George Soros was born György Schwartz on August 12, 1930 in Budapest, Kingdom of Hungary.
George Soros was born György Schwartz on August 12, 1930 in Budapest, Kingdom of Hungary. ◦ As a 13-year-old Jewish boy he survived the 1944 Nazi occupation of Hungary and the Siege of Budapest by living under a false Christian identity arranged by his father, who arranged false identities for his family and a number of other people. ◦ He studied at the London School of Economics under philosopher Karl Popper, earning a BSc in philosophy in 1951 and an MSc in 1954. ◦ He later established Soros Fund Management in 1970 and renamed the Double Eagle fund the Quantum Fund. ◦ During the 1992 Black Wednesday crisis he sold short over $10 billion in pounds sterling, profited an estimated "over $1 billion," and was dubbed "the man who broke the Bank of England." ◦ He has donated more than $32 billion to his Open Society Foundations. ◦
Soros developed a conceptual framework that helped him both to make money as a hedge fund manager and to spend money as a policy oriented philanthropist, but he clarifies that "the framework itself is not about money, it is about the relationship between thinking and reality." ◦ He states his core idea in two propositions: "One is that in situations that have thinking participants, the participants' view of the world is always partial and distorted. That is the principle of fallibility. The other is that these distorted views can influence the situation to which they relate because false views lead to inappropriate actions. That is the principle of reflexivity." ◦ He adds that "treating drug addicts as criminals creates criminal behavior... declaring that government is bad tends to make for bad government." ◦ He traces his attraction to open society to "having lived through both Nazi and Communist occupation here in Hungary." ◦ He argues that "the empirical truth cannot be known with absolute certainty... they can only be falsified by testing. One failed test is enough to falsify, but no amount of conforming instances is sufficient to verify." ◦ He contends that social theories are reflexive in a way natural science is not, noting that "Heisenberg's discovery of the uncertainty principle did not alter the behavior of quantum particles one iota, but social theories, whether Marxism, market fundamentalism or the theory of reflexivity, can affect the subject matter to which it refers." ◦ He faults mainstream economics for "physics envy," rejecting rational expectations as "absurd but... needed in order to allow economic theory to model itself on Newtonian physics," and maintains that "the slavish imitation of natural science inevitably leads to the distortion of human and social phenomena." ◦
Soros said in 2008, "I'm only rich because I know when I'm wrong," having "survived by recognising my mistakes." ◦ He added, "To others, being wrong is a source of shame; to me, recognising my mistakes is a source of pride." ◦ On contrarian aggression in bubbles, he said in 2009, "When I see a bubble forming, I rush in to buy, adding fuel to the fire. That is not irrational." ◦ He believed that if the odds favor you, "you must bet big, and go for the jugular." ◦ He famously used his body as a risk signal; his son Robert recounted that Soros would change positions partly because "his back starts killing him... He literally goes into a spasm and it's this early warning sign," and Soros confirmed relying on "animal instincts," describing acute pain as "a signal that there was something wrong in my portfolio." ◦ He noted that his conceptual framework enabled him both to anticipate the 2008 crisis and to deal with it. ◦
He distinguishes two functions of participants' thinking: "One is to understand the world in which we live; I call this the cognitive function. The other is to change the situation to our advantage. I call this the participating or manipulative function. The two functions connect thinking and reality in opposite directions." ◦ When both operate at once they interfere, so "the outcome is liable to diverge from the participants' intentions." ◦ He explains that "a positive feedback process is self-reinforcing. It cannot go on forever because eventually the participants' views would become so far removed from objective reality that the participants would have to recognize them as unrealistic." ◦ He calls the result "far-from-equilibrium conditions" and says "initially self-reinforcing but eventually self-defeating boom-bust processes or bubbles are characteristic of financial markets." ◦ He ties fallibility and reflexivity together, stating that "The two principles [fallibility and reflexivity] are tied together like Siamese twins, but fallibility is the firstborn: without fallibility there would be no reflexivity." ◦ He notes that "Confronted by a reality of extreme complexity we are obliged to resort to various methods of simplification—generalizations, dichotomies, metaphors, decision-rules, moral precepts," and that these "mental constructs take on an existence of their own, further complicating the situation." ◦ He adds that brain science has substantiated "Hume's contention that reason is the slave of passion." ◦
Soros has operated as both a hedge fund manager and a policy oriented philanthropist. ◦ He has specialized in financial markets, particularly boom-bust dynamics and bubbles, which he says are characteristic of financial markets. ◦ His published work and lectures advance a critique of mainstream economics and the theory of reflexivity. ◦ His book *The Alchemy of Finance* is taught in business schools. ◦
Soros published his first book, *The Alchemy of Finance*, in 1987, trying "to explain the philosophical underpinnings of my approach to financial markets." ◦ He observed that the book "is taught in business schools but the philosophical arguments did not make much of an impression," and he long considered himself "a failed philosopher" until the 2008 crisis. ◦ He frames his framework as deserving attention "not because it constitutes a new discovery, but because something as commonsensical as reflexivity has been so studiously ignored by economists." ◦
He admits to rushing into bubbles while knowing they are unsustainable, stating, "When I see a bubble forming, I rush in to buy, adding fuel to the fire. That is not irrational." ◦ He confirmed relying on "animal instincts," describing acute pain as "a signal that there was something wrong in my portfolio." ◦ He long considered himself "a failed philosopher." ◦ He recalled in *The Alchemy of Finance* that alchemists should have focused on financial markets, "where they could have succeeded." ◦
Engage him as a fallibilist: present a thesis together with the test that would falsify it, since for him "One failed test is enough to falsify, but no amount of conforming instances is sufficient to verify." ◦ Expect him to probe how a stated view could itself move the situation it describes, because "these distorted views can influence the situation to which they relate because false views lead to inappropriate actions." ◦ Frame disagreement as mistake-correction rather than confrontation, since for him "recognising my mistakes is a source of pride." ◦
> "In the course of my life, I have developed a conceptual framework which has helped me both to make money as a hedge fund manager and to spend money as a policy oriented philanthropist. But the framework itself is not about money, it is about the relationship between thinking and reality." ◦
> "One is that in situations that have thinking participants, the participants' view of the world is always partial and distorted. That is the principle of fallibility. The other is that these distorted views can influence the situation to which they relate because false views lead to inappropriate actions. That is the principle of reflexivity." ◦
> "treating drug addicts as criminals creates criminal behavior... declaring that government is bad tends to make for bad government." ◦
> "a positive feedback process is self-reinforcing. It cannot go on forever because eventually the participants' views would become so far removed from objective reality that the participants would have to recognize them as unrealistic." ◦
> "the empirical truth cannot be known with absolute certainty... they can only be falsified by testing. One failed test is enough to falsify, but no amount of conforming instances is sufficient to verify." ◦
> "Heisenberg's discovery of the uncertainty principle did not alter the behavior of quantum particles one iota, but social theories, whether Marxism, market fundamentalism or the theory of reflexivity, can affect the subject matter to which it refers." ◦
> "I'm only rich because I know when I'm wrong," ◦
> "To others, being wrong is a source of shame; to me, recognising my mistakes is a source of pride." ◦
> "When I see a bubble forming, I rush in to buy, adding fuel to the fire. That is not irrational." ◦
> "you must bet big, and go for the jugular" ◦
> "Confronted by a reality of extreme complexity we are obliged to resort to various methods of simplification—generalizations, dichotomies, metaphors, decision-rules, moral precepts," ◦
> "the slavish imitation of natural science inevitably leads to the distortion of human and social phenomena." ◦