July 25, 2023

George Soros is a name that evokes a range of emotions worldwide. For some, he symbolizes business acumen and philanthropic ideals; for others, political manipulation. But who is this man really, who controls a fortune of $8.5 billion?

Early Years

George Soros, born György Soros on August 12, 1930, in Budapest, Hungary, hails from a Jewish family. His parents, Tivadar and Erzsebet Soros, raised him amidst relative affluence, but their life dramatically changed with the onset of World War II. Facing the threat of genocide, the Soros family survived unimaginable hardships. To save his family, Tivadar devised a false narrative that they were Christians and procured counterfeit documents to substantiate this claim. This experience deeply influenced the young György. He later asserted that his ability to perceive things "as they could be, not as they are," emerged during those times.

After the war, Soros moved to London where he attended the London School of Economics (LSE). Here, he encountered the works of renowned philosopher Karl Popper, which profoundly shaped his perspectives on society and economics.

The Man Who Beat the Bank of England: The Billion-Dollar Story of George Soros1

Career in Finance

After graduating from the LSE in 1952, Soros began his career at Singer & Friedlander in London. In 1956, he moved to the US and started working at the investment bank F.M. Mayer on Wall Street in New York, specializing in European securities. In 1959, he joined Arnhold & S. Bleichroeder, where he rose to the position of vice-president. By 1963, he had set up his first investment fund called 'Double Eagle', which, after ten years, was renamed 'Soros Fund Management.' At this point, Soros left Arnhold & S. Bleichroeder to focus exclusively on his own fund.

Under his guidance, 'Soros Fund Management' grew substantially, was renamed 'Quantum Fund,' and became the foundation of his wealth and fame in the investment world. In September 1992, George Soros reached the zenith of his business success when he 'broke' the British pound. This operation, now known as 'Black Wednesday,' garnered Soros billions of dollars in profits and attracted global attention. He earned the moniker 'the man who broke the Bank of England,' making him renowned not just in the business realm but also among the general public.

At that time, Europe was operating under the European Exchange Rate Mechanism (ERM), a system of exchange rates within the European Monetary System. The system entailed that the currencies of participating countries were kept within a certain fluctuation corridor. The British pound sterling was included in this system, with a stipulation to maintain its rate within specific limits against the German mark. However, amidst mounting economic pressures and currency market speculations, maintaining this established rate became problematic.

Soros saw an opportunity for speculation in this situation. His Quantum Fund began aggressively selling pounds, thereby escalating pressure on the currency. This was a so-called 'bear raid' - Soros and his team were selling currency they effectively did not own, hoping to buy it back later at a lower rate and profit from the price difference.

On September 16, 1992, 'Black Wednesday,' the Bank of England was forced to announce the devaluation of the pound and its exit from the ERM, despite numerous attempts to support the currency through interest rate hikes and currency market interventions. This led to a plummet in the value of the British currency - the pound fell by 15% against the German mark and 25% against the US dollar. George Soros reportedly made about $1 billion overnight, making him one of the most famous currency speculators in history, and the Quantum Fund, one of the most successful hedge funds.

How Soros and Quantum Fund Make Their Earnings

One of Soros' fundamental principles is his 'theory of reflexivity,' which perceives markets as unstable and unpredictable systems that behave irrationally. Hence, he actively applies speculative and arbitrage strategies, trying to profit from short-term price fluctuations and market imbalances. Soros and his Quantum Fund generate earnings by actively using various investment tools and techniques, including the purchase of stocks, bonds, commodities, currencies, and derivative financial instruments. For instance, Soros invested in the stocks of technology companies in the late 1990s and profited by exiting these stocks before the 'dotcom bubble' burst in 2000.

However, there's always a risk in investing, and even the most successful investors can make mistakes. George Soros too has made mistakes. Some trades have brought him and the Quantum Fund significant profits, while others have led to substantial losses. Nonetheless, Soros has managed to maintain his status as one of the most successful and influential investors in history, and his strategies and approaches have had an impact on the entire financial world.

