Profile: George Soros: God of all he surveys

His gift for making money has invested him with almost magical power. Stephen Fay reports

THE story first appeared last Tuesday in the Wall Street Journal: "Soros bets pound will fall more". The next day it had become the banner headline on the Guardian's front page, which priced Soros's bet at $8bn. The subliminal message was that George Soros, the big, bad wolf of international finance, the Wall Street raider who made a billion dollars when he broke the Bank of England in 1992, was about to take another huge bite out of the pound.

Soros provokes ambiguous reactions. There is a sneaking admiration for his billion-dollar profits in the foreign exchange market at the expense of governments, even when the government is our own. At the same time he is feared because he symbolises the vulnerability of our currency to outside attack.

Soros runs a hedge fund called the Quantum Fund, which invests heavily in markets for shares and bonds, currencies and commodities. This has always made more than it has lost, but its losses have also been spectacular. Last winter, when Soros was on the wrong side of a bet about the values of the dollar and the yen, he lost almost as much as he won in his great bet against sterling in 1992.

But Soros doesn't just make money and lose it in vast amounts, he also gives it away on much the same scale. He has spent more than a billion dollars of his own money on charity. He is a splendid philanthropist as well as a remarkable speculator.

A passage in his book The Alchemy of Finance, published in 1987, distinguishes Soros from all other financiers, ever. "I have always harboured an exaggerated view of my self-importance," he wrote. "To put it bluntly, I fancied myself as some kind of god or an economic reformer like Keynes, or, even better, like Einstein. My sense of reality was strong enough to make me realise that these expectations were excessive, and I kept them hidden as a guilty secret. This was a source of considerable unhappiness through much of my adult life. As I made my way in the world, reality came close enough to my fantasy to allow me to admit my secret, at least to myself. Needless to say, I feel much happier as a result."

Soros's life has been a rich breeding ground for fantasy. His Jewish father was an expert in the art of survival, having escaped from a Siberian prisoner-of-war camp in the First World War. Soros was nine when the Second World War broke out, and he survived in Budapest by posing as the godson of a Hungarian civil servant. Recalling the buzz he got from escaping detection, he says that, in some ways, 1944 was the happiest year of his life.

It was better than his first years in London, when he was lonely and - although he worked as a waiter while studying at the London School of Economics - so hard up that he had to lie and beg to the Jewish Board of Guardians, a body that instilled at an early age a distaste for conventional charity. Being a Jew has been important to Soros, who once told Anthony Sampson that he felt it was his Jewishness that drove him, because it added to his sense of insecurity.

"There are two strong motives in his life, and it would be hard to disentangle them," says Aryeh Neier, a friend who runs Human Rights Watch in New York City. "The first is his being a Jew; the second is the profound influence on him of Sir Karl Popper, the Viennese emigre who taught philosophy at the LSE after the war."

Popper, who wrote The Open Society and its Enemies, one of the most influential philosophical works of the past 50 years, taught that philosophical method cannot tell what is true; it can only discover what is false. The key words were test and reject. Because Marxism - and Freudianism, for that matter - could not be tested, Popper rejected both as dangerous pseudo- sciences. Popper's concept would make Soros rich.

After graduating from the LSE, Soros worked as a leather-goods salesman before joining Singer and Friedland, a City merchant bank. There he learnt the tricks that led to the offer of a job on Wall Street. He left London, and worked in New York for 13 years before setting up the Quantum Fund. He took time off to write a philosophical treatise called The Burden of Consciousness, of which he later remarked: "Unfortunately the title was the best part of it."

"Quantum" was a reference to Heisenberg's uncertainty principle, which shows that it is not possible to predict the behaviour of sub-atomic particles in quantum mechanics. Soros practised what he had learnt from Popper, testing and rejecting ideas and concepts in the markets. It was his rejection of conventional market wisdom that was Soros's unique selling point.

