There’s a lot going on at the moment, between wars, pandemics, technological changes, climate factors, but what if we’ve already been here before, what if we could look to the past to guide us so we know how best to respond?
In this bite-sized episode we share with you a brief review of the book, principles for dealing with the changing world order by Ray Dalio and what it means for our finance teams and careers.
[00:00:00] Andrew: Hi everyone. And welcome to this week’s Monday memo. Hope you’ve just had a fantastic weekend to relax and recharge
[00:00:06] it feels like summer’s finally arrived here in Ireland. We were actually able to get to enjoy some sunshine outside without any rain water. And it also gave me opportunity to finish off a book I’ve been reading. I’d love to share with you.
[00:00:19] And this is a title of this week’s Monday memo. But before that, just some events for your diet. That you might find useful in some different areas relating to finance. And I include links to those in the show notes. I’m with the posts that go with this episode,
[00:00:32] The first one, I’ll be hosting a panel around why the best finance and procurement leaders work together. Some of you are probably where I started my finance and accounting career in accounts payable. One of the most fantastic experiences I’ve ever had, and because I’ve been able to keep connections with that part of the business over the years, I’ve always been able to define some additional opportunities.
[00:00:55] to drive more value for our organizations and shareholders. So just, I think it’s hugely important area, great place to start your finance career. And that’s also a face-to-face one. So I’ll be in London for that. If you’re interested in attending. I’ve also been given a few passes to share out
[00:01:11] I’ll also be hosting a virtual panel on is finance business partnering still the route to success in the digital world. Obviously I’d like to think the answer’s. Yes, but there are some other circumstances to consider there as well. So we don’t walk in with a load of blind spots. So looking forward to that and that’s with the gen CFO team.
[00:01:30] So again, I have to link to that one. I’ll also be presenting a mini TEDx type talk for the association of finance professionals called a crafting value, how data and digital’s reshaping financial planning and analysis.
[00:01:46] I suppose it’s the first opportunity I’ve taken to go into my experience of transforming the performance of a finance team in a business unit at a well-known tech company that was struggling, but by the end, it was motoring full steam ahead. I wasn’t fully engaged finance team are fully enabled by digital, delivering and exceeding expectations or business unit stakeholder.
[00:02:09] and finally we’ve been nominated for an award is actually a best resource award, which is why we do the strengthen a number show. It’s this free resource that’s available 24 7 for those looks. And accounting and finance do more of the right things. More often accelerate their careers, elevate themselves within their organizations, improve their influence.
[00:02:27] And that’s part of the digital finance function awards being run by generation CFO. So again, looking forward to that in-person event and getting to catch up with so many.
[00:02:37] Yeah, personalities and peers out there who are driving fantastic value for our community and finance, accounting, FP, and a
[00:02:45] Now, back to the book I mentioned previously and reason why I picked it up as, you know, there’s a lot going on at the moment between wars, pandemics, technological changes, climate factors, extreme weather events going on in the world. And, I was wondering how do we plot a password? How do we possession it ourselves so that we can, better from elements of it. so to, to get near towards our goals are how do we avoid the worst of it? You know? So in effect, doing more of the right things more often. And that just knocks goes for our organizations or our teams are part of, but ourselves and our families personally, to.
[00:03:26] More importantly, what if we’ve already been here before? What if we could just look to the past to guide us so we know how to best respond and like, I’m not a historian. And I live in a rock in the Atlantic ocean, so I’m not going to know all the past events of what’s happening around the world, but maybe so much compiled something similar.
[00:03:47] And that’s what I feel. It’s been done in this book principles for dealing with the changing world order Ray Dalio and his team. I’ve had a go at it. Some of you, might be aware of him. He eats, automate his name, predicting well of my books anyway, predicting the financial crisis of 2008. And before that, he built up I think it’s the world’s largest hedge fund at Bridgewater associates with over $200 billion of assets on the management. And lately he started writing a number of books. I think this was third of his books written in the last five years. What I like about what he tries to do, he tries to deconstruct into some principles using data.
[00:04:28] That he then back to us. And it’s not just him. He’s got this massive team of analysts at Bridgewater associates. But in this particular book, he’s tried to deconstruct the current economic environment and the challenges it’s presenting us. So like the macro environment by delving into many centuries past of the economics, ups and downs that have been out there and he’s been able to identify a number of patterns in histories.
[00:04:52] And again, a lot of you listening appreciate that change is not linear. I know sometimes when we budget, we look at the past and we probably add a few percentage points into the future to adjust and we might, or early profile, but at a macro level, nature operates off cycles I talked about before with the seasons.
[00:05:14] Various different ups and downs and business cycle, hot and cold periods in markets bears and bowls and so on. But it turns out that human beings and the rise and falls of societies are all so cyclical in nature.
[00:05:27] So what he actually does in the book is Chronicles the rises and falls of some of the largest economic and cultural powers of the last few hundred years. So think the Dutch great Britain, China United States, and even where Europe fits into that. And some other countries.
[00:05:44] So it’s a bit like a history guidance. It was nice sort of reaffirming some history I’d picked up along the way, but it was also a great opportunity to learn about countries that didn’t know as much about like China. So saw that quite useful and what Ray Dalio and his team did is he was able to identify 18 factors behind these rise and fall cycles.
