BOOK REVIEW
By Cam R
Title: Soros on Soros: Staying Ahead of the Curve
Author: George Soros with Byron Wien and Krisztina Koenen
It’s hard not to have heard of George Soros if you are not
involved in the market, being the famous man who made a cool profit of one billion
dollars in one day. It’s especially harder not to be awed by his phenomenal trading skills if you are involved in the markets. How many traders can
genuinely claim to be in his league?
My first introduction to the man was from an indirect source however. I
had picked up The New Market Wizards
book and had really liked the interview with Stanley Druckenmiller.
And I was intrigued (and admittedly wide-eyed) when reading the famous phrase
that Soros uttered when Druckenmiller told him he had a position of a billion
dollars on a trade. “You call that a position?” Soros said dismissively, and
urged him to double it.” Boldness is certainly admirable.
So I was looking forward to reading Staying Ahead of the Curve, because unlike a biography, this was
more akin to a conversation with Soros himself. So did it shed more light
on the man and his methods? Let’s find out below.
Packaging - 5/5 (Hardcover)
A nice hardcover about B5 size. The paper quality is relatively
thick and of good quality, though it felt slightly rough to the touch. Not
something that will yellow much. I particularly liked the cover design. It’s simple,
clean, with the Soros name in big muted gold print (hinting of the midas touch
yes?) and a simple white serif font for the title. The picture of George Soros
is very appropriately chosen too. He’s leaning back, confident, relaxed and
very engaged in a conversation, which is exactly what the book is. Full marks
here!
Writing Style - 4/5
The whole book is divided into two parts, one geared more towards
investing and the second part towards his philanthropy, with each part
consisting of a couple of chapters. Structured as an interview, questions were asked
by Krisztina Koenen/Byron Wien, and then answered by Soros. The writing is
crisp, straight-forward and there is very little fluff. No complains here.
Trading Methods (Specifics) - 3/5
I guess that most people who are interested in George Soros would mainly be keen to learn more about how he trades. Imagine
you had an audience with Roger Federer, I suspect he would be flooded with tennis
related questions and not marketing or other non tennis related subjects. And so it is
here.
The bulk of it is found in the section “The Theory of Investing”, in which he shares his theory of reflexivity. A bonus is that his explanations and
answers are very concise here. This is infinitely more accessible than The Alchemy of Finance. Soros has obviously had the benefit of time to refine his
ideas, and he presents it succinctly now. I would in fact recommend reading
this first, ahead of The Alchemy of
Finance.
Here are some short excerpts:
Soros on the framework he uses in his investing:
“The main idea is that our understanding
of the world we live in is inherently imperfect. The situations we need to
understand in order to reach our decisions are actually affected by those
decisions. There is an innate divergence between the expectations of the people
taking parts in events and the actual outcome of those events. Sometimes the
divergence is so small that it can be disregarded, but at other times it is so
large that it becomes an important factor in determining the course of events.
That is not an easy idea to communicate.”
Soros on his general theory of reflexivity:
“Essentially, it has to be with the role
of the thinking participant, and the relationship between his thinking and the
events in which he participates. I believe a thinking participant is in a very
difficult position, because he is trying to understand a situation in which he
is one of the actors. Traditionally, we think of understanding as essentially a
passive role, and participating is an active role. In truth, the two roles
interfere with each other, which makes it impossible for the participant to
base any decisions on pure or imperfect knowledge.”
I really wish the interviewer had gone more into more depth in regards
to his trading. And with specific examples of some past trades he
has done, along with a dissection of them. Reverting back to the tennis analogy, there
are plenty of compilation videos on YouTube celebrating the greatest shots of
Roger Federer, so I was hoping for something similar in this regards too. It
seems such a waste to keep his other great trades (aside from the Pound trade) unknown and buried in the dark.
