George Soros: 'The man who broke the Bank of England'

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Welcome to Good Bad Billionaire from the BBC World Service.

Every episode we pick a billionaire and find out how they made their money.

And then we judge them.

Are they good, bad, or just another billionaire?

I'm Simon Jack.

I'm the BBC's business editor.

And I'm Zhang Sing, I'm a journalist, author and podcaster.

And this week's billionaire is the man who broke the Bank of England.

It's someone who has attracted multiple conspiracy theories.

Yeah, a pariah to those on the hard right and the hard left, George Soros.

Yes, and I have to caveat here.

You can tell me if this means I worked for him because this is what I used to get.

all the time.

So I used to work for a company that one of Soros' funds invested in and later took over along with a bunch of other companies.

Does that mean I worked for Soros?

Well, we'll let our listeners make up their own mind, but let's do him in numbers first of all.

He's 94 years old for a start.

He's Hungarian-born, currently worth just over $6.5 billion.

Although at his peak, he was estimated to be worth over 25 billion.

The bulk of Soros's wealth comes from this hedge fund called Quantum.

I mean, he could have picked a little less super villain title for this firm.

But if you don't know what exactly a hedge fund is, we will explain it when we come to that.

Yeah, this fund has generated nearly $40 billion in profits.

It's one of the most successful funds of its type of all time.

And as you say, Simon, he is also known as the man who broke the Bank of England because he shorted the British pound in 1992 and made a billion dollars in a single day.

And we will explain shorting later on, too.

He owns some lavish homes in New York and London, but he's not the private jet or super yacht type.

No, he doesn't own any of those.

He's actually given away more more money than he has kept for himself.

He's been a major philanthropist since 1979.

His foundation claims that he's donated over $32 billion to various good causes.

And among these, he especially funds projects that promote democracy.

And he rather modestly claims the work of his foundation contributed to the collapse of communism.

He's what you might call a committed globalist.

He's written 15 books espousing his philosophies.

Yeah, and that kind of work and donations of millions to Democratic candidates in the US has made him a bit of a bogeyman for the American right.

And conspiracy theorists have kind of latched onto him.

There have been multiple theories about him online and offline.

They've even led to a pipe bomb being delivered to this house.

As we go through his life, you'll see he's a fascinating man.

Let's hear what he sounds like.

Here's a clip of him talking to BBC Radio 3 in 2011.

There are good people and bad people.

That's part of humanity.

So I don't identify necessarily either with the good people or with the bad people, because I think the good people sometimes are far too good for my taste.

So I am one of those who are

little good, little bad.

And that's where you are right about the there is sort of the philanthropic

character and the money-making character.

And those are different roles, and I can see the difference between in those two roles.

Couldn't be much better better for good, bad, billionaire.

There's a billionaire admitting that there's good and bad in him.

I know, and it's sort of funny because we've never heard one of our billionaires talk about himself in that way before.

No, it's true.

I've met him a few times,

and it's fascinating.

In many ways, he's a sort of philosopher.

He's definitely an intellectual, or at least likes to think of himself as an intellectual.

But he's given away billions, become a pariah for the US right, and he's apparently collapsed communism.

Let's go back to where it all started for George Soros.

He was born in Budapest, Hungary in 1930, the second son of Uzabet and Tivadar, who were a cultured middle-class couple of Jewish descent.

So his father was a lawyer who fought in World War I, and he even escaped a POW camp in Siberia and went on to found a journal in an international language called Esperanto.

It was actually his well-read father who listened to the BBC German service and decided in 1936 to change the family name Schwartz to Soros, meaning to soar in Esperanto, to protect them from increasing anti-Semitism in Hungary.

But little George was on the business trail already.

He started his first business age just nine.

It was a newspaper called Lupa News, made for people on the Hungarian island of Lupa, where his family spent their summers.

So quite typical for a lot of our billionaires to start businesses when they were little kids.

Many of them actually starting newspaper businesses.

But unusually for our billionaires, George actually donated the money he made to the nation of Finland.

At the time, there's a reason for this.

They were resisting the rise of the Soviet Union.

And he did this because, in his words, daddy said they are fighting a freedom fight.

Well, the people of Finland must have been jolly grateful for however much money nine-year-old George Soros, but there's more to come in the future.

So politics and donating to these political causes were clearly already embedded to him when he was a young child.

And then in 1944, huge world events start kicking off.

Germany invades Hungary.

Within a few months, over 420,000 Jewish Hungarians are transported to Auschwitz.

His father obtained false papers for the family and another Jewish friend saying they were Christians and they actually stayed in Budapest under those assumed identities throughout the Second World War.

I'm sorry, but that sounds so stressful, to say the least.

I know.

And Soros said it shaped my outlook on life.

He taught me that there are abnormal times when the rules don't apply.

If you follow the rules, you will die.

You just have to wonder how much of that lesson has gone on to influence his later life and thinking.

