Academics From Hungary

"If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring."

"Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected."

"Americans, sadly, are now victims who have turned into perpetrators. Indeed, since September 2001, the war on terror has claimed more innocent victims than those terrorist attacks. This fact is unrecognized at home because the victims of the war on terror are not Americans. But the rest of the world does not draw the same distinction, and world opinion has turned against America."

"The supremacist ideology of the Bush Administration stands in opposition to the principles of an open society, which recognize that people have different views and that nobody is in possession of the ultimate truth. The supremacist ideology postulates that just because we are stronger than others, we know better and have right on our side. The very first sentence of the September 2002 National Security Strategy (the President's annual laying out to Congress of the country's security objectives) reads, "The great struggles of the twentieth century between liberty and totalitarianism ended with a decisive victory for the forces of freedom and a single sustainable model for national success: freedom, democracy, and free enterprise." The assumptions behind this statement are false on two counts. First, there is no single sustainable model for national success. Second, the American model, which has indeed been successful, is not available to others, because our success depends greatly on our dominant position at the center of the global capitalist system, and we are not willing to yield it."

"George Soros: Actually, president Mandela asked me, "How could South Africa protect itself against speculators like you?" And I told him. I wrote him a memo, trying to give him the best advice I could on how to reduce the exposure of South Africa to speculative attack. Steve Kroft: That's the old "stop me before I kill again" approach, right? You're telling him, "This is what you can do to stop me." George Soros: Whether I or somebody else does whatever is happening in the markets really doesn't make any difference to the outcome. I don't feel guilty, because I'm engaged in an amoral activity which is not meant to have anything to do with guilt."

"George Soros: I think that I am being blamed for everything. I am basically there to make money. I cannot and do not look at the social consequences of what I do."

"Steve Kroft: In the last two years, you have been blamed for the financial collapse of Thailand, Malaysia, Indonesia, Japan and Russia. George Soros: All of the above. Steve Kroft: All of the above. Are you that powerful? George Soros: No. I think there's a great misunderstanding. Steve Kroft: The prime minister of Malaysia said that the region spent 40 years trying to build up its economy, and along comes a moron like Soros with a lot of money, and it's all over. He called you a criminal. George Soros: It's easier for him to blame an outside force than to admit that they were mismanaging their economy and their currency. The French finance minister talked about hanging speculators from lamp posts."

"A global society does not mean a global state. To abolish the existence of states is neither feasible nor desirable; but insofar as there are collective interests that transcend state boundaries, the sovereignty of states must be subordinated to international law and international institutions."

"It is time to recognize that financial markets are inherently unstable. Imposing market discipline means imposing instability, and how much instability can society take? ... To put it bluntly, the choice confronting us is whether we will regulate global financial markets internationally or leave it to each individual state to protect its interests as best it can. The latter course will surely lead to the breakdown of the gigantic circulatory system, which goes under the name of global capitalism."

"The global crisis is caused by pathologies inherent in the global financial system itself."

"Financial markets are supposed to swing like a pendulum: They may fluctuate wildly in response to exogenous shocks, but eventually they are supposed to come to rest at an equilibrium point and that point is supposed to be the same irrespective of the interim fluctuations. Instead, as I told Congress, financial markets behaved more like a wrecking ball, swinging from country to country and knocking over the weaker ones. It is difficult to escape the conclusion that the international financial system itself constituted the main ingredient in the meltdown process."

"The development of a global economy has not been matched by the development of a global society. The basic unit for political and social life remains the nation-state. International law and international institutions, insofar as they exist, are not strong enough to prevent war or the large-scale abuse of human rights in individual countries. Ecological threats are not adequately dealt with. Global financial markets are largely beyond the control of national or international authorities."

"We live in a global economy, but the political organization of our global society is woefully inadequate. We are bereft of the capacity to preserve peace and to counteract the excesses of the financial markets. Without these controls, the global economy, is liable to break down"

"I rely a great deal on animal instincts. When I was actively running the fund, I suffered from backache. I used the onset of acute pain as a signal that there was something wrong in my portfolio. The backache didn’t tell me what was wrong — you know, lower back for short positions, left shoulder for currencies — but it did prompt me to look for something amiss when I might not have done so otherwise."

