An Encounter with George Soros

I had an appointment to interview legendary financier George Soros who was in town recently. A colleague asked me to get some financial tips from the man who made billions in the stock market during past crises while others got burnt. If anyone got any fail proof investment strategies, this veteran market player would certainly be the man. Since the world is still reeling in the midst of a global financial crisis (I just got back from Europe where the Euro is taking a beating from the debt crisis in Greece), I thought I better acquaint myself with the wherefores and hows of the recent financial market meltdown.

So I got hold of George Soros’ book with the suitably cogent title ‘The new paradigm for financial markets: the credit crisis of 2008 and what it means’ and was ready for an expounder on supply and demand, bullish and bearish market sentiment and so on and so forth that reflects the workings of a capitalist economic theory, or something along those lines. Soros after all should know. He has made so much money in the market he is now happy to spread it around in philanthropic activities.

The ‘what happened’ part of the credit crisis is relatively straightforward. There was a credit crisis because people who were given credits to buy houses in the US, couldn’t pay their loans back. Why was there a whole financial market meltdown? Because the banks that gave the loans to those people sold their debts to the global financial markets as investment products with the belief that house prices would continue to rise. Why did financial institutions invest in the stocks? Because stock prices were on the up and up investors were feeling pretty bullish about making piles of money.

Why did the market collapse? Because the debtors couldn’t pay their housing loans back and suddenly there were a lot of houses in the market which brought down house prices so the credits went toxic and blew up taking the real economy along with it. Those caught up in the game, which was practically everybody in the US who had debts, got affected.

In other words, that’s the way the market works. People buy or sell. Make money or lose money. The trick is in knowing when to buy or sell. We have had booms and then busts in the past and will continue to have them in the future because the economy is very scientific and a knowledge privy only to smart economists who created the theories.

While the government, who don’t feel as smart as the economist, are afraid to interfere in the free market because those theories have formed the very definition of capitalism since the days of their grandfathers.

At least, that’s my poor naïve understanding of what went on.
Getting advice directly from the financial wizard who had succeeded in using the market rules to his advantage and who managed to survive busts with relatively few bruises if not downright profit, was a priceless opportunity. What are the secrets of a successful speculator? How to get perfect knowledge of the market and make accurate predictions about the future?

Reading the book and then finally meeting the person however, I got a revelation: In the sense that the encounter revealed less about the workings of the financial markets but more about the mind of George Soros. The financial markets according to him, do not function according to prevailing theories of economic scientists that set out that markets behave in a certain way that could be predicted.

On the contrary, most of the time both the markets and the regulators don’t really know what’s going on. This is because financial markets are human activities and humans can’t really make generalization about their activities without bias or subjectivity. In other words, nobody can make accurate predictions about how markets will behave. So how could economists make theories or governing laws about something that are based on misconceptions.

The new paradigm he offers is one based on accepting that markets are fallible because we’re humans and humans, even though we think and analyse a lot, are fallible. He calls the concept ‘reflexivity’. Or something like that. After all, I’m human too and my understanding is most likely imperfect.

Is this a new economic theory? No. It’s a philosophy. Take note people, George Soros is not an economist or even a financial guru. He is a philosopher. Now, we know.
So how about that investment advice that could make one as successful as him?

I suppose since the only certain thing about financial markets is uncertainty, trusting your luck, hunches and making guesses are just as good tips when investing in the market as any expert financial advice. After all, the small print always says that past performances are not indicators of future performances and prices can down as well as up. Which is a clear indication that the free market really is blind.

Which makes me think the safest place to invest my money at the moment is in my piggy bank and the best place to borrow money from is my sister.

(Desi Anwar: First published in The Jakarta Globe)

Mental Health Audit

I recently had plans to tape a talk show with an official from the Supreme Audit Agency who was anxious to make the body’s financial audit report on the state’s various institutions available to the public — all in the name of transparency and accountability.

The agency was paying handsomely for the program to be aired, and to its credit, it seemed very serious in wanting to make a success of it. I imagined that if some of their findings on financial irregularities would be followed up in earnest as a result, the government would be able to recoup a significant chunk of state money lost through corruption and inefficiencies.

All in all, I figured, a sincere effort worth supporting for the sake of the health of the country’s budget.

As the interview was to be taped at the television station sometime before noon, I spent the greater part of the morning reviewing the copious material put together by the agency’s staff and having makeup plastered on my face, while the crew finished setting up their equipment and the studio backdrop they’d been working on since dawn.

Ten minutes before the taping was to begin, however, my producer called to inform me that it was canceled. To say that I was irritated by this sudden decision was putting it mildly, but when I heard the reason behind it I was flabbergasted.

What happened? As it transpired, my guest, an agency official who according to staff was quite high-ranking and eager to appear on television, arrived at the main lobby of my office at the scheduled time and asked to be directed to the studio.

The lobby security guard, who assumed that the taping was to take place in the news studio, directed him to another lobby a mere meters away.

This was not correct. The taping was to take place in a non-news studio in the building closer to the main lobby.

