George Soros: Big Bets and Big Backlash

Morning folks, and welcome to today’s episode. It is called George Soros: Big Bets and Big Backlash.
Soros’s life is extraordinary. A Jewish teenager who survived the Nazi occupation, fled communist Hungary with almost nothing, and went on to build one of the most remarkable investing careers in modern history.
We’re talking about some of the boldest trades ever made. In his most famous bet — the one that led to the label “the man who broke the Bank of England” — Soros personally made around $650 million.
But the money is only part of the story. He also gave away roughly $32 billion, becoming one of the most polarising figures in finance and politics.
And while we’ll touch on that controversy, this episode is really about the trades — how he thought, how he positioned, and why they were so extraordinary. I love this story.
Enjoy.

George Soros was born on August 12, 1930, in Budapest, Hungary, as György Schwartz. He grew up in a prosperous, secular Jewish family.
After Nazi Germany occupied Hungary in 1944, Soros’ father organised forged Christian identity papers and safe arrangements for his family — and for others. He paid for a Hungarian official to take George and pretend he was his godson — allowing him to evade deportation to the concentration camps.
After the war, as Soviet control replaced Nazi rule, at the urging of his father, Soros immigrated to London, enrolled at the London School of Economics, and supported himself by working a series of low-paid jobs: railway porter, waiter.
At the LSE, Soros encountered the philosopher Karl Popper, and this had a huge impact on Soros’ life. Popper argued that no one ever possesses absolute truth, that human understanding is always flawed, and that societies function best when they remain open, self-correcting, and tolerant of dissent. Closed societies, whether fascist or communist, fail because they claim certainty. This gave Soros a philosophical framework that would later underpin both his investing and his worldview. But at this stage Soros had no intention of becoming an investor — his goal was to become a philosopher and work in academia.
But his grades weren’t strong enough, so he reluctantly turned to finance. In 1956, he moved to the US, where he worked in arbitrage — essentially spotting small price differences in the same asset across different markets and profiting from the gap.

His first big break came quickly — the Suez Crisis, also in 1956. When Egypt nationalised the Suez Canal — a key route for oil into Europe — it disrupted shipping and triggered major volatility in oil prices and currencies. Soros capitalised on the instability, moving quickly as prices swung wildly. As he later said of his trading style: “I was generally first in, first out.” And over the next four years, Soros continued to trade successfully, working at a conservative international investment firm.

We’re in the early 60s. In terms of his personal life, Soros kept a low profile. He was recently married and had three children.
By this stage he was not mega-wealthy but financially comfortable, and he takes a semi-sabbatical, spends a few years working on a philosophy book or treatise that he never publishes. He realises that he’s a better investor than philosopher, but what he does develop during this sabbatical is a theory he calls reflexivity.

Reflexivity, put simply, is the idea that markets aren’t driven just by hard facts, but by what people think is happening. If investors believe things are improving, they buy. Prices rise. That rise pulls in more buyers. And before long, the higher price starts to change reality itself — boosting confidence, shifting behaviour.
Belief affects decisions.
Decisions affect outcomes.
It’s a feedback loop, and this theory was very different to the prevailing view in economics at that time, where the belief was that markets were largely rational and prices reflected underlying fundamentals. And for Soros, reflexivity became central to how he traded for the rest of his career.

By the late 1960s, Soros persuaded his employer to let him manage a small pool of capital on an experimental basis. Instead of chasing small pricing errors, he made big bets on currencies, markets, and political change, and the results were exceptional — especially after teaming up with Jim Rogers. Rogers was younger and intense. He dug into data and balance sheets. Soros made the big calls — when to take risks, when to stop.

In 1970 he finally went out on his own, setting up Soros Fund Management, and his first decision was to bring Jim Rogers with him.

Then just one year later, the rules of global finance changed overnight — in a way that played straight to Soros’ strengths.

On Sunday night, 15 August 1971, President Nixon went on television and made a short announcement that had huge consequences. The United States would no longer exchange dollars for gold, bringing an end to the Bretton Woods system — the system that had governed global money since the end of the Second World War.

