Soros on Soros: Staying Ahead of the Curve

by George Soros with Byron Wien and Krisztina Koenen

Quick Summary

An extended interview-format autobiography of George Soros covering his investment philosophy, his theory of reflexivity in financial markets, his career as a fund manager at Quantum Fund, his political philanthropy promoting open societies, and his broader philosophical worldview. The book provides rare direct insight into one of the most successful macro traders in history.

Categories

• Trading
• Macro Trading
• Trading Philosophy
• Trading Memoirs

Detailed Summary

"Soros on Soros: Staying Ahead of the Curve" by George Soros, conducted in interview format with Byron Wien (investment strategist at Morgan Stanley) and Krisztina Koenen (journalist at Frankfurter Allgemeine Zeitung), published in 1995, represents Soros's attempt to provide a comprehensive summing up of his life's work in investing, philanthropy, and philosophy. The book evolved from a German-language interview publication into what Soros describes as "a summing up of my life's work" structured as a "Socratic dialogue."

Part One, "Investing and Global Finance" with Byron Wien, provides the most directly relevant content for traders. Soros discusses his strengths as an investor, his relationship with Warren Buffett, and the distinctive features of Quantum Fund's approach. He explains his use of derivatives, leverage ("leveraged to the hilt"), and his methods for measuring risk. Critically, Soros describes his concept of "intuition as an investment tool," revealing that physical discomfort (particularly backaches) sometimes served as early warning signals that his portfolio was mispriced.

The concept of reflexivity - Soros's central philosophical contribution to financial theory - receives extensive treatment. Soros argues that market participants do not merely passively observe market conditions but actively influence them through their decisions. This creates feedback loops where perceptions shape reality and reality then reshapes perceptions, generating boom-bust sequences that are inherent to financial markets rather than aberrations. He distinguishes this from the efficient market hypothesis, which assumes that prices accurately reflect available information.

Soros discusses his famous trade against the British pound in 1992, when Quantum Fund shorted approximately $10 billion in sterling ahead of the UK's forced exit from the European Exchange Rate Mechanism. He explains the analytical framework that led to the trade: the conviction that the Bundesbank would not lower interest rates sufficiently to allow sterling to remain within its ERM band, combined with the asymmetric risk profile where the downside was limited while the upside was enormous.

His discussion of characteristics of good investors is illuminating: he emphasizes character and intelligence, noting that the willingness to take risk is "the essential ingredient" and describing himself as "the insecurity analyst" who profits from recognizing his own fallibility. Soros contrasts "going against the herd" with the "messianic complex" he identifies in himself, acknowledging the fine line between conviction-driven contrarianism and dangerous overconfidence.

Part Two covers Soros's political views and philanthropic career, including his extensive work through the Open Society Foundations to support democratic transitions in Eastern Europe following the collapse of the Soviet Union. While less directly relevant to trading, these chapters reveal the philosophical framework - drawn from Karl Popper's "The Open Society and Its Enemies" - that informs Soros's approach to both markets and politics: the belief that all human constructs are inherently fallible and that recognizing this fallibility is the foundation of both good investing and good governance.

Part Three synthesizes the philosophical underpinnings of both Soros's investing and his philanthropy, presenting his concept of "dynamic disequilibrium" as a unified framework for understanding financial markets, political systems, and the human condition. The book concludes with Soros expressing hope that his ideas about reflexivity and open society will find wider acceptance, viewing the communication of these ideas as integral to their validity.