Yeah, he was definitely a rule breaker when it came to his business career, as we'll find out when we go forward.

And yeah, I think needs must in a situation like that.

So I think that must have been very formative for his outlook on life.

And after the war ended in this kind of chaotic post-war era, he learned another really important lesson when black markets were taking off.

Yeah, he had this hyperinflation, and a friend of his asked him to change some US dollars into the Hungarian currency and what Soros noticed was that the rates of exchange differed even across the city.

So when he found a better than expected rate he actually asked for a higher fee and he was refused in that one time but it did teach him the skills and power of being a financial go-between, being the guy who runs around between exchanges.

Yeah and also notices difference in prices at different exchanges which you can exploit by buying in one and selling another, making a small amount and doing that many, many times.

That's the essence of what his hedge fund, which we'll talk about a bit more, becomes in the future.

So clearly George Soros is a very smart young man and he eventually gets the opportunity to study abroad in 1947.

He gets into the prestigious London School of Economics.

But he had no money so he took on various jobs to fund his studies.

He worked as a farmhand, a railway porter, a waiter.

But he's also a kind of philosopher.

So he studied philosophy.

He was especially influenced by his teacher Karl Popper's ideas.

Now if you haven't done a politics degree or international studies degree, Karl Popper was this incredibly significant post-World War II thinker who wrote this book called The Open Society and Its Enemies.

And in it Popper takes a pop at both Nazis and communists saying that they believe they have the ultimate truth which makes them what he described as closed societies.

And the alternative that he puts forward to this kind of tribalism is what he calls an open society.

Nobody knows where the truth is or the ultimate truth, but they have to find a way to live together and coexist.

And it's this philosophy that becomes central to Soros' worldview.

Okay, so Soros graduates in 1951, gets his first job as a bookkeeper at a Hungarian-owned financial firm called Singer and Friedlander.

It wasn't a great job.

He earned seven pounds a week, around $20.

That's the equivalent of around $250 a week in today's money.

And he did so well, he was soon moved to the arbitrage department, where he was surrounded by other immigrants and he thought they were all making smart deals because they had a broader worldview.

Quick arbitrage explain it.

It just basically means benefiting from small differences in prices for the same thing elsewhere.

So for example, some shares are traded on both the New York Stock Exchange, they might have a secondary listing in the UK, they might also be listed elsewhere.

And at any given time, you're buying the same thing at a slightly different price in different markets.

If you do that plenty of times, you can begin to make money from those small price differences.

There's other forms of it, but that's basically it.

So it's basically a kind of grown-up version of what he was doing running around Budapest between all the exchanges.

Exactly right.

So Soros was good at this.

I mean, obviously.

He made a good call in 1956 when the Ford Motor Company, which was already really huge.

I mean, we still know the name Ford now, manufacturing cars.

They were having their first public offering.

Yeah, and the company's bankers had been on a bit of a roadshow selling stock in the company across Europe.

But Soros persuaded his firm to buy shares in London, which they could get more cheaply.

And then they sold them in the New York market and made a profit.

This is a pretty smart piece of manoeuvring.

And we'll see this kind of behavior quite a lot in this Soros story.

And his bosses were pleased with him, so his wage was increased from £7 to £12 a week.

But he still ended up falling out with his manager.

Yeah.

So he moved to New York, where a colleague sorted him a job in a small firm.

And this was part of his life plan.

He said, I wanted to work on Wall Street for five years, make $500,000 and come back to England and go back to studying philosophy.

Nice, easy plan.

Interesting that he's still into philosophy.

Yeah, but he knows that Wall Street's where he can make money the fastest.

And he actually says, I chose the West because I sought for freedom.

But to be frank, I came to America to make money.

And he wouldn't be the first.

So Soros went to New York City in 1956, quickly made an impression there.

You know, he's always around the hoop when it comes to global events and profiting from them because the Suez crisis happened that October in 1956.

and there was a big international political event.

Oil prices, for example, were fluctuating massively and Soros was able to use his international connections to buy low in Europe, sell high in New York and made a big profit and he started making money right away.

He actually moved up to a larger investment firm where he got a job researching European stocks.

And again, he had this uncanny ability to spot an inefficiency in the market which ended up putting money back into his pocket.

So what he noticed was that there were some undervalued West German bank stocks which bundled up up different kind of industrial insurance and equities that were worth much more individually broken apart than the price that they were being sold for as a package deal.

Yeah and he said look there was hidden value in there and nobody was paying attention to the things inside those companies and he says my skill was always being ahead of the crowd because I had this flexibility in my thinking.

And he cites this kind of intuition and flexibility as being key to his talents rather than any analytic skills because actually he'd failed the security analysts exam.

In his words, I was a brash young man and I had a sense of my own powers.

And things were going well.

By 1961, he'd exceeded his five-year plan of earning half a million dollars, but he stayed in New York because he just settled down after marrying his first wife a year earlier.