The Bretton Woods system tied the dollar to gold. Other major currencies were tied to the dollar. That arrangement kept exchange rates stable. You didn’t really trade currencies. You assumed they would stay roughly where they were.

Nixon’s decision broke that chain. Nixon did it because the US no longer had enough gold to back all the dollars in circulation.

Without gold anchoring the system, gradually governments were forced to let currencies float — rising and falling based on supply, demand, and confidence.

As a result, if traders believed a currency was in trouble, they sold it. That selling pushed the exchange rate down, the fall signalled weakness to others, and more traders rushed to sell — creating a self-reinforcing loop.

For Soros, this was reflexivity in practice. Talk about being the right person in the right place with the right theory. So he spent the next couple of years watching how currencies behaved. He tested ideas with real money, took positions, adjusted them, and learned how quickly expectations could move prices.

It was clear this strategy needed a different kind of fund, one that could move fast and use leverage.

So in 1973, Soros set up the Quantum Fund. And it’s important to note here — this wasn’t just about currencies — although currencies are where Soros makes his name and most of his money. Soros was applying his reflexivity idea more broadly, looking at how political decisions and global events could ripple through markets.

Returns through the mid-1970s were exceptional, well above thirty percent most years, and remember from the recent Paul Singer episode — the 70s were a brutal decade for most investors. Not for Soros. By the end of the 70s, he had a net worth of about $100 million.

But Soros was never interested in simply accumulating wealth. His philosophical background, combined with his experience of living under Nazi and communist regimes, had shaped how he saw power, systems, and control.

Once he had financial independence, he began applying that thinking outside markets.

In 1979, he launched his first major philanthropic initiative, funding scholarships for Black students in apartheid-era South Africa. He saw education as a way to weaken the system from within.

By 1980, Soros was at a peak, or his first peak. Institutional Investor magazine named him the world’s greatest money manager.

The numbers explained why.

From the early 1970s through to 1980, Soros’s funds gained roughly 4,200 percent. Over the same period, the S&P 500 rose about 47 percent.

Now we have to remind ourselves that Soros wasn’t working alone — he had Rogers in his corner and from the outside this looked like the ideal partnership. So when Jim Rogers announced in 1980 that he was leaving, it became one of the most famous break-ups in hedge-fund history.

There were a few different reasons for the split.

They were opposites. Soros moved fast. He trusted instinct and wanted total freedom to change his mind and act. Rogers was disciplined, methodical, and deeply data-driven, so there was always that tension between them.

Rogers wasn’t happy with the firm getting bigger and the management that comes with that. I get where he’s coming from here. When we were growing our business, I hated handling the management side of it — it started taking up all of my time.

And there was burnout. Rogers was still just 37, worth an estimated $14 million, and as he later put it:
“I didn’t want to be the richest man in the cemetery. I wanted to have a life. George was a workaholic; I had other things I wanted to do.”

So they split. I really admire Rogers because, man, he got out and lived life a little. He travelled around the world twice, both times making it into the Guinness Book of Records, continued investing, built up a $300 million fortune — a very interesting character. He might be worth an episode at some stage.

The impact of Rogers leaving was pretty immediate.

In 1981, for the first time in its history, the Quantum Fund lost money — down roughly 22 percent.

Soros stepped back from day-to-day management, and this marked the end of the first golden era of the Quantum Fund. His personal life had also changed significantly. By now he had divorced his first wife and married for a second time in 1983.

In 1984 he returned to Hungary to open a foundation that would eventually be called the Open Society Foundations, a network aimed at shaping public policy by promoting democracy, government accountability, and human rights. The first initiative in Hungary was deceptively simple: distributing hundreds of photocopiers to universities and libraries. In a system built on information control, the ability to copy documents freely was quietly subversive.

And while Soros was semi-retired, he’d been quietly working on a huge trade.

So for context:

At the time, US interest rates were very high, which attracted money from overseas. Foreign investors bought dollars to invest in the US, and that demand pushed the dollar higher. A strong dollar helped keep inflation down, and that made the US economy look healthy.

But Soros thought the setup was dangerous.

It only worked as long as foreign investors kept sending money into the US. If that flow slowed — or reversed — the dollar would fall quickly. So he bet big against the dollar and put money into the Japanese yen.

