By Johan de Villiers
Welcome to our third edition of our quarterly E-zine for 2022!
In between the frustrating return of loadshedding and the release of the Zondo report, at least we can look forward to the rest of the year without the frustration of wearing masks everywhere!
I wanted to use this edition to highlight a fascinating book that was released recently and that I would highly recommend to any business owner or manager. Ray Dalio, the author is a well-known American billionaire and hedge fund manager.
In essence, it aims to describe the two cycles that govern the rise and fall of nations and empires. The first cycle is long term and revolves around debt. If debt levels are low, people borrow money, invest it and in so doing create wealth. The result of course is that the standard of living of that country increases.
Unfortunately, human nature being what it is, wealthy people soon become lazy and decadent and then stop investing and creating new things. Borrowing soon increases and as the country becomes less innovative their power starts declining and the elevated levels of debt soon trigger other financial and socio-economic crises. Even wars. Eventually the country collapses and the entire cycle starts again with low levels of debt.
The second cycle is called the Cycle of Internal Order. Do people treat each other well and respect the law? How well are they educated, and do they work hard in society? Poor people tend to work hard to improve their lives, whereas rich people are less willing to do so. Once again, the entitled become lazy and the country soon loses economic power. Infighting starts over resources and the country declines.
The World Order Cycle is influenced by these two cycles which happen simultaneously. A strong country will always establish their own World Order Cycle. Once that country declines, another will take their place with its own World Order Cycle.
This switch often happens when one country conquers another country in war.
This is how the two Internal Cycles influence the External Cycle, the World Order.
All countries or empires eventually decline because of this.
It is worthwhile to briefly look at the seven major types of wars between countries:
Trade wars
Technology wars
Geopolitical wars
Capital wars
Military wars
Culture wars
War with ourselves.
None of the above wars should be viewed as random data points, but rather small conflicts that eventually will lead to all-out war between countries.
1. The Trade/Economic War
An economic or trade war is all about import restrictions and tariffs. On a regular basis the USA accuses China of stealing intellectual property or of industrial espionage at a state level.
Should the trade war escalate one country may cut off essential commodities such as roil or rare earth materials to another. This will lead to an escalation in war.
To quote the author “When things are not going well, leaders don’t hesitate to do stuff previously considered immoral”
Countries thus want to rely less on each other, and to increasingly insulate themselves against economic risk. A huge shift in domestic production can be expected to achieve this.
2. The Technology War
China right now is by far leading the technology war in AI, data, and computing. The USA’s lead has been steadily declining, and they are acutely aware of that. This lead will increase as China is by far better when it comes to strategic decision making. To slow them down, the USA has restricted access to Chinese technology companies such as Huawei.
Whomever wins the tech war will probably win an all-out war as well.
3. The Geopolitical War
Right now, after Ukraine, the highest risk for geopolitical war on the planet is by far the South China Sea and Taiwan. China wants to ensure that they are powerful enough to deter the USA from engaging militarily with them when they decide to invade Taiwan.
It will be hugely costly for America to get involved. And hugely costly if they do not.
4. The Capital War
Countries use sanctions to cut off capital. Think Russia right now! Money has always been equated to power, so the moment money is cut off, power depletes. This can easily ignite conflict.
5. The Military War
Owing to the extremely deadly technologies developed in the past couple of decades, the next military war will be much worse than we can possibly imagine. Think nuclear, hypersonic missiles, artificial drones, etc.
6. The Culture War
How people behave with each other determines how they react to challenges. This behavior is determined by culture.
A classical case here is how different American and Chinese culture is.
Americans fight for freedom of speech, whilst the Chinese fight for “harmony.” America is all about capitalism, individualism, and free thinking. China is communist, hierarchical, and collective thinking at the expense of the individual.
Chinese and Americans both fail to empathize with each other and in addition to that, the USA does not think the group should be held accountable for the behavior of an individual. In China, they most certainly do!
7. The War with Ourselves
This one is viewed as the most important war, as we can control it through our own behavior. Its inter-alia revolves around some of the following principles:
Strong leadership
Strong education
Strong character, civility, work ethic
Low corruption, high respect for the rule of law
People that can work well together
In the book, the author reasons that empires rise and fall because of this internal order, and it may be worthwhile asking our politicians how South Africa rates against these criteria.
In conclusion the author recommends the following advice for the future at an individual level:
“Dealing With What You Know and What You Do Not Know
Success is more a matter of knowing what you do not know than the other way around.
Know all the possibilities, think about the worst-case scenarios, and then find ways to protect yourself against them.
Protecting yourself against worst-case scenarios is liberating since it means that whatever you do…you are covered.
Diversify
You cannot think of all the worst-case scenarios. Therefore, by diversifying, you make sure that you have covered as many as possible.
Put deferred gratification ahead of immediate gratification so you will be better off in the future.
The more you work for your future, the better the future will be. The more you eat your fruits in the present, the worse the future will be.
Triangulate among the smartest people possible”
In summary a worthwhile book to invest in, with some serious food for thought during the winter months.
Stay warm and thank you for your continued support of First Technology Cape Town!
Warm Regards
Johan de Villiers
CEO
First Technology Western Cape
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