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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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George Soros was far more than a man who made a few billion dollarsBy 1994, the myths surrounding Soros were so pervasive that Washington was beginning to pay attention. If indeed a George Soros could move markets, and if fortunes could be made or lost by the actions of one man, was he not a danger? Should George Soros not be reined in? That became one of the main themes surrounding the man who by the mid-1990s had scaled a height in the fiial world few others had even attempted. As the worlds greatest investor, he had amassed more money than most people will ever see in one lifetime, or a hundred lifetimes. Yet, that fact only partly accounted for the mystique surrounding him. George Soros was far more than a man who made a few billion dollars. Far more than the Man Who Broke the Bank of England, as The Economist called him. Far more than the Man Who Moves Markets, as he was dubbed by Business Week. Money, as it turns out, at one time had only marginal appeal for Soros. He did not set out to be a world-class investor, to make huge amounts of money. He had yearned instead to be a man of ideas and had always found it more comfortable to move in the realm of the intellect than that of fie. Yet, he found he had a gift for earning money - a great deal of money. It seemed to come easily. Perhaps that was why he felt tainted by money. He wanted to do more with his life than simply accumulate wealth. Not that Soros considered fiial speculation immoral or thought it mere gambling. He made no excuses for what he was doing; he simply did not get a kick out of it. Soros yearned to make a contribution to others-a contribution that would be remembered. He pictured himself as a philosopher rather than a fiier. He liked to call himself a failed philosopher, as a kind of reminder of what he had once tried to do in his early years but had abandoned. His great dream was to add knowledge to the world, knowledge about the way the world worked, about how human beings functioned in that world. As a student, Soros had begun to search for such knowledge. His quest drew him into the world of philosophy, and for a time he wanted to be a professor of philosophy. He studied economics, but he always seemed to be more of a visitor to that world than a permanent resident. Feeling cheated by the way economics was taught to him, Soros thought economists lacked a practical understanding of the way the world worked. They dreamt big dreams, talked only about ideal situations, and made the mistake of thinking that the world was a very rational place. Even at that early age, George Soros knew very well that the world was far more chaotic than economists would have people believe. As he began to formulate his own theories: theories of knowledge, theories of history, and in time, theories about fie, Soros anchored his convictions to his bedrock belief that the world was highly unpredictable, thoroughly irrational-in short, hard to figure out. He tried to advance those theories in book form but had a difficult time making them understandable and readable. Sometimes even he had a hard time fathoming what he had written. Frustrated that the intellectual world was too difficult to conquer, he set out to find worlds that he could conquer. The decision was, in one sense, easy. He had to make a living anyway. Why not try to show all those economists that he understood the workings of the world better than they did by making as much money as possible? Soros believed that money would give him a platform from which he could expound his views. Making money, in short, would help him to be a philosopher after all. The world he entered, the world of high fie, carried the potential for great rewards. The risks, however, were daunting. It was no place for the faint of heart. Perhaps the timid enjoyed a few good years. But eventually, the strain got to them, the strain of being responsible for other peoples money. The price was high, paid in the currency of lost sleep, leisure time, lost friends, a lost home life because all hell was breaking loose in the fiial markets. In time, the faint of heart found other work. Soros, in contrast, was not faint of heart. He seemed to be icecool. He displayed no emotion. When an investment paid off, he took satisfaction. When it did not, he did not run to the nearest roof or skyscraper. He was calm, even-tempered; rarely did he laugh hysterically but rarely did he get morose. He was, he liked to say, a critic; indeed, he eventually joked that he was the worlds highest-paid critic. The term suggested something of an outsider, someone above the battle. I am a critic of the processes. I am not an entrepreneur who builds businesses. I am an investor who judges them. My function in the fiial markets is that of a critic, and my critical judgments are expressed by my decisions to buy and sell. Though he had been in the investing business since 1956, first in London, then in New York, his career