From 'The Man Who Broke the Bank of England' to Philanthropy

George Soros is more than just a legendary businessman. His interests are broader and extend far beyond Wall Street. He is actively involved in philanthropy, using his enormous fortune to support various charitable projects. In 1979, Soros founded the Open Society Foundations (OSF), which has become one of the largest philanthropic organizations in the world. The foundation implements projects in more than 120 countries around the world. Here are a few types of such projects:

Education and Science: The Foundation supports a wide range of initiatives, from programs to assist children from disadvantaged families to programs aimed at supporting academic research and universities. In 1991, Soros founded the Central European University in Budapest.

Human Rights Protection: OSF funds organizations and movements fighting for the protection of human rights, including the rights of migrants, refugees, the LGBT+ community, and other vulnerable groups.

Justice and Law Enforcement: The foundation supports projects aimed at fighting corruption, improving the functioning of the legal system and criminal justice.

Healthcare: OSF actively participates in tackling some of the most critical health issues, such as HIV/AIDS, tuberculosis, and drug addiction.

Media Freedom: The foundation supports independent media and journalists who face censorship or persecution.

As previously mentioned, one of the goals of OSF is to support civil associations that defend human rights and seek to influence political changes in transition economies or where human rights and democracy are under threat. Soros's active work in this direction has led him to become the centre of various conspiracy theories. The billionaire is often accused of organizing colour revolutions and mass protests in various countries. However, as many media outlets note, Soros and his Foundation did not directly control or organize these revolutions. As for the accusations against him, they often come from authoritarian governments or political forces that see OSF's activities as a threat to their power.

For instance, in 2018, OSF was forced to cease its operations in Hungary due to constant pressure and antagonism from the government of Viktor Orban, which accused the Foundation of undermining national security and interfering in the country's internal affairs. Among other events often associated with Soros are the "Rose Revolution" in Georgia (2003), the "Orange Revolution" in Ukraine (2004-2005), and the "Tulip Revolution" in Kyrgyzstan (2005).

Which Books Soros Wrote and What He Warned About

George Soros is not only a financier and philanthropist, but also a keen commentator, thinker, and writer. He has authored several books and numerous articles and essays. In them, he combines analysis of economic and financial trends with political and social issues, making his works interesting for both professionals and a broad audience.

Among his books:

"The Alchemy of Finance", 1987 - in this book, Soros outlines his views on finance and economics, including his "theory of reflexivity". This theory suggests that decisions about buying and selling securities are based on expectations of future prices. These expectations are purely psychological, so they can and should be influenced for one's own advantage (through the media, primarily).

"Underwriting Democracy", 1991 - in this book, Soros shares his thoughts and experience supporting the transition to democracy in Eastern Europe after the fall of communism.

"The Crisis of Global Capitalism: Open Society Endangered", 1998 - in this work, Soros analyses the financial crisis of 1997-1998 and its consequences for the world.

"The Tragedy of the European Union: Disintegration or Revival?", 2014 - the book is a dialogue between Soros and journalist Gregor Schmit, in which they discuss the future of the European Union and Russia's role in world politics.

Quotes from Soros's works reflect his thought processes and views on economics, politics, and society. Here are some of the most famous ones:

– "I'm not afraid to be a contrarian and go against the crowd."

– "Market prices are always wrong in the sense that they present a biased view of the future."

– "Markets are a reflection of our collective consciousness, but they are far from perfect."

– “There is no point in being confident and having a small position”.

– “I'm only rich because I know when I'm wrong”.

– “The more complex the system, the greater the room for error”.

– "Financial markets, no matter how hard we try to predict them, will always be full of surprises."

– "To others, being wrong is a source of shame; to me, recognizing my mistakes is a source of pride."

– "I chose to do good because it is more satisfying for me."

– "Misunderstanding and misrepresentation of how things work is the source of many, if not most, mistakes in politics."

– "If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring."

– "It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong."

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