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soever. A stock either went up, it went down, or it stayed the same. Any theory about how the stock market operated could be tested on a day-to-day basis.

Many investors believed the financial world to be rational, convinced that stock prices had a built-in logic. Discern that logic, and you could become rich.

Soros would have none of that. He thought the financial world was unstable, chaotic. Soros thought: Discern the chaos, and you could become rich. Trying to fathom the financial markets, as if their movements were part of some gigantic mathematical formula, would never work. For Soros was convinced that mathematics did not govern the financial markets.

Psychology did. More precisely, the herd instinct.

Figure out when and how the herd was going to get behind a certain stock or currency or commodity, and the successful investor could get out in front.

That was the Soros theory in a nutshell.

Today, George Soros was testing his theory out on the entire European financial world. He had been applying it there for the past few years, laying back, waiting for the timing to be right, waiting for the murmur of the rumbling herd.

And when he heard it, he would be ready to pounce, ready to seize the opportunity. When he sensed he was right about a financial situation, he was ready to throw caution to the wind. This time, he was sure he was right.

And this time, he was ready to place the biggest bet anyone had ever made in the investment world.

If he lost, well, he would lose some money. No matter. He had lost money before. Take the October 1987 stock market crash. He had read the market wrong and had to cut his losses. He had been out $300 million.

But more often, he had won money - for his elite group of clients -and he had done it so well for so long that by June 1981 he had already been called "The World's Greatest Money Manager" by Institutional Investor magazine.

In only one year since 1969, when he established his flagship Quantum Fund, did Soros have a losing year. That was in 1981. Quite simply, no one had done as well for so long in the financial markets as George Soros. Not Warren E. Buffett, not Peter Lynch. Not anyone.

His record was the best on Wall Street.

In his office late that day, Soros kept thinking about London. It was now 10:30 in the evening there. That was where the action was today. Not in New York City.

A look of satisfaction crossed Soros's face. He thought back to November 9, 1989, that crucial day that the Berlin Wall came tumbling down.

Everyone knew how significant that day was for modern history. Others believed, or at least they hoped, that with the fall of the Berlin Wall, a new unified Germany would rise and prosper.

Soros thought differently. He often did. Being a contrarian was his secret. He sensed that the new Germany would have a hard time trying to finance the unification. He also sensed that Germany would turn inward, worry about its own economic problems, and dismiss as less important the economic problems of the other Western European countries.

An inward-looking Germany would have vast implications for the economies - and the currencies - of the other countries in Europe. So Soros believed.

He watched and waited.

In 1990, he had watched Great Britain take the fateful step of joining forces with the new Western European monetary system, the ERM, or Exchange Rate Mechanism. Soros thought it was a mistake for Britain to participate. The British economy was not strong, and by joining the ERM, the British were essentially linking themselves to the strongest economic power in Western Europe - the new united Germany.

It was a linkage that, for better or for worse, would make Britain ultimately dependent upon the Germans. As the strongest economy in the region, Germany had the power to decide what was good economically for the rest of Western Europe.

That dependence upon Germany, thought Soros, would eventually prove fatal for the British.

For Britain might want to move one way in its monetary policies-and it would not be able to. It would have to link those policies with the dominant German monetary policies.

Just as Soros had predicted, 1992 brought a financial crisis to Western Europe. A number of economies there, including Great Britain's, had sagged. Britain wanted to lower its interest rates.

The Germans, however, were unwilling to reduce their interest rates for their own domestic reasons: They were deeply afraid that inflation would recur in Germany. They remembered with horror the 1920s, when inflation was the poison that brought the German economy to collapse.

If Germany would not drop its rates, the other European countries could not afford to drop theirs. To do so would have put them in jeopardy of weakening their currencies, and once weakened, those currencies would be prey to speculators.

So Britain was increasingly trapped.

Its economy was deteriorating. Since it was overvalued, the pound was under increasing pressure. Britain wanted to improve its economy, but to do so, it needed to reduce the value of the pound, making its exports more attractive.

