forces that have never happened in his lifetime but have happened many times in history before: 1) zero or near-zero interest rates that led to massive debt creation and the printing of money in the world’s major reserve currencies; 2) big political and social conflicts within countries due to the largest wealth, political, and values gaps; and 3) the rise of a great power to challenge the existing world power and subsequently, the existing world order. As a global macro investor for more than 50 years, Dalio has learned that to understand the big cause-effect relationships of economic events he needs to study many cases in history. As such, he undertook a study of the rise and fall of major empires and their markets over the last 500 years. This book is that study.

Principles for Dealing with the Changing World Order, publishing on November 30th, 2021, clearly presents Dalio’s “Big Cycle” model for how the world works. The model explains what has driven the successes and failures of countries throughout history and contains imperative lessons for today’s economic, political and policy environment. To show how the model works, he takes readers through the major empires of the last 500 years—including the Dutch, British, American and now the rising Chinese. He explains in detail the framework of a “Big Cycle” that has driven the successes and failures of countries throughout history and contains imperative lessons that apply to today’s economic, political and policy environment.

“I knew that I wouldn’t be able to understand and navigate what’s happening today—much less what may come—without having a deep understanding of the cause-effect relationships that are embedded in pattens of history,” said Dalio. “My hope is that this book will be of some use to others seeking to understand these cause-effect patterns and what they mean for the decisions we make individually and collectively today.”

Principles for Dealing with the Changing World Order is unlike any other work of history because it is written by an extremely practical investor who has made a 50+ year career by betting on how events will unfold. Dalio’s unique global perspective is founded on unmatched experience and decades of interactions with the leading markets and policy makers in the world. While in the past he would have kept these insights to himself, he is now at stage in his life where his main goal is to help others be successful by passing along his learnings, which he is doing once again in his latest book.

Dalio and his team turn their understandings into models and algorithms that help them understand and deal with the dynamic combination of economic and political of forces that shape our world. Their insights and models are shared throughout the book, culminating in a one-of-a-kind “Overall Empire Score” for eleven of the world’s leading nations. This score measures the 18 key factors that lead countries to rise and fall over time. It is a “health index” that people and policy makers can use as a guide to what is happening and how to make their countries healthier. Dalio will update and publish these scores annually.

Dalio is the founder, Co-Chief Investment Officer and Co-Chairman of Bridgewater Associates, which he founded in 1975 out of his two-bedroom apartment in New York and has since grown into the largest hedge fund in the world and one of most important private companies in the U.S. according to Fortune. As explained in his New York Times #1 Bestseller Principles: Life & Work, one of Dalio’s core beliefs is that most everything happens in cycles that are repeated throughout history, and so by studying patterns one can understand the cause-effect relationships behind events and develop principles for dealing with them well. Dalio believes that this unique way of studying and understanding the world has been the main factor behind his success and is an approach that anyone can adopt.

The book will go on-sale on November 30th, 2021. Interested readers will have the choice between a Kindle version, available through Amazon, for $16.99, and a hardcover print version for $29.99.

For more information on book and how to preorder it, please visit: https://www.principles.com/the-changing-world-order/.

About the Author:

Ray Dalio is the founder, Co-Chief Investment Officer and Co-Chairman of Bridgewater Associates, a global asset manager and leader in institutional portfolio management as well as the largest hedge fund in the world. Under Dalio’s guidance, Bridgewater Associates has developed a distinctive culture, an idea-meritocracy that produces meaningful work and meaningful relationships through radical truth and radical transparency that is the foundation of the firm’s success. Since starting Bridgewater Associates out of his two-bedroom apartment in New York in 1975, Dalio has grown the firm into the largest hedge fund in the world and one of the most important private companies in the U.S. according to Fortune. It has made more money for its clients than any other hedge fund since its inception, according to LCH Investments. For his innovative work as well as being a valued advisor to many global policy makers, Dalio has also been called the “Steve Jobs of Investing” by ai-CIO Magazine and Wired Magazine, and has been named one of TIME Magazine’s 100 Most Influential People. Over the past three decades, Dalio wrote down his decision-making criteria and has recently passed along his principles and tools through his book, Principles: Life & Work, a New York Times #1 Bestseller and Amazon #1 Business Book of 2017.

