George Soros – Biography

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One of the most legendary investors of the past century has been George Soros. He turned his hedge fund into a money making machine by which he has not only been making billions of dollars, but he helped provide funding to needy people around the world. In 2011 he retired from running the Quantum Group of Funds and started paying more attention to his philanthropic activities .

A Short History

George Soros was born in Budapest, Hungary on 12th of August, 1930. His family background was Jewish and he was forced to hide his identity during World War II, when Nazis ruled Hungary. He was only 13 years old when his country was occupied by the Nazis. A really bad period in his life had just started. He lived in constant fear for his, and his family’s lives. Fortunately, he managed to flee to England in 1947 and escape form communism and repressions. Initially he worked as a railway porter for some time. Then he became a waiter at a restaurant. The last job outside finance he got was as a seller at a souvenir shop. He finally realized that such kind of jobs were not what he wanted to do for life. So, he wrote to every investment bank and financial institution he could find, asking for a job. He got just a few replies, one of which was from┬áSinger & Friedlander investment bank. This is how he got his first financial job, which was a helping accountant there. Everyday he had to make sure that the balance sheet of the company was OK, and many times numbers just didn’t add up. This made his boss not really happy about that. In 1952 he graduated from the London School of Economics, where he studied anti-communist philosopher Karl Popper. Popper’s philosophy had deep impact on the further development of Soros. Popper taught the difference between an “open” and “closed” society. Soros gravitated to the more universal open society. Over time Soros developed his own premises about building societies. Later he would name his philanthropic foundation ‘Open Society Institute’ in honor of the ‘The Open Society and Its Enemies’ work of Karl Popper.

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Several years later Soros moved to New York to become a trader and financial analyst. This happened in 1956. After the next fourteen years, he would work in different financial institutions, when finally a big change in his life was going to happen. In 1969 he founded an investment firm and named it Soros Fund Management, which became the key to growing his fortune. But the real money making part of his arsenal would become present three years later. In 1973 the ‘Quantum Fund’ was born. It was founded by ‘Soros Fund Management’ in partnership with the not so famous investor in that time – Jim Rogers. Soros worked in finance so that he could eventually finance his interests in writing and philosophy. He was working on a social theory called “Reflexivity theory” which was a tool for predicting and explaining market behavior such as financial bubbles. The main concepts of this work are very well explained in his book ‘The Alchemy of Finance’, which was written in the early 90s and became a commonly read book among finance students. I have read that book, and there are some amazing ideas in it. One of them is that markets are always in disequilibrium, which is the opposite to what the classic economy theory teaches. These ideas and conceptions about markets helped him to become one of the richest people in the world.

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The Man Who Broke The Bank Of England

Harald Dettenborn [CC-BY-3.0-de (http://creativecommons.org/licenses/by/3.0/de/deed.en)], via Wikimedia Commons

Harald Dettenborn [CC-BY-3.0-de (http://creativecommons.org/licenses/by/3.0/de/deed.en)], via Wikimedia Commons

In 1992, Soros became known as ‘The man who broke the Bank of England‘ by speculating against the Pound sterling, which made him a billionaire overnight. He managed to correctly predict, that England would not be able to stay in the ERM (European Exchange Rate Mechanism), which main purpose was to achieve monetary stability and reduce exchange rates variability in Europe, by fixing all European currencies to the newly developed instrument – ECU (European Currency Unit). Due to increasing inflation pressure, the British pound began devaluing, and The Bank Of England announced, that they would buy unlimited amounts of pounds to stop the depreciation and keep the fixed rate between its currency and the ECU. Soros knew, that this was impossible and started selling heavily the pound against other currencies. And when the reserves of BOE were depleted (as predicted) and the pound couldn’t be supported anymore, the latter simply started falling freely. At that time the size of the positions of George Soros and his partners had reached 10 billion dollars. This huge bet made them more than $2 billion in profits.

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Philanthrophy

Soros began his ventures into philanthropy in 1979, providing funding to black students at the University of Cape Town in South Africa. In the next five years he established a foundation in Hungary to promote education and culture. The more Soros became successful at investing, the more he expanded his interests in philanthropy. In 1986 Soros launched an Open Society Foundation in China that was shut down three years later. The center re-opened in the early 2000s, spreading awareness about HIV and AIDS programs.