VI. ANTECEDENTES
6.5. Generalidades de la Especie de Bagre de Canal (Ictalurus punctatus)
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To friends of Soros, the silence surrounding the investor came less from Soros than from Wall Street. Some argued that the investment community, jealous of his brilliant record, imposed a conspiracy of silence on him; they rarely mentioned him around reporters, so Soros, according to these friends, was hardly known to the business media.
The aw in this view is that when Soros did receive media attention, it was almost entirely sympathetic. If there was a conspiracy of silence in those days, it surrounded not just George Soros but most Wall Street business personalities.
Though articles on him had appeared before, it was only when he made the cover of Institutional Investor in June 1981 that George Soros attracted widespread public notice.
Full of bombast and grandiose verbiage, the magazine crowned Soros “The world’s greatest money manager.” This was no small praise, and the phrase had such a ring to it that it remained in people’s minds. Even as the magazine heightened Soros’s prole, it reminded its readers that Soros was very much an enigma. “For all his personal and professional success ... Soros has remained something of a mystery man, a Howard Hughes of investment. Aside from his occasional-and uncharacteristic-appearances in Barron’s annual forecast panel, few on Wall Street or in the nancial community at large know much about the reclusive fund manager. Yet few haven’t heard of his record.
“. . . Adding to the mystery surrounding his record is the fact that no one is ever quite sure where Soros is making a move or how long he stays with an investment. As a manager of offshore funds, he is not required to register with the SEC. He avoids Wall Street profes-sionals. And those in the business who do know him personally admit that they have never felt particularly close to the man. As for fame, it’s widely agreed that he can happily do without it.”
While the Institutional Investor story was certainly positive, what happened in its wake was certain to make Soros wonder whether media attention was desirable. In the months immediately following the story, Soros suffered through the only losing year of his career. In conversations with James Marquez in 1982 before hiring him, Soros made clear how distasteful he had found the whole experience of
“coming out.”
“To George this [publicity followed by the nancial setback] was almost a causal relationship,” remarked Marquez. “George knew the risk of believing one’s own press clippings and knew it causes one to
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sit back on one’s laurels and watch rather than participate. He thought that he had shared ... what he knew and how to invest with others through the media, and look what it got him. Not only that. He had lost some of his long-term investors and friends in the process. So he went into a very secretive phase.”
Marquez experienced the “secretive phase” up front as Soros’s right-hand man in 1983 and 1984.
Business journalists often phoned the Quantum Fund during that period, wanting to know what it was doing or how Soros and Mar-quez thought some piece of news would impact on Wall Street. When Marquez joined the rm, Soros made clear that he was not to talk to the press. “The last time I went on the record,” said Marquez, “was the day I went to work for George Soros, January 1, 1983.”
Marquez, a friendly type who obviously enjoyed talking with reporters, took the phone calls, despite Soros’s orders. To Marquez, it was important to get certain issues before the public. But he made it clear to journalists that his remarks were to be reported only on a back-ground basis. “I would say to the reporters: `I’ll tell you the things I know, or that I think I know, but it’s absolutely not for attribution.”
Neither he nor the Quantum Fund could be quoted. Those were his rules.
Soros probably sensed that Marquez was talking to reporters, but he never asked Marquez to leak information. Sometimes Marquez was sure that Soros knew he had been the source of a story. “He always had a way of acknowledging that I was behind somethinghe would say, `Gee, this sounds almost like you wrote this.’ I would be espous-ing somethespous-ing one day to him and the next thespous-ing it would appear in the newspapers.”
When Allan Raphael joined Soros in 1984, he was told never to speak to the press. And he obeyed. “We were known as the secretive Soros Fund, which in my opinion is the right way to do it. We gener-ally took good-sized positions, and the last thing you want is for any-body to know what you’re doing.”
Why?“Because people front-run. If you’re running a fund that’s global and people want to know what you’re doing, you don’t want people tracking you very easily because if you want to buy something, and everyone else nds out about it, they buy it ahead of you; it just messes you up.”
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Also, Soros’s clients were all outside the United States and “very secretive,” according to Raphael. “They just don’t want to see their name in the newspaper.”
And so in the early and mid-1980s, Soros’s press policy was to have none. He had no spokesperson; no press releases were issued. “We wanted,” said Raphael, “to come and go quietly.”
One critical exception came in September 1987, when Soros was interviewed for the Fortune magazine cover story entitled “Are Stocks Too High?” Soros predicted that the American stock market would not suffer a setback. The Japanese market, however, would. Soon thereaf-ter, Wall Street collapsed.
“It was like appearing on the cover of Sports Illustrated, said Raphael. “Your team is favored to win the World Cup and then it’s immediately eliminated. We sort of joked that it’s almost like a jinx to be on the cover.”