For weeks, the dollar stayed strong. By September 1985, Soros was $200 million underwater.

Then, late on the evening of Sunday, September 22, 1985, everything changed.

Finance ministers from the world’s biggest economies secretly met at New York’s Plaza Hotel and announced a joint plan to push the dollar down. The dollar had become too strong — it was hurting US exports and creating trade tensions around the world. The agreement, later called the Plaza Accord, was meant to lower the dollar slowly and in a controlled way.

But Soros knew that it wouldn’t be slow or controlled — because this was his reflexivity theory in real time. Governments had just told the market which way they wanted the dollar to go. And once traders began selling dollars, that action alone would push the dollar down in a way that encouraged more traders to sell, so in short it wouldn't be controlled, it would be a frenzy.

And he was proven right because as soon as the markets opened on the Monday morning after the Plaza Accord meeting, the dollar fell sharply and the yen surged.

Soros wrote in his diary:
“This has been the killing of a lifetime.”

By the end of the year, the fund was up 122 percent and the Plaza Accord re-established Soros as the investor who understood how policy, belief, and markets collide.

But Soros wasn’t infallible.

Just two years later came Black Monday.

On October 19, 1987, global stock markets collapsed. The Quantum Fund was heavily exposed to US stock indexes. And within a week, the fund was down roughly $300 million — a painful reminder that even when you understand how markets behave, timing and positioning still matter.

Soros continued with his strategic philanthropy throughout the 1980s. In Hungary his foundation supported student scholarships and emerging democratic groups as the country loosened decades of communist control.

One of those democratic groups was called Fidesz. And one of its members was Viktor Orbán, who got a scholarship funded by Soros.

Fast forward to 2010, Orbán is now Prime Minister of Hungary, advancing a political philosophy that’s very much at odds with Soros’s worldview.

Over time, the conflict escalated.

Orbán’s government ran very public campaigns that portrayed Soros as a hidden external force. The language and imagery echoed themes long associated with anti-Semitic political propaganda.

And the effects extended beyond Hungary, to the extent that Soros has now been recast as the right and far-right’s bogeyman.

I’m not going to go too much into it, because there are plenty of other podcasts that cover this type of stuff, but my own take on it is simple.

Whatever you think of Soros politically, his philanthropy has played a meaningful role in supporting post-communist transitions, strengthening civil society, expanding access to education, and funding initiatives around drug policy, election monitoring, and marginalised communities.

And look — not every listener will agree with my politics. As I’ve always said, we can disagree and still be perfectly fine with each other.

And look, I’m not saying Soros is a saint.

There are question marks over some of his trades.

For example, in 1988 he bought shares in Société Générale, a French bank, after discussions about a possible takeover. The profit was modest by his standards — around $2 million — but regulators argued he had acted on non-public information. Soros denied wrongdoing, yet after a legal battle that stretched more than a decade, a French court convicted him of insider trading. Soros appealed, but the ruling was upheld by the European Court of Human Rights, and while they agreed that French law was "unclear," the court maintained that Soros, as an experienced investor, should have known his actions were illegal.

Now we’re still in 1988, and this is when Soros hired 35-year-old Stanley Druckenmiller to run the portfolio. Druckenmiller had earned a very strong reputation as a fund manager, where he was known for being aggressive but very precise. And over the next four years the fund performed very strongly under Druckenmiller, returning an average 30% every year.

And then came the trade that defined Soros.

In 1992, Britain was part of the European Exchange Rate Mechanism — the ERM — which meant the pound was tied to the German mark. On paper, that was meant to create stability.

But Britain was in a recession and needed lower interest rates to get the economy moving again.

Germany, newly reunited, needed higher rates to control inflation. To keep the pound pegged, Britain had to follow Germany — even though it was bad for its own economy.

Both Soros and Druckenmiller saw that it couldn’t last, so they started shorting the pound. Druckenmiller’s initial plan was a $1.5 billion position.