Key Quotes from Principles for Dealing with the Changing World Order

“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.”

“No system of government, no economic system, no currency, and no empire lasts forever, yet almost everyone is surprised and ruined when they fail.”

“All the empires and dynasties I studied rose and declined win 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.”

“Around the upward trend of productivity gains that produce rising wealth and better living standards, there are cycles that produce prosperous periods of building in which the country is fundamentally strong because there are relatively low levels of indebtedness, relatively small wealth gaps, values, and political gaps, people working effectively together to produce prosperity, good education and infrastructure, strong and capable leadership, and a peaceful world order that is guided by one or more dominant world powers. These are the prosperous and enjoyable periods. When they are taken to excess, which they always are, the excesses lead to depressing periods of destruction and restructuring in which the country’s fundamental weaknesses of high levels of indebtedness, large wealth gaps, values, and political gaps, different factions of people unable to work well together, poor education and infrastructure, and the struggle to maintain an overextended empire under the challenge of emerging rivals lead to a painful period of fighting, destruction, and then a restructuring that establishes a new order, setting the stage for a new period of building.”

“The stats in my model suggest that the US is roughly 70 percent through its Big Cycle, plus or minus 10 percent. The United States has not yet crossed the line into the sixth phase of a civil war/revolution, when the active fighting begins, but internal conflict is high and rising.”

“Ultimately, it would be wise for leaders and citizens of both countries to recognize that the US and China are in a competition of systems and abilities. Each will inevitably follow the system that they believe works best for them, Americans have a slight lead in power, but it is shrinking and they’re outnumbered, and history has shown that while numbers of people can matter a lot, other factors matter more, so even small-population empires become leading world powers if they manage themselves well.”

“How people are with each other is of paramount importance in determining how they will handle the circumstances that they jointly face, and the cultures that they have will be the biggest determinants of how they are with each other.”

“The internal wars and challenges in both China and the US are more important and bigger than external wars and challenges. These include political wars within the leadership of the country and at all levels of government, wars between different factions (e.g., the rich and the poor, the rural and the urban, conservatives and progressives, ethnic groups, etc.), demographic changes, climate change, etc. Fortunately, the most important of these forces are within our control and are measurable, which allows us to see how we are doing and, if we’re not doing well, to make changes so these things move in the right directions. By and large we will get what we deserve. As Churchill said to the British people, ‘Deserve Victory!’”

Excerpts from Principles for Dealing with the Changing World Order

From the Introduction:

“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. 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…

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.”

From Chapter One: The Big Picture in a Tiny Nutshell - The 17 Drivers Behind the Rise and Eventual Fall of World Powers

The Rise

  1. Strong Leadership
  2. Inventiveness
  3. Education
  4. Strong culture
  5. Good resource allocation
  6. Good competitiveness
  7. Strong income growth
  8. Strong markets and financial centers

The Top

  1. Less productive
  2. Overextended (debts, obligations, etc.)
  3. Losing competitiveness
  4. Wealth gaps

The Decline

  1. Large debts
  2. Printing money
  3. Internal conflict
  4. Loss of reserve currency
  5. Weak leadership
  6. Civil war/revolution

The Big Picture in a Tiny Nutshell

The next chart shows the relative wealth and power of the 11 leading empires over the last 500 years.

Ray Dalio Principles

Each one of these indices of wealth and power is a composite of eight different determinants that I will explain shortly. Though these indices aren’t perfect because all data through time isn’t perfect, they do an excellent job of painting the big picture. As you can see, nearly all of these empires saw periods of ascendancy followed by periods of decline.