To achieve some of his other goals, especially fostering open societies in Eastern Europe and elsewhere, Soros could not remain entirely secretive. For he wanted respect. He wanted the cynics to take him seriously as a thinker. He understood that his philanthropic efforts in Eastern Europe would be helped if he became more of a public gure and spoke out on behalf of them.
It was as if he were in a tug-of-war with himself. One side, the investment side, was tugging in the direction of secretiveness; the other side, the philanthropic side, was tugging in the direction of openness. This tension was best illustrated when he noted that “there is a point beyond which self-revelation can be damaging, and one of the aws in my character, which I have not fully fathomed, is the urge to reveal myself.”
His theory of reexivity had vaulted him into the stratosphere of investing, and now-in 1987-he was ready for the public to get to know him better. He had used his most powerful resource, his mind, liked the results, and was now condent that the time was right for him to carve out a place for himself in the world of ideas. That place had been denied to him in the past. But what about now?
He had long wanted to publish a book that would make some con-tribution to human knowledge, but he knew he would have to make
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his ideas clearer to the public. “They are not understood,” he said once, “because I have not been very good at explaining them and they are complex.”
While publishing a book of his philosophy remained an elusive dream, he could produce a book that would explain his nancial theo-ries. He hesitated, though, before taking the plunge; he worried that, in exposing his nancial theories to public scrutiny, he would appear to be boasting. What if, after the book was published, he suffered more
nancial setbacks? What would the public say then? What would it think of his nancial theories?
He decided to take the plunge anyhow.
The manuscript for what eventually became The Alchemy of Finance basically existed. He simply had to prepare it for publication. As far back as 1969, he had shown chapters of the book to colleagues. Some had digested it and said nothing to him. Some had remarked about how difcult it was to understand. Few made any concrete sugges-tions. They understood that Soros wanted praise for his writing, not a critique.
One who saw an early version of the book-actually loose notes in manuscript in a bound volume-was Jim Marquez. “He gave me a number of these notes to read and it was very heavy slogging, very heavy slogging. It’s great sleeping material for a lot of people.” James Grant, editor of Grant’s Interest Rate Observer in New York, one of the more astute minds on Wall Street, thought little of Alchemy: “I tried to read [the book] and I came away slightly empty-handed, or I guess, empty-headed. I did not nd it a particularly lucid exposition.”
Another who saw some early chapters was Allan Raphael. “The book is meant for graduate students, not popular reading. We had to read every draft of every chapter that he did. In all candor, it’s not so stimulating. From the reader’s point of view, it wasn’t how to make a zillion dollars in 10 days. It wasn’t a diary of what he did. He jumped back and forth. He didn’t let anyone edit the book, which I think was a mistake.” Simon & Schuster wanted to provide a professional editor to go over the book, a standard publishing practice, but Soros refused, according to Raphael.
It was not entirely true that the manuscript lacked an editor. Byron Wien, Soros’s longtime friend and U.S. investment strategist at Morgan Stanley, did some serious editing on it. “He would write drafts of it, and I would make suggestions for rewriting and I would also edit
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pretty severely.... Some people say it’s still unreadable, and I said to them: `You should have seen it before.”’
Soros originally wanted to call the book Boom and Bust. But Byron Wien talked him out of it. “It was such a cliché. It sort of demeaned what the book was all about.”
Soros was very concerned that readers not misunderstand the purpose of the book. He did not want to publish yet one more how-to guide about getting rich on Wall Street. Readers might search for investment tips on every page. But he was not trying to help others make money.
He was writing for one purpose only: to explain to readers how his
nancial theories were part of a wider set of general theories about how the world functioned. He wrote that he was using his “experi-ences in the nancial markets to develop an approach to the study of historical processes in general and the present historical moment in particular.”
To be taken seriously, to get the public interested in his ideas, Soros had to make himself understood. He had to set out his theories in a way that others would have no trouble comprehending. He would also have to make clear how he had applied his theory to his decision making as an investor.
If he could do that, he would open a window to his mind, and the respect that he so longed for might follow. If he did not do that, he would simply confuse people, and inevitably turn off most or all of those who waited eagerly to be enlightened. But while the book was taken seriously, particularly by book reviewers, it did little to win Soros great respect within the nancial community.
The reason was simple.
Soros did not make clear to these people what his nancial theories were all about. He obfuscated in ways that were apparently not obvi-ous to him. For anyone who took the time to plow through it, the book was heavy, difcult reading.
Soros genuinely believed that, even with his amazing nancial acu-men becoming more and more a matter of public record, he could
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remain in the shadows. He genuinely believed that the publication of Alchemy would buttress his reputation without thrusting him too much into the public spotlight.
He was about to nd out how wrong he was.
When The Alchemy of Finance was published in 1987, Soros hoped that the nancial community and those outside of it would treat him with the respect he felt he deserved as an intellectual. It did not dawn on him that the media would treat the ideas contained in the book with indifference. When Soros realized that his theories were of less interest than his investment positions, the experience proved jarring to him.