truly started in 1969. It was then that he launched his own investment fund called the Quantum Fund. He remained active in it - except for a few years in the early eighties - for the next 25 years. In the late eighties, he adopted a lower profile, spending most of his time on his philanthropic activities. He always, however, stayed in touch with the people who were handling his funds. Quantum was one of the first offshore funds that was freely available to non-American investors. Most other offshore funds were limited by American law to 99 investors and ordinarily required a minimum investment of at least $1 million. It was also a hedge fund, an ultrasecretive investment partnership of wealthy people who were willing to take incredible risks with their money in order to get even richer. Soross fund sold short, used complex fiial instruments, and borrowed large quantities of money-strategies not available to mom-and-pop investors. When hedge funds began years earlier, a small group of managers adopted a strategy of mixing their stock acquisitions. These funds were hedged in the sense that managers divided their portfolios between long positions on stocks that would profit if the market rose and short positions on stocks that would profit if they fell. Soros and a number of other hedge-fund kings discarded that strategy and moved beyond the American stock market, betting on broad global shifts not just in stocks but in interest rates, currenciesthe overall direction of fiial markets. On an average trading day, Soross funds were buying and selling $750 million of securities. And the results he achieved were nothing short of astounding. If someone had invested $100,000 in 1969 when Soros established the Quantum Fund, and reinvested all dividends, he or she would have been worth $130 million by the spring of 1994 - a compound growth rate of 35 percent. Achieving this kind of return on a much smaller fund, say one of $50 or $100 million, would be considered remarkable; to do so with a multibillion-dollar portfolio has amazed Wall Street. A share in Soross Quantum Fund that sold for $41.25 in 1969 was worth $21,543.55 by early 1993; it would have paid out a large amount in cash distributions as well. By June 1994, that share cost $22,600. To qualify as a member of the Quantum Fund, one needed to invest a minimum of $1 million. Soros owned, according to most reports, onethird of the Quantum Funds. Soros had not obtained his money the old-fashioned way. The nineteenth-century captains of American industry-entrepreneurs like Rockefeller or Carnegie-had obtained wealth by building things, by producing oil and steel. George Soros neither owned nor ran his own corporation. Nor did he have any other power base. His specialty was nimble moves in the fiial markets, using a great deal of capital. Though small in physical stature, Soros looks rugged, athletic. He has cropped, wavy hair and wears wire-rimmed glasses. Some think he looks like an economics professor or a ski instructor. He speaks English excellently, though a slight trace of a Hungarian accent remains. One writer described him as an intense, squarely built man with a wrinkled brow, an angular chin, and a thin mouth. His hair is cut en brosse. He has a first, slightly harsh voice. . . . Somehow people expect Soros to be a gruff fellow, and they are surprised that he looks no different from most others. He doesnt look particularly wolflike, wrote The Guardian. His relaxed air and lilting Hungarian accent lend him the style of a European grandee. His forehead is furrowed, suggesting hours spent pondering the state of the world-an impression of scholarship which he is eager to encourage. To a writer for The Observer, Soros seemed to it right into the European mold. He is a slightly built, elegant man stamped with the indelible courtliness and restrained irony of Austro-Hungarian cafe society. In an earlier age one could easily have imagined him sipping his mocha over chess with Trotsky in the old Cafe Central in Vienna. The Independent, the British newspaper, summed up Soross looks this way: He is no glitzy Gordon Gekko, antihero of that quintessentially eighties movie, Wall Street. He looks a decade younger than his years, perhaps as a result of his compulsive tennis playing and lack of interest in the fashy lifestyle that New York offers to the seriously rich. He neither drinks nor smokes, and his taste in food is modest. He comes across like an earnest, rather untidy Middle European professor. By the late seventies and early eighties, Soros found the pain of investing to be too severe; it was the pain that came from running an investment fund that had grown way beyond what Soros thought was a manageable size. He was, however, a survivor. He had learned that art from his father, and he had practiced it during World War lI hiding from the Nazis in 1944 in Budapest. To survive in the fiial markets sometimes meant beating a hasty retreat. Thats what Soros did in the early eighties. He adopted a low profile. He let others handle the fund. And he came to a fateful conclusion. He