Yes, the call of romance.

And they bought an apartment in Hip Greenwich Village and added a $15,000 plot in the Hamptons, very bougie place where the rich go in the summer.

And he built a summer home there for $28,000.

So he's living life.

I wonder what that house is worth right now.

It's worth a lot more than $28,000.

I can promise you that.

But in 1962, he suffered his first big wrong call.

He's not infallible.

He had put a large amount of his own savings into stocks of a US car manufacturer called Studebaker.

He was buying their A shares, which hadn't come out quite yet.

They weren't activated as full shares until a date in the future.

So you could buy those at a discount.

But at the same time, he was shorting the ones that you could buy.

Okay, so this is the point at which we have to explain shorting, a responsibility I would gladly hand over to Simon so he can do his Margle Robbie bathtub impression from the big short.

So take it away, Simon.

It's put simply, shorting something just means betting that it will fall.

And technically what you do is you go and borrow something.

Let's say I go and borrow shares in Ford.

I borrow them.

I then sell them.

So I owe this person 100 shares in Ford, so I'm short 100 Ford shares.

I think they're going to fall.

They do fall.

I then go and buy them back for less money than I sold them for, give you your hundred shares back, and I pocket the difference.

That's pretty much how it works.

And this is the assumption that George was making.

He figured that the original stocks would drop in value when the cheaper A stock was activated as a full share, so then he'd make a profit, but that all the stock would eventually rally because the company was good.

So he would then also make a profit on his A stock.

Unfortunately, he was wrong.

So basically, he bet that the shares in this company would fall.

They didn't.

And he'd even borrowed money to do this trade.

So he was pretty close to losing it all at this point.

But fortunately, after a long period, he actually got the money back because that A stock made up his losses.

But he said of that whole experience, before I had this illusion that I'm simply playing a game, like playing Monopoly.

Afterwards, I lost some of my moral superiority.

Yeah, probably quite a salutary and humbling lesson to him at this point.

Yeah, I imagine if you're playing God with that much money and all those stocks, after a while it does become just monopoly money.

And an experience like that kind of brings you down to earth.

So after that bad deal with his own money, another tough break actually forced him out of his job.

In the early 1960s, then US President John F.

Kennedy introduced a new tax on foreign investments.

And the reason he did that was he was worried that there was too much money flowing out of the US into foreign investments.

So he put a tax on it to stop it.

And of course, foreign investments like European ones were his speciality.

Soros' speciality.

And he was actually in the middle of making this huge deal for Japanese insurance when the tax was announced.

The deal started looking shaky.

The fallout actually pushed Soros out of his job.

He found another one, but the point was that his international trading expertise wasn't that valuable anymore because of Kennedy's new tax on foreign investments.

So he ended up switching his attention to philosophy.

The next three years, he spent working on a philosophy book called The Burden of Consciousness.

I mean, you say this about George Soros, he does not stray away from the big issues.

Yeah, quite pretentious, the burden of consciousness.

I don't know, maybe not.

But, you know, he.

I'll let you know when I finished it.

Okay.

He wrote it in his spare time, but decided not to publish it.

We've missed out on that term.

So instead, he turned his attention to studying American securities, which were things like stocks and bonds, insurance, oil and gas, interests.

And he created an investment plan.

His company and an Italian broker each chip in $100,000 for a sort of test venture.

So he put about $50,000 of the money he'd raised into haulage companies.

Some of them dropped at first, but when one of the companies he'd invested in did list on the new stock exchange, as he had foretold, he made the profit that he predicted.

And the bank was so impressed they put him in charge of their new $3 million mutual fund, First Ego.

Yeah, a mutual fund is just like an investment fund that anyone can buy into and someone invests it for you.

And he was running this.

And he put some of his own money in there, and that was kind of starting a practice he would continue investing for others as he did for himself.

In 1969 the bank then launched something called a hedge fund called Double Eagle.

Now a hedge fund is something which makes a bet that this asset will do slightly better than this asset.

What you do is you buy one and sell the other and even if they both go down as long as the one that you've bought goes down less than the one you've sold, you still make money even if they both fall because you're getting more from one than you are from the other.

So, what I'm learning is that basically being on the stock market is all about the little differences that add up.

Yeah, the other thing about hedge funds, which characterizes them, is they often borrow lots of money to basically make bigger bets.

So, they might want to do this trade A, but they've only got X amount of money.

They'll borrow more money so they can do a bigger trade.

It's called leverage, and so they can be quite highly indebted.

And that can make them volatile.

So, hedge funds were actually around since the 1940s, but in the 60s they were still considered relatively new.

The bank put in $4 million of capital.

And Soros starts running this too.

Yeah, and this is a big moment because it is hedge funds that will make Soros the billionaire we know today.

But as Soros put it, running a hedge fund, there were no limitations.