But Britain was forced, under ERM rules, to keep the pound at 2.95 German marks.

Over the summer of 1992, British political leaders insisted that they would survive the storm - and that there would be no devaluation of the pound. Britain would not leave the ERM. Somehow, they would muddle through.

Nonsense, thought George Soros.

He knew better. He understood how dire was Britain's economic situation. It would not be possible for them to remain in the ERM. They would have to abandon ship.

The crisis began in mid-September.

Rumors started to surface that the Italians would devalue the lire. Traders in New York rushed to sell their lire.

On Sunday, September 13, the Italian lire was devalued, but only

The World's Greatest Investor by 7 percent, still within the range set by the ERM's rules. Investors made a good deal of money betting that the European central banks would honor their commitments to keep their currencies within ERM ranges. It seemed like a bad bet to wager on an ERM realignment that went beyond the ERM's rules.

But if the Italians had devalued the lire, which they said they would not do, did that not mean the emperor had no clothes? That all the promises from other governments meant nothing?

Perhaps there would be a second wave... perhaps it was time to start selling sterling?

Suddenly, in different parts of the world, investors and corporations all at once lost faith in the willingness of Western European governments to permit the ERM to determine exchange rates. Now they were eagerly trying to get rid of a variety of weaker currencies, including sterling.

As September 15 wore on, George Soros's confidence that Britain would pull the pound out of the ERM was growing.

It had been Stanley Druckenmiller who had thought the time ripe for making a bet against the sterling. He talked to Soros about doing something. Soros gave him the green light but urged his head trader to bet an even larger sum than Druckenmiller had in mind.

And so Druckenmiller, acting for Soros, sold $10 billion worth of sterling.

Leaving for his Fifth Avenue apartment, Soros seemed a man of extreme self-confidence. He slept well that night.

The next morning at 7:00, the phone rang at Soros's home. It was Stan Druckenmiller with news. Soros heard the trader say that all had gone well. While George Soros had slept, he racked up a profit of $958 million. When Soros's gains from other positions he took during the ERM crisis were tallied, they totaled close to $2 billion.

The British called September 15-the day they were forced to pull the pound out of the ERM-Black Wednesday.

Soros called it White Wednesday.

It was this bet, this single act of placing $10 billion on the fact that Britain would have to devalue the pound, that made George Soros world famous.

It was, and remains, his greatest coup as an investor.

Because of that bet, Soros - "The World's Greatest Investor"became a legend in the financial world.

After September 1992, myths grew around George Soros.

The central one was that he could move markets: A word from him about a certain commodity like gold, or a currency like the mark, could cause a shift in trading. Prices would rise or fall, all because of what he said.

He seemed infallible, worthy of emulation.

A reporter doing a television documentary on Soros in December 1992, two months after his coup against the pound, was impressed with Soros's seeming ability to move markets: "You invest in gold, and because you invest in gold everybody thinks they should invest in gold, and the price goes up. You write an article that questions the value of the deutsch mark and the deutsch mark goes down. You make an investment in London real estate and overnight it seems that the trend of downward prices is reversed. Should one person have that much influence?"

Seeming to enjoy the compliment, Soros sought to offer some perspective.

"Currently," he began, "the influence I have is exaggerated. In fact I'm pretty sure it is. And it will correct itself because people will realize" - he gave a big smile - "I'm not infallible, and you know, just as I'm currently swept up on a wave of interest, I'll be swept down."

Wrong on both counts.

His influence had not been exaggerated. Nor was the wave of interest in him about to diminish.

In a Business Week story, he was asked how it felt to be a guru. He said he was amused.


Some people were becoming less than amused.

By 1994, the myths surrounding Soros were so pervasive that Washington was beginning to pay attention. If indeed a George Soros could move markets, and if fortunes could be made or lost by the actions of one man, was he not a danger? Should George Soros not be reined in?

