The New Paradigm For Financial Markets - George Soros
Chapter 1
The Core Idea
My starting point is that our understanding of the world in which we live is inherently imperfect because we are part of the world we seek to understand. There may be other factors that interfere with our ability to acquire knowledge of the natural world, but the fact that we are part of the world poses a formidable obstacle to the understanding of human affairs.
Understanding a situation and participating in it involves two different functions. On the one hand people seek to understand the world in which they live. I call this the cognitive function. On the other, people seek to make an impact on the world and change it to their advantage. I used to call this the participating function, but now I consider it more appropriate to call it the manipulative function. If the two functions were isolated from each other they could serve their purpose perfectly well: the participants' understanding could qualify as knowledge, and their actions could have the desired results.
Chapter 2
Autobiography of a Failed Philosopher
I have always been interested in philosophy. From an early age, I wanted to know who I was, the world into which I was born, the meaning of my life, and, even more, when I became aware of it, the prospect of my death. I started reading classical philosophers early in my teens, but the really important preiod came during the Nazi occupatio of Hungary in 1944 and afterwards, when I emigrated to England in 1947.
The year 1944 was the formative experience of my life. I shall not give a detaied account of it because my father has done it better than I could. Imagine a child of fourteen, coming from a middle0class background, suddenly confronted with the prospect of being deported and killed just because he is Jewish. Fortunately my father was well prepared for this far-fromequilibrium experience. He had lived through the Russian Revolution in Siberia, and that was the formative experience of his life. Until then he had been an ambitious young man. When World War I broke out, he volunteered to serve in the Austro-Hungarian army. He was captured by the Russians and taken as a prisoner of war to Siberia. Being ambitious, he became the editor of a newspaper produced by the prisoners. The paper was called The plank because handwritten articles were posted on a plank; the authors hid behind the plank and listened to the comments made by the readers. My father became so popular thta he was elected the prisoners' representative. When some soldiers escaped from a neighboring camp, their prisoners' representative was shot in retaliation. Instead of waiting for the same thing to happen in his camp, my father organized a group and led the breakout. His plan was to build a raft and sail down to the ocean, but his knowledge of geography was deficient; he did not know that all the rivers in Siberia flow into the Arctic Sea. They drifted for several weeks before they realized that they were heading to the Arctic, and it took them several months to make their way back to civilization across the tiaga. In the meantime, the Russian Revolution broke out, and they became caught up in it. Only after a variety of adventures did my father manage to find his way back to Hungary; had he remained in the camp, he would have arrived home much sooner.
My father came home a changed man. His experiences during the Russian Revolution affected him profoundly. He lost his ambition and wanted nothing more from life than to enjoy it. He imparted to his children values that were very different from those of the milieu in which we lived. He had no desire to amass wealth or become socially prominent. On the contrary, he worked only as much as was necessary to make ends meet. I remember being sent to his main client to borrow some money before we went on a ski vacation; my father was grouchy for a few weeks afterwards because he had to pay it back. Although we were reasonbly prosperous, we were not the typical bourogeois family, and we were proud of being different.
When the Germans occupied Hungary on March 19, 1944, my father knew these were not normal times and the normal rules did not apply. He arranged false identities for his family and a number of others. The clients paid; others received his help for free. Most of the survived. That was his finest hour.
Living with a false identity turned out to be an exhilarating experience for me. We were confronted by mortal danger, and people perished all around us, but we managed not only to survive but to emerge victorious because we were able to help so many others. We were on the side of the angels, and we triumphed against overwhelming odds. I was aware of the dangers, but I did not think they could touch me. It was high adventure, like living through Raiders of the Lost Ark. What more could a fourteen-year-old ask for?
After they heady adventures of the Nazi persecution, the situation began to deteriorate during the Soviet occupation. At first, the adventures continued, and we were able to maineuver sccessfully through perilous situation. The swiss consulate employed my father to act as the liaision officer with the Russian occupying forces. The Swiss were looking after the Allied interests at the time, so this was a key position. When the Allied Powers established their own representative officers, my father retired because he felt that if he worked for the Allies he would be too exposed. It was a awise decision- he avoided later persecution.
will continue..later
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