A few months ago we highlighted a report published by Ray Dalio detailing his thoughts on the new "populist" president entitled "Populism: The Phenomenon." In reviewing the history behind historical populist movements from around the world, Dalio raised some concerns about what he viewed as a conflict-prone new administration and warned that populism is "more likely than not to become extremism."
Now, in his latest Linkedin blog post, Dalio once again expresses his concern about "Donald Trump moving toward conflict rather than cooperation", a movement that he suggests is highlighted by the White House"s recent decision to withdraw from the Paris climate accord.
It seems to me people who are trying to figure out whether or not to support him are faced with three big questions: 1) what exactly is the part he’s trying to optimize for (e.g., American manufacturing workers) and at the expense of whom, 2) am I more aligned with that part he is trying to protect (e.g., American manufacturing workers) or more aligned with those who will lose out (e.g., immigrants, those who will lose benefits from his budget changes), and 3) will his path of conflict rather than cooperation be effective or harmful? Sometimes conflict produces better results and sometimes it produces worse results for the people who are pursuing it to get what they want. For example, if Donald Trump were optimizing for his own well-being through conflict, it"s entirely possible that he would undermine his own well-being because the retaliation could be more damaging to him than the cooperation.
The more I see Donald Trump moving toward conflict rather than cooperation, the more I worry about him harming his presidency and its effects on most of us.
Of course, any decision aimed at protecting a nation"s sovereignty rather than blindly surrendering that sovereignty to the inevitable progression of globalism is just another sign of a deranged dictator looking to provoke international conflict, at least in the mind of Ray Dalio.
And, just in case it wasn"t obvious, Dalio would like for you to know that his "personal bias" is exactly the opposite of Trump"s as he would prefer to "optimize for the whole through cooperation in order to make the pie bigger, and then cooperatively and competitively divide up the pie"...
I have to confess a personal bias that is opposite his—i.e., I"m inclined to optimize for the whole through cooperation in order to make the pie bigger, and then cooperatively and competitively divide up the pie. I believe that we are connected to our whole ecology, our whole world community, and our whole United States, such that it pays to be in symbiotic relationships with them—so, I"m concerned about his path. I am especially concerned about the consequences of his pursuing so much conflict. At the same time, I see some encouraging moves on his part (e.g., to pursue public-private partnerships to rebuild infrastructure).
...which, of course, makes a whole lot of sense if you"re in a position to perpetually take a disproportionate share of the pie.
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Dalio"s full post:
Below is my update thoughts on Donald Trump"s policies and China"s latest economic moves.
1) On Donald Trump’s Policies
Naturally, my inclinations are to view Donald Trump"s policies through the lens of one who thinks about economies and markets, as well as from my vantage point of being a global and US citizen. My perspectives are colored by studying patterns and the cause-effect relationships of history and nature. My inclinations are to view things in a mechanistic way and to try to express the cause-effect relationships in principles and algorithms. While most cause-effect relationships can be expressed that way, not all can. Human nature is one that is difficult to express this way, and it is uniquely important now in Donald Trump"s presidency.
Trying to figure out Donald Trump"s perspective, what choices he will make, and their feedback loops has been an interesting and challenging puzzle to try to solve. As a frame of reference, I"m comparing him with populists of the past. That has led me to pay special attention to how he and his adversaries approach conflict.
Last week, Donald Trump"s decision to pull out of the Paris climate accord agreed to by 195 countries was consistent with his increasingly clear patterns of behavior.
From the higher-level perspective, when faced with the choices between what"s good for the whole and what"s good for the part, and between harmony and conflict, he has a strong tendency to choose the part and conflict. By “the whole,” I mean the whole ecosystem, the whole world community, and whole of the US, and by “the part,” I mean the part of the US that he is presumably trying to help.
It seems to me people who are trying to figure out whether or not to support him are faced with three big questions: 1) what exactly is the part he’s trying to optimize for (e.g., American manufacturing workers) and at the expense of whom, 2) am I more aligned with that part he is trying to protect (e.g., American manufacturing workers) or more aligned with those who will lose out (e.g., immigrants, those who will lose benefits from his budget changes), and 3) will his path of conflict rather than cooperation be effective or harmful? Sometimes conflict produces better results and sometimes it produces worse results for the people who are pursuing it to get what they want. For example, if Donald Trump were optimizing for his own well-being through conflict, it"s entirely possible that he would undermine his own well-being because the retaliation could be more damaging to him than the cooperation.
I have to confess a personal bias that is opposite his—i.e., I"m inclined to optimize for the whole through cooperation in order to make the pie bigger, and then cooperatively and competitively divide up the pie. I believe that we are connected to our whole ecology, our whole world community, and our whole United States, such that it pays to be in symbiotic relationships with them—so, I"m concerned about his path. I am especially concerned about the consequences of his pursuing so much conflict. At the same time, I see some encouraging moves on his part (e.g., to pursue public-private partnerships to rebuild infrastructure).
In our study “Populism: The Phenomenon,” I highlighted that the most important thing to watch in the early days of a populist government is how conflict is handled. The more I see Donald Trump moving toward conflict rather than cooperation, the more I worry about him harming his presidency and its effects on most of us.
Every week is telling in that regard. This next week will be no different.
2) On China"s New FX Policy
China"s policy makers" decision to squeeze the shorts in its currency is, in my opinion, a smart move because it a) demonstrates the Chinese government"s power, b) discourages those who would lose confidence in its currency (in turn lessening the desire to sell the yuan), which helps stabilize the balance of payments and currency, and c) produces a tightening that works well in conjunction with tighter monetary policies to tighten credit (which is appropriate now).
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