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George Soros: The Public Intellectual that We Refused to Recognize – MarketSkeptics 9/19/23, 8:46 PM
George Soros: The Public Intellectual

that We Refused to Recognize
View all posts by themarketskeptics January 26, 2019
Named Financial Times’ Person of the Year of 2018, George Soros is a

controversial figure that many aspiring hedge funders admire. Yet many
more resent him as a selfish finance guru who generates his wealth at the
cost of others. The public at large seems to characterize Soros only based
on his career as an extraordinary hedge fund manager, but they often fail to
remember Soros’ equally important, if not more important, contribution to
philosophy and philanthropy. Inspired by his theory of reflexivity and in an
attempt to understand one of the greatest minds of the century, this article
examines Soros’ life from his early childhood in Hungary to his later
commitment to philanthropy. In doing so, I seek to discern the events and
people that formulated Soros’ thinking, understand the controversies
surrounding Soros, and promote a profile of Soros as a public intellectual.
https://marketskepticscom.wordpress.com/2019/01/26/george-soros-the-public-intellectual-that-we-refused-to-recognize/ Page 1 of 10
From A Lawyer’s Son to A Philosopher
Born to a lawyer’s family in 1930 and coming from a well-to-do middle-class

background, George Soros had a relatively peaceful early childhood. It
wasn’t until 1944 when the Nazis occupied Hungary that Soros first learned
of the complexity of the world he lived in. Suddenly he was faced with the
prospect of being captured and imprisoned because of his Jewish
background. Luckily for him, Soros’ father was a former soldier in the Austro-
Hungarian army who recognized the despicable sins that the Nazis were
committing, and one who was smart enough to escape the Nazis by creating
false identities for him and his family. The experience greatly troubled the
young Soros. On the one hand, he was able to live a normal life and escape
the fate that so many like him suffered. On the other hand, however, Soros
struggled to make sense of the crazy world into which he was born.
With his father’s help, at the ripe age of seventeen, Soros left Hungary for
London, where he studied philosophy at the London School of Economics.
His mentor, Karl Popper, was a philosopher famously known for his liberal
political view. Popper greatly shaped Soros’ view of the world and became
one of the most formative people in Soro’s life. Much of Soros’ thinking can
be traced back to his mentor, Popper. Whether it be the theory of reflectivity
or the belief in open society, Soros refined Popper’s philosophy and made it
applicable not only on paper but also to the society at large. “While I was
reading Popper I was also studying economic theory, and I was struck by the
contradiction between Popper’s emphasis on imperfect understanding and
the theory of perfect competition in economics, which postulated perfect
knowledge. This led me to start questioning the assumptions of economic
theory. I replaced the postulates of rational expectations and efficient
markets with my own principles of fallibility and reflexivity.”
When Soros graduated in 1952, he found himself in a rather awkward
situation. His philosophy theory had yet to gain any traction, and he was left
to work unskilled jobs. After several false starts, Soros was employed as an
arbitrage trader at a London investment bank, where he continued to work
on philosophy in his spare time.
The Man Who Broke the Bank of England
In 1956 Soros moved to the United States to work for a New York investment
bank. As a security analyst, Soros flourished: he was promoted to the
position of vice president in 1963. It is during this time that Soros first
understood and formulated his theory of reflexivity. Influenced by his mentor
Popper, Soros believed that action-taking participants in the financial market
were inherently biased and that their bias, in turn, distorts the reality in which
the market is based on. The exact premise of Soros’ theory will be explained
in detail later on, but in simplest terms, the theory of reflexivity states that
people’s perception about the reality will actually change the reality itself.
Soro’s theory was groundbreaking, to say the least, it went against the
foundation on which modern economics relied upon.
With this theory in mind, Soros was eager to test it in the financial markets. In
1967 he convinced his investment bank to set up an offshore investment
fund, First Eagle, for him to run at his discretion. When regulations cracked
down and it became difficult to operate as an affiliated entity, Soros quit his
position at the firm. He then started a hedge fund that eventually became
the infamous Quantum Fund. A hedge fund is an investment vehicle that
participates in the financial markets (Stock Market, Bond Market, Foreign
Currency Exchange Markets, etc.). Unlike traditional investment funds, a
hedge fund is often not public and open only to a select few of investors.
Hedge funds usually charge outlandish fees for their investment
management service, and the managers of the fund are usually under high
pressure to submit superior performance and investment returns. The very
nature of hedge funds and their ability to maintain secrecy away from the
public eye give rise to many controversial practices that tainted the hedge
fund industry.
The name George Soros became a household name and a quintessential