"The prevailing wisdom is that markets are always right. I take the opposition position. I assume that markets are always wrong. Even if my assumption is occasionally wrong, I use it as a working hypothesis. It does not follow that one should always go against the prevailing trend. On the contrary, most of the time the trend prevails; only occasionally are the errors corrected. It is only on those occasions that one should go against the trend. This line of reasoning leads me to look for the flaw in every investment thesis. ... I am ahead of the curve. I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded."

"On the abstract level, I have turned the belief in my own fallibility into the cornerstone of an elaborate philosophy. On a personal level, I am a very critical person who looks for defects in myself as well as in others. But, being so critical, I am also quite forgiving. I couldn't recognize my mistakes if I couldn't forgive myself. To others, being wrong is a source of shame; to me, recognizing my mistakes is a source of pride. Once we realize that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes."

"My peculiarity is that I don't have a particular style of investing or, more exactly, I try to change my style to fit the conditions."

"Go for the jugular."

"The bureaucratic method of building an integrated Europe has exhausted its potential."

"The United States would not be called upon to act as the policeman of the world. When it acts, it would act in conjunction with others. Incidentally, the combination of manpower from Eastern Europe with the technical capabilities of NATO would greatly enhance the military potential of the partnership because it would reduce the risk of body bags for NATO countries, which is the main constraint on their willingness to act. This is a viable alternative to the looming world disorder."

"Economic theory is devoted to the study of equilibrium positions. The concept of equilibrium is very useful. It allows us to focus on the final outcome rather than the process that leads up to it. But the concept is also very deceptive. It has the aura of something empirical: since the adjustment process is supposed to lead to an equilibrium, an equilibrium position seems somehow implicit in our observations. That is not true. Equilibrium itself has rarely been observed in real life — market prices have a notorious habit of fluctuating."

"The act of lending can change the value of the collateral"

"I made two major discoveries in the course of writing: one is a reflexive connection between credit and collateral; the other is a reflexive relationship between regulators and the economies they regulate"

"The truth is, successful investing is a kind of alchemy."

"Steve Kroft: You're a Hungarian Jew who escaped the Holocaust by posing as a Christian. And you watched lots of people get shipped off to the death camps. George Soros: Right. I was 14 years old. And I would say that that's when my character was made. Steve Kroft: In what way? George Soros: That one should think ahead. One should understand and anticipate events and when one is threatened. It was a tremendous threat of evil. I mean, it was a very personal experience of evil. Steve Kroft: My understanding is that you went out with this protector of yours who swore that you were his adopted godson. Went out, in fact, and helped in the confiscation of property from the Jews. I mean, that sounds like an experience that would send lots of people to the psychiatric couch for many, many years. Was it difficult? George Soros: Not at all. Maybe as a child you don't see the connection, but it created no problem at all. Steve Kroft: No feeling of guilt? For example, "I'm Jewish and here I am, watching these people go. I could just as easily be there. I should be there." None of that? George Soros: Well, of course I could be on the other side, or I could be the one from whom the thing is being taken away. But there was no sense that I shouldn't be there, because that was—well, actually, in a funny way, it's just like in markets: that if I weren't there—of course, I wasn't doing it—somebody else would be taking it away anyhow. Whether I was there or not, I was only a spectator. The property was being taken away. So I had no role in taking away that property. So I had no sense of guilt."

"Suppose Germany had developed two bombs before we had any bombs. And suppose Germany had dropped one bomb, say, on Rochester and the other on Buffalo, and then having run out of bombs she would have lost the war. Can anyone doubt that we would then have defined the dropping of atomic bombs on cities as a war crime, and that we would have sentenced the Germans who were guilty of this crime to death at Nuremberg and hanged them? But, again, don't misunderstand me. The only conclusion we can draw is that governments acting in a crisis are guided by questions of expediency, and moral considerations are given very little weight, and that America is no different from any other nation in this respect."

"If we focus our attention on the next twenty-five years we may say that development is likely to reach some point intermediate between the first bomb detonated over Hiroshima and processes which once initiated might put an end to all life on earth. Just what intermediate point will be reached within twenty-five years no one can tell."

