The Soros Lectures

At the Central European University


By George Soros

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Five lectures George Soros recently delivered at the Central European University in Budapest – which he founded in 1991 – distill a lifetime of thinking on finance, capitalism and open society In a series of lectures delivered at the Central European University in October 2009, George Soros provided a broad overview of his thoughts on economics and politics. The lectures are the culmination of a lifetime of practical and philosophical reflection. In the first and second lecture, Soros discusses his general theory of reflexivity and its application to financial markets, providing insight into the recent financial crisis. The third and fourth lectures examine the concept of open society, which has guided Soros’ global philanthropy, as well as the potential for conflict between capitalism and open society. The closing lecture focuses on the way ahead, closely examining the increasingly important economic and political role that China will play in the future. “The Budapest Lectures” presents these five seminal talks into one volume, which offers a condensed and highly readable summary of Soros’ world view.


IN OCTOBER 2009, I delivered this series of lectures in Budapest under the auspices of the Central European University, an international postgraduate institution in the field of humanities and social sciences that I established after the collapse of the Soviet system in 1991.
Lectures One and Two summarize a lifetime of experience and reflection. I lay out in detail the conceptual framework that has guided me in business and philanthropy and apply it to the current turmoil in financial markets. Lectures Three and Four explore what is, for me, newer ground—questions of ethical values and political power and the relationship between the two. The final lecture presents such predictions and prescriptions as my conceptual framework allows.
My goal is ambitious. It is that this conceptual framework should provide the foundation for a better understanding of human affairs. The reader will judge whether I have been successful. I hope that my ideas will be received in the same spirit of critical thinking in which they are offered and not as some sort of dogma.
These lectures and the discussions that followed were videoconferenced to universities around the world. The recordings are available at the website of the Open Society Institute,
One of the discussion partners was Fudan University, Shanghai, and another partner was Hong Kong University. I am very pleased about that because I believe China will become increasingly influential in the world, and if my conceptual framework finds a following in China, the world might be a better place. Other partners included Columbia University; the London School of Economics, my alma mater; and the Massachusetts Institute of Technology. I was pleased to be able to share my ideas at these distinguished institutions.
I am grateful to those at the Central European University and the Open Society Institute, and to my personal staff who helped make the original presentation and videocasting of these five lectures a success. My thanks also go to my publisher, Peter Osnos, and his colleagues at PublicAffairs. I owe a debt of gratitude to Colin McGinn and Mark Notturno for clarifying certain philosophical points; to John Shattuck, the president of the Central European University; to Anatole Kaletsky, Ivan Krastev, Mark Danner, and Howard Davies for moderating the discussions that followed each lecture; and to Cristovam Buarque and the many others who offered their comments.
January 2010
New York

