2007-10-25 Not all lead turns into gold

Probably this book went way over my head.

The one insight I think I got from it was that during the tech boom, many of the new products were appearing, not because of some fundamental increase in the rate of innovation brought on by the Web, but because of all the money pouring into startups because investors believed the Web would lead to such innovations for technological reasons. A phenomena Soros calls "reflexivity", I guess. But even without knowing that it seemed clear a boom was in progress that would eventually bust. But how to know when? It doesn't seem this book or Soros could tell you.

I hear Soros became a billionaire through his investments and that seemed well beyond a chance event, but I didn't understand anything in this book to explain how that happened. Speculations about global politics and finance, then a big dash of intuition, and then at times a gain, at times a loss. I don't follow in Soros's case why his gains exceeded his losses. There are others who don't believe in unbiased marketes, why didn't they similarly profit to such an extent. And just knowing that markets are biased, how does it tell you how to time? Perhaps Soros benefitted from adjusting his market positions quickly if his assumptions weren't confirmed by the market: would that help and to such an extent?

It's not clear to me that Soros' explanations in this book are closely related, if at all, to his successes. It may be helpful to be exposed to his mindset, if this book does that, but, after finishing it, it isn't clear how to apply what I've read. I won't not recommend this book, because I may very well be missing a lot of what it says. Other people's books may not make you a billionaire. But I haven't figured out whether this one will make me one or even allow me to pay for a new car. "The Alchemy of Finance" seems to be about bold gambling I wouldn't want to do with any money I may someday need.