"A great power imposes the obligation of exercising restraint, and we did not live up to this obligation. I think this affected many of the scientists in a subtle sense, and it diminished their desire to continue to work on the bomb."

"Another explanation for the failure of logic and observation alone to advance medicine is that unlike, say, politics, which uses a form of logic – mathematics – as its natural language, biology does not lend itself to logic. Leo Szilard, a prominent physicist, made this point when he complained that after switching from physics to biology he never had a peaceful bath again. As a physicist he would soak in the warmth of the bathtub and contemplate a problem, turn it in his mind, reason his way through it. But once he became a biologist, he constantly had to climb out of the bathtub to look up a fact."

"After the war ended, partly disgusted by the cruel use to which his beloved physics had been put, Szilard left professional physics to explore new pastures – in his case, biology... there was a more pragmatic reason. As Szilard put it, this was an age when you took a year to discover something new in physics but only took a day to discover something new in biology."

"By the time his ideas became accepted he had already forged ahead to take up a new attitude. Szilard himself illustrated this characteristic in a story which he liked to tell about himself. He served once on a jury in a murder case. When the first vote was taken, eleven jurors were in favour of convicting, but one — Szilard — was for acquittal. Since unanimity was required, the discussion was resumed and Szilard expounded his arguments. After some time another vote was taken; the result was again eleven to one, but this time eleven were for acquittal, and one for conviction: the odd vote was Szilard’s who had in the meantime changed his mind!"

"I had not been long back from Hiroshima when I heard someone say, in Szilárd's presence; that it was the tragedy of scientists that their discoveries were used for destruction. Szilárd replied, as he more than anyone else had the right to reply; that it was not the tragedy of scientists, it is the tragedy of mankind."

"The people who have sufficient passion for the truth to give the truth a chance to prevail, if it runs counter to their bias, are in a minority. How important is this "minority?" It is difficult to say at this point, for, at the present time their influence on governmental decisions is not perceptible."

"Even in times of war, you can see current events in their historical perspective, provided that your passion for the truth prevails over your bias in favor of your own nation."

"I sometimes have the feeling that I have lived through all this before and, in a sense, I have. I was sixteen years old when the first World War broke out, and I lived at that time in Hungary. From reading the newspapers in Hungary, it would have appeared that, whatever Austria and Germany did was right and whatever England, France, Russia, or America did was wrong. A good case could be made out for this general thesis, in almost every single instance. It would have been difficult for me to prove, in any single instance, that the newspapers were wrong, but somehow, it seemed to me unlikely that the two nations located in the center of Europe should be invariably right, and that all the other nations should be invariably wrong. History, I reasoned, would hardly operate in such a peculiar fashion, and it didn't take long until I began to hold views which were diametrically opposed to those held by the majority of my schoolmates."

"Even if we accept, as the basic tenet of true democracy, that one moron is equal to one genius, is it necessary to go a further step and hold that two morons are better than one genius?"

"A man's clarity of judgment is never very good when you're involved, and as you grow older, and as you grow more involved, your clarity of judgment suffers."

"All we had to do was lean back, turn a switch and watch a screen of a television tube. If flashes of light appeared on the screen it would mean that liberation of atomic energy would take place in our lifetime. We turned the switch, saw the flashes — we watched for about five minutes — then switched everything off and went home. That night I knew the world was headed for trouble."

"Science is progressing at such a rapid rate that when you make a prediction and think you are ahead of your time by 100 years you may be ahead of your time by 10 at most."

"In life you must often choose between getting a job done or getting credit for it. In science, the most important thing is not the ideas you have but the decision which ones you choose to pursue. If you have an idea and are not doing anything with it, why spoil someone else's fun by publishing it?"

"It is not necessary to succeed in order to persevere. As long as there is a margin of hope, however narrow, we have no choice but to base all our actions on that margin. America and Russia have one interest in common which may override all their other interests: to be able to live with the bomb without getting into an all-out war that neither of them wants."

"In order to succeed it is not necessary to be much cleverer than other people. All you have to do is be one day ahead of them."

"The most important step in getting a job done is the recognition of the problem. Once I recognize a problem I usually can think of someone who can work it out better than I could."

"A scientist's aim in a discussion with his colleagues is not to persuade, but to clarify."

"I'm looking for a market for wisdom."