Central European University Lecture Series,
October 26-30, 2009
IN THE COURSE OF MY LIFE I have developed a conceptual framework that has helped me to make money as a hedge fund manager and also to spend money as a policy-oriented philanthropist. But the conceptual framework itself is not about money—it is about the relationship between thinking and reality, a subject that has been extensively studied by philosophers from early on. I started developing my philosophy as a student at the London School of Economics in the late 1950s. I took my final exams one year early, so I had a year to fill before I was qualified to receive my degree. I could choose my tutor, and I chose Karl Popper, the Viennese-born philosopher whose book The Open Society and Its Enemies had made a profound impression on me.
In his books Popper argued that the empirical truth cannot be known with absolute certainty. Even scientific laws can’t be verified beyond a shadow of a doubt: they can only be falsified by testing. One failed test is enough to falsify, but no amount of conforming instances is sufficient to verify. Scientific laws are hypothetical in character and their truth remains open to falsification. Ideologies that claim to be in possession of the ultimate truth are making a false claim; therefore, they can be imposed on society only by compulsion. All such ideologies lead to repression. Popper proposed a more attractive form of social organization: an open society in which people are free to hold divergent opinions and the rule of law allows people with different views and interests to live together in peace. Having lived through both German and Russian occupation here in Hungary, I found the idea of an open society immensely attractive.
While I was reading Popper I was also studying economic theory, and I was struck by the contradiction between Popper’s emphasis on imperfect understanding and the theory of perfect competition in economics, which postulated perfect knowledge. This led me to start questioning the assumptions of economic theory. These were the two major theoretical inspirations of my philosophy. There were, of course, many other minor ones.
My philosophy is also deeply rooted in my personal history. The formative experience of my life was the German occupation of Hungary in 1944, when I was not yet fourteen years old. I came from a reasonably well-to-do middle-class background, and I was suddenly confronted with the prospect of being deported and killed just because I was Jewish. Fortunately, my father was well prepared for this far-from-equilibrium experience. He had lived through the Russian Revolution—the formative experience of his life. Until then he had been an ambitious young man. When the First World War broke out, he volunteered to serve in the Austro-Hungarian Army. He was captured by the Russians and taken as a prisoner of war to Siberia. Being ambitious, he became the editor of a newspaper produced by the prisoners. It was handwritten and displayed on a plank, and it was called The Plank. This made him so popular that he was elected the prisoners’ representative.
Then some soldiers escaped from a neighboring camp, and their prisoners’ representative was shot in retaliation. My father, instead of waiting for the same thing to happen in his camp, organized a group and led a breakout. His plan was to build a raft and sail down to the ocean, but his knowledge of geography was deficient; he did not know that all the rivers in Siberia flow into the Arctic Sea. They drifted for several weeks before they realized that they were heading for the Arctic, and it took them several more months to make their way back to civilization across the taiga. In the meantime, the Russian Revolution broke out, and they became caught up in it. Only after a variety of adventures did my father manage to find his way back to Hungary; had he remained in the camp, he would have arrived home much sooner.
My father came home a changed man. His experiences during the Russian Revolution profoundly affected him. He lost his ambition and wanted nothing more from life than to enjoy it. He imparted to his children values that were very different from those of the milieu in which we lived. He had no desire to amass wealth or become socially prominent. On the contrary, he worked only as much as was necessary to make ends meet. I remember being sent to his main client to borrow some money before we went on a ski vacation. My father was grouchy for weeks afterward because he had to work to pay it back. Although we were reasonably prosperous, we were not the typical bourgeois family, and we were proud of being different.
In 1944, when the Germans occupied Hungary, my father immediately realized that these were not normal times and that the normal rules didn’t apply. He arranged false identities for his family and a number of other people. Those who could, paid; others, he helped for free. Most of them survived. That was his finest hour. Living with a false identity turned out to be a very positive experience for me. With the rest of my family, I was in mortal danger. People perished all around us, but we managed not only to survive but also to help other people. We were on the side of the angels, and we triumphed against overwhelming odds. This made me feel very special. It was high adventure. I had a reliable guide in my father, and I came through unscathed. What more could a fourteen-year-old ask for?
After the euphoric experience of escaping the Nazis, life in Hungary started to lose its luster during the Soviet occupation. I was looking for new challenges, and with my father’s help I found my way out of Hungary. When I was seventeen I became a student in London. In my studies, my primary interest was to gain a better understanding of the strange world into which I had been born, but I have to confess, I also harbored some fantasies of becoming an important philosopher. I believed that I had gained insights that set me apart from other people.
