The Reflexive Alchemy (Advanced Sophistry) of George Soros

Excerpts from video:

Hegel propounded a dialect of dialectic of ideas. Marx turned the idea on its head and espoused dialectical materialism. Now there's a new dialectic that connects the participants thinking with the events in which they participate. That is, it operates between ideas and material conditions. If Hegel's concept was the thesis, and Marxism is the antithesis, reflexivity is the synthesis...

... "There's a fundamental difference," Soros tells, "between Marxism and the new dialectic. Marx labored under the misapprehension that in order to be scientific, a theory had to determine the future course of history. The new dialectic is emphatically not deterministic, since the shape of society cannot be scientifically determined. It must be left to the participants to decide their own form of organization."

That's his definition of Open Society. "Since no participant," he says, "has a monopoly on Truth, the best arrangement allows for a critical process," there's your critical theory, "in which conflicting views can be freely debated and eventually tested against reality." But there he's trying to mix it with actual scientific and reasonal, uh, and reason, like in the liberal tradition. Democratic elections provide such a form in politics and the market mechanism provides one in economics that he's actually correct about. In both cases neither markets nor elections constitute an objective Criterion, only an expression of the prevailing bias. But that is the best available in an imperfect World, thus the concept of reflexivity leads directly to the concept of an Open Society. 

...but at the same time he had his practical survival skills that he would later learn to apply to the market to get rich. And the lesson that he drew is: that outcomes are more dependent upon perceptions than they are about facts. That's very important, and it's at the center of reflexivity. We can talk about if he's a good guy, or a bad guy, in relation to that. But the lesson was that outcomes are more dependent upon people's perceptions than they are on facts, which in practice means: "if you can screw with people's perceptions, you can lead them in places you want them to go if you're good at it."

Remember, the whole thing is called "the Alchemy of Finance". Well, it would also be "the Alchemy of social science". It would also be "the Alchemy of historical change".

And so, here's how he spells out some of these ideas in the book that were that he developed out of this realization of perception versus reality. So we're pack backtracking a page and a half or so in the book, if you're following along. He says, "I was greatly influenced at the time by Karl Popper's ideas on scientific method. I accepted most of his views, with one major exception. He argued in favor of what he called 'Unity of method'. That is the methods and criteria that apply to the study of natural phenomena also apply to the study of social events. I felt that there was a fundamental difference between the two. The events studied by the social scientists have thinking participants. Natural phenomena do not. The participants thinking creates problems that have no counterpart in Natural Science. The closest analogies in quantum physics, where scientific observation gives rise to Heisenberg's uncertainty principle, but in social events, it is the participant's thinking that is responsible for the element of uncertainty, not the outside Observer."

"Natural Science," he says, "studies events that consist of a sequence of facts. When the events have thinking participants, the subject matter is no longer confined to facts, but also the P, the participants perceptions. The chain of causation does not lead directly from fact to fact, but from fact to perception, and from perception, to fact. This would not create any insuperable difficulties if there was some kind of Correspondence, or equivalence, between facts and perceptions. Unfortunately, that is impossible because the participants perceptions do not relate to facts, but to a situation that is contingent on their own perceptions and therefore cannot be treated as a fact."

"So," he says, "that in fact, people don't act on facts, they act on their perceptions of facts." As he says, "facts lead to perceptions and then perceptions lead to new facts, which are new states of the world, but those are assessed as perceptions."

"Again, and the process repeats over, and over, and over again." And the fact is that he says, "there's not a correspondence between what people perceive, and the facts." Which seems to be a strong overstatement of how much bias there is, "but to," he says, "a situation that is contingent on their own perceptions."