You could buy, sell, you could borrow money.

It was a case of everything goes.

Right, so are they regulated?

Are there rules around what they can do?

Not back then, that's for sure.

I mean, everything, you know, that we have financial police in the UK and the US, it's the SEC in the US, it's the Financial Conduct Authority over here.

So there are some rules, but within those bounds, people can pretty much do what they like, as long as the people running the money have explained the risks they're taking very clearly to the people who've put the money in.

Most of the people who put money in hedge funds are quite sophisticated investors themselves.

Wow.

It's like the Wild West out there, isn't it?

It can be.

It can be.

So Soros does what he does best.

He sets about looking for flawed perceptions.

And he noticed one in the the then popular trend for companies doing mergers.

He thinks the merged companies are being overvalued.

So he starts shorting one.

He borrows some stock in it and sells it, hoping the price will go down.

And when the price falls, he profits.

And then he spots more and more overvalued stocks and shorts more and more companies.

So the double eagle hedge fund he's running at that point grows from an initial $4 million in 1969 to $17 million by 1973.

So it's growing fast.

Can I ask, when a company realizes they're being shorted, what is the reaction?

Well they don't like it very much, that's for sure.

So

it's basically a bit of a slap in the face for the management or not so much to the management, to the market.

You're saying, all the other investors, I've got it wrong and we think we've got it right.

And so the Double Eagle hedge fund has been growing and he decides that rather than running these funds for the bank, he's better off running his own hedge fund.

So he and a junior partner called Jim Rogers quits and they start a new hedge fund.

And this is where George Soros goes from running someone else's fund to running his own company.

But when asked how much of his own money he'd actually used to set up this new fund, he said very little at the time.

The management team was entitled to 20% of the profits.

We kept our share of the profits invested in the fund and we earned the same return on it as all the other shareholders.

Yeah, so it's hard to say for certain, but the profits at Double Eagle, which he just left, were 13 million.

20% of that is over 2.5 million.

He's the senior guy in the team, so a significant chunk of that is his.

He's earning the interest on that too.

Plus, he likely had a similar deal for First Ego, the mutual fund that he ran.

And then we can add in the accumulated wealth after 17 years of lucrative work.

By 1973, it's pretty certain to say that George Soros was a millionaire.

So, Soros is a millionaire in 1973.

That was a lot of money in those days.

A lot of money.

But a billion is a lot more.

So, how does he go from a million to a billion?

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So how does he go from a million to a billion?

He's got three qualities that will fuel his journey there.

He's got this global outlook from his years of working in international arbitrage.

So he's looking across lots of markets.

He knows how to diagnose market inefficiency.

This is being priced wrong.

That's from his study of American securities.

And he's able to take big risks because he's in control of a massive hedge fund.

So he begins to grow that fund, initially called the Soros Fund, but soon renamed Quantum.

He brought over $12 million of investment from former customers and soon he found new customers too.

And those investors must have been absolutely thrilled to come across George Soros.

Because in 1974, Quantum sees 17.5% growth in a year that the Dow Jones industrial average dropped by 24%.

In 1975, it grew over 27%.

In 1976, it was up a whopping 62%.

So those investors are very pleased.

But all this growth comes at a price because it drew the attention of the financial police, the SEC, that's the Securities and Exchange Commission.

They basically accuse him of what's called market manipulation.

In the late 70s, before there was going to be a big offering of shares from a computer company, Soros sold off a bunch of shares, which drove down the price.

He then promptly bought the shares in the public offering at the artificially low price, which he'd helped create and made a tidy profit when they came back up.

And so they said, you're manipulating the price there.

So the SEC charged him, but he settled the lawsuit for $1 million.

He also signed a consent decree that meant that he neither admitted nor denied the charges.

And it didn't affect the success of his fund at all.

By 1978, Quantum was valued at close to $100 million and by 1980, Soros' personal wealth is up to 25 million.

I mean, does this all kind of seem like a game to him?

It seems to me that his background means that he has no real reverence for institutions.

I think he's got a general disregard for them and that comes through time and again.

I guess when you've got a father who basically changed your name and also gave your family false papers to survive persecution and, you know, almost certain death, and that you lived under those false pretenses for a year and survived intact.

I mean, why would you put any faith in institutions?

Because those institutions never really protected you.

Exactly.

And also, you would say, though, in those situations, the stakes are incredibly high.

It was literally life and death.

You know, so a stock goes up or down a little bit.

Who cares?

I mean, you can profit from it.

Yeah, I mean, when the fine is only $1 million.

And you're worth 25 $25 million personally.

It's chump change.

Yeah.

So Soros is getting very rich, but it doesn't seem to have made him all that happy.

In 1978, he left his wife and three young children.

He moved into a rented apartment alone.

He took just a few suitcases and some books away in a cab.

He didn't even have a car at the time.

Yeah, he also split with his business partner, Jim Rogers, who went off to set up his own fund very successfully.

