The Biography of George Soros, the Financial Mastermind

Author: Michael Kaufman
Translator: Wang Bohong
Country: United States
Publisher:
Publish Date: 2003-02-12
Features: Shortly after, he went on a skiing vacation in Switzerland, managing to rediscover the drive to move forward. He wanted to use this skiing trip to reaffirm his self-esteem. To be more precise, he was aiming to punish an English relative who was an ophthalmologist. Soros knew this doctor feared he would become a burden, but also thought he was stingy. When they first met, this doctor-cousin took Soros to a luncheon at the Ophthalmological Society. After the meal, he gave Soros a one-pound note and asked him to buy some chocolate. Soros managed to refuse the kindness, but the other insisted he take it, so Soros left feeling very angry.
“I knew I was a annoying, arrogant, and sensitive 17-year-old boy, and I also knew my father had helped him find a job at the Jewish hospital in Budapest. But I thought it was inappropriate for him to give me a pound in such a dismissive way when I was poor.” After some thought, Soros decided to confront his cousin. He told him, “I want to go skiing in Switzerland. Can you lend me one hundred pounds?”
Half a century later, Soros claimed he borrowed money to punish this inappropriate cousin. He said, “My behavior was somewhat childish. But I knew he owed my father something, so when I was living on only three pounds a week, I borrowed one hundred pounds from him to go skiing on vacation. But from this incident, I realized I was still my father’s reflection. I was poor, I failed my English exam, but what mattered was the concept of skiing, which was more important in my life than money.”
In fact, money became very important. Soon after returning from Switzerland, he found himself so poor he only had enough money to buy a pot of tea. He felt overwhelmed with emotions, desperate to the bottom, but realized that since he had reached rock bottom, the only direction was upward. His father sent him more money, but Soros’s life remained monotonous and lonely. He took the entrance exam again, but this time, although he passed all the subjects, his grades were not good enough to get into the London School of Economics. Instead, he enrolled in Kendal City Technical College, which had no reputation or distinguishing features.
In September, when school was about to start, he felt no joy. Meanwhile, he heard about the Labor Party government-supported harvest program, which required urban residents to go to the countryside to help with agricultural harvesting. Despite many restrictions on his visa, Soros found he was eligible for the harvest program. When living in old barracks in the countryside and helping pick apples, the feeling of boredom disappeared—partly because there were young people and young women in the camp, which might solve the issue of sexuality, and partly because he could earn money. After a week of harvesting, his wages were three pounds, and because of the bountiful fruit harvest, the team introduced a reward system: for every extra box picked, he would earn an additional shilling.
After a few weeks, when the apples were picked and they moved on to pears, the team leader decided to reduce the bonus for picking an extra large box to half a shilling. So, at the age of not yet 18, Soros went on strike in protest. He found an independent contractor and, because the farmers were eager to harvest, agreed to pick an extra large box for an additional shilling. A few days later, Soros and others resumed picking pears. They lived in free barracks and did the work of independent contractors. The camp director, believing Soros had instigated trouble, kicked him out. However, Soros had no difficulty finding a place to stay nearby in another camp, where he continued to pick pears during the day and work at the canning factory at night to earn more money. This was the happiest time he had spent away from home.
He returned to London with some money, renting an apartment nearby with a Hungarian he had met in Hyde Park, Hervitz (Andren Herskovitz), and a Dutch student. The courses at the school were very ordinary; Soros majored in basic economics, took five compulsory courses, and had no group discussions either in class or outside. Soros was dissatisfied with this. He considered himself smart, young, and unsophisticated, having read the great works of Aristotle and others, and having survived the war, seen death, yet here he was in what he deemed a third-rate school, listening to teachers ramble on. This was not the destiny he had envisioned for himself. He began skipping classes frequently, sneaking into lectures at the London School of Economics, listening to the famous political science master and Labor Party chairman Harold Laski discuss the British constitutional tradition. Soros found the atmosphere and discussions at the London School of Economics much more enlightening and felt this was where he belonged. However, he was still an illegal immigrant, waiting for his luck to run out.
Later, a geography teacher at the London School of Economics spotted him and reported him to the. The told him that since he did not attend classes and was also sneaking into the London School of Economics, it was clear he did not care about the school and did not belong there. Thus, he was expelled.
Failing out further sank Soros into academia and pushed him to the bottom of society. His only hope was to apply to the correspondence department of the University of London. Though disappointed, he was no longer as discouraged as before. His long-standing frustration gradually faded, and he began dating girls and learning survival skills from Hervitz.
When the money from Budapest stopped coming, Soros was forced to take lowly jobs, most of which violated the restrictions on his visa. He washed dishes but soon developed a fever from the exhausting work. He also worked at a mannequin factory but was fired because he put on a wig incorrectly.
In the spring of 1949, he took the exam again, and this time his scores were high enough to get into the London School of Economics. By September, he could enroll. He rented a top-floor room alone in Chiswick, near the Thames. In the same building lived another student at the London School of Economics, who had many important books that Soros could borrow.
