Emperor Soros’s new clothes

10 May 2008

Matthew Lynn says hedge-fund pioneer and currency speculator George Soros is still a brilliant player of markets — but as a philosopher, frankly, he’s incomprehensible

But, of course, this is George Soros we’re talking about, and he’s a man who now prefers his speculations to be philosophical rather than financial. He’d like to be known as a thinker of stature. ‘To make a contribution to our understanding of reality would be my greatest accomplishment,’ he said in one recent interview.

But is he actually saying anything worth hearing? In reality, Soros gets away with a lot on account of being very rich. He is, without question, a superbly incisive investor, one of the best of his generation in the world, but as a writer and thinker his work varies from the incomprehensible to the plain weird. Put his views under a microscope and it’s surprising anyone takes them seriously at all. Indeed, although Soros keeps warning us about the crisis of global capitalism, it may well be that what he’s really discussing is the crisis of George Soros.

The Hungarian-born Soros is among the most interesting characters in the financial world. Having fled his native country after the second world war, he settled in Britain and studied at the London School of Economics before making his way into the financial markets, eventually starting his own private investment company, which evolved into the Quantum Fund. With Quantum, Soros virtually invented the hedge-fund industry. Investors gave him money and he took bold gambles with it: in return he and his team took 20 per cent of any profits. It was a fabulously lucrative business model, turning Soros into one of the first billionaires of the industry. In the first ten years of its existence, the Quantum Fund made average annual returns of more than 40 per cent and wealthy New Yorkers flocked to put money into the fund.

But Soros laboured in relative obscurity, known mostly to his own investors and Wall Street insiders. That was until 1992, when he bet big against the pound, convinced that the Conservative government would eventually be forced out of the ERM. That trade made Soros another fortune. More importantly, it made him a financial celebrity, loved by investors and hated by politicians: an official in Thailand once labelled him an ‘economic war criminal’.

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Alan Scott

May 8th, 2008 6:41pm Report this comment

Soros is obviously a man of great intelligence, strategical analytical capacity etc. Would have made a good Roman Emperor in the time of Justinian, perhaps. But his confusion of the worth of financial skills - and in him,there can be no doubt about that - with philosophy or the understanding of or empathy with the human condition, is evidence of his Cyclopean condition. And I yield to noone in my admiration of his philanthropical activities.
It is yet again a reflection of our celebrity obsessed culture - that a person who excels in one sphere is automatically assumed to be competent to act in/ pronounce upon/be listened to in other spheres.

Fredd Kambo

May 9th, 2008 2:08pm Report this comment

George Soros did not invent the hedge fund industry. Alfred Winslow Jones did so in 1949, including the practice of charging the fee of 20% of performance. Hedge funds were in fact quite popular in the 1960s, a popularity that declined in the following decades. It could be argued that Soros and men like him ignited their resurgence to the fashinable status they enjoy today. A philosopher, he is not however.

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