But for Soros, the situation was so lopsided that he believed it would be foolish not to bet big, because Britain could only keep interest rates high for so long before doing serious damage to its own economy. So this is what he said to Druckenmiller:
“If the setup is that clear you don’t make a small bet. You go for the jugular.”

And that’s exactly what they did.

The fund leveraged itself roughly ten to one, building a $10 billion short position against the pound — a bet larger than the entire value of the Quantum Fund itself. If they were wrong, the fund would likely be wiped out.

And Soros didn’t stop there.

Most hedge funds hide their positions. Soros did the opposite. He talked. He let it be known that he believed the pound couldn’t hold. Because he understood that if enough traders became convinced the pound would fall, their selling would make it fall.

The pressure had been building for weeks. It burst on Wednesday, September 16, 1992 — Black Wednesday — when traders began selling pounds in huge volumes.

The Bank of England went into full defence mode. By late morning, it raised interest rates from 10 percent to 12 percent, hoping higher yields would attract buyers for the pound.

The market ignored it.

The selling continued.

The government announced another emergency hike later that day — this time to 15 percent. It was an act of desperation, and that’s exactly how the markets saw it.

That evening, Britain withdrew from the ERM.

The pound collapsed.

The Quantum Fund made more than $1 billion on the trade. Soros himself earned an estimated $650 million. Headlines crowned him “the man who broke the Bank of England.”

The irony was that Britain was better off for it. Freed from being tied to the German mark, the pound fell, interest rates came down, and the economy began to recover.

For Soros, it was the ultimate proof of his reflexivity theory. Belief drives action. Action changes outcomes.

And look — before anyone starts jumping into reflexivity and investing all their money on it, it’s worth slowing down for a second. As we’ve seen, and as we’ll see again, Soros wasn’t infallible, and many economists have long been sceptical of reflexivity because it’s hard to model, hard to test, and doesn’t give neat predictions. That said, more recent thinking — especially behavioural economics — has moved closer to Soros’s view, recognising that belief, herd mentality, and feedback loops do play a real role in how markets move, particularly in bubbles and crashes.

By the early 90s, Soros had little left to prove as a trader. Assets under management at his Quantum Fund were pushing toward $10 billion, and his reputation for “moving markets” was at such a height that even a casual remark from him about a currency could trigger massive flows of capital.

But as mentioned, he didn’t get it right all of the time. In February 1994, he and Druckenmiller misread the Japanese yen. Expecting weakness after trade negotiations, they built large short positions. Instead, the yen surged. The fund lost roughly $600 million in a single day.

But a few years later Soros made the headlines and another huge killing on a currency trade.

For years, Thailand attracted foreign capital by offering high interest rates while promising to hold its currency, the baht, at a fixed value against the US dollar. The arrangement worked — but only as long as the government had enough dollar reserves to defend it.

Soros believed those reserves were running out.

He and other traders began betting against the baht. They borrowed the currency, sold it for dollars, and forced the Thai central bank to spend its reserves trying to hold the line.

But the central bank couldn’t print US dollars. Its reserves were finite, and once markets sensed they were running low, the defence became impossible to sustain.

On July 2, 1997, Thailand abandoned the peg. The baht fell sharply, and the pressure quickly spread across Asia, triggering the Asian Financial Crisis.

Across the region, businesses failed and governments destabilised. Malaysia’s Prime Minister publicly blamed Soros for the turmoil.

But speculation did not create the underlying problem.

Many Asian economies were already under strain from rising debt, overheated property markets, fragile banking systems, and weakening export growth. Thailand was simply where the break became visible first. Traders like Soros simply sped up the inevitable crash, but they did not create the vulnerability.

Soros’s funds are estimated to have made roughly $1 billion on the trade.

Then in 1998, Soros faced one of the most damaging trades of his career.

For context, he was heavily invested in Russia, backing its unstable transition toward a market economy — a position shaped not just by analysis, but by conviction.

Throughout the 1990s, Soros had committed hundreds of millions of dollars through his foundations to support Russian institutions. By mid-1998, Russia’s economy was under severe strain. Debt was rising, revenues were weak, and pressure on the rouble intensified.

On August 13, 1998, Soros published a letter in the Financial Times, calling for a controlled devaluation.