Trading Management (Soft Skills) - 4/5
The general idea that he is a trend
follower comes across very clearly. It is also quite clear that he knows he is
a trend follower. Most importantly, he knows the pros and cons of being a trend
follower – when to go with the herd and when to step aside. This reminds me of
Sun Tzu’s saying in The Art of War:
“If you know the enemy and know yourself, you need not fear the result of a
hundred battles.” It’s probably why Soros is known as one of the best loss
takers in the business, he is supremely confident in his own ability to win.
Here’s a short snippet on how he views
being a contrarian:
“Being so
critical, I am often considered a contrarian. But I am very cautious against
going against the herd; I am liable to be trampled on. According to my theory
of initially self-reinforcing, but eventually self-defeating trends, the trend
is your friend most of the way; trend followers only get hurt at inflection
points, where the trend changes. Most of the time I am a trend follower, but
all the time I am aware I am a member of the herd and I am on the lookout for
inflection points.
The prevailing
wisdom is that markets are always right. I take the opposite 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 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. My sense of insecurity is satisfied when I
know what the flaw is. It doesn't make me disregard the thesis. Rather I can
play it with greater confidence because I know what is wrong with it while the
market does not. I am ahead of the curve.”
Indeed, he is.
Trading Psychology (Mindset) - 4/5
Everything seems to boil down to his theory of his infallibility.
But he is very honest about his own failings, which I found very refreshing. It
is most certainly useful to understand how he thinks, for any one who is or aspires to be a trader. It does take a confident man to not only know
his weaknesses but to freely admit them.
A small part in which Soros discusses his strengths and
weaknesses:
“I think my analytical abilities are
rather deficient, but I do have a very strong critical faculty. I am not a
professional security analyst. I would rather call myself an insecurity
analyst. I recognize that I may be wrong. This makes me insecure. My sense of
insecurity keeps me alert, always ready to correct my errors. I do this on two
levels. On the abstract level, I have turned the belief in my own infallibility
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 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.”
Soros on risk-taking:
“What is there to say? Risk taking is
painful. Either you are willing to bear the pain yourself or you try to pass it
on to others. Anyone who is in a risk taking business but cannot face the
consequences is no good.”
Longevity - 4/5
I actually found this book very enlightening, and really like the
interview format. It makes flipping back to certain sections very easy. Unlike
a biography, there are no superfluous stories or descriptions to distract from
the key ideas he presents in the book. If you are receptive to his ideas and
his thoughts, this is definitely a book to have on your shelf.
Value - 2/5
It’s a very big picture book. There are no specifics, and you
probably need some experience, and also interest, in basic economics as well as
finance to really get what the book is offering. For anyone who has an
interest in the mindset and philosophy of George Soros though, this book is fantastic
value. If you have no interest in George Soros, I doubt this book would be of
much interest.
Things to Watch Out For -
This is really very much a big picture book, think broad
macro-economics and fundamentals. There is little to none on technical
analysis, so don’t expect anything on technical analysis here. Also, I'm not
sure how relevant is the portion of his philanthropy to actual trading
itself, so it’s just something to keep in mind. It might be better if he had a
single book dedicated solely to his philanthropic efforts.
Overall - 3/5
The book does do what it sets out to do, which is to have a
conversation with George Soros. It was very educational in some aspects, and
surprisingly, it was a very accessible read. I enjoyed it very much and would
recommend this book to anyone interested in having a greater insight into the
man.
Score Recap:
Packaging - 5/5
Writing Style - 4/5
Trading Methods (Specifics) - 3/5
Trading Management (Soft Skills) - 4/5
Trading Psychology (Mindset) - 4/5
Longevity -4/5
Value - 2/5
Overall - 3/5
Where to Buy:
If you found the above review helpful and want to buy the book,
please do consider buying it from my Amazon affiliate link below. The prices
are competitive, and any purchase goes a long way in supporting this site and
as a small motivation for me to continue working on this resource for you.
Thank you!Related Books
If you are interested to find out more about Soros's life, the biography titled Soros: The World’s Most Influential Investor is a pretty good account of it. Here's the link to my review of it. (Review Here)
Thanks for reading!
And do check back soon for new reviews!
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