Take a moment to study the thicker lines on the chart, which represent the four most important empires: the Dutch, British, American, and Chinese. These empires held the last three reserve currencies— the US dollar now, the British pound before it, and the Dutch guilder before that. China is included because it has risen to be the second most powerful empire/country and because it was so consistently powerful in most years prior to around 1850. To very briefly summarize the story this chart shows:

  • China was dominant for centuries (consistently out-competing Europe economically and otherwise), though it entered a steep decline starting in the 1800s.
  • The Netherlands, a relatively small country, became the world’s reserve currency empire in the 1600s.
  • The UK followed a very similar path, peaking in the 1800s.
  • Finally, the US rose to become the world’s superpower over the last 150 years, though particularly during and after World War II.
  • The US is now in relative decline while China is rising.

The single measure of wealth and power that I showed you for each country in the prior charts is a roughly equal average of 18 measures of strength. While we will explore the full list of determinants later, let’s begin by focusing on the key eight shown in the next chart: 1) education, 2) competitiveness, 3) innovation and technology, 4) economic output, 5) share of world trade, 6) military strength, 7) financial center strength, and 8) reserve currency status. This chart shows the average of each of these measures of strength across all the empires I studied, with most of the weight on the most recent three reserve countries (i.e., the US, the UK, and the Netherlands).

Ray Dalio Principles

The lines in the chart do a pretty good job of telling the story of why and how the rises and declines took place. You can see how rising education leads to increased innovation and technology, which leads to an increased share of world trade and military strength, stronger economic output, the building of the world’s leading financial center, and, with a lag, the establishment of the currency as a reserve currency. And you can see how for an extended period most of these factors stayed strong together and then declined in a similar order. The common reserve currency, just like the world’s common language, tends to stick around after an empire has begun its decline because the habit of usage lasts longer than the strengths that made it so commonly used.

I call this cyclical, interrelated move up and down the Big Cycle.

From Chapter 12: The Big Cycle of China and the Renminbi

What is especially interesting to me is seeing how far back in his- tory the patterns of the archetypical Big Cycle go, since China’s his- tory is both so ancient and so well-documented. I was also fascinated to see what happened when the Eastern and Western worlds inter- acted more significantly from the 17th through the 19th centuries, and how, as the world became much smaller and more interconnected, the Chinese and Western Big Cycles affected each other.

Probably the most important thing I gained from studying the his- tory of so many countries is the ability to see the big patterns of causes and effects. Shifting my perspective to the very long term felt like zooming out in Google Maps because it allowed me to see contours that I couldn’t see before and how the same stories play out over and over again for basically the same reasons. I also came to understand how having so much history to study has affected the Chinese way of thinking, which is very different from the American way of thinking, which is much more focused on what is happening now. Most Americans believe their own history is just 300 or 400 years old (since they believe the country began with European settlement), and they aren’t terribly interested in learning from it.

Whether they are interested or not, 300 years seems like a very long time ago to Americans, but for the Chinese, it isn’t long at all. While the prospect of a revolution or a war that will overturn the US system is unimaginable to most Americans, both seem inevitable to the Chinese because they have seen those things happen again and again and have studied the patterns that inevitably precede them. While most Americans focus on particular events, especially those that are happening now, most Chinese leaders view current events in the context of larger, more evolutionary patterns.

Americans are impulsive and tactical; they fight for what they want in the present. Most Chinese are strategic; they plan for how they can get what they want in the future. I have also found Chinese leaders to be much more philosophical (literally, readers of philosophy) than American leaders. For example, I had a meeting with a Chinese leader who had just met President Donald Trump and had concerns about the possibility of a US-China conflict. He explained how he approached the meeting, which struck me as starkly different from how President Trump likely had. This leader and I have known each other for many years, during which time we have talked mostly about the Chinese and world economies and markets. Over those years we have developed a friendship. He is a very skilled, wise, humble, and likable man. He explained that going into his meeting with Trump, he was concerned about the worst-case scenario where tit-for-tat escalations could get out of control and lead to war. He referred to history and gave a personal story of his father to convey his perspective that wars were so unimaginably harmful and the damage of the next war could be worse than the last war, which had killed more people than any other. He focused on World War I as an example. He said that to calm himself down and gain equanimity he read Critique of Pure Reason by Immanuel Kant, and he realized that he could only do his best and then the outcomes would take their course. I told him about the Serenity Prayer6 and suggested meditation to him. I went home and read Critique of Pure Reason again, which I found challenging. I did, and still do, admire him and value his perspective greatly.