And Soros sought new partners at the fund to delegate some of the responsibility to.

He explained this as being down to the fact that he was, in his words, somewhat burnt out.

I don't do it as well because I don't enjoy it.

So in 1980, when he turned 50, he's rich, but in something of a personal crisis.

He said, I'd been extremely successful and it took a lot out of me.

And it didn't seem worth the effort in taking all that pain and punishment that running a hedge meant just to make more money.

I asked myself, what's the meaning of my life?

Why am I doing what I'm doing?

So he starts seeing a psychoanalyst.

The fund is beginning to suffer.

In 1981, for the first time, Quantum was down 26%.

A lot of investors pulled out.

He managed to reduce those losses to 21% by the end of the year.

But the next year, he finally brings in someone else to run the fund day to day.

And he's still researching the markets, but he's also starting to look more seriously into philanthropy.

Maybe this psychoanalyst has something to do with it.

Maybe.

He actually started giving away some of his money back in 1979 and he returned to this notion of helping democracy to open up society.

His first major act of international philanthropy was to give money to black students at the University of Cape Town in South Africa.

Remember, this is a time when South Africa was operating under apartheid.

So society was literally divided on racial grounds and it was enforced in the law in institutions.

He said, there was a closed society with all the institutions of a first-world country, but they were off-limits to a majority of population on racial grounds.

Where could I find a better opportunity for opening up a closed society?

So, again, returning to that idea of Kau Poppa's open versus closed societies.

But he also wanted to reduce his taxes, so he set up the charitable trust in a way that would let his children inherit his wealth tax-free.

If he gave away a certain amount of millions, 3 million a year for 20 years, he would get some tax breaks for that.

So now he's away from the pressure of running this hedge fund.

He is focused all in on philanthropy.

And in 1983, he sets up his Hungarian foundation and he studies countries that are deeply in debt.

He visits Brazil and Mexico to look for where to help next.

On the personal front, he's 53.

He divorces his first wife and marries his second wife, who is just 28, 25 years his junior.

And he goes on to have two more children with her.

His oldest son, Robert, by way of the first wife, cites this time as being one in a series of transformations for his father.

Robert said, His whole life has been a series of recreations of himself in various forms.

Hiding under an assumed identity during the war, a new life life as a student and philosopher, recreated himself as a financial wizard.

He progressed and he grew.

And then, when he separated from my mother, he did it again, this time setting out to create himself as a more public figure.

A very interesting evaluation of your own dad.

Yeah, really interesting.

All of this seems to have reinvigorated George Soros.

So he refocuses back on quantum.

He rearranged the management team.

He focuses on looking at the market.

So he's back.

He's back and he's better than ever.

He made a massive deal that he would call a killing of a lifetime.

Yeah, he bets that the Japanese yen and the German mark would rise against the dollar.

So he buys vast quantities of Japanese yen and German marks.

And he piles in.

He invested amounts which actually total to the entire value of the quantum fund.

And then he adds more because he's borrowing money.

It seems like an insane risk.

But then top officials from these five largest industrial countries meet in Manhattan, something called the Plaza Accord, to announce a new system where they were going to deliberately devalue the dollar against the yen and the Deutsche Mark.

They did exactly what George Soros was predicting and he'd made a fortune.

And he makes $150 million.

So in 1985, Quantum was the first hedge fund to be valued at over $1 billion, all on the basis of this insane bet that he made.

He bet big and he won.

So he's on top of the world.

He's actually now becoming quite famous.

He was on the cover of Fortune magazine, described as Wall Street's most successful investor.

And even after he loses $800 million after the 1987 Black Monday crash, don't forget that was the infamous day for the US markets when billions were wiped off the value of stocks.

Financial World magazine put him as number two on their top earners list in 1987 with $75 million.

And in 1988, the Washington Post called him a billionaire.

Although the same year, Forbes, the magazine that ranks all of our billionaires by their wealth, put Soros on their rich list with an estimated wealth of $290 million.

So we won't say he's a billionaire just yet, but his own personal wealth is definitely growing.

In their 1992 list, Forbes estimated his wealth at $785 million, but on the 16th of September 1992, there's one notorious deal that will confirm him as a billionaire.

In the UK, that day is known as Black Wednesday, which should give you a little bit of an indication about how seismic it was for the UK.

So the UK had joined something called the European Exchange Rate Mechanism.

It was a new system designed to stabilise currency exchange rates in Europe, and it was seen as a pathway to introducing the common currency, the Euro.

So you get everyone and have them trade in little, quite narrow bands against each other, get everyone used to the idea and migrate them to the idea that one of these days you're going to have a single currency.

Now, if you're thinking to yourself, wait a second, the UK doesn't have a single currency, you're absolutely right.

The value of the UK pound was set at a high exchange rate against the German mark, the Deutsche Mark, which by 1992 it just couldn't sustain.