So, people's perceptions are based on people's perceptions, they're not based on the facts of the world. Which kind of overwhelmingly says that when we're looking at Social phenomena, we can't kind of boil it down and do the observational study. Which, I think, some rigorous social scientists would have a hard time with. The way that we say could boil it down and agree upon the facts, you know, describing a rock, or a tree, or something like that in the, or a proton in the natural world. He says, "economic theory tries to sidestep the issue by introducing the Assumption of rational Behavior." So, economic theory in fact does presume that people can be rational, he overstates it by saying that it assumes that people are perfectly rational. And we all know those Libertarians, and we know that that's not correct, but at any rate he says the economic theory is wrong because it assumes rationality. So, this is a, this "Alchemy of Finance" is a robust attack also on the rational Tradition at the heart of Classical liberalism. So, to characterize Soros, even though he's already admitted he's a dialectical character, means not classical liberal, as a classical liberal, or in line with Classical liberalism, would be dead wrong.

The dude's a leftist... 

 

...That comes from his financial thinking about how prices may or may not anticipate future Behavior, or discount prices. A simpler way to put it would be that our beliefs about the future, right or wrong, are among the inputs that determine the future. That's a much simpler way to put it. If we believe something's going to be true, then we might make it true. If we believe something's going to be false, then we might make it false. In other words, Soros's great idea is that markets, and social circumstances, operate according to the rules of dynamic systems governed by coupled differential equations. And he seems to lack the mathematics to express it that way. So he has this great Insight, really his great Insight is that people can be wrong. It really is, people can be wrong and other people can act on wrong Behavior too. And then, things that are wrong can happen because people were wrong. Soros, in fact, goes further and believes that we're always wrong, though. Which is actually of some importance because it means he thinks we're always creating the future out of beliefs about both the future and the present that are in fact, "not just biased," as he calls it, "but also wrong."

One of the ways he explains this sounds a lot like the whole dialectical process of either Hegel or Marx is, that we're always making mistakes, and then we're correcting according to them, or losing control of them. More per pertinently though, it isn't said here explicitly yet but it comes up later, Soros's idea of reflexivity contains the idea of feedback loops and Perceptions, in other words, chaotic circumstances creating future reality. That is, he believes that our incorrect beliefs can run away and spill over into historical change, and that's, in fact, how he defines historical change, It's when these feedback loops spill over based on incorrect beliefs, creating more incorrect beliefs going, and people acting on them. And then, boom! You end up in a completely different system. So within much waffling, as an aside, another character related piece to bring up here, he says, related to this attitude, he says, "when I asserted that markets are always biased, I was giving an expression to a deeply felt attitude. I had a very low regard for the sagacity of professional investors." Of course, he does, because he think thinks he's smarter than everybody else because he thinks he's a God, right? "And the more influential their position, the less I consider them capable of making the right decisions. My partner and I took a malicious pleasure in making money by selling short stocks that were institutional favorites." 

 

...The other point is more subtle, but I want you to catch it. He said the participant's bias is the key to an understanding of all historical processes that have thinking participants. So I don't want to give away the whole point, although I did at the beginning too quickly here, but it's this. Soros realizes something very important, and I want you to take this in. Get ready, Soros realizes that he who controls the biases of the people, controls the future. Not, "he who can relate the best facts, he can understand the world the best, who can articulate facts the best, that's not who controls the future." Soros realizes, it is he who controls the biases of the people, is who controls the Future. Okay? So that's really important.

But let's carry on, it's tangential to read it all here. I just want to talk about something, because it's going to come up later, about why he wants to short America, and how it's structured. But there's a big long piece of substance that comes next, throughout most of the rest of the introduction, where Soros is talking about, uh, the history of financial markets. And the, he, wants to talk about, as I mentioned before, that the history really needs to be understood in terms of boom, and busts proceeding, and Cycles. The so-called boom-bust cycle of the market. And of course, generally speaking, what he's putting out is that the bigger the the Boom, the bigger the unhappy, and his words, bust that follows it. And he seems to think that in fact, there was a huge credit boom that happened during the 1970s, and since that should have produced, in his words, a very unhappy Financial bust that never arrived. I don't know if 2008 changed that, this is obviously written long after 2000, or long before 2008, but maybe not. So he thinks there should have been a, there was a huge amount of of market bubble through the 1970s through a credit boom, and there was no accompanying market crash, no big recession, no big depression, or whatever that should have corrected for it. And so, we're in a hugely artificial state of economics, and have been ever since, really, uh, at least the 1970s, but maybe completely after World War II, and this resulting state that we're in of avoiding the inevitable bust that he said must happen, uh, he calls the Golden Age of capitalism with some self-aware irony. And we're not going to get into the whole weeds, but it's it's more to understand Soros's mentality and disposition, and to introduce a couple of other, uh key Concepts, that are going to matter later.