I tell this story to share with you one Chinese leader’s perspective on the risk of wars and to also give one example of the many interactions I’ve had with this leader and of the many interactions I’ve had with many Chinese leaders and Chinese people in order to help you see them through my eyes and through their eyes.

From Chapter 13: US-China Relationships And Wars

History has taught us that there are five major types of wars:

1) trade/economic wars, 2) technology wars, 3) geopolitical wars, 4) capital wars, and 5) military wars. To these I would add 6) culture wars and 7) the war with ourselves. While all sensible people wish that these “wars” weren’t occurring and instead that cooperation was happening, we must be practical in recognizing that they exist. We should use past cases in history and our understandings of actual developments as they are taking place to think about what is most likely to happen next and how to deal with it well.

We see these wars transpiring in varying degrees now. They should not be mistaken for individual conflicts but rather recognized as interrelated conflicts that are extensions of one bigger evolving conflict. In watching them transpire we need to observe and try to understand each side’s strategic goals—e.g., are they trying to hasten a conflict (which some Americans think is best for the US because time is on China’s side because China is growing its strengths at a faster pace) or are they trying to ease the conflicts (because they believe that they would be better off if there is no war)? In order to prevent these conflicts from escalating out of control, it will be important for leaders of both countries to be clear about what the “red lines” and “trip wires” are that signal changes in the seriousness of the conflict …

The Culture War

How people are with each other is of paramount importance in determining how they will handle the circumstances that they jointly face, and the cultures that they have will be the biggest determinants of how they are with each other. What Americans and the Chinese value most and how they think people should be with each other determine how they will deal with each other in addressing the conflicts that we just explored. Because Americans and the Chinese have different values and cultural norms that they will fight and die for, if we are going to get through our differences peacefully it is important that both sides understand what these are and how to deal with them well. As described earlier, Chinese culture compels its leaders and society to make most decisions from the top down, demanding high standards of civility, putting the collective interest ahead of individual interests, requiring each person to know their role and how to play it well, and having filial respect for those superior in the hierarchy. They also seek “rule by the proletariat,” which in common parlance means that opportunities and rewards are broadly distributed. In contrast, American culture compels its leaders to run the country from the bottom up, demanding high levels of personal freedom, favoring individualism over collectivism, admiring revolutionary thinking and behavior, and not respecting people for their positions as much as for the quality of their thinking. These core cultural values drove the types of economic and political systems each country chose.

To be clear, most of these differences aren’t obvious in day-to-day life; they generally aren’t very important relative to the shared beliefs that Americans and the Chinese have, which are numerous, and they aren’t held by all Chinese or all Americans, which is why many Americans are comfortable living in China and vice versa. Also, they are not pervasive. For example, the Chinese in other domains, such as Singapore, Taiwan, and Hong Kong, have had governance systems that are similar to Western democratic systems. Still these cultural differences subtly affect most everything, and in times of great conflict, they are the defining differences that determine whether the par- ties fight or peacefully resolve their disputes. The main challenge the Chinese and Americans have with each other arises from some of them failing to understand and empathize with the other’s values and ways of doing things, and not allowing each other to do what they think is best.

While the opening up of both countries has increased their inter- actions and their increasingly shared practices (e.g., their similar eco- nomic freedoms that produce similar desires, products, and outcomes) have made both environments and their people much more similar than they ever were before, the differences in approaches are still no- table. They are reflected in how each country’s government and its people interact with each other and how Americans and the Chinese interact especially at the leader-to-policy-maker level. Some of these cultural differences are minor and some of them are so major that many people would fight to the death over them—e.g., most Ameri- cans believe in “give me liberty or give me death” while to the Chinese individual liberty isn’t nearly as important as collective stability is.