representation of capitalism when, in September of 1992, Soros pocketed an
estimated $1 billion in one day and nearly $2 billion dollars over time by
short selling (short selling is when the investor profits when the value of
financial product falls, in this case, the value of British Pound) the British
Pound. His trade on the British Pound is widely regarded as the greatest
currency trade of all time, and Soros himself became one of the richest men
in the world. What Soros did was brilliant: during the period, Britain was part
of the European Exchange Rate Mechanism, or ERM. The term was that
Britain agreed to keep the British Pound’s exchange rate within a certain
range in comparison to the German mark. Soros sensed that the British
Pound was inherently overvalued against the mark, and predicted that the
fixed exchange rate would soon become afloat and collapse once the reality
catches on.
Having sensed the opportunity, Soros began to build a massive short

position against the British Pound, amounting to $10 billion at its height.
The magnitude of Soros’ bet was so powerful that when the Bank of England
tried to stabilize the exchange rate by burning through its currency reserves,
it failed to find enough funding to support the British Pound. Under immense
political and economic pressure, the British government eventually decided
to abandon the ERM on Black Wednesday, September 16, 1992, allowing the
Pound to devalue. The painful withdraw from the ERM cost Britain an
estimated $3.3 billion, and all the while handing Soros billions of dollars.
Soros became known as “the man who broke the bank of England”.
Soros’ career as a hedge fund manager was undoubtedly one of the most
colorful chapters of his life. He is arguably the most accomplished investors

of his time, and one of the greatest in history. For four decades years, Soro’s
fund returned more than 20% in annualized returns, and on two occasions,
returned more than 100%. $1 invested with George Soros in the 1950s would
be worth nearly $3000 in 2000. During the same period of time, the average
hedge fund returned a mere 7.53%, and very few were able to consistently
achieve a high return for more than a couple of years. When asked about his
trick, Soros contends that it is his theory of reflexivity that gave him the edge
in the game. “My conceptual framework enabled me both to anticipate the
crisis and to deal with it when it finally struck. It has also enabled me to
explain and predict events better than most others. This has changed my
own evaluation and that of many others. My philosophy is no longer a
personal matter; it deserves to be taken seriously as a possible contribution
to our understanding of reality.”
The Philanthropist and The Conspiracy Magnet
As one of the foremost philanthropist, George Soros donated more than $32
billion to his philanthropic agency, The Open Society Foundations. Soros
began his philanthropy work as early as 1979, pledging to support non-
violent liberal democracies around the world in an attempt to “build vibrant
and tolerant democracies whose governments are accountable and open to
the participation of all people.” In 2001, Soros ended his four-year run as
hedge fund manager and activist investor to become a full-time
philanthropist. Today, Soros’s foundation has active philanthropy operations
in more than 50 countries, mostly in central eastern Europe and Russia, but
also in Asia, Africa, Latin America, and the United States.
Most notably, Soros is known for his political support for non-violent
democracies in post-Soviet Eastern European states. According to
Waldemar A. Nielsen, an authority on American philanthropy, “[Soros] has
undertaken … nothing less than to open up the once-closed communist

societies of Eastern Europe to a free flow of ideas and scientific knowledge
from the outside world.” His funding of pro-democratic movements in
Georgia, for example, were considered crucial for the success of the Rose
Revolution. For more than three decades, Soros relentlessly fought against
political oppression. Financial Times called Soros “the standard bearer of
liberal democracy and open society.”
Needless to say, Soros’ fight against authoritarian regimes has attracted the
attention of many critics. Soros was portraited by anti-Semitic groups as a
mastermind of the universe who throttles sovereign governments for
financial gain. Conspiracies ran rampant. It seemed as though Soros was
behind every political movement in the world. In one extreme case, he was
even the target of an assassination attempt. A pipe bomb was placed in the
mailbox at Soros’s Katonah, New York home on October 22, 2018. Although
Soros was left unharmed, the attempt goes on to show the immense
opposition facing Soros. “I’m blamed for everything, including being the
anti-Christ,” scoffs Mr. Soros. “I wish I didn’t have so many enemies, but I
take it as an indication that I must be doing something right.”
The Philosopher and The Public Intellectual
Soros devoted much of his life elaborating the theory of reflexivity. First
published in his book, The Alchemy of Finance, the theory of reflexivity is the
guiding principle of Soros life, and one that he relentlessly professed to the
world throughout his career. When I first learned of his theory, I dismissed it
as the sort of nonsensical advice that one finds in a timeshare presentation.
However, upon further exploration and deeper consideration, I was shocked
to realize the wealth of wisdom concealed within Soros’ words.
Soros argues that humans are inherently imperfect in their understanding of
the world. People make decisions based on imperfect knowledge, which in

