Soros | Robert Slater

Summary of: Soros: The Life, Ideas, and Impact of the World’s Most Influential Investor
By: Robert Slater

Introduction

Prepare to dive into the life and ideas of George Soros, one of the world’s most successful investors, whose philosophy and investment strategies have made him billions. In this summary of Robert Slater’s book, ‘Soros: The Life, Ideas, and Impact of the World’s Most Influential Investor’, you will explore Soros’ unique approach to investing, based on crowd psychology and contrarian principles, and his phenomenal achievements in the financial markets. You will also learn about his philanthropic endeavors aimed at building open societies, his influence in global politics, and his deep engagement in intellectual life.

George Soros: The Greatest Investor

George Soros made billions by betting on crowd psychology and “herd instinct” in the financial markets instead of quantitative financial analysis. He started his legendary Quantum Fund in 1969 and only lost money in one year, 1981, attributing his success to being a contrarian investor. Soros began donating to philanthropic causes, with a focus on promoting political and economic freedom in the world. His investments in Russia caused a $2 billion loss, but he remained undeterred, believing his work had prevented chaos in the country. Soros remains one of the world’s most successful investors, with a track record better than his competitors, including Warren Buffett and Peter Lynch.

The Courageous Life of George Soros

George Soros grew up in Hungary during World War II, where his father taught him to be self-confident and handle difficult situations. Soros learned the value of taking risks in moderation and that perception and reality can differ widely. Soros left Hungary alone at age 17 and studied at the London School of Economics, where he was mentored by philosopher Karl Popper. In New York, Soros became a valuable addition to any trading firm and started his own funds, including the Quantum Fund. Soros made his most famous and profitable trades by betting against the British pound in 1992. He advocated for better regulation of hedge funds and disclosed his investment strategies to educate government regulators. Despite setbacks such as the 1987 New York stock market crash, Soros continued to make money and engage in intellectual life while giving away substantial amounts of money through his charitable campaigns.

George Soros, born Dzjchdzhe Shorash in Hungary in 1930, experienced a horrific awakening when the Nazis invaded Hungary in 1944 and began deporting Hungarian Jews to concentration camps. Soros’s father, Tivadar, had already been a given traumatic experience as a prisoner in World War I, which he used to teach George valuable lessons. Tivadar taught George that people will do anything to survive in frightening times and encouraged his self-confidence and the ability to handle difficult situations. Tivadar taught George to solve problems using nontraditional methods and trained him to take risks in moderation. From this experience, Soros learned that perception and reality can differ widely.

At the age of 17, George left Hungary alone for London, where he studied economics at the London School of Economics. There he discovered the works of philosopher Karl Popper, who taught him how to use some of Popper’s philosophical insights and change the world. This idea later led to Soros’s decision to begin his charitable campaigns. Soros arrived in New York in 1956, and in the early days, he had only $5,000. But his knowledge of the London markets made him a valuable addition to any New York trading firm, and soon, he found a job as an arbitrageur and later as an analyst. Choosing stocks successfully gave him the confidence to start his own funds, the offshore First Eagle Fund and the Double Eagle hedge fund, started in 1967 and 1969, respectively. These funds were not open to U.S. investors other than Soros.

In 1973, Soros joined forces with Jimmy Rogers and transformed the Double Eagle Fund into Soros Fund Management, which traded commodities, stocks, and bonds. From 1969 to 1980, the fund increased 3,365%, compared with the 47% growth of the Standard and Poor’s index. In 1979, the Quantum Fund was renamed, and the fund continued to grow and suffered setbacks such as the 1981 bond market debacle and the 1987 New York stock market crash. Soros’s most famous and profitable trades occurred in 1992 when he bet against the British pound, anticipating that the London would raise interest rates to defend the pound, but it would eventually devalue. Soros’s funds made $1 billion. By 1993, the Quantum Fund’s profits, as well as those of other major hedge funds, attracted Washington’s attention.

As various governments started to investigate hedge funds, Soros called for better regulation. He said that bubbles result from widespread “trend-following,” and hedge funds control less than 1% of the daily foreign exchange market, so other sources were causing the currency volatility. Soros disclosed that he put 60% of his investments in individual stocks, 20% in “macrotrading,” or wagers on currencies and global stock indices, and 20% in Treasury bills and bank deposits. Despite the decline in the 1987 New York stock market crash, Soros continued to make money and engage in intellectual life while giving away substantial amounts of money through his charitable campaigns. His contributions to society make him an admirable figure whose legacy will inspire generations to come.

Soros’s Theory of Reflexivity

George Soros, a former philosophy student, developed an investment theory based on the idea that economics is not a science as humans are not objective. At the heart of his “theory of reflexivity” is the notion that investors’ flawed perceptions and emotions become critical in determining stock prices, and gaps between perceptions and reality can shape events. Soros urges investors to identify markets heading for a “boom-bust sequence,” take a contrarian position, and combine reflexivity-based reasoning with intuition to achieve good results. Soros is an exceptional investor, with qualities of stoicism, open-mindedness, knowledge, self-confidence, and flexibility, dealing in world markets using various financial instruments. He capitalizes on the herd instinct and interacts individually with his traders, encouraging them to explore opposing opinions, asking them probing questions, and urging them to rethink their assumptions and trading positions based on new data. When it is time to make significant decisions, Soros acts quickly, often within 15 minutes.

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