[00:06:03] And as you move from number one to eight, Well say one to eight will be the rise. Then you’d have a few more at the top and then say from 13 to 18, that’s how you could determine if you were in that declining phase and more than likely there was another major power out there that was running. And just though, just going through those factors for you very quickly.
[00:06:25] The first few stats around is having strong leadership, innovation and inventiveness within those countries, strong education, strong culture, where people are bi-partisan by nature. They don’t hold any extreme views. People are coming together for the common good, same like resource allocation, very competitive.
[00:06:43] So again, if you thinking back to the boom periods of various countries, living in Ireland, we were all very cost competitive in the early days, which led to strong income growth and stronger financial markets and set centers of commerce, which is what we have here in this Ireland. And then you get to this top phase, which is you see it happening when people become less productive, overextended, lose a better competitiveness to other countries and wealth gaps.
[00:07:10] And this is one that’s accelerated lately because with the lower interest rates has led to an inflation of asset prices and those are hard tend to own assets. So you’ve now got a massive, the increasing gap between those who haven’t, who have not on these wealth gaps.
[00:07:24] And again, you’re probably seeing some of this in some of your countries where you’re listening in from. And then as we start going to the decline phase, we’re now looking at large debts, a continual printing of money who are sounding very familiar and turn on conflicts, largely because of value gaps.
[00:07:39] People are polar opposites of the political and cultural spectrums countries at the top normally are the reserve currency and they lose that status. There’s weak leadership at the top. Well, the last stage it’s civil war revolution, or perhaps a global war, which typically involves the replacement at the top of the new world order.
[00:07:57] Now there’s a lot of charts. I go with this book and convenient enough. There is a link to them on his website, economic principles.org. I’ll include that link as well with this post, if you want to go check out some of those cycles and it’s got a lot of the summary of what he said, but what I like again about what he’s done is he’s trying to measure it with various indexes.
[00:08:17] I remember measurement doesn’t have to be an absolute science measurement can be used if you accept. It’s just the principle of reducing uncertainty. We spoken this about about this on the show previously, and it does feel like we’re in this sort of. Inflection point of the end of the old us order and the beginning of a new order.
[00:08:36] And Rachel looked back at this transition period between the Dutch to the British and the British to the U S and he feels like we could be there he’s assigned, I think like a 30, 40% probability to a war between China and the U S particularly if the U S wants to try and impose its values upon the Chinese system. For them, it’s sort of worked quite well for them. And given that they’re quite cohesive as a country at the moment, and as a culture more than likely that they would probably fight back.
[00:09:04] So let’s, hopefully it doesn’t come to that stage, but again, a useful way of trying to have discussions with people about what’s going on. How many of us in our organizations have actually gotten our plan? I’m not saying this is going to happen in the next year, but in our longer-term planning in a scenario.
[00:09:22] Have we figured out what does a world look like? Where the us dollar is not the world’s first choice of currency reserve or the world’s reserve currency. Have we factored in what would a civil war or even a international war look like for organizations? Or do we just want to bury our heads in the sand and just start, think about it?
[00:09:42] Is that because to, to talk about those scenarios would just be a bit nonsense.
[00:09:47] and outside of our organizations, how are we preparing perhaps for the worst than our own approximate circumstances, in terms of security supply for basic things like water and food and energy and so on that tend to come under threat in a civil or international war scenario where resources and having resources.
[00:10:08] So look, I’ve been very positive about the book. Some things that probably doesn’t touch on things like around climate change, not that I’m saying it has an impact or not on these cycles. I would just love to have seen if there was any correlation or no correlation at all. just because he has a strong team behind him that looks into these things.
[00:10:25] I would love to have understood if that had any role to play or if it is all the human beings, driving the cycles and not other environmental factors, but unless these cultural and value and wealth gaps start narrowing a bit like they tended to grow in.
[00:10:42] In great Britain. Like it, they grew in with the scenario, the Dutch, we have probably heading down a path towards someone rests.
[00:10:50] and I hate to say it had a bit more uncertainty, but I suppose one thing that we can be certain about is that look changes to constant and. Yeah, I’ll share it to strengthen the numbers. We’ll try and share with you. What’s working out there. What’s not how people are managing their way through this change, whether in our environment, whether it be technological or how it’s impacting our finance teams, how it’s impacting people’s careers and what they’re doing about it,
[00:11:15] to help you do more of the right things more often as we all navigate our way through. So luck, hope you find this week’s Monday memo useful. If you did. We love it. When you share with your friends and colleagues, or an automated platforms, iTunes, Stitcher, SoundCloud, YouTube, Spotify, and Amazon music.
[00:11:31] so thanks again for tuning in today. Hope you have a fantastic week and until next time, take care of yourselves and let’s keep on building our strength in the numbers.
Link to charts and data: https://www.economicprinciples.org/DalioChangingWorldOrderCharts.pdf
Links upcoming events:
Why the Best Finance and Procurement Leaders Work Together: https://www.p2pnetwork.org/events/p2p-transformation-summit.html
Is finance business partnering still the route to success in a digital world?: https://summit.generationcfo.com/talks/is-business-partnering-the-next-step-for-finance/
Crafting Value: How Data/Digital is Reshaping FP&A: https://dynamic.afponline.org/fpaseries/p/1