That became one of the main themes surrounding the man who by the mid-1990s had scaled a height in the financial world few others had even attempted.

As the world's greatest investor, he had amassed more money than most people will ever see in one lifetime, or a hundred lifetimes. Yet, that fact only partly accounted for the mystique surrounding him.

George Soros was far more than a man who made a few billion dollars. Far more than the Man Who Broke the Bank of England, as The Economist called him. Far more than the Man Who Moves Markets, as he was dubbed by Business Week.

Money, as it turns out, at one time had only marginal appeal for Soros.

He did not set out to be a world-class investor, to make huge amounts of money. He had yearned instead to be a man of ideas and had always found it more comfortable to move in the realm of the intellect than that of finance.

Yet, he found he had a gift for earning money - a great deal of money. It seemed to come easily. Perhaps that was why he felt tainted by money. He wanted to do more with his life than simply accumulate wealth.

Not that Soros considered financial speculation immoral or thought it mere gambling. He made no excuses for what he was doing; he simply did not get a kick out of it. Soros yearned to make a contribution to others-a contribution that would be remembered.

He pictured himself as a philosopher rather than a financier. He liked to call himself a failed philosopher, as a kind of reminder of what he had once tried to do in his early years but had abandoned.

His great dream was to add knowledge to the world, knowledge about the way the world worked, about how human beings functioned in that world. As a student, Soros had begun to search for such knowledge. His quest drew him into the world of philosophy, and for a time he wanted to be a professor of philosophy. He studied economics, but he always seemed to be more of a visitor to that world than a permanent resident.

Feeling cheated by the way economics was taught to him, Soros thought economists lacked a practical understanding of the way the world worked. They dreamt big dreams, talked only about ideal situations, and made the mistake of thinking that the world was a very rational place. Even at that early age, George Soros knew very well that the world was far more chaotic than economists would have people believe.

As he began to formulate his own theories: theories of knowledge, theories of history, and in time, theories about finance, Soros anchored his convictions to his bedrock belief that the world was highly unpredictable, thoroughly irrational-in short, hard to figure out.

He tried to advance those theories in book form but had a difficult time making them understandable and readable. Sometimes even he had a hard time fathoming what he had written. Frustrated that the intellectual world was too difficult to conquer, he set out to find worlds that he could conquer.

The decision was, in one sense, easy. He had to make a living anyway. Why not try to show all those economists that he understood the workings of the world better than they did by making as much money as possible? Soros believed that money would give him a platform from which he could expound his views. Making money, in short, would help him to be a philosopher after all.

The world he entered, the world of high finance, carried the potential for great rewards. The risks, however, were daunting. It was no place for the faint of heart.

Perhaps the timid enjoyed a few good years. But eventually, the strain got to them, the strain of being responsible for other people's money. The price was high, paid in the currency of lost sleep, leisure time, lost friends, a lost home life because all hell was breaking loose in the financial markets. In time, the faint of heart found other work.

Soros, in contrast, was not faint of heart. He seemed to be icecool. He displayed no emotion. When an investment paid off, he took satisfaction. When it did not, he did not run to the nearest roof or skyscraper. He was calm, even-tempered; rarely did he laugh hysterically but rarely did he get morose.

He was, he liked to say, a critic; indeed, he eventually joked that he was the world's highest-paid critic. The term suggested something of an outsider, someone above the battle. "I am a critic of the processes. I am not an entrepreneur who builds businesses. I am an investor who judges them. My function in the financial markets is that of a critic, and my critical judgments are expressed by my decisions to buy and sell."

Though he had been in the investing business since 1956, ffrst in London, then in New York, his career truly started in 1969. It was then that he launched his own investment fund called the Quantum Fund. He remained active in it - except for a few years in the early eighties - for the next 25 years. In the late eighties, he adopted a lower profile, spending most of his time on his philanthropic activities. He always, however, stayed in touch with the people who were handling his funds.