...The point is that imperfect understanding isn't a state of ignorance or bias. It is a feature of every system that consists of thinking participants. This is his point. He says, scientific method he has a very he doesn't say the scientific method or the scientific methods he always just says scientific method he says scientific method is to designed to deal with facts but as as we have seen events which have thinking participants do not consist of facts alone. The participants thinking plays a causal role. Yet it does not correspond to the facts for the simple reason that it does not relate to facts. participants have to deal with a situation that is contingent on their own decisions. their thinking constitutes an indispensable ingredient in that situation. whether we treat it as a fact of a special kind or something other than a fact the participant's thinking introduces an element of uncertainty into the subject matter. This element is absent in the Natural Sciences skipping a bit it is the self-influence character of the participants thinking that is responsible for the element of uncertainty or indeterminacy I mentioned before. the difficulties of scientific observation pale into insignificance when compared with the indeterminancy of the subject matter. The indeterminacy would remain even if all the problems related to The Observer were resolved. that means even if God were the Observer whereas the problem of the Observer can be directly attributed to the indeterminacy of the subject matter thus the problem of the social sciences is not merely methodological but is inherent in the subject matter."
 

...He says (about Social Sciences), "They've had little success in the unity of method thing. Their endeavors have yielded little more than a parody of Natural Science. In a sense, the attempt to impose the methods of Natural Science on social phenomena is comparable to the the efforts of Alchemists, who sought to apply the methods of magic to the field of Natural Science. But while the failure of the Alchemists was well nigh total, social scientists have managed to make a considerable impact on their social matter, or their subject matter. Situations which have thinking participants may be impervious to the methods of Natural Science, but they are susceptible to the methods of alchemy."

That wording is very important. I think that the Natural Science methods actually can work in a like I said, limited scope in the social sciences and that recognizing those limitations is actually pretty key to doing rigorous social scientific work. And I don't think most social scientists would disagree with me. I think most of the reason that most social science is crap is not because of inherent limitations that he's talking about, because I think he's a crackpot, but rather because of badly aligned professional incentives that ran amok. But he didn't say that. He said that situations which have thinking participants are "susceptible" to the methods of alchemy. They are susceptible, you can intentionally do alchemy to social science. In other words, you can intentionally NOT do social science in the name of social science. You can do social Alchemy. You can try to make lead into gold through misapplication of the social sciences, which is in fact exactly what his reflexive method is. And what it's doing, he says, the thinking of participants exactly because it is not governed by reality. Reality is easily influenced by theories, so you can mislead people in the field of natural phenomena. Scientific method is a effective only when its theories are valid. But in Social, political, and economic matters, theories can be effective without being valid. In other words. they can be operationally useful.

Whereas Alchemy has failed as a natural science, social science can succeed as alchemy. That is very interesting wording. Social sciences can succeed as Alchemy, he insists, but that means to make something that isn't out of what is. That's a heavy point that deserves a whole podcast of its own, that the social sciences can succeed as Alchemy. It's not that they are Alchemy. They can succeed "as Alchemy." In other words, you can do bogus social science like nudge Theory, and Achieve results in the world. That's what he's actually saying.