Soros's first fantasy was that he would establish a philosophical principle; his second that he would be a philanthropist. The second was always more likely. In 1979 he started the Open Society Fund (a homage to Popper), which made its first grants to black students in South Africa.

In the early Eighties his charity started to operate in Hungary. Aryeh Neier, who first met him in 1979, saw the motive straight away: "Having survived the Second World War, then studied at the LSE, he knew his subsequent opportunities were entirely attributable to his education. He wanted to offer students in repressive countries the same opportunities he had had."

By the mid-Eighties Soros was becoming known in circles outside Wall Street and the City of London. He began entertaining lavishly, and attracted guests such as Sir James Goldsmith and George Weidenfeld.

At 67, Soros's age is well disguised by a shock of hair. He has a beguiling eastern European accent and an easy athleticism that has come from playing tennis regularly and competitively. A friend notes: "Despite his wealth, he doesn't mind where he sleeps or what he eats, but there is trouble if he doesn't get a game of tennis every day." A doubles partner at Queen's Club in west London reports that Soros likes to play with new balls and always leaves them on the court. (His style, unsurprisingly, is to get to the net and dominate a point.)

Anthony Sampson, one of Soros's wider circle, says: "Back in the Eighties he was anonymous and unassuming. We took long walks in the park and his bright eyes would light up when a new idea hit him. I think he is just about the cleverest man I've ever met."

Watching Soros closely, Sampson realised that part of his secret as an investor was his ability to listen: "You see this at his parties. Soros talks to his guests separately about the things they know best. If a banker is back from India, Soros finds out about India. If a guest belongs to the Prime Minister's staff, he talks about Downing Street." Neieh says Soros gets more pleasure from seeing his by-line in the New York Review of Books than from making another $100m.

But the one thing Soros has not been able to buy is privacy. When he sacked the family butler, Patrick Davison, in 1991, Davison's case for unfair dismissal was heard before an industrial tribunal, and we learnt of the parcels that would arrive from hotels all over Europe containing items Soros had left behind; of his stopping the car in London to telephone his secretary in New York to find out where he was supposed to be going; and his preference for an old brown cardigan rather than the new clothes his wife, Susan, had bought for him. Susan Weber Soros, director of a graduate centre for the decorative arts in Manhattan, is his second wife; they have two children, and Soros has two others from his first marriage.

The high-water mark of Soros's philanthropy came during the conflicts in the former Yugoslavia. He paid $50m for a water-purification plant in Sarajevo; he lent $25m to the government of Macedonia to pay the people's fuel bills during the cold winter of 1993. Even greater - amounting finally to well over $1bn - was his contribution to information and education throughout eastern Europe, and to Russian science. But Soros has a naive streak, too. He was shocked when he was ripped off in Russia and suffered vicious anti-Semitic abuse, perhaps because of his generosity.

Recently Soros has shifted the emphasis of his charitable work to his own American backyard. But the subjects he focuses on have attracted criticism in the United States, too. His $1m backing for the campaign in California and Arizona to legalise the medical use of drugs such as cannabis led to accusations that he was part of a moneyed, out-of-state elite.

Soros also finances campaigns against harsh drug laws and unjust welfare reforms that victimise immigrants like him. He says he does not mind the abuse this attracts - it is evidence that his money is buying influence. Keeping a high profile has become essential to him.

Soros's influence in the financial markets, however, has diminished. Others have learnt the rules of his game and have taken a share of the profits. But the astonishing volume of cash that Soros plays with means that he remains a force. "He's got muscle and a muscle mouth," says a competitor on Wall Street.

Last week Soros put between $6bn and $8bn where his muscle mouth is. The bet, in a ferociously complicated market in financial options, is that sterling will continue to fall sharply against the deutschmark. His presence in the market immediately altered expectations. "Soros is a bit like God," one trader told the Wall Street Journal. "There are three of him at any one time, and he moves in mysterious ways."

Though, in a curious way, the Bank of England - conscious that sterling's high value is hurting exporters and endangering jobs - may this time be hoping that George Soros has got it right.