Quantum was one of the first offshore funds that was freely available to non-American investors. Most other offshore funds were limited by American law to 99 investors and ordinarily required a minimum investment of at least $1 million. It was also a hedge fund, an ultrasecretive investment partnership of wealthy people who were willing to take incredible risks with their money in order to get even richer. Soros's fund sold short, used complex financial instruments, and borrowed large quantities of money-strategies not available to mom-and-pop investors.

When hedge funds began years earlier, a small group of managers adopted a strategy of mixing their stock acquisitions. These funds were hedged in the sense that managers divided their portfolios between long positions on stocks that would profit if the market rose and short positions on stocks that would profit if they fell. Soros and a number of other hedge-fund kings discarded that strategy and moved beyond the American stock market, betting on broad global shifts not just in stocks but in interest rates, currenciesthe overall direction of financial markets. On an average trading day, Soros's funds were buying and selling $750 million of securities.

And the results he achieved were nothing short of astounding. If someone had invested $100,000 in 1969 when Soros established the Quantum Fund, and reinvested all dividends, he or she would have been worth $130 million by the spring of 1994 - a compound growth rate of 35 percent. Achieving this kind of return on a much smaller fund, say one of $50 or $100 million, would be considered remarkable; to do so with a multibillion-dollar portfolio has amazed Wall Street.

A share in Soros's Quantum Fund that sold for $41.25 in 1969 was worth $21,543.55 by early 1993; it would have paid out a large amount in cash distributions as well. By June 1994, that share cost $22,600. To qualify as a member of the Quantum Fund, one needed to invest a minimum of $1 million. Soros owned, according to most reports, one-third of the Quantum Funds.

Soros had not obtained his money "the old-fashioned way." The nineteenth-century captains of American industry-entrepreneurs like Rockefeller or Carnegie-had obtained wealth by building things, by producing oil and steel. George Soros neither owned nor ran his own corporation. Nor did he have any other power base. His specialty was nimble moves in the financial markets, using a great deal of capital.

Though small in physical stature, Soros looks rugged, athletic. He has cropped, wavy hair and wears wire-rimmed glasses. Some think he looks like an economics professor or a ski instructor. He speaks English excellently, though a slight trace of a Hungarian accent remains. One writer described him as "an intense, squarely built man with a wrinkled brow, an angular chin, and a thin mouth. His hair is cut en brosse. He has a flat, slightly harsh voice. . . ."

Somehow people expect Soros to be a gruff fellow, and they are surprised that he looks no different from most others. "He doesn't look particularly wolflike," wrote The Guardian. "His relaxed air and lilting Hungarian accent lend him the style of a European grandee. His forehead is furrowed, suggesting hours spent pondering the state of the world-an impression of scholarship which he is eager to encourage."

To a writer for The Observer, Soros seemed to fit right into the European mold. "He is a slightly built, elegant man stamped with the indelible courtliness and restrained irony of Austro-Hungarian cafe society. In an earlier age one could easily have imagined him sipping his mocha over chess with Trotsky in the old Cafe Central in Vienna."

The Independent, the British newspaper, summed up Soros's looks this way: "He is no glitzy Gordon Gekko, antihero of that quin-tessentially eighties movie, Wall Street. He looks a decade younger than his years, perhaps as a result of his compulsive tennis playing and lack of interest in the flashy lifestyle that New York offers to the seriously rich. He neither drinks nor smokes, and his taste in food is modest. He comes across like an earnest, rather untidy Middle European professor."

By the late seventies and early eighties, Soros found the pain of investing to be too severe; it was the pain that came from running an investment fund that had grown way beyond what Soros thought was a manageable size.

He was, however, a survivor. He had learned that art from his father, and he had practiced it during World War lI hiding from the

Nazis in 1944 in Budapest. To survive in the financial markets sometimes meant beating a hasty retreat. That's what Soros did in the early eighties. He adopted a low profile. He let others handle the fund.