But we can understand Soros. And his reflexive dialectic here is indicating that he subscribes to sociological gnosticism. In fact, a hermetic kind of it that is "social science as a form of social Wizardry." That is, social science as intentional manipulation by those who understand the boundaries of social science.

Not only that though, but this is alchemy which makes something that isn't, from something that is, by means of magical processes, which, in the social realm means manipulative processes. Think of magic. So I'm not talking about like Gandalf, cuz that's fiction, I'm talking about real magic. You go to a real magic show, you watch a real magician. Did the real magician that you went and watched do real magic? No. So a good definition from a real Magician of magic that I saw is where you have cause A leading to effect B, and you have no ability to discern a causal relationship between cause and effect. That's a, you can let that sink in, that's actually a sophisticated definition. But it's, for example, that I put the thing in the cup, and I wave my hand in front of the cup. Which should do nothing to the thing in the cup. And then the thing inside the cup is gone. So, you have the cause A, me, waving my hand in front of the cup, and the effect B, the thing inside the cup disappeared. And there's no causal relationship. You can't discern how it happened. Now, of course, there is a causal relationship between the ball leaving the cup. You just don't know what I did because I tricked you. which is to say, I manipulated you. I had it tucked between a finger, or in a cup with a false bottom, or you know, whatever. It depends on the trick. And there are lots of videos, go watch your Instagram. Look it up on on your Instagram or whatever, YouTube. There are lots of videos where they show you magic tricks from The Magician's perspective. I've watched a ton of them, and when you see it, you're like... uh... social Alchemy, which is what he's actually advocating for here as what social science either is or can succeed as, is manipulation. It is deception. It's not real magic. You cannot make an Open Society out of a real Society through a magical alchemical process. Somewhere in there, is lying deception, manipulation. And when you try to do it, it's not a magic trick in a show. You're going to cause massive disaster. This is the same problem all of the other sociological gnostics that are hermatic in nature, like the Marxists, have caused. Or the liberationists. It's Calamity after Calamity after Calamity because they're trying to make something that doesn't exist out of something that does exist through deceptive methods.

But anyway, later in this book actually, Soros explains explicitly what he means by Alchemy. So let's say in his words instead of mine. It's important to bring it to Bear immediately since he's now invoked the word alchemy, which is, of course, in the title. This is how Soros splits the natural and the social sciences, and it's crucially important to understand. He says, "scientific method seeks to understand things as they are while Alchemy seeks to bring about a desired State of Affairs." So, you're not trying to study social phenomena, you're trying to manipulate them. Or the point is, not to understand the world but to change it. The guy says he's not a Marxist, let's be very clear. To put it another way the primary objective of science is truth, that of alchemy, operational success. So, you have an intended state that you want to change the world to, and your goal is to succeed in the operation through alchemical, which is to say manipulative, processes. That is reflexivity. That is George Soros's modus operandi.

 

...He says, "there is much to be gained by pretending to abide by the conventions of scientific method without actually doing so so" he's talking about behavior in the social sciences he says, 'yeah try to look scientific'. He says, 'there's much to be gained by pretending to be scientific but you're not actually doing so, you're doing Alchemy, pretending to be a scientist ,listen to science, follow the science. Oh my God the whole covid thing was a gigantic reflexive environment wasn't it? Let that pill sink in for a second, or is it a jab? I guess we got to inject it ,right? "Natural Science," he says," is held in great esteem. A theory that claims to be scientific can influence the gullible public much better than one which is, frankly, which that frankly admits its political or ideological bias. Follow the science, listen to science the science is settled," he said, "a theory that claims to be scientific can influence who the gullible public much better than one which frankly admits it's political or ideological bias."

