Magazine article Foreign Policy

The Imperfect World of George Soros

Magazine article Foreign Policy

The Imperfect World of George Soros

Article excerpt

George Soros cites Isaiah Berlin as an important intellectual influence, so it makes sense to see Soros through one of the Riga-born philosopher's best-known lenses--the division of the world into foxes and hedgehogs. In his public life, Soros is a broad-minded fox: As a hedge fund manager, his success rested on his ability to make many different bets every day. In his philanthropy, Soros is foxy too, supporting, under the broad umbrella of "open society" dozens of causes in dozens of countries.

But intellectually, Soros is a more narrowly focused hedgehog. He has been pondering, articulating, elaborating, and publicizing variations on one big idea for more than half a century. The way he describes that central thought today is "the significance of imperfect understanding as a motive force or determinant of history."

Over the years, Soros's written expositions of this concept have sometimes met with bafflement, even as his financial prowess and philanthropic accomplishments have been widely admired. For Soros himself, though, his big idea and many public initiatives are intimately connected; his intellectual framework, he believes, is what has made him good at everything else. And, to his delight, after years of struggling to be accepted as a public intellectual, the turmoil in the world economy has finally made the rest of us more receptive to his insight.

"The present moment is a potent illustration" of how imperfect understanding shapes bad outcomes, Soros told me when I interviewed him recently for FOREIGN POLICY. "We have had z5 years of a superboom, interspersed by financial crises. Each time, the authorities intervened by reinforcing the credit and leverage in the economy, until it became unsustainable. Then you had the crash of 2008, where the financial system actually collapsed and had to be put on life support, which consisted of substituting sovereign credit for the financial credit that was no longer credible."

Soros sees this boom-and-bust cycle as a real-world example of his theory, illustrating how flawed ideas shape events: "It was all due to a false dogma which postulated that financial markets tend towards equilibrium."

Of course, there's a bit of a contradiction at the very core of Soros's big idea: He is absolutely, zealously, passionately certain that all our knowledge of the world is imperfect. He knows for sure we can never know anything for sure.

One way Soros squares this in real life is to relentlessly apply his theory of imperfect knowledge to himself. His business partners say that his investing genius isn't some oracular power to always make the right trade. What he's good at is knowing when he's wrong--and cutting his losses. And knowing when he's right--and doubling down.

Soros takes particular pleasure in spotting his own mistakes. "In 1997, I thought that global capitalism was unsustainable," he reminded me. "And yet it lasted another 11 years!" Soros traces his own acceptance of volatility to his teenage experience of a world transformed: the Nazi invasion of Hungary when he was the 13-year-old younger son of a comfortable Budapest household. The Soros family survived, and George learned the necessity of responding to revolutionary change. "I had the guidance of a father who had a similar experience as a prisoner of war in Russia in World War I," he said. "I had a family history of turbulent times. And that gave me a personal advantage in managing these far-from-equilibrium situations" Soros has been arguing for his ideas in the public arena for decades. But, he told me, "my ideas were dismissed as the indulgence of a successful speculator." With the onset of the financial crisis--a textbook example of the impact of imperfect knowiedge--Soros has been getting more respect as a thinker. "Since the crisis, there is more recognition in the value of recognizing the role of imperfect knowledge, he said.

Of course, Soros doesn't restrict himself to the abstract realm of philosophy. …

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