Good things came one after another. Soros found a job as a receptionist and lifeguard at a swimming pool. The swimming pool seemed to hold great significance in his life. During the war, his father had met him there; now, before entering the academic world worth exploring and beginning true learning, he had found a job that allowed him to study. The pool had few swimmers, so he could sit for long periods, reading books he had borrowed from neighbors and the library, delving into the works of Adam Smith, Hobbes, Ricardo, and Machiavelli, and understanding major ideas. He felt he had finally taken the right path. Many years later, when Soros had earned $10 billion, he said it was one of the happiest summers of his life.
For Soros, games always mattered. His father used sports and competitions to cultivate his competitive spirit, and his rivalry with his brother made him even more eager to win. Tennis player Ron Glickman knew Soros’s competitiveness and competitive nature deeply. When Glickman was young, Soros hired him to play tennis and partner with him in matches. Glickman said Soros was one of the most competitive people he knew and that he nearly treated competition as a physical need, like food and sleep. But Soros had absolute sportsmanship, respecting competition, and even when playing games with his first son, Robert, he would not deliberately let him win.
Robert, who now works at Soros Fund Management, believes his father did this to teach him the importance of survival, so he would not misjudge situations when faced with unfavorable circumstances in the future. However, as Soros’s work became busier, making money became his main way to vent his competitiveness. When he first started, he engaged in arbitrage with limited funds, developing the habit of acting quickly and seeking short-term gains. Later, people compared him to Warren Buffett because both had amassed incredible wealth at roughly the same time, but in reality, their fundamental approaches were completely different. Buffett sought to invest in undervalued companies and held his investments for decades, but Soros had no interest in managing companies or long-term investments. He moved in and out of the market frequently, with no emotional attachment to the companies he invested in—neither loving those that made him money nor hating those that lost him money. He believed in the flow of time and would tell his staff, “Invest first, then research.” He urged them to act decisively and quickly as soon as preliminary research suggested a profit. A correct decision at 10 a.m. might be wrong by 10:15 a.m., and an hour later could become a serious mistake. Working under this mindset required decisiveness and constant self-criticism to spot and correct mistakes early.
Many years later, when asked what the key to his success was, Soros said, “I probably make as many mistakes as any investor, but I usually spot them earlier and often correct them before they cause too much harm.”
However, even in the 1960s, when Soros was fully dedicated to his career and intensely involved in financial operations, he did not focus entirely on getting rich and was unwilling to admit he had found his life’s mission. While acknowledging that after earning $500,000, he had become more deeply involved in finance because of money’s allure, he insisted it was only a temporary detour—a temporary set aside of his philosophical studies, but not a of his dream to be a philosopher. He believed that making money was a game, and by definition, games could not be taken seriously. Life, on the other hand, was serious, and giving life and history meaning was a profoundly serious matter. Therefore, he still hoped to become famous through philosophy outside of Wall Street. He had once promised his wife and himself that if the time was right, he would abandon the pursuit of profit to explore universal truths.
In fact, even when operating fully in the market, Soros never forgot his philosophical studies. After dinner or on weekends, he would go to his desk to read, think, and write. When his first son, Robert, was at daycare, someone asked him what his father was busy with, and Robert seriously replied, “He’s busy typing.”
The path of philosophy is lonely, and its rules are quite complex. Because different schools often argue with each other, studying philosophy is difficult to gain gratitude or recognition, and there is no simple way to measure success. While Soros won wealth and praise from Wall Street, no one commented on his philosophical research except for a few encouraging words from Professor Popper when he was a year at the London School of Economics. Even no one knew that he was studying philosophy. But in the early years when he first came to the United States, he indeed pursued both financial operations and philosophical studies.
In 1962, his career hit a low point when he invested most of his savings in the Studebaker car company. Studebaker had once produced wagons used by Americans to settle the West, but in the 1960s, it was under intense pressure from General Motors, Ford, and Chrysler, struggling to survive. However, the company still worked hard to launch new models and diversify its investments. In addition to common stocks, Studebaker issued a class of preferred stock (A) with fewer rights and obligations than common stock, and its price was lower than that of common stock. Soros simultaneously bought the preferred stock and shorted the common stock, hoping that before the company turned around, the common stock would fall and the preferred stock would rise, allowing him to profit from both sides.
But fate was not on his side. The shorted common stock shot up, forcing him to continuously top up margin calls. As a result, the price difference between the common stock and the preferred stock widened, wiping out most of his savings and his brother’s savings. At the time, his brother was preparing to start a business, and if Soros had lost his money, the latter’s entrepreneurial plans would have been threatened. Therefore, Soros was in great distress during this period.
Eventually, Soros managed to make the money back, but this experience shook him deeply. He realized he was not as detached as he thought and that he, even more so, was already deeply entangled with money. Money became very important, and he could no longer treat financial operations as a game. He could no longer take the money game lightly, seeing it as a secondary task merely a means to achieve his dream of exploring philosophy. Therefore, the next year, Soros set aside abstract philosophical thoughts and focused more on foreign market investments at Wertheim Company.