Soros on Soros

In Hungary, there are so many personal attacks against Soros by the government that it made me curious. What does one of the richest men in the world stand for?

I have to confess I just downloaded the first book I found on Soros and boy oh boy did I hit the jackpot!? I have greatly enjoyed reading this book because it brought this topic to the surface that I have been struggling to articulate for ages. It's this idea of reality not just being a static thing. But a “living” being that responds to expectations, actions even thoughts. And this book finally cracked this for me. Thanks Soros <3

reflexive reality

We like to think of life as a sequence of facts. But nothing is further from the truth. Life is a complex environment where things are reflexive.

reflexive: directed or turned back on itself

To understand this concept better, imagine an electron field where all electrons move with some speed, hitting each other and changing directions. You would think that life is like that. You bump into your neighbor Electra, and she mentions this fancy new cryptocurrency called Dogecoin. You get excited and buy some. And just like that, people are interacting and changing the course of each other's movement. But this is wrong. It's off by an order of magnitude.

"And if you gaze long enough into an abyss, the abyss will gaze back into you." - Nietzsche

Life is a physical and a virtual electron field in the same time. Where the physical entities do interact with one another but also with this virtual field that each and every electron produces. Now the virtual field is a representation of the electron's idea of reality. In our case, Electra can talk with other humans and share a little piece of her own distinctive virtual reality: Dogecoin is great!

Since people generally communicate with others, these virtual fields are being updated all the time. This process is our best way to detect Reality. And usually, it's pretty darn close. Cause when virtual realities (people's thinking) and physical realities (people's actions) are in sync, electrons (and people) flow like water.

But just like Reality, people are imperfect. Sometimes, the virtual fields are not updated, and Chaos can slip through the cracks.

Just like water Chaos has two extreme states: dynamic and static disequilibrium to use Soros' fancy terminology. But for our purposes let's just stick with water. Water has three distinct states. Normal water (yes I just wrote that, deal with it), ice and steam. Since the interesting stuff happens at the extremes we will have a look at those.

Ice is when the rigid dogma is not catching up with Reality. It is when the electrons stop interacting with each other and responding to the real world. Think about the Soviet Union, where people just plain died of starvation because of horrible political decisions, economic policies, and brutal state control.

On the other hand, there is steam. Steam is in Soros' words when the “prevailing trend and the bias reinforce each other”. It is when some stimuli create a reinforcing feedback loop which by definition leads to a catastrophic collapse. Think about the audio feedback when the microphone and the speaker are too close. Leave long enough and the system breaks. But to bring you an economic example this is exactly what happened with the first big surge and crash of Bitcoin in 2013 (and in the second, and third, and fourth).

“Trend following speculation renders a freely fluctuating exchange system unstable and the instability is cumulative. The longer it lasts the more unstable it becomes.”

“The usual flaw is in people's values. What they believe to be fundamental turns out to be reflexive." What Soros tries to explain is complexity theory. Effectively, he is saying that the market (or Reality) is a complex adaptive system (moving target) instead of the common prevailing wisdom at the time, the efficient market hypothesis. And as he very well sniffed, much of the contemporary business has shifted into the complex domain. And every once in a while, things become chaotic.

Now this is why honest communication is hugely important so that virtual realities, can update themselves.

But if not, that's why we have investors… These people are getting paid to correct the market. Now time is of the essence because the two extreme ends are generally ephemeral (except like the soviet union). But if you catch it you might be able to break a country. Just like Soros became famous as the man who broke England. But be cautious because Reality is not a linear set of facts. It's a reflexive thing. And when you bet against a nation, the nation can bet back against you…

And so the Japanese government realized that Soros' fund was indeed shorting the Yen and propped it back up, making them lose hundreds of millions in mere hours.

And here is the second big lesson. In a reflexive (complex) environment, the best is to act with speed AND the standard that you are wrong.

'i am wrong'

There were a few big winners of the 20th century and maybe none of them is as controversial as George Soros… The Hungarian investing genius was able to ride multiple financial waves and the last I checked his net worth was still in the realm of billions.

Now generally these genius people at their core act on a controversial idea. To bring you an example, in retrospect, it seems obvious that people act unconsciously (as well as consciously), but when Freud said this for the first time it was crazy. Or when Jeff Bezos first said that online shopping was going to be this massive thing, people thought he was nuts. At the time of Soros, the prevailing idea was that the market is: "efficient". Soros clearly believed that it was not.

Soros believes that the world is imperfect and therefore everything is "fallible". Which makes perfect sense. But the harder thing to contend with is that he built his value system on top of this idea. This is the cornerstone of his philosophy: "I am fallible". Now this might sound just like a good new age, pc policy but in my humble experience that is extremely hard to contend with.

Just imagine that you are willing to make bets for hundreds of millions of dollars, but at the same time thinking about being wrong. I think the uncertainty here would just crash most of us. I certainly have no idea, how he can act so certain with so much uncertainty. Nevertheless, this paradoxical value system hacking worked out pretty well for him. I suspect that this hack is what could unlock what Ken Wilber refers to as a “type 2” civilization.

open society

Now, the third and final theme at the heart of the book is the concept of open society. This is Soros' taking on Karl Popper's idea (from the book with the same title) and putting his wealth to share and prosper that idea.

Karl Popper's The Open Society and Its Enemies is a defense of liberal democracy and a critique of totalitarianism. He argues that societies should remain "open" by embracing critical thinking, democratic governance, and institutional mechanisms to prevent authoritarianism.

Although Soros "does not define" what open society means in a very liberal way, he does define it, by what it isn't: totalitarianism. This is genuinely not surprising because Soros grew up during the 2nd world war, and very much lived through the experience of totalitarianism himself.

What does surprise me is that the collapse of a closed society e.g.: the Soviet Union in Hungary, does not necessarily mean the birth of an open and democratic one. To be fair, Soros did try and put a lot of money (mostly through NGOs) to actively facilitate the opening of a new system. But after 5 years of trying it became obvious, that the Hungarian system was regressing, and he exited. As a Hungarian, I can attest, that after the Berlin Wall fell, people in power remained the same. And now 30 years later Hungary is still pretty much closed.

But coming back to the previous point of values. How can a nation, let alone human civilization, orient itself on a subjective value (such as the open society)? Isn't subjectivity its own worst enemy? Because how can we find common ground if the same thing means something different to us (e.g.: identity politics)? How can a subjective value be global?

These are some big questions I do not have answers for.

Just one more thing. Soros became concerned with the common good after hitting "escape velocity" in money. And that's a theme I see over and over again. I cannot stop wondering if the road to self-actualization goes through being rich first.