These differences are also reflected in everyday life. For example, the Chinese government, being more paternal, regulates what types of video games children play and how many hours a day they can play them, whereas in the United States video games aren’t government-regulated because such things are considered an individual parent’s decision to make. One could argue the merits of either approach. The Chinese hierarchical culture makes it natural for the Chinese to simply accept the government’s direction, while the American nonhierarchical culture makes it acceptable for Americans to fight with their government over what to do. Similarly, different cultural inclinations influenced how Americans and the Chinese reacted to being told that they had to wear masks in response to COVID-19, which led to second-order consequences because the Chinese followed the instructions and Americans often didn’t, affecting the numbers of cases and deaths and the economic impact. These culturally deter- mined differences in how things are handled affect how the Chinese and Americans react differently to many things— information privacy, free speech, free media, etc.—which add up to lots of ways that the countries operate differently.

While there are pros and cons to these different cultural approaches, and I’m not going to explore them here, I do want to get across that the cultural differences that make Americans American and the Chinese are deeply embedded. Given China’s im- pressive track record and how deeply imbued the culture behind it is, there is no more chance of the Chinese giving up their values and their system than there is of Americans giving up theirs. Trying to force the Chinese and their systems to be more American would, to them, mean subjugation of their most fundamental beliefs, which they would fight to the death to protect. To have peaceful coexistence Americans must understand that the Chinese believe that their values and their approaches to living out these values are best, as much as Americans believe their American values and their ways of living them out are best.

For example, one should accept the fact that when choosing leaders most Chinese believe that having capable, wise leaders make the choices is preferable to having the general population make the choice on a “one person, one vote” basis because they believe that the general population is less informed and less capable. Most believe that the general population will choose the leaders on whims and based on what those seeking to be elected will give them in order to buy their support rather than what’s best for them. Also, they believe—like Plato believed and as has happened in a number of countries—that democracies are prone to slip into dysfunctional anarchies during very bad times when people fight over what should be done rather than support a strong, capable leader.

They also believe that their system of choosing leaders lends it- self to better multigenerational strategic decision making because any one leader’s term is only a small percentage of the time that is required to progress along its long-term developmental arc. They believe that what is best for the collective is most important and best for the country and is best determined by those at the top. Their system of governance is more like what is typical in big companies, especially multigenerational companies, so they wonder why it is hard for Americans and other Westerners to understand the rationale for the Chinese system following this approach and to see the challenges of the democratic decision-making process as the Chinese see them.

To be clear, I’m not seeking to explore the relative merits of these decision-making systems. I am simply trying to make clear that there are arguments on both sides and to help Americans and the Chinese see things through each other’s eyes and, most importantly, to understand that the choice is between accepting, tolerating, and even respecting each other’s right to do what each thinks is best or having the Chinese and Americans fight to the death over what they believe is uncompromisable.

The American and Chinese economic and political systems are different because of the differences in their histories and the differences in their cultures that have resulted from these histories. As far as eco- nomics is concerned the two different viewpoints—the classic left (favoring government ownership of the means of production, the poor, the redistribution of wealth, etc., which the Chinese call communism) and the classic right (favoring private ownership of the means of pro- duction, whoever succeeds in the system, and much more limited re- distributions of wealth)—exist in China as in the rest of the world, and there have been swings from one to the other in all societies, especially in China, so it would not be correct to say that the Chinese are culturally left or right. Similar swings in American preferences have existed throughout its much more limited history. I suspect that if the United States had a longer history we would have seen wider swings, as we have in Europe through its longer history.

