Sunday, Jul 20, 2008
He went from apple harvester to capitalist kingpin to progressive savior. The countercultural investor has more money than you've ever heard of, and he just loves to give it away.
Mar 27, 2001 | Last year, when the great investor George Soros retired, at 70, from his career of speculating with billions of other people's dollars, it was as if a legendary athlete -- his fingers covered with championship rings -- had grudgingly given up after a couple of humiliating losing seasons. Soros' lifetime record was astonishing: If you had invested $1,000 in his Quantum Fund when he started out in 1969, he would have turned your paltry grand into $4 million by the new millennium -- a cumulative 32 percent annual return, the financial equivalent of a major-league slugger batting .400 not just for a single season but for three decades.
Like John D. Rockefeller in a previous generation, Soros found making his billions to be very stressful, and he took much more pleasure in giving them away. Even though he has already given $2.8 billion to his foundation, Soros is still worth around $5 billion. He has promised to give away the rest of his wealth before he turns 80, meaning that his legacy as a philanthropist and reformer could be even greater than it already is.
Soros achieved his lasting fame early on: Back in 1981 he was hailed as "the world's greatest money manager" by the bible of the trade, Institutional Investor, which wrote: "As Borg is to tennis, Jack Nicholas is to golf and Fred Astaire is to tap dancing, so is George Soros to money management."
Only one other individual -- the famed Warren Buffett -- rivaled Soros as an investing wizard for the long stretch from the '60s through the '90s. Buffett's approach was dreadfully prosaic -- he lived in Omaha, Neb., of all places, bought stocks in a few supersolid companies (among them Coca-Cola, Disney, ABC and the Washington Post) and held onto them forever. Soros, in contrast, was the epitome of guts and glory. He was a short-term speculator who made terrifyingly huge bets on the directions of financial markets.
No wager was bigger than the time in September 1992 when he risked $10 billion -- billion with a B -- that the British pound would fall. His instinct was right: That night, while Soros slept in his apartment on New York's Fifth Avenue, he made $1 billion from the trade. Ultimately his profit reached almost $2 billion -- and earned him international notoriety.
From that point on, Soros had guru status among traders, who believed that he could move markets single-handedly. Presidents and prime ministers constantly feared that Soros would bet against their currencies, and the sheeplike denizens of Wall Street and London's City would follow him, resulting in sharp devaluations and economic crises. Malaysia's chief of state demonized him for allegedly ruining that country's economy during the Asian financial panic. Soros gained a reputation as one of the few names -- along with Buffett and Alan Greenspan -- that had oracular status in the global economy.
And then it all went to hell. Soros lost $2 billion in Russia's default in 1998. The following year he made a big bet that Internet stocks would fall. The basic idea was right, but he was about a year too early, and he quickly lost $700 million. Then he rushed to buy up a bunch of tech stocks, which sank. His embarrassing losses mounted to almost $3 billion when the NASDAQ ultimately did crash in the spring of 2000. That's when Soros announced that he was withdrawing from an active role at Quantum, which he would transform from a high-risk speculative fund into a conservative institution -- a move like Babe Ruth pledging that he would only try to hit singles from now on.
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