So, George Soros thought it's only a matter of time before something's got to give.

So, he used his hedge fund to borrow billions of pounds from various banks and then started selling them and bought up things like German marks and US dollars.

So, what you're doing is increasing the supply of pounds and you're increasing the demand for the other currencies, like the marks and the dollars.

So, what you see is the marks and the dollars go up and the pound starts to fall really quite quickly.

The Bank of England under the guidance of the then UK Chancellor raises interest rates to attract more investors taking them from 10% to 15%.

That was a big deal I remember everyone but we're trying to defend the pound because if you put interest rates up that makes people want to have deposits in that currency because you can earn more money.

So it's a classic way of trying to defend a currency is to jack up interest rates.

It went up to 15%.

They spent billions of pounds from foreign exchange reserves.

So they they were using the dollars they had in reserve to buy pounds to try and fight the tide of all the selling.

But it didn't work.

It wasn't enough.

And also, to be fair, George Soros was not the only person doing this.

There were other people trying to short the pound.

Yeah.

So the pound plummeted in value.

Britain crashed out of the exchange rate mechanism.

It led to the value of the pound falling 15%.

And newspapers claimed that the Quantum Fund had made a billion dollars in a single day.

Soros actually agreed with this assessment.

He said a billion is about right as an estimate of the profit, though dollars, not pounds.

Yeah, Soros was painted as a bit of a villain.

He was the man who broke the Bank of England.

But there's been a bit of revision about how he's judged because in a way that anyone who is pleased that the UK is not in the Euro or

doesn't use the Euro owes George Soros, if you like, a debt of gratitude because this crashing out of the exchange rate mechanism scuppered any hope that the UK would ever join the Euro.

I just want to get an understanding of how big a deal this was because it was huge, right?

Yeah, it was a very, very significant moment in the economic history of the UK.

Interestingly, however, One Times journalist who interviewed George Soros said that the reaction towards him was amazing because here was this guy who symbolised a $10 billion loss to British taxpayers.

And in a very short time, the public response was that he was a genius and quite possibly a hero.

But either way, whether you think of him as a hero or a villain, Soros was officially a billionaire.

On the Forbes rich list in 1993, he was given an estimated wealth of $1.1 billion.

He is officially on the billionaires list.

So beyond a billion, his hedge funds have had their ups and downs.

His wealth has continued to grow.

He had some big losses during the Russian financial crisis of 1998.

He lost money in the internet, the great dot-com boom and bust in 1999.

But he was one of the few people to predict and profit from the 2007-2008 great financial crisis.

And he also puts his success down to his Karl Popper-inspired political theory, which is called reflexivity.

This is an idea that he started as a student in the 50s and honed through years of speculation.

It's this idea that investors aren't rational, they base their decisions on a perception of reality rather than the actual reality itself.

Yeah, and he says this practice enabled him to predict the 2007-8 financial crisis and prepare for it.

He actually came out of retirement and quantum made $2.5 billion in 2007 and $1.1 billion in 2008.

If word is on the street that George Soros is coming out of retirement, everyone's like, what's he going to do next?

Let's do it too.

Yeah.

But it's his philanthropy that he's really focused on since then.

He said his philanthropy contributed to the fall of communism.

And this was apparently through setting up foundations in communist bloc countries during the 80s.

He was funding photocopying machines for banned writing.

He was giving grants to schools, libraries, activists.

In his native Hungary, where he was born, He says that this helped demolish the monopoly of dogma by making an alternate source of financing available for cultural and social activities.

But the nature of the causes he has helped have made him a hated figure on the right.

Hungary's current far-right leader, Viktor Orban, used state funds to vilify him in a national poster campaign.

While he's been vilified by elected right-wing Republicans in the US, who have even spread conspiracy theories about Soros helping Nazis confiscate property from Jewish people during World War II.

Some may legitimately question his unchecked power and that of billionaire philanthropists, but the root of the criticism is often anti-Semitic and it's only been inflamed in the social media age.

Soros is now 94 years old.

He's seen a lot of world events, not least the UK crashing out of the ERM.

So he's given more than $32 billion,

but he's still worth over $6 billion.

Yeah, the Quantum Fund itself, which was the centrepiece of the Soros funds, was closed to outside investors back in 2011.

A new SEC rules, that's the financial police in the US, stated that hedge funds with more than $150 million in assets would have to report more information.

And rather than do that, they decided to close the fund to outside investors.

I'm not playing by your rules.

Soros ended up shutting up shop and he returned a billion dollars to those investors.

And in 2023, he retires completely.

He hands over the running of his philanthropic empire to his youngest son, Alex, who was the unexpected successor.

And within a month, Alex lays off 40% of the staff at the fund in order to streamline it.

So he's an old man now.

He's lived a long, incredible life.

And it is time to judge him.

Is George Soros good, bad, or just another billionaire?

