Soros was deeply influenced by his mentor karl popper's falsificationism philosophy when he was in college, and on this basis, he put forward the principle of Reflexivity, and applied this principle to his financial securities practice, thus achieving great success.

the so-called reflexivity means that the participants' thoughts and the events they participate in are not completely independent because of the limitations of human knowledge acquisition and cognitive prejudice. They not only interact with each other, but also determine each other, and there is no symmetry or correspondence. There is such a reflexive connection in the political, economic, historical and other fields of people's activities. Through the argument that the choice of participants is based on the inherent incomplete understanding of things, Soros puts forward an uncertain proposition. Soros compared Heisenberg's uncertainty principle in quantum mechanics when demonstrating his own principle. He believes that the uncertainty brought by people's thoughts about the development of events is similar to the uncertainty in quantum mechanics. In his book, Soros recorded his diachronic experiment by applying the principle of reflexivity, and the facts showed that most of his predictions were successful. This shows that there is something that can be correctly predicted in the state of affairs in which thinkers participate, but it requires great wisdom. Soros correctly saw the uncertainty of the historical process in which thinking participated, and the fundamental defect of mainstream market economics theory caused by ignoring this factor, and creatively put forward the principle of reflexivity. 473:1。 This is Soros's investment record as a quantum fund manager from 1968 to 1993. His investment record is not so much a victory of his investment skills as a victory of his philosophy.

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The market is unbalanced. The participants themselves are not independent of the event, and the decisions made by the participants themselves will also have an impact on the whole event itself. That is, participants will also influence the event, making it in a dynamic fluctuation.

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Soros, a famous investment guru, built his investment philosophy on the basis of "reflexivity theory". This "reflexivity" has also been translated as "reflexivity" or "feedback". Its theoretical meaning is:

Assuming that human behavior is Y and human cognition is X, since human actions must be influenced by human cognition, behavior is a function of cognition, which is expressed as:

y=f(x)

Its meaning is: what kind of knowledge has what kind of behavior.

Similarly, people's cognition does not appear in isolation. People's cognition is influenced by the objective world, which is closely related to people's behavior. This means that people's behavior has a negative effect on people's cognition, and cognition is a function of behavior, which is expressed as:

x=F(y)

It means that there will be a certain kind of knowledge if there is a certain kind of behavior.

after combining the above two formulas, we can get the following formula:

y=f(F(y))

x=F(f(x))

that is to say, both x and y are functions of their own changes-cognition is a function of cognitive changes, and behavior is a function of behavioral changes.

Soros called this function pattern "reflective". It is actually an "autoregressive system".

Soros also believes that due to the limitations of human cognition, human cognition can never reach the absolute truth, so human cognition will always be one-sided and incomplete. This one-sidedness and incompleteness will be gradually accumulated until it finally collapses.

reflected in the financial market, Soros's point of view is easy to understand: because people's understanding is always one-sided and incomplete, therefore, people's behavior can never be correct, so the market is always wrong. Since the market is always wrong, if it reaches the extreme, the market will inevitably collapse.

under the guidance of this theory, Soros made every effort to deal with market mistakes in his investment practice, and explored investment opportunities from them. In Financial Alchemy, he recorded an experimental investment process from August 16, 1985 to November 7, 1987. During this process, his capital appreciation reached 113%, which was an unprecedented success.