When Simon & Schuster talked to him about promoting the book, he thought he was embarking on a journey of exploring ideas with the media, not exposing himself to the kinds of questions he had avoided throughout his business career.
“You’ve got to go out and publicize the book,” a senior gure at the publishing house told him.
“OK, I guess so,” Soros said grudgingly. “What should I do?”
Well, the publicity folks explained, you should seek interviews with Fortune, the New York Times, and others. We’ll set them up for you.Soros comforted himself with the notion that the interviews would focus on his book. It was a naive presumption, and some of his associ-ates tried to steer him right: No, they’re not going to want to talk about your book. They’ll want to nd out what you bought last. That’s what they’ll ask about, that’s what they’ll want to know.
One Friday afternoon, Soros was sitting in a conference with his fund managers when suddenly he announced that he had to catch a train to Washington.
“I’m going on this `Wall Street Week’ program,” he declared with seeming pride. “They’re going to discuss my book.”
Allan Raphael, one of the fund managers at that meeting, knew that Soros never watched television. He tried to be helpful.
“You know what this program is all about?”
“Yes, they want to discuss my book.” Soros seemed so insistent.
Still Raphael plunged on.
“George, they don’t want to discuss your book. They want to know what you’re buying, what your favorite stocks are. They’re going to ask you a lot of things which you don’t want to respond to.”
“No,” said Soros, this time with less insistence in his voice. “They’re going to discuss my book.”
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That evening Soros appeared on the program. Sure enough, after two minutes of pleasantries, the question was put to him:
“What are your favorite stocks?”
Soros, however, was prepared. “I’m not going to tell you.”
And he didn’t.
Nonetheless, this encounter was his initial entry into the world of public life. And he was not entirely comfortable with it.
But Soros was in for yet another surprise.
Donald Katz wanted to interview Soros for Esquire. But Soros had been hard to pin down. The writer seemed at his wit’s end until he learned that Soros had written a book, which he later described as “an impenetrably dense but at times breathtakingly brilliant book.”
Katz wrote the investor a long letter, begging for an interview. Who could deny an audience, he asked Soros in seeming good humor, to someone who claims to have read your book? A few days later Soros granted Katz only 10 minutes. Evidently he was not entirely convinced Katz had read The Alchemy of Finance.
Katz arrived at the Soros Fund ofces and was escorted into a wait-ing room lled with books with such titles as Quantitative Risk Assess-ment in Regulation and The Political Economy of Socialism: A Marxist View. He also found a book in Chinese and a work about a painter.
Then Soros arrived, wearing a beautiful gray suit, looking cheerful. He escorted Katz into his spacious ofce.
Then Soros popped the question. It came out as more of a state-ment, tinged with cynicism or doubt.
“So, you say you’ve actually read my book.”
Katz said he had, but he sensed Soros was skeptical. “And you understood it?”
Whatever Katz answered-he offered no clue-it convinced Soros that the conversation with the writer was worth pursuing. Soros sought to make the same point he had hoped to make on the Washington talk show, that he cared only about philosophy, not at all about money-making.
“My real interest is genuinely analytical,” he explained to Katz.
“It’s the theory I care for. My success in the market merely provides me with a platform so people will take me seriously. I have no interest in getting new clients.”
Then a grin ashed across Soros’s face. “And I certainly don’t want to get rich on this book.”
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T
he incredible bull market of the mid-1980s had showered inves-tors with billions of dollars of prots. None had done better than George Soros.In 1986, the Quantum Fund was up 42.1 percent-to $1.5 bil-lion, adding to Soros’s luster. His own income from the fund was $200 million.
In 1985 and 1986, he had amassed a staggering $2.5 billion for him-self and his small group of foreign investors.
The Dow Jones average had risen steadily, from 776.92 in August 1982 to a high of 2722.42 in August 1987. According to Soros’s theory of reexivity, the market would climb even higher. The sheer enthusi-asm and frenzy of investors would carry it aloft.
Yet, in the back of his mind, Soros knew that sooner or later, if his theory of reexivity was correct, the bust aspect of the boom/bust sequence would take hold. It was only a matter of time. But it need not happen immediately.
Meanwhile, Soros appeared on the cover of Fortune magazine on September 28 and proclaimed that things never looked better, particu-larly in Japan.
“That stocks have moved up, up and away from the fundamental measures of value does not mean they must tumble,” Soros observed in an interview for that cover story. “Just because the market is over-valued does not mean it is not sustainable. If you want to know how much more overvalued American stocks can become, just look at Japan.” He reiterated these views on “Wall Street Week.”
Even after adjusting for the peculiarities of Japanese accounting, Japanese stocks were selling in October 1987 at prot/earning ratios of
Even after adjusting for the peculiarities of Japanese accounting, Japanese stocks were selling in October 1987 at prot/earning ratios of