So this is the point where we judge our billionaires on a range of categories.

We score them from one to 10 on things like wealth.

Is their story a rags to richest one?

What's their villainy level like?

So let's start with wealth.

How fabulously wealthy is George Soros?

Well, not so much anymore.

What's he worth?

6.5 billion, we think now.

But he's given a ton of money away.

I think at the height of his wealth, he was worth in the 20 billion.

So he was up there.

He's still known as a very rich man and he's still got that kind of aura of the financial guru.

I'm going to judge him on the wealth he has had.

So I'm going to say this is a rich guy.

I'm going to give him a seven.

I would actually score him lower than that because

a lot of our billionaires, we judge wealth based on how they wear it and what they do with it.

And he's not a flashy guy.

He doesn't seem, he doesn't have super yachts.

He doesn't have a fleet of private jets.

So I'm going to give him one point lower, six out of ten.

Okay, alrighty.

Rags to riches.

So that came from Hungary under Nazi occupation, had to change their name.

They were living in fear and in hiding essentially from their true identities to being someone who could cause havoc in international markets and possibly bring down governments.

So I would say that's a pretty high.

And

they weren't poor.

No.

They were sort of middle-class Jewish family in Hungary.

But nevertheless, given the journey he's been on, I'd give him a...

seven for this.

It's a real coming to America story, right?

Yeah.

The idea that if you want to make money, you have to go to New York, you have to go to Wall Street.

I mean, just that narrative arc alone, I think is worth more.

I think I would give him an A out of 10.

You can see the biopic.

Yes, you can, for sure.

Villainy.

What have they done to get to the top?

And this is where we go back to that quote of his we heard right at the beginning.

There's a good George Soros and a bad George Soros, isn't there?

And so on villainy, he's absolutely ruthless when it comes to making money.

Oh, yeah.

There's a quote from him where he said that he has fancied himself as a god.

He said, if truth be known, I carried some rather potent messianic fantasies with me from childhood, which I felt I had to control, otherwise they might get me into trouble.

Yeah, well, at least he admits it.

That is true.

He's a very self-perceptive man.

Yeah, for sure.

When George Soros turns on your company or on your currency, you can fear it.

He's also, it's important to note, not played by the ruse.

So he was actually convicted of insider trading by French prosecutors in 2002, got fined 2.3 million for that.

2009, the Hungarian financial regulator fined him 2.2 million for trying to manipulate the stock of Hungary.

Yeah.

So, you know.

There's kind of an inbuilt disrespect for rules and institutions, which he wouldn't see as being bad.

I don't think he would calibrate it in those moral terms.

No, and though the fines seem like a lot to us, for someone who's a billionaire, I mean, this is basically getting a parking ticket.

Yeah.

American historian Daniel Bessner said of him, Soros has made a number of wise and exciting interventions, that's for sure.

From a democratic perspective, though, this single wealthy person's ability to shape public affairs is catastrophic Soros himself has recognized that the connection between capitalism and democracy is tenuous at best that's a thoughtful comment

come on then well villainy I'm gonna I'm gonna I'm gonna scoring quite high on this I think because I think he's just a mad bad you know he's a bad hombre in the financial markets isn't he you don't want to run into him

you don't you don't want to take him on yes so I'm gonna say

we've got another category coming up philanthropy so we can soften the blow here but I'm gonna give him an eight for for for villainy.

Maybe that's too high.

All right, I changed my mind.

When he wants to be, he's a very, very powerful enemy to have, so I'd give him seven.

I would say that Daniel Bessner's comments have kind of

slightly swayed me.

I would probably give him a seven out of ten.

Okay, got it.

Okay, philanthropy.

He's going to score high on this one.

In fact, George Soros topped Forbes' philanthropy score from 2019 through to 2023.

So of the over 70 billionaires on their list who have pledged to give away more than half of their wealth by the time they die, only Soros has hit the mark.

And importantly, he is still a billionaire, despite that.

Yeah, he has donated $32 billion to his Open Society Foundation over his lifetime.

He's also given to other foundations and think tanks.

The total amount is hard to calculate.

With the exception of Chuck Feeney, one of our last billionaires who invented duty-free shopping and gave away all his money, this is one of the highest we've seen.

So I've got to score him very highly a nine I mean if Chuck Feeney's a ten Soros is a nine yeah I would give him a nine got it power he's very powerful isn't he well he just even in British if in British history for sure

I mean he he basically he made sure that the UK could never join the the euro which some people will be glad about some people be sad about

he effectively humiliated the finance minister of the day

he crashed the value of the pound

compared to other currencies.

And you could argue he set in train a change of government, which took went by by, I suppose, by ruining the Conservative Party's reputation for financial competence, which eventually saw Tony Blair take over and take power for 13 years.

So pretty powerful.

I mean, it's a real sliding doors moment, right?

