Part 5/7:
This pattern-based approach enables clearer understanding of cause-and-effect relationships, allowing us to craft principles expressed through words and algorithms. Dalio emphasizes that our expectations about the future are merely updated versions of the present—biased by recent history. Recognizing this helps avoid being blindsided by rare or long-past events, as they tend to reoccur.
He reflects on past mistakes, such as failing to see the cyclical patterns during the Great Depression, and highlights how this awareness equips us for future decision-making. Identifying the repetitive nature of historic cycles allows us to predict and prepare better, ultimately improving risk management and opportunity recognition.