He believed Western governments would not allow Russia to descend into financial chaos.

He was wrong.

And the letter he wrote didn’t calm the markets — it had the opposite effect. It unsettled the market. Selling accelerated. His own reflexivity theory worked against him.

Four days later, Russia defaulted on its debt and the rouble collapsed.

The Quantum Fund lost roughly $2 billion.

Then came the internet bubble.

By 1999, Druckenmiller was convinced internet stocks were detached from reality. Valuations were extreme. Profits were often non-existent. He built short positions worth roughly $200 million, betting prices would fall. He was right in the long run, but the timing was wrong.

Instead of collapsing, valuations kept rising. Within weeks, Soros’ fund was looking at a $600 million loss.

Druckenmiller reversed course.

In March 2000 he committed roughly $6 billion to technology stocks.

The timing was catastrophic because that same month, the Nasdaq peaked. And the internet bubble burst. The Quantum Fund lost approximately $3 billion.

Druckenmiller resigned.

The partnership that had driven some of the fund’s greatest successes was now over.

And for Soros, this marked another shift.

The Quantum Fund gradually moved away from the highly aggressive style that had defined its earlier years, placing greater emphasis on protecting capital rather than constantly making large, high-risk bets.

But while his trading career largely took a back seat to his philanthropy, he continued to make huge amounts of money. He correctly predicted the 2008 financial crisis and gained significantly from it.

In 2011 he closed his fund to outside investors and the fund became a private family office, and it’s clear that he was making good profits because in 2017 he transferred $18 billion of his fortune to the Open Society Foundations, one of the largest philanthropic transfers in history.

It still left him with a personal fortune of $8 billion. In total, it’s estimated that he’s given $32 billion to his foundation.

In 2023 he handed control to his son Alexander. At the time of recording, Soros is still alive and is 95 years old.

So where do I stand on George Soros?

As an investor, the story is pretty straightforward. He had an extraordinary career. Big wins. Big losses. But the wins were bigger. And very public. He became the most famous investor of his time and one of the very best.

And while in this episode I focused mainly on the big dramatic trades, what’s really interesting about Soros is that he never seemed obsessed with money just for the sake of money. He treated wealth more like a tool. Something to use. Something to put to work.

And that’s where things get complicated.

Because this is what triggered so much backlash.

Now look, plenty of people disagree with Soros politically. That’s completely fair. Some of the causes he supported were clearly political. No question about that.

But I think the context behind Soros’ philanthropy really matters.

Soros lived through Nazi occupation.

And it’s hard to overstate what that means. He saw what happens when societies close in on themselves. When governments turn hostile. When identity becomes dangerous. Six million Jews murdered. Millions more forced to flee, to leave their families just to survive.

That kind of experience obviously shapes how he sees the world.

It shapes how Soros thinks about power, minorities, refugees, and vulnerable groups.

So when Soros spends huge amounts of money supporting open societies, civil institutions, and democratic movements — yes, often political — there’s a very clear logic behind it.

Closed systems tend to concentrate power, restrict information, and limit dissent. And historically, that goes hand in hand with censorship, repression, and abuses of power.

Open systems, in his view, reduce that risk — by dispersing power and protecting freedom of expression.

You can agree with that logic or not. That’s a political debate. But I definitely understand his reasoning and agree with it.

And another reason why I’m really on Soros’ side is that, unlike lots of billionaires, he’s not donating to get favourable regulations for his business or to ensure that he has to pay less tax. In fact, he’s argued that the wealthy should pay more tax.

His donations have always been toward causes he believed would help people who were vulnerable, marginalised, or exposed to bad political systems.

The motivation, as far as I can see, has always been moral.

Whatever your opinion of Soros, he makes for a fascinating story. And that brings us to listener emails. This one comes from Peter, who would love to hear an episode on the Robber Barons of the 19th century. Peter, that’s a great suggestion. There are so many great characters from that time in history, and I’m actually in the middle of a story that takes place around that time, which I’ll be recording in the next few weeks.

Thanks for listening, Peter, and remember, if you have any comments, any corrections, or any story you’d like us to cover, email us at: info@gbspod.com

All the best, folks.