"I only need to mention," he says, "Marxism and psychoanalysis as typical examples but Laissev fair capitalism with its Reliance on the theory of perfect competition is also a case in point. It is noteworthy that both Marx and Freud were vocal in protesting their scientific status and based many of their conclusions on the authority they derive from being 'scientific'." Once this point sinks in, the very expression "social science" becomes suspect. It is a magic word employed by social Alchemists in their effort to impose their will on their subject matter by incantation. And he just said Marx and Freud are these people. Now hang on, so you think, "wow, he just said that's really bad. That's not legitimate." But no, as a matter of fact, he's like, "this is how the world works, so that's what we're going to do." That's really important to, to get. He's basically saying, "People can be manipulated so we should. The gullible public can be tricked by the appearance of science, so let's do it!"


...So let's just jump into it. The next section is called "The Concept of Reflexivity". It starts out this way, "the connection between the participants thinking, and the situation in which they participate, can be broken up into two functional relationships. I call the participants efforts to understand the situation the cognitive or passive function, and the impact of their thinking on the real world, in the participant," uh, sorry the grammar here is a little challenging, so I'm going to actually modify what he wrote to make it more clear. "I call the participants effort to understand the situation the cognitive or passive function, and I call the impact of their thinking on the real world the participating or active function."

I don't know why he says passive and active, because what he really says is when you try to understand the world, that's the cognitive function. When you try to act in the world, that's the participating function. We could call them "theory" and "practice", right?

"In the cognitive function, the participant's perceptions depend on the situation. In the participating function, the situation is influenced by the participants perceptions." So when I said Dynamic systems with coupled equations, that's what I'm talking about. "It can be seen that the two functions work in opposite directions. In the cognitive function," this is a very bad way to say they're coupled equations. By the way, "in the cognitive function the independent variable is the situation. In the participating function, it is the participants thinking. But again, this is theory and practice, and that they're reflexive on one another."

This guy's just Reinventing, you know, the other dialectics and thinking he's got something genius here. "There are many cases where one or the other function can be observed in isolation, but there are also instances where they are both operating at the same time. When both functions operate at the same time, they interfere with each other. Functions need an independent variable in order to produce a determinant result. But in this case, the independent variable of one function is the dependent variable of the other."

I'm telling you all he did was invent Dynamic systems here, and think he's done something really freaking genius. You got, oh you found out, coupled equations exist, did you? Instead of a determinant result, usually what happens in Dynamic systems is that you have a dynamic result. Like, that the population follows a cyclical like, an orbit, right? So sometimes a population goes up, and then, when they get kind of over stresses this environment, it goes down, and then there's not really enough. So there's lots of food, or whatever, excess of food, so it goes back up. And then it overstress the environment, so it goes back down. And it goes in, like a circle of up and down, or a sine wave up and down, up and down. Something that's a very simple example, Oh my gosh, it's so complicated.

He says, "Instead of a determinant result, like a single number, we have an interplay in which both the situation and the participants views are dependent variables, so that an initial change precipitates further changes in both the situation, and in the participants views. I call this interaction 'Reflexivity' using the French word," sorry, "using the word as the French do when they describe a verb who subject and object are the same." So like I said, he literally just figured out coupled equations and dynamic systems. And he's like, Errmagerd, like because he doesn't actually know the math behind what he's doing. But I digress.

Here's a simpler articulation of his Reflexive thing, because that was Technical and weird. I just need this to set up for the determining function and the cognitive or the participating function, and the cognitive function. "Reflexive things, are things," this is a simple definition, "Reflexive things are things that are neither true nor false, but that become true or false based on what people believe about them. That simple. "This is a revolutionary moment, well, if we all believe it is then it is. It becomes one. And if none of us believe it, nothing happens, and it's definitely not one. If enough people believe a stock is going to crash, people will act in a way that crashes the stock. If enough people believe a bank is going to fail, people will act in a way called 'Running on the bank,' that causes the bank to fail. If enough people believe that a stock is going to go Gang Busters like Dogecoin, or even like Bitcoin did for a while, they'll buy in and it'll go Gang Busters."

