What does Soros’ philosophy of “reflexivity” mean?

Author: Nianhua Chengfo Soros's investment ideas are complex, obscure and easy to create ambiguities.

Strictly speaking, Soros has never disclosed his specific investment methods to the outside world.

When Soros gave a speech at Harvard University, he humorously said that anyone who reads his books will never make money because no one can know the real him.

An audience member raised his hand and asked him: "Can you tell us what you are really like?" Soros replied with a smile: "No, if you tell us, there will be no Soros." Therefore, the outside world can only learn from his

Philosophy and investment cases to understand him, I am no exception.

I have read all the books written by Soros, and I have also read many doctoral and master's theses that study Soros's investment ideas. I have my own opinions on Soros's investment ideas.

I believe that Soros's investment philosophy is based on a cornerstone, which is error, fallibility, and complete fallibility.

The market will make mistakes, and people will make mistakes. All seemingly correct investment theories are just errors waiting to be tested. To put it more extreme - the ideas that have shaped the face of history are nothing more than some fallacies with rich connotations.

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A set of fallacies rich in derivatives is often initially regarded as a true insight. Only after it is interpreted as reality, its flaws begin to be exposed, and then another set of equally rich connotations but the opposite will appear.

new fallacies, and this process will continue.

This view can be said to be "heresy" among orthodox people, but Soros has achieved amazing achievements by relying on the investment methods derived from this idea.

Fallibility is consistent with Soros’s philosophical beliefs.

Soros's philosophical foundation mainly comes from Karl.

Popper's falsificationism is partly derived from Hayek's "The Order of Sense" and "The Counterrevolution of Science".

Falsificationism can be said to be a revolution in epistemology. It puts forward new viewpoints shockingly.

It believes that all scientific knowledge is temporary and is waiting to be falsified. Some truths that seem unbreakable today may just be fallacies tomorrow.

Scientific propositions cannot be verified, but can only be falsified. Falsifiability is the criterion for distinguishing science from non-science.

The growth of human scientific knowledge is not a cumulative progress, but a progress of eliminating errors, first proposing hypotheses and then refuting them.

Therefore, Soros raised two objections, one against induction and the other against scientism.

Soros believes that it is impossible to generalize a general method of winning excess profits through induction rules. If it exists, then investors can theoretically take over the market and the market will cease to exist.

Induction is a typical cumulative epistemology, which violates the falsification principle from conjecture to refutation.

Using the black swan theory, even if 99 white swans are found, we cannot use induction to say that all swans are white. Maybe the 100th one is black.

Therefore, Soros believes that it is an investment taboo to try to copy the natural scientific research methods to summarize the historical process of the financial market, or to summarize general profit methods from the historical process.

At the same time, Soros also strongly opposed scientism.

There is a huge difference between natural science and social science. The object of research in the former is independent facts, and the facts cannot be changed no matter what attitude the researcher holds, while the latter is mixed with the bias of the observer, the researcher's beliefs, values, and

Differences in stances and ways of thinking can reshape the facts.

The financial market belongs to the latter. How the stock price moves depends not only on the facts, that is, the fundamentals, but also on people's prejudices, that is, how they view the fundamentals. As a result, the financial market is full of huge uncertainties.

To illustrate this problem, Soros cited the theory of quantum mechanics.

Heisenberg's quantum mechanics believes that the mass and speed of quantum particles cannot be accurately measured at the same time. The reason is that the measurement behavior interferes with the measurement object. In this case, the uncertainty factor is introduced by an external observer.

Soros believes that the participants in the financial market are the same as the principles of quantum mechanics. The thinking of the participants will affect the financial market itself, so that the stock price trend is no longer independent. It always vibrates repeatedly with the participating thinking.

This is reflexivity.

In this case, financial markets cannot be calculated using simple scientific methods.

Scientologists, on the other hand, mechanically and uncritically apply scientific methods to their research. In this sense, scientism is precisely a betrayal of the scientific spirit.

Soros echoed Hayek's view that scientism is a self-destructive force in our modern scientific civilization and an extreme manifestation of the abuse of reason.

He opposed anyone's rational arrogance in claiming to master the ultimate truth in the name of science.

This is why investment masters oppose the tendency of over-mathematization and engineering. Soros even said ironically that his mathematical symbols have never been more than ɑ and ?.

Another master, Buffett, also said that the mathematics knowledge he used did not exceed the elementary school level.