And he came to a fateful conclusion. He wanted something more from life than success in the investment world. Since he was no hedonist, money could bring him only so much. He wanted to turn his money to good use. Since he needed no approval from family or boards of directors, once he decided how to spend money, he could go ahead and spend it.

That kind of freedom, that kind of power, induced him to think at length and carefully about his options. Eventually, he settled on a grand project to encourage open societies, first in Eastern Europe, later in the former Soviet Union.

Soros had left Hungary years before because he could not abide political systems that had been ruling his coun-try-frst fascism in World War II, then communism in the postwar years. The "closed" societies that had sprouted throughout Eastern Europe and in the Soviet Union offended him, for he was a ffrm believer in the kind of political and economic freedom that flourished in America and in Western Europe.

Others-frequently Western governments, sometimes private foundations-had tried to make a dent in these societies. Never, however, had a private individual from the West sought to make such far-reaching changes.

Soros believed he was equal to the challenge. Just as he had taught himself to do with his investments, he would start slowly, monitor his progress carefully, spend his money prudently. His hope-and it was a very long-term hope-was to pry open these closed societies.

Using his own ffnancial resources, he wanted to plant seeds among those people in Eastern Europe and the Soviet Union who would in turn, however gradually, influence their own countries to adopt the Western-style freedoms that Soros cherished. To have an impact without arousing suspicion would be hard, to win the approval of the political authorities for his efforts might be impossible. He wanted, however, to give it a try.

"To survive in the financial markets sometimes means beating a hasty retreat."

He actually began his aid efforts in South Africa in 1979, but that was a failure. Turning to Eastern Europe, he established a base in Hungary in 1984. Later, he established himself elsewhere in Eastern Europe and in the Soviet Union.

Just getting a toehold in some of these countries was an achievement, given the suspicions and hostilities of their governments. In time, though, Soros Foundations blossomed. By the mid-nineties, he was donating hundreds of millions of dollars to these foundations. In 1992 and 1993, Soros gave away $500 million and made commitments to give away another $500 million. In 1993, he donated more to Russia than many Western governments had, even after he had proclaimed the situation there "cataclysmic."

George Soros, the world's greatest investor, had become George Soros, the world's greatest philanthropist.

He had become the most important private Western donor between the Danube and the Urals. Praised by many as a saint, damned by cynics as an intruder, Soros had finally found a way to make a difference, to gain some respect, and to do something outside the precincts of Wall Street and the City of London.

The philanthropy aimed at opening up closed societies gave him far more satisfaction than accumulating all that money. It also gave him far more exposure. He liked the publicity-indeed he was eager for it, because he was interested in letting the world know that he was not simply an exceptionally rich man.

Yet Soros was not entirely content, for he sensed that he would be expected to lay bare his secretive world of investing in the process. He wanted publicity, but only good publicity. He wanted to remain a private figure as much as possible, but his profile was too high, his accomplishments too substantial, his reach too vast.

Once Soros understood that it was impossible to escape the searchlights of public scrutiny, he sought to exploit his newfound fame. He had always veered away from revealing his investment positions. Suddenly, he became talkative, making public declarations about what parts of the financial markets he liked. He had never shown any great interest in international affairs. Yet, there he was, offering advice in public on a whole variety of foreign policy issues, from NATO to Bosnia, hoping to attract the attention of the world's leaders. He especially wanted American politicians to take notice. In the short term, Soros's talkative spree backfired on him. He won no new respect. He was accused of an excessive case of hubris.

Now in his mid-sixties, Soros was adamant in asserting that he was a philanthropist first and foremost and that his investment days were well behind him. He continued to try to keep as low a profile as possible with respect to his investments. Yet stardom had been thrust on him because of his 1992 coup against the pound. And he himself seemed to court a certain amount of publicity. He was quite prepared to let the world in on all of his philanthropic activities. He continued to guard his private investment world even as the public sought to discover more and more how this man had become the world's greatest investor.

The story that follows is an attempt to examine the life and career of this remarkable man, both the public and private worlds of George Soros.

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