Living in London was a big letdown. I was without money, alone, and people were not interested in what I had to say. But I did-n’t abandon my philosophical ambitions, even when circumstances forced me to make a living in more mundane pursuits. After completing my studies, I had a number of false starts. Finally, I ended up as an arbitrage trader in New York. But in my free time I continued to work on my philosophy.
That is how I came to write my first major essay, “The Burden of Consciousness.” It was an attempt to model Popper’s framework of open and closed societies. It linked organic society with a traditional mode of thinking, closed society with a dogmatic mode, and open society with a critical mode. What I could not properly resolve was the nature of the relationship between the mode of thinking and the actual state of affairs. That problem continued to preoccupy me, and that is how I came to develop the concept of reflexivity—a concept I shall explore in greater detail a little later.
It so happened that the concept of reflexivity provided me with a new way of looking at financial markets, a better way than the prevailing theory. This gave me an edge, first as a securities analyst and then as a hedge fund manager. I felt as if I were in possession of a major discovery that would enable me to fulfill my fantasy of becoming an important philosopher. At a certain moment when my business career ran into a roadblock, I shifted gears and devoted all my energies to developing my philosophy. But I treasured my discovery so much that I could not part with it. I felt that the concept of reflexivity needed to be explored in depth. As I delved deeper and deeper into the subject, I got lost in the intricacies of my own constructions. One morning I could not understand what I had written the night before. At that point I decided to abandon my philosophical explorations and to focus on making money. It was only many years later, after a successful run as a hedge fund manager, that I returned to my philosophy.
I published my first book, The Alchemy of Finance, in 1987. In that book I tried to explain the philosophical underpinnings of my approach to financial markets. The book attracted a certain amount of attention. It has been read by many people in the hedge fund industry and it is taught in business schools, but the philosophical arguments did not make much of an impression. They were largely dismissed as the conceit of a man who has been successful in business and therefore fancies himself as a philosopher.
I myself came to doubt whether I was in possession of a major new insight. After all, I was dealing with a subject that has been explored by philosophers since time immemorial. What grounds did I have for thinking that I had made a new discovery, especially since nobody else seemed to think so? Undoubtedly, the conceptual framework was useful to me personally, but it did not seem to be considered equally valuable by others. I had to accept their judgment. I didn’t give up my philosophical interests, but I came to regard them as a personal predilection. I continued to be guided by my conceptual framework in my business and in my philanthropic activities—which came to assume an increasingly important role in my life—and each time I wrote a book I faithfully recited my arguments. This helped me to develop my conceptual framework, but I continued to consider myself a failed philosopher. Once I even gave a lecture with the title “A Failed Philosopher Tries Again.”
All this has changed as a result of the financial crisis of 2008. My conceptual framework enabled me both to anticipate the crisis and to deal with it when it finally struck. It has also enabled me to explain and predict events better than most others. This has changed my own evaluation, and that of many others. My philosophy is no longer a personal matter; it deserves to be taken seriously as a possible contribution to our understanding of reality. That is what has prompted me to give this series of lectures. So here it goes. Today I shall explain the concepts of fallibility and reflexivity in general terms. Tomorrow I shall apply them to the financial markets, and after that, to politics. That will also bring in the concept of open society. In the fourth lecture I shall explore the difference between market values and moral values, and in the fifth I shall offer some predictions and prescriptions for the present moment in history.
I CAN STATE THE CORE IDEA in two relatively simple propositions. One is that in situations that have thinking participants, the participants’ view of the world is always partial and distorted. That is the principle of fallibility. The other is that these distorted views can influence the situation to which they relate because false views lead to inappropriate actions. That is the principle of reflexivity. For instance, treating drug addicts as criminals creates criminal behavior. It misconstrues the problem and interferes with the proper treatment of addicts. As another example, declaring that government is bad tends to make for bad government.


On Sale
Feb 9, 2010
Page Count
144 pages

George Soros

About the Author

George Soros was named as the Financial Times Person of the Year for 2018, citing the standard bearer of liberal democracy and open society: the ideas which triumphed in the cold war, now under siege from all sides, from Vladimir Putin’s Russia to Donald Trump’s America.

For more than three decades, George Soros has used philanthropy to battle against authoritarianism, racism and intolerance. Through his long commitment to openness, media freedom and human rights, he has attracted the wrath of authoritarian regimes and, increasingly, the national populists who continue to gain ground, particularly in Europe.

He is chairman of Soros Fund Management and founder of a global network of foundations dedicated to supporting open societies. Soros  is the author of several bestselling books including The Crash of 2008 and The Crisis of Global Capitalism

Learn more about this author