turn renders the decision irrational and biased. We live in a world whose
complexity far exceeds our capacity to decipher it. As a result of our attempt
to understand the world, we discovered natural sciences such as
mathematics and physics. This has allowed us to achieve enormous success
and discover theories that withstand the test of reality. Objective truth such
as those in math and physics enabled us to develop simplified models that
are applicable in real life. Then, given the level of success we have achieved
in natural science, we attempted the same methodology for social science:
that is, we tried to quantify the world we live in using various assumptions
and simplifications. In doing so, we developed various branches of study
such as economics. Modern economic theories, for example, rest upon the
assumption of equilibrium. However, this practice of quantification and
modeling, argues Soros, has far-reaching implications when free-thinking
participants are involved.
First of all, free-thinking participants are once again inherently biased in their
decisions. Moreover, this bias can happen without the participant even
realizing it. When the participant makes a decision that they think is rational,
but is irrational in essence, a bias occurs. Soros calls this the principle of
fallibility. Then, Soros went on to argue that the decisions made by thinking
participants affect the course of events. For example, when an investor
believes that stock A will rise in value, he will invest in that particular stock
and his action will directly impact the value of the stock. In other words,
Soros believes that perception about reality affects the course of the event
that eventually shapes reality. The two work in a circular manner, where
changes in one will inevitably affect the other, and both are unpredictable
without knowing the other. This, declared Soros, is the theory of reflectivity.
To understand his theories in practice, consider the stock of Amazon. In its

early stages of operations, Amazon was perceived to be a powerhouse for
innovations and a future leader of e-commerce. The perception, whether it

was true or not, caused Amazon’s stock price to skyrocket. The high price of
Amazon’s stocks then made it easier for the company to finance its
operations, despite the fact that Amazon never turned a profit in its early
stages. The ease of financing and the ability to maintain this particular
perception have helped Amazon to grow into the technology giant it is today.
Consider, however, that if Amazon hadn’t received the level of support it did
from investors, would it still be able to achieve the same results? Modern
economics would argue that since stock prices are reflections of the reality,
so long as Amazon itself hasn’t changed, it will be able to achieve the same
results regardless of what people’s perceptions are. But reality rarely plays
out as the economists expected. As in the case of Amazon, since
perceptions are formed in part due to reality, and reality is affected in part
due to perceptions, it is impossible to distinguish the results Amazon has
achieved as solely a contribution of either reality or perception. That is to say
that since reality and perception engage each other in a circular, or reflective
manners, it is impossible to understand the course of events and the effect
without considering both.
Guided by the theory of reflexivity, Soros challenges the basic assumptions

made by modern economics such as the idea of equilibrium and rational
participants who supposedly make decisions in their best interest. It is easy
to see that the theory of reflexivity is not one developed by Soros, but rather,
it is merely discovered and elaborated on by Soros. In his wise words, Soros
argued that “when my critics say that I am merely stating the obvious, they
are right – but only up to a point. What makes my propositions interesting is
that they contradict some of the basic tenets of economic theory. My
conceptual framework deserves attention not because it constitutes a new
discovery, but because something as commonsensical as reflexivity has
been so studiously ignored by economists. The field of economics has gone
to great lengths to eliminate the uncertainty associated with reflexivity in

order to formulate universally valid laws similar to Newtonian physics. In
doing so, economists set themselves an impossible task. The uncertainty
associated with fallibility and reflexivity is inherent in the human condition.”
Having written some 14 books, George Soros still refers to himself as the
“failed philosopher.” By contrast, I would contend that it is only the society
that refuses to recognize his thought that has failed. Many of the criticisms
of Soros are centered around his career as a finance guru and his political
view. But too often we as a society let criticisms of this kind discredit the
work that public intellectuals like George Soros actually do. Irrespective of
unfair criticisms against him, Mr. Soros is a public intellectual by any
measure. Public intellectuals serve an important social function: criticism.
They ask questions so that truth might be unearthed, and then they question
the truth so that it might be perfected. Such is the function of the public
intellectual, and such is the work of Mr. Soros. He devoted his life to the
unearthing of truth. His innate tendency to question the world surrounding
him gave rise to his great wisdom, but it was his eagerness and willingness
to share his thoughts that made him a public intellectual. For decades, Mr.
Soros exemplified his thinking through actions. He is the embodiment of
liberalism, the pinnacle of critical thinkers, the defender of truth, and most
importantly, the public intellectual that we refused to recognize.
https://www.ft.com/soros

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George Soros: The Public Intellectual that We Refused to Recognize – MarketSkeptics 9/19/23, 8:46 PM

George Soros: The Public Intellectual

Named Financial Times’ Person of the Year of 2018, George Soros is a

From A Lawyer’s Son to A Philosopher

Born to a lawyer’s family in 1930 and coming from a well-to-do middle-class

When Soros graduated in 1952, he found himself in a rather awkward

The Man Who Broke the Bank of England

The name George Soros became a household name and a quintessential

Having sensed the opportunity, Soros began to build a massive short

colorful chapters of his life. He is arguably the most accomplished investors

The Philanthropist and The Conspiracy Magnet

undertaken … nothing less than to open up the once-closed communist

The Philosopher and The Public Intellectual

Soros argues that humans are inherently imperfect in their understanding of

the world. People make decisions based on imperfect knowledge, which in

To understand his theories in practice, consider the stock of Amazon. In its

innovations and a future leader of e-commerce. The perception, whether it

Guided by the theory of reflexivity, Soros challenges the basic assumptions

to great lengths to eliminate the uncertainty associated with reflexivity in

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