For these reasons these “left” versus “right” inclinations appear to be more big cycle swings around revolutionary trends than evolving core values. In fact, we are seeing these swings now taking place in both countries, so it’s not a big stretch to say that policies of the “right,” such as capitalism, are close to being more favored in China than in the United States and vice versa. In any case, when it comes to economic systems, there don’t appear to be a lot of clear distinctions rooted in deep cultural preferences. In contrast to economic systems, the inclination of the Chinese to be top-down/hierarchical versus bottom-up/nonhierarchical appears to be deeply embedded in their culture and in their political systems while Americans are strongly inclined to be bottom-up/nonhierarchical. As for which approach will work best and win out in the end, I will leave that for others to debate, hopefully without bias, though I will note that most knowledgeable observers of history have concluded that neither of these systems is always good or bad. What works best varies according to a) the circumstances and b) how people using these systems are with each other. No system will sustainably work well—in fact all will break down—if the individuals in it don’t respect it more than what they in- dividually want and if the system is not flexible enough to bend with the times without breaking.

As we imagine how Americans and the Chinese will handle their shared challenge to evolve in the best possible way on this shared planet, I try to imagine where their strong cultural inclinations, most importantly where the irreconcilable differences that they would rather die for than give up, will lead them. For example, most Americans and most Westerners would fight to the death for the ability to have and express their opinions, including their political opinions. In contrast, the Chinese value the respect for authority more, which is reflected in and demonstrated by the relative powers of individuals and the organizations they belong to and the responsibility to hold the collective organization responsible for the actions of individuals in the collective.

Such a culture clash took place in October 2019 when the then-general manager of the Houston Rockets (Daryl Morey) tweeted an image expressing support for Hong Kong’s pro-democracy protest movement. He quickly pulled down his tweet and explained that his views weren’t representative of his team’s views or the NBA’s views. Morey was then attacked by the American side (i.e., the press, politicians, and the public) for not standing up for free speech, and the Chinese side held the whole league responsible and punished it by dropping all NBA games from China’s state television, pulling NBA merchandise from online stores, and reportedly demanding that the league fire Morey.

This clash arose because of how important free speech is to Americans and because Americans believe that the organization should not be punished for the actions of the individual. The Chinese, on the other hand, believe that the harmful attack needed to be punished and that the group should be held accountable for the actions of the individuals in it. One can imagine much bigger cases in which much bigger conflicts arise due to such differences in deep-seated beliefs about how people should be with each other.

When they are in a superior position, the Chinese tend to want a) the relative positions to be clear (i.e., the party in a subordinate position knows that it is in a subordinate position), b) the subordinate party to obey, and c) the subordinate party to know that, if it doesn’t do so, it will be punished. That is the cultural inclination/ style of Chinese leadership. They can also be wonderful friends who will provide support when needed. For example, when the governor of Connecticut was desperate to get personal protective equipment in the first big wave of COVID-19 illnesses and deaths and couldn’t get it from the US government or other American sources, I turned to my Chinese friends for help and they provided what was needed, which was a lot. As China goes global a number of countries’ leaders (and their populations) have been both grateful for and put off by China’s acts of generosity and strict punishments. Some of these cultural differences can be negotiated to the parties’ mutual satisfaction, but some of the most important ones will be very difficult to negotiate away.

I think the main thing to realize and accept is that the Chinese and Americans have different values and will make different choices for themselves than the other would like. For example, Americans might not like how the Chinese handle their human rights issues and the Chinese might not like how Americans handle their human rights issues. The question is: what should be done about that—should Americans fight with the Chinese to impose what they think the Chinese should do on them and vice versa, or should they agree not to intervene into what each other does? In my opinion it is too difficult, inappropriate, and probably impossible to force others in other countries to do what they strongly believe is not good for them. The United States’ ability to impose things on the Chinese and China’s ability to impose things on the United States will be a function of their relative powers.

While I just explored the US-China war issues conveying the little that I know about them relative to what I need to know, I want to remind you that these wars are far more complex than one-to-one conflicts. They are like multidimensional chess games because many countries are involved with many other countries in many dimensions. For example, when I think of US-China relations I have to think way beyond their bilateral relations to think about their multilateral relationships in all important dimensions—e.g., with all notable Asian, Euro- pean, and Middle Eastern governments and private sectors, and with all of those countries’ important relationships with the other countries, etc.

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