The Alchemy of Finance:
Reading the Mind of the Market
George Soros (1987)
Why Read It?
• Gives insight into Soros’s investment strategies, and the decision-making processes of the most
successful money manager of our time.
• Depicts how he ran the hugely successful Quantum Fund in the mid-1980s, giving examples of his
approach and lessons in how to make money in times of uncertainty.
• He recommends his technique of being adaptive and flexible, as there is no way of knowing how any
market situation will turn out.
successful money manager of our time.
• Depicts how he ran the hugely successful Quantum Fund in the mid-1980s, giving examples of his
approach and lessons in how to make money in times of uncertainty.
• He recommends his technique of being adaptive and flexible, as there is no way of knowing how any
market situation will turn out.
Getting Started
The Alchemy of Finance analyzes current financial trends, and presents a new paradigm by which to
understand the financial market today. It details Soros’s innovative investment practices that have made him
into a billionaire, along with his views of international finance and the global economy. It is quite philosophical
in outlook, and technical in his examination of the connection between thought and reality, and how they
apply to the financial markets
The Alchemy of Finance analyzes current financial trends, and presents a new paradigm by which to
understand the financial market today. It details Soros’s innovative investment practices that have made him
into a billionaire, along with his views of international finance and the global economy. It is quite philosophical
in outlook, and technical in his examination of the connection between thought and reality, and how they
apply to the financial markets
Author
George Soros (b. 1930) is President of Soros Fund Management and Co-Founder and Chief Investment
Advisor to the Quantum Fund. A billionaire investor, philanthropist, and author, he is also active in education,
culture, and economic aid and development through his Open Society Fund and the Soros Foundation.
George Soros (b. 1930) is President of Soros Fund Management and Co-Founder and Chief Investment
Advisor to the Quantum Fund. A billionaire investor, philanthropist, and author, he is also active in education,
culture, and economic aid and development through his Open Society Fund and the Soros Foundation.
Context
• Provides an in-depth discussion of Soros’s “theory of reflexivity,” explaining its key analytical principles
in the context of boom–bust cycles in financial markets and economies, and its applications in his
successful trading system.
• The basic premise of reflexivity is events create expectations that influence the financial markets; the
markets, in turn, then influence these events, creating a cycle.
• Offers a unique contrarian insight into our understanding of supposedly obvious economic and financial
ideas, such as his denial of the efficient markets hypothesis and financial markets equilibria.
• Argues that the market is a useful early warning system for potential economic catastrophes, as they
reflect the fears of investors.
• Proposes a human uncertainty principle that suggests our understanding is often incoherent and
always incomplete, inspired by Heisenberg’s rule about quantum particles.
• Provides an in-depth discussion of Soros’s “theory of reflexivity,” explaining its key analytical principles
in the context of boom–bust cycles in financial markets and economies, and its applications in his
successful trading system.
• The basic premise of reflexivity is events create expectations that influence the financial markets; the
markets, in turn, then influence these events, creating a cycle.
• Offers a unique contrarian insight into our understanding of supposedly obvious economic and financial
ideas, such as his denial of the efficient markets hypothesis and financial markets equilibria.
• Argues that the market is a useful early warning system for potential economic catastrophes, as they
reflect the fears of investors.
• Proposes a human uncertainty principle that suggests our understanding is often incoherent and
always incomplete, inspired by Heisenberg’s rule about quantum particles.
Impact
• He became famous for making a billion dollars in one day by shorting the British pound against the US
dollar and other currencies, and this book provides important business and investing lessons.
• Examines his technique of buying during the upturns and taking the profit, waiting for a while, then sell
shorts during the downward cycle.
• Discusses how Soros trades in the currencies and commodities markets, simplifying his model into
eight variables.
• He became famous for making a billion dollars in one day by shorting the British pound against the US
dollar and other currencies, and this book provides important business and investing lessons.
• Examines his technique of buying during the upturns and taking the profit, waiting for a while, then sell
shorts during the downward cycle.
• Discusses how Soros trades in the currencies and commodities markets, simplifying his model into
eight variables.
Quotations
“I seek to lay the groundwork for a new paradigm that is applicable not only to financial markets but to all
social phenomena.”
“Financial markets are always wrong in the sense that they operate with a prevailing bias.”
“Equilibrium itself has rarely been observed in real life—market prices have a notorious habit of fluctuating.”
“I seek to lay the groundwork for a new paradigm that is applicable not only to financial markets but to all
social phenomena.”
“Financial markets are always wrong in the sense that they operate with a prevailing bias.”
“Equilibrium itself has rarely been observed in real life—market prices have a notorious habit of fluctuating.”
Books:
• Cunningham, L. A. (ed). The Essays of Warren Buffett: Lessons for Investors and Managers. New
York: Cardozo Law Review, 1997. A compilation of the writing and thinking of the great investor.
• Soros, George. Soros on Soros: Staying Ahead of the Curve. New York: Wiley, 1995. Produced in an
interview format, revealing his views on investing, global finance, and world affairs.
• Cunningham, L. A. (ed). The Essays of Warren Buffett: Lessons for Investors and Managers. New
York: Cardozo Law Review, 1997. A compilation of the writing and thinking of the great investor.
• Soros, George. Soros on Soros: Staying Ahead of the Curve. New York: Wiley, 1995. Produced in an
interview format, revealing his views on investing, global finance, and world affairs.
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