How The Economic Machine Works
By Ray Dalio – Bridgewater
A number of people have asked me to explain what’s now going on in the markets and economy. As you probably know by now, I believe that everything (i.e., all reality) works like a machine with cause-effect relationships that drive what happens, and that to be effective it’s essential to have a good mental model of how those machines/realities work and to have good principles for dealing with them well. So, I believe that economies and markets work like machines with basic cause-effect relationships (including human nature) interacting to cause their movements. Since economies are the aggregates of the markets that make them up, to understand how economies work one has to understand how markets work. My mental model of how markets and economies work is described in brief below and is conveyed more simply in my 30-minute animated video “How the Economic Machine Works”.