The agency staff member who was already waiting for the official was made aware of the mistake and immediately called him to point out the error and inform him he had to return to the main lobby.

So what’s the big deal, I asked. It was a matter of getting his driver to turn around and drop him at the right lobby. I mean, on foot it takes less than a minute to get from one lobby to the other. By car, a matter of seconds.

A major deal as it turned out. Because instead of turning back to the initial lobby, my talk show guest decided that enough was enough and zoomed off in his car in a big huff, leaving his staff open-mouthed and the crew at a loss. And no amount of apologizing from his staff and the producer could convince him to change his mind. He preferred, apparently, to have wasted his time going all the way to the TV station and not tape a show rather than be told to go back to the same lobby by his underling because of a harmless miscommunication.

Thus, there was to be no taping that day.

Now, here was a senior official in charge of auditing serious financial reports in the country — and ready to reveal their irregularities — displaying a sulking behavior that would have made him a laughing stock in elementary schools.

His staff was understandably put out by the whole incident. I was embarrassed for them and felt sorry they had to endure a man who insisted on receiving, swallowing and digesting offense when none was given.

I genuinely wondered what actually went on in his mind where instead of simply returning to the main lobby, with perhaps a sharp word at his staff if need be, he chose to tell his driver to speed off back home or to whatever planet he came from where such behavior might be deemed normal.

Never mind financial audits. It looks like what this country really needs is a mental audit of its public officials, especially those occupying high places.

Perhaps we need tests similar to the ones that schoolchildren and company employees are constantly subjected to in order to weed out potential psychos, the people whose gray matter is a bit on the soft side and whose self-image is so inflated that they fail to see where ego ends and idiocy begins. Otherwise this country is in danger of being run by a bunch of thin-skinned, egocentric and insecure individuals concerned more about having their bag carriers and hangers-on always at their beck and call rather than getting any serious work done.

Or perhaps they’re already running this country. (Desi Anwar. First published in The Jakarta Globe)

Picking a Face at the Quiet Polls

Exactly one day before Election Day my voter’s slip finally arrived, and thus I could well and truly take part in determining the country’s leaders.

I must admit that up until then my enthusiasm for this whole democratic exercise had been less than lukewarm. But when my driver proudly showed me his purple-stained pinkie and expounded at lengths — with the skills and cogency of a political analyst — on why he chose a particular party, suddenly I too felt fired up to do my bit for the country.

So off I went, barely a half-hour before closing time, expecting to find a long line of eager voters at the neighborhood badminton court waiting for their turn to vote.

Instead the polling station, housed under a makeshift tent, had only a couple of election officials with a big bag full of as yet unopened ballot papers in front of them, while the few plastic chairs to seat waiting voters were curiously empty.

Either I was very late compared to my neighbors or there weren’t that many voters who came to begin with.

Later I was told that out of the 400 or so registered voters in my area, less than 200 came. The rest had obviously decided to spend their long weekend on less democratic pursuits.

I was handed four sets of thick ballot papers bearing different colors and went to the booths, which were merely spaces separated by tin partitions set on a long table.

I’d come with a relative and since nobody else happened to be voting, we could easily hold a conversation and compare notes.

One candidate looked like she had had a nose job, so we decided to pass. Another looked like an aging nun with a creepy smile.

This was important since neither of us had a clear idea of what to do and had paid very little attention to the General Elections Commission’s voting instructions.

Once we sussed out the technicalities of it, which took a few good minutes and some verbal consultations with a skinny official in a green uniform, it was time to make our choices for local, provincial and national representatives.

I checked my mobile for messages sent that morning by friends who advocated such and such persons for such and such reasons.

I scoured the broadsheet-sized district representative ballot paper for some familiar names and found none. My area apparently just missed out on being in Jakarta.

Instead I am a resident of the city of Tangerang in Banten Province and since I didn’t know any of the names on the sheet, I just had to find a method of choosing that was more meaningful than random.

It was a good thing I was not in a hurry.

A voter at the other end of the table loudly claimed that since he didn’t know any of the candidates pictured on the ballot for the Regional Representatives Council, he wasn’t going to fill it in. Nobody paid any attention to him, but when I spread out the ballot I understood exactly what he meant.

Before me were rows of out-of-focus headshots of people completely unfamiliar to me.

My relative was similarly at a loss. But a choice had to be made for the sake of our precious democracy.

As there were only a handful of women out of the dozens of males on the sheet we decided that our choice would be for a woman.

This narrowed it down considerably to five or six candidates.

The question was which one. Since all wore headscarves and were heavily made up it was not as easy as we thought. One looked like she had had a nose job, so we decided to pass on her. Another looked like an aging nun from “ The Sound of Music,” all black with a strip of white covering on her head and a creepy smile.

Yet another had some academic titles behind her name that seemed a bit dodgy.

We hemmed and hawed for a few minutes and both agreed on No.14, the woman with the friendliest face, a relatively normal smile and a recognizable academic title.

We folded the thick ballot sheets and forced them in the slots of their appropriate boxes and dipped our fingers in the purple ink. It ran down my little finger in one long indelible mess.

But I felt satisfied. I had done my duty.