Chapter 1
The Big Cycles in a Tiny Nutshell
Published 03/29/20
As explained in the Introduction, the world order is now rapidly shifting in important ways that have never
happened in our lifetimes but have happened many times before in history. My objective is to show you those
cases and the mechanics that drove them and, with that perspective, attempt to imagine the future.
What follows here is an ultra-distilled description of the dynamics that I saw in studying the rises and declines of
the last three reserve currency empires (the Dutch, the British, and the American) and the six other significant
empires (Germany, France, Russia, India, Japan, and China) over the last 500 years, as well as all of the major
Chinese dynasties back to the Tang Dynasty around the year 600. The purpose of this chapter is simply to provide
an archetype to use when looking at all the cycles, most importantly the one that we are now in. In studying these
past cases, I saw clear patterns that occurred for logical reasons that I briefly summarize here and cover more
completely in subsequent chapters of Part 1. While the focus of this chapter and this book are on those forces that
affected the big cyclical swings in wealth and power, I also saw ripple-effect patterns in all dimensions of life
including culture and the arts, social mores, and more, which I will touch on in Part 2. By going back and forth
between this simple archetype and the cases shown in Part 2, we will see how the individual cases fit the archetype
(which is essentially just the average of those cases) and how well the archetype describes the individual cases.
Doing this, I hope, will help us better understand what is happening now.
I’m on a mission to figure out how the world works and to gain timeless and universal principles for dealing with it
well. It’s both a passion and a necessity for me. While the curiosities and concerns that I described earlier pulled
me into doing this study, the process of conducting it gave me a much greater understanding of the really big
picture on how the world works than I expected to get, and I want to share it with you. It made much clearer to me
how peoples and countries succeed and fail over long swaths of time, it revealed giant cycles behind these ups and
downs that I never knew existed, and, most importantly, it helped me put into perspective where we now are.
Though the big-picture synthesis that I’m sharing in this chapter is my own, you should know that the theories I
express in this book have been well-triangulated with other experts. About two years ago, when I felt that I needed
to answer the questions I described in the Introduction, I decided to immerse myself in research with my research
team, digging through archives, speaking with the world’s best scholars and practitioners who each had in-depth
understandings of bits and pieces of the puzzle, reading relevant great books by insightful authors, and reflecting
on the prior research I’ve done and the experiences that I have from investing globally for nearly 50 years.
Because I view this as an audacious, humbling, necessary, and fascinating undertaking, I am worried about missing
important things and being wrong, so my process is iterative. I do my research, write it up, show it to the world’s
best scholars and practitioners to stress test it, explore potential improvements, write it up again, stress test it again,
and so on, until I get to the point of diminishing returns. This study is the product of that exercise. While I can’t be
sure that I have the formula for what makes the world’s greatest empires and their markets rise and fall exactly
right, I’m confident that I got it by-and-large right. I also know that what I learned is essential for me putting what
is happening now in perspective and for imagining how to deal with important events that have never happened in
my lifetime but have happened repeatedly throughout history.
I’m passing it along to you to take or leave as you like.
The Countries Shown in This Study Had the Most Wealth and Power
This is a study of how wealth and power have come and gone in the leading powers of the world. To be clear,
while the leading powers covered in this study were the richest and most powerful, they weren’t necessarily the
best-off countries for two reasons. First, while wealth and power are what most people want and will fight over
most, some people and their countries don’t think that these things are the most important and wouldn’t think of
fighting over them. For example, some believe that having peace and savoring life are more important than having
a lot of wealth and power and wouldn’t think of fighting hard enough to gain enough of the wealth and power to
make it into the group included in this study. (By the way, I think there is a lot to be said for putting peace and
savoring life ahead of gaining wealth and power.) Second, this group of countries excludes what I will call the