For Soros, these states are not reflections of reality itself, but are a kind of self-reinforcing feedback loop caused by misperceptions of reality that cause circumstances that generate more perceptions, that cause more circumstances, and so on. In other words, sort of like 'Society creates man, creates Society, creates man.' But it's the circumstances create perceptions, the perceptions create circumstances, and the circumstances create new perceptions, and that creates new circumstances. In fact, they are in his mind, so he thinks that it's a dialectical environment. Basically, when people act in Mass formation idiocy, he thinks it's a dialectical environment. And so, what do dialectical environments produce? People that are acting in Mass formation psychosis. Oh, how about that! But the fact is for Soros, this always depends on a inaccurate appraisal of the situation. It's always that it's based on perception, and your perceptions are always wrong.

Soros then says that, "this situation can be depicted mathematically, specifically." He actually shows a pair of coupled functions. He doesn't write them as differential equations, but he actually shows a pair of coupled equations "where the input of the cognitive function is, itself, a function of the participating function. And the input of the participating function is, itself, a function of the cognitive function." It's a lot of math work. I apologize, "that is the theory function takes practice as an input, and the practice function takes Theory as an input." Which is exactly like dialectical Marxism and exactly like Hegelian dialectics. Just like Soros said about his method in the first place.

Now, let me remind you real quick as a tangent here, that for Marxists, and Soros says he's not a Marxist, right? But he just uses the same methods. The exact same methods that happen to have kind of an identical conclusion, but not the same way of getting there. 'The saying is that practice is the Criterion of Truth." And I've wanted to do a short podcast about that phrase itself, and I haven't done it yet. "Practice is the Criterion of truth," but what that actually refers to is that theory and practice are unified dialectically. and literally. As Hegel said, "it, the unification, is speculative." Which means, in a sense, reflected. Because it, when Hegel says 'speculate' he's talking about "look in a mirror" from the Latin speculum, which means mirror. So it's, when, when he says, 'it's a speculative thing', what he's saying is that you're looking at what's happening in the world while you're reflecting not just on your ideas about the world, but what the ideal ideas, the perfect idea might be. And that allows you to refine your ideas about things more toward the Platonic ideal. That is, if something, uh, in other words, that if something is true, if it works to advance the goals of the theory. And the way that you can tell is, you look at the theory and decide whether or not it advanced the goals.

And Soros thinks the same way about his own approach. If it works, say, if it opens Society some more, and, he says, it, or if it makes him money in the market. And he says, "this is the only quasi objective measuring stick available." By the way, whether or not it works, then it is true within the boundaries of social Alchemy. And that's what Soros is trying to describe practice is. A Criterion of Truth.

So it doesn't matter if it's true or false. It doesn't matter if it takes you to a state of society that's functional, or not. It matters were you able to move Society. That's all he cares about. And if it was, then it must have been right. So it doesn't matter how many misconceptions your historical change is based on, it must have been right if you were able to induce it to happen in the first place, and if it moves you more in the direction of what you think is supposed to be. Which, he says, you're not supposed to know what the direction is, it just has to be open, which means more people get to participate. And I'm telling you, Soros is quite explicit about all this. Here's how he continues, "this is the theoretical Foundation of my Approach," he says. "The two recursive functions do not produce an equalibrium, but a Never-Ending process of change."

Remember when Freddy said that the the cultural revolution would be Perpetual? "The process is fundamentally different from the processes that are studied by the Natural Science. There, one set of facts follow," see it's not a traditional theory it's a critical theory, uh, "there one set a facts follows another without any interference from thoughts or perceptions. Although in quantum physics observation introduces uncertainty, when a situation has thinking participants the sequence of events does not lead Direct from one set of facts to the next. Rather, it connects facts to perceptions, and perceptions to facts in a shoelace pattern. Thus the concept of Reflexivity yields a shoelace theory of history, or really, a theory of change is how it should be looked at, because this is how you're going to go do change in the world. It must be recognized that the shoelace theory is a kind of dialectic."