wanted something more from life than success in the investment world. Since he was no hedonist, money could bring him only so much. He wanted to turn his money to good use. Since he needed no approval from family or boards of directors, once he decided how to spend money, he could go ahead and spend it. That kind of freedom, that kind of power, induced him to think at length and carefully about his options. Eventually, he settled on a grand project to encourage open societies, first in Eastern Soviet Union. Soros had left Hungary not abide political systems that had been ruling his country-first fascism in World War II, then communism in the postwar years. The closed societies that had sprouted throughout Eastern Europe and in the Soviet Union offended him, for he was a firm believer in the kind of political and economic freedom that flourished in America and in Western Europe. Others-frequently Western governments, sometimes private foundations-had tried to make a dent in these societies. Never, however, had a private individual from the West sought to make such far-reaching changes. Soros believed he was equal to the challenge. Just as he had taught himself to do with his investments, he would start slowly, monitor his progress carefully, spend his money prudently. His hope-and it was a very long-term hope-was to pry open these closed societies. Using his own fiial resources, he wanted to plant seeds among those people in Eastern Europe and the Soviet Union who would in turn, however gradually, influence their own countries to adopt the Western-style freedoms that Soros cherished. To have an impact without arousing suspicion would be hard, to win the approval of the political authorities for his efforts might be impossible. He wanted, however, to give it a try. He actually began his aid efforts in South Africa in 1979, but that was a failure. Turning to Eastern Europe, he established a base in Hungary in 1984. Later, he established himself elsewhere in Eastern Europe and in the Soviet Union. Just getting a toehold in some of these countries was an achievement, given the suspicions and hostilities of their governments. In time, though, Soros Foundations blossomed. By the mid-nineties, he was donating hundreds of millions of dollars to these foundations. In 1992 and 1993, Soros gave away $500 million and made commitments to give away another $500 million. In 1993, he donated more to Russia than many Western governments had, even after he had proclaimed the situation there cataclysmic. George Soros, the worlds greatest investor, had become George Soros, the worlds greatest philanthropist. He had become the most important private Western donor between the Danube and the Urals. Praised by many as a saint, damned by cynics as an intruder, Soros had finally found a way to make a difference, to gain some respect, and to do something outside the precincts of Wall Street and the City of London. The philanthropy aimed at opening up closed societies gave him far more satisfaction than accumulating all that money. It also gave him far more exposure. He liked the publicity-indeed he was eager for it, because he was interested in letting the world know that he was not simply an exceptionally rich man. Yet Soros was not entirely content, for he sensed that he would be expected to lay bare his secretive world of investing in the process. He wanted publicity, but only good publicity. He wanted to remain a private figure as much as possible, but his profile was too high, his accomplishments too substantial, his reach too vast. Once Soros understood that it was impossible to escape the searchlights of public scrutiny, he sought to exploit his newfound fame. He had always veered away from revealing his investment positions. Suddenly, he became talkative, making public declarations about what parts of the fiial markets he liked. He had never shown any great interest in international affairs. Yet, there he was, offering advice in public on a whole variety of foreign policy issues, from NATO to Bosnia, hoping to attract the attention of the worlds leaders. He especially wanted American politicians to take notice. In the short term, Soross talkative spree backfired on him. He won no new respect. He was accused of an excessive case of hubris. Now in his mid-sixties, Soros was adamant in asserting that he was a philanthropist first and foremost and that his investment days were well behind him. He continued to try to keep as low a profile as possible with respect to his investments. Yet stardom had been thrust on him because of his 1992 coup against the pound. And he himself seemed to court a certain amount of publicity. He was quite prepared to let the world in on all of his philanthropic activities. He continued to guard his private investment world even as the public sought to discover more and more how this man had become the worlds greatest investor. The story that follows is an attempt to examine the life and career of this remarkable man, both the public and private worlds of George Soros. |
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