If George Soros had woken up on the wrong side of bed today and decided not to take that risk.

Yeah.

And that's the case that we're familiar with because obviously it it impacted the UK and that's where we're recording this podcast.

I mean he could do this conceivably to any country you know he doesn't even live in the UK don't forget yeah future of the UK could have looked so different.

That's a good question because one of the litmus tests we use in this is would that have happened anyway without him and it's quite possible that the pound was actually overvalued and would have made its way down in value over time.

He just made it happen overnight.

Oh, I mean, I'm going to give him an eight out of ten.

I'm going to give him a nine.

I mean, I think he, I think, you know, the height of his powers, oh, he's 94 now, but we can't judge you know someone

when they're sort of you know their powers may be fading in their late in their mid to late 90s.

So I'm going to give him a nine.

I think he had an incredibly powerful influence on the on the on on not just on UK politics but on the financial markets as a whole.

Do you think people at the height of his powers when he was really doing all those deals would wake up in the morning and think, what's George Soros doing?

I've got to follow what he's doing.

100% definitely.

And if you are the finance minister around the mid-90s of any country and you find out that George Soros is betting against your currency, that's going to give you some sleepless nights.

Very powerful.

Oh, okay.

Well, I mean, I think I'll revise my assessment then.

I'll go up to a nine.

Okie-dokie, that's the first time I've ever dragged you towards my score.

It's usually the other way around.

Legacy.

I think that Soros, even though he is now 94 and it's a long time since 1992, it's a whole 32 years ago,

the name sort of George Soros still has some, you know, people know what it is.

Yes, even if those people are the ones spreading absolutely outrageous conspiracy theories about him it really speaks to the kind of grip yeah that this guy has on the popular imagination yeah and also he takes credit rightly or wrongly for being quite instrumental in the sort of fall of communism throughout eastern europe and the us as are yeah although do you think that was actually do you think he's just blowing his own i think that's a probably a bit much i find it a little bit hard to believe that activists photocopying things

i mean maybe maybe that's this is how it happened well listen put it this way um he's considered important enough by Victor Orban who's a very big figure in European politics to have a national advertising campaign vilifying him.

So you know

clearly Orban thinks he's an adversary worth trashing.

Right.

A 90-something year-od-manster.

Yes.

The legacy I think he'll have is that he made hedge funds synonymous with having real power in the world of finance and politics.

And he is this one-person embodiment of when the financial markets can influence politics.

And they call the financial markets vigilantes sometimes.

They can go and meet out justice on their own terms.

And I think he would be vigilante in chief.

Right, the Batman, basically.

Yeah, exactly.

So, legacy, I'm going to give him eight.

Yeah, I would score him quite similarly to how we did Warren Buffett, another one of our super genius investors.

I would give him an eight out of ten.

Okay.

And then we've got to decide whether he's good or bad.

He doesn't even know himself.

Clearly his philanthropic work is, you know, puts him in the good category,

giving away tens of billions to promote democracy, something that we

should lord.

And he was absolutely ruthless when it came to making the money that he was eventually going to give away.

I'm going to cut it right down the middle.

His philanthropic work exactly offsets some of his villainy in his dealings with countries and currencies.

So I'm going to say he's just another billionaire.

It's fascinating because I feel like maybe on some subconscious level, the reason why George Soros gives away so much of his money is because he implicitly feels like one person should not have this much power on Wall Street.

And it's almost like a philosophical kind of cancelling out of what he's done.

And the very fact that he chooses to give away so much of his money maybe points to he thinks that he's done a bad thing.

I don't know.

Maybe I'm just armchair psychoanalysing him.

I mean, he's been in psychoanalysis.

I'm sure he's done this calculation too.

But I would agree with you.

I think that the amount that he's given speaks almost proportionally to the amount of probable bad he's done in just in being able to influence, you know, just one country's trajectory, like the UK.

Yeah.

So...

Yeah, I would say he's just another billionaire, but not because he's not done anything.

No, he's a fascinating character.

He's so fascinating.

He's done lots of things, but the things that he's done seem to almost cancel each other out.

Yeah, okay.

Well,

we're in agreement.

He's half good, half half bad, and therefore he's just another billionaire.

I think he'll be pleased with that assessment.

I think he will.

He sort of agreed with it himself.

So, who do we have on the next episode?

She was India's first female self-made billionaire.

And she made her money manufacturing medicines.

But only because she couldn't get the job she trained for, being a brewmaster and making beer.

Yeah, she actually wasn't accepted into that industry because of gender bias.

That's why she calls herself the accidental entrepreneur.

It's Kieran Mazumda Shaw.

Good, Bad, Billionaire is a BBC World Service podcast produced by Mark Ward with additional production by Tamzin Curry.

James Cook is the editor and it's a BBC Studios production for BBC World Service.

For the BBC World Service, the senior podcast producer is Kat Collins and the podcast commissioning editor is John Minow.

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