He survived both the Nazi and Soviet occupations of Hungary to become one of the world's wealthiest people. George Soros, who stumbled upon finance at the age of 14 trading jewelry to French soldiers in war-torn Europe, spoke to University faculty, students and community members Friday in coordination with the Centennial Symposium for Karl Popper presented by the Forum for Contemporary Thought.
Soros, now 71, illustrated how the philosophy of Karl Popper helped mold his development both as a global financial speculator and as a philanthropist.
"I started reading Karl Popper as an undergraduate at the London School of Economics between 1949 and 1951" Soros said.
Popper was then a prestigious member of the London school's faculty. A small, feisty man who relished intellectual conflict, Popper was notorious for his rash interactions with students and other members of the faculty. Nevertheless, Soros grew enamored with Poppers' writings.
"Karl Popper's philosophy has had a formative influence on my entire outlook on life," Soros said. "It has affected not only my thinking, but also my actions."
Soros admitted that Popper's philosophies molded his understanding of financial markets and economic principles.
According to Soros, financial markets are susceptible to a force known as the Human Uncertainty Principle. In its essence the HUP states that while humans have knowledge, it is always tainted with an element of judgment or bias. The HUP is related to the Heisenberg Uncertainty Principle of quantum physics, which reflects the uncertainty of electron movements. Financial markets are equally unstable: rather than tending toward equilibrium, markets experience boom and bust cycles.
Soros' financial success is due to this understanding of the fallibility of the market. He saw the market as nothing more than a collection of human actors, whose perceptions of the current financial situation greatly determined the future. Therefore, Soros' ability to predict market trends was largely because of his acknowledgment that people were not always rational as classical economics predicted.
In managing his hedge fund, Quantum Fund, Soros had the freedom to exploit the erratic ups and downs of the market and its participants. Soros' skillful piloting of hedge funds has made him a financial guru often compared with Warren Buffet.
Hedge funds were largely unknown on Wall Street until the mid-1960s when Soros' first fund was created. Soros expressed his enthusiasm for hedge funds in his biography by Michael Kaufman.
"There was no limit to what you could do," Soros said. "You could sell short, you could buy, you could leverage. So there were no holds barred -- it was a case of everything goes."
Operating within the law and the SEC were the only confines to a hedge fund manager. And without a doubt Soros could manage his funds: $1,000 invested in Soros' Quantum Fund in 1969 would have blossomed to over $4 million in the year 2000, an annual rate of return of more than 32 percent!
It comes as no surprise that George Soros' current net wealth is approximately $7 billion. But for all his financial success, Soros' philanthropic efforts are legendary. "With the help of Popper's philosophy I made more money than I had personal use for," he said. "I reflected long and hard on what I wanted to do with it, and that's when I established the Open Society Foundation."
The 'open society' became the guiding light behind Soros' philanthropic efforts. Having survived two totalitarian regimes -- which Soros described as 'closed societies' -- the establishment and promotion of open societies is the primary goal of his foundations. Although the notion of an open society is ill defined, it can be described as a society receptive to internal criticism and improvement. The totalitarian Nazi and Soviet regimes presumed ideological perfection and were therefore 'closed' to such improvements.
Soros' first attempts at fortifying an open society began in Soviet-controlled Eastern Europe in 1984. In Hungary, Soros sought to foster cultural and intellectual activities free of the party state apparatus. Today Soros' foundations operate on an annual budget of more than $420 million and deal with a wide variety of regions and disciplines, ranging from English instruction in China to the democratization of Burma. While his philanthropic efforts have been lauded worldwide, Soros' reputation as an arbitrager and currency speculator add an interesting polarity to his personality.
In September of 1992 Soros speculated that the British pound would fall. It did. On Black Wednesday as the day became known, the pound was devalued by 20 percent. Soros walked away with $2 billion from the incident. The British people bore the brunt of the devaluation, and Soros gained global notoriety. It is this dichotomy between the speculator and the philanthropist that contributes to Soros' mysterious raison d'
tre.
And in the Dome Room of the Rotunda, no one heckled Soros or challenged his convictions.
"It was wonderful to be able to see one of the authors of our class readings in person," fourth-year College student Charles Crimmins said. Soros' "On Globalization" is on the reading list for Political Development.
The only complaint was that there were empty chairs in the audience.
"It was a great event for the University to have such a well-known person, but it was a pity that not as many students knew about it ahead of time. The University should have advertised more," second-year College student Taner Hastan said.
Indeed, it's not everyday that a multibillionaire visits Grounds.
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