Karl Popper’s Influence on George Soros:
Soros’s study of economics at the LSE coincided with his reading of Karl Popper’s “Open Society and Its Enemies.” Popper’s emphasis on inherent fallibility led Soros to question the basic assumptions of economic theory and develop the concept of reflexivity.

The Connection Between Open Society and Reflexivity:
The connection between open society and reflexivity is not immediately apparent but is closely related on a personal level for Soros. On a conceptual level, the connection is indirect, with fallibility serving as the bridge between the two concepts.

Fallibility and Misconceptions:
Fallibility in this context means that our view of the world is incomplete, distorted, and often misconstrued due to our efforts to simplify complex reality. Misconceptions play a significant role in shaping the course of history.

The Importance of Critical Thinking and Open Society:
Soros believes that his emphasis on misconceptions is an original contribution to his thinking. Misconceptions provide a strong argument for critical thinking and open society.

Popper’s Influence:
George Soros highlights Karl Popper’s approach to defining open society, emphasizing the limitations of exact definitions and the value of describing and labeling phenomena. Popper’s epistemological argument justifies democracy by advocating for freedom of speech, thought, and elections, in contrast to ideologies imposed by force. Soros’s personal experiences with Nazi and communist oppression made Popper’s philosophy particularly persuasive to him.

Financial Insights:
Soros credits Popper’s philosophy for enhancing his sensitivity to misconceptions in financial markets. The concept of reflexivity allowed Soros to develop his theory of bubbles, giving him an advantage as a market participant.

Midlife Reflection and Philanthropic Shift:
Approaching 50, Soros experienced a midlife crisis, questioning the continued pursuit of financial success. He decided to establish a foundation dedicated to promoting open society, with a mission to open closed societies, rectify deficiencies in open societies, and foster critical thinking.

Global Philanthropy:
Soros established foundations in various countries, including Hungary, China, Poland, and the Soviet Union, to support the development of open societies. His philanthropic efforts provided practical experience in building open societies and led to valuable lessons.

Challenges in Building Open Societies:
Soros realized that the disintegration of closed societies does not always result in the immediate birth of open societies. Disintegration can lead to ongoing fragmentation until a new regime emerges, resembling the collapsed regime rather than an open society.

Re-evaluation of Open Society:
The re-election of President Bush in 2004 prompted Soros to reconsider the concept of open society, reflecting on the potential challenges and obstacles to its realization.

Enlightenment Fallacy and Reflexivity:
George Soros questions the conceptual framework of an open society, particularly Popper’s epistemological argument. He highlights the manipulative function of thinking in politics, contradicting Popper’s assumption that free political discourse aims to understand reality.

Dichotomy between Thinking and Reality:
Soros argues that the Enlightenment view of reality, which separates reason and reality, is flawed. This dichotomy ignores the active role of reason in shaping reality, leading to a distorted understanding of human affairs.

Critique of Reason:
Soros criticizes the Enlightenment’s excessive faith in reason. He points to the French Revolution as an example of how reason failed to reconstruct society and led to terror.

Fertile Fallacies:
Soros introduces the concept of fertile fallacies, which are pieces of knowledge that have become overexploited and extended beyond their applicability. He argues that the Enlightenment dichotomy between reason and reality is a fertile fallacy that has influenced fields like the natural and social sciences.

Critique of Popper and Economic Theory:
Soros criticizes Karl Popper’s model of scientific method and economic theory for failing to recognize reflexivity. He emphasizes the need to acknowledge the manipulative function of thinking in these fields.

The Flaws in Open Society:
George Soros realized that Popper’s concept of open society assumes the cognitive function takes precedence over the manipulative function, which is not always the case. The Enlightenment fallacy, which assumes truth-seeking over manipulation, is also at the root of the efficient market hypothesis and market fundamentalism.

The Manipulation of Political Discourse:
Political discourse in a democracy is aimed at getting elected and staying in power, not discovering reality. This leads to free political discourse not necessarily producing better policies than authoritarian regimes. Commitment to the truth has become a handicap in political manipulation.

The Influence of Right-Wing Propaganda:
The Bush administration used a powerful right-wing propaganda machine that disregarded the facts, giving it an advantage over old-fashioned political practitioners. Frank Luntz, a successful right-wing propagandist, used George Orwell’s 1984 as a textbook for devising slogans.

The Decline of Truth-Seeking and the Rise of Manipulation:
People are conditioned by sophisticated manipulation techniques to accept deception. They prefer pre-packaged messages and entertainment over informed discourse.

The Origins of Manipulation:
Manipulation techniques originated in the commercial arena in the 19th century with branding and advertising. Research into consumer motivation, message testing, and focus groups led to the development of a consumer society and spread to politics and culture.

The Impact on Economics and Politics:
Economic theory assumes conditions of demand and supply as given, ignoring the manipulation of demand through advertising. Representative democracy assumes candidates present programs and the electorate chooses, not that candidates tell the electorate what they want to hear.

The Postmodern Worldview and the Manipulation of Reality:
George Soros discusses the postmodern worldview’s denial of an objective reality and its focus on narratives. He acknowledges his initial dismissal of postmodernism but later recognized its influence, particularly in the Bush administration’s propaganda machine. Soros highlights the manipulative function of postmodernism and contrasts it with the Enlightenment’s emphasis on reason and the pursuit of truth.

The Fallacies of Enlightenment and Postmodernism:
Soros critiques both the Enlightenment and postmodern fallacies. He argues that the Enlightenment’s neglect of the manipulative function is a defect, while postmodernism’s disregard of objective reality is more misleading.

The Importance of Objective Reality and Its Implications:
Soros emphasizes the importance of objective reality, which he sees as independent of reason. He stresses the need for a better understanding of reality to minimize the divergence between manipulation and intended outcomes. Soros introduces a commitment to the pursuit of truth as a requirement for open society, citing the Bush presidency’s manipulation of reality as an example of the consequences of disregarding objective reality.

The Misinterpretation of Reflexivity and the Power of Objective Reality:
Soros warns against misinterpreting the concept of reflexivity in favor of the postmodern fallacy. He highlights the difficulty of understanding reflexive reality and the appeal of simple answers. Soros emphasizes the importance of acknowledging objective reality, particularly the fact of death, to counter postmodern narratives.

Personal Belief and Objective Reality:
Soros acknowledges that his insistence on the objective aspect of reality is a matter of personal belief, resembling a religious belief. He attributes his attitude to his personal history, including the German occupation of Hungary and his experiences in the financial markets and with his foundations. Soros sees his commitment to objective reality as playing a similar role in his thinking as religion does for others.

Objective Reality and Its Consequences:
Ignoring objective reality, even when it’s unpleasant, can have detrimental consequences. Manipulating reality might seem feasible, but our actions are governed by external forces we don’t fully grasp. Understanding reality guides our actions, while manipulation can lead to fallacies like the postmodern fallacy.

The Enlightenment and Postmodern Fallacies:
The Enlightenment fallacy disregarded manipulation’s prevalence in human affairs. The postmodern fallacy emerged from the discovery of the manipulative function and recognizes only part of the reality-thinking relationship. Soros’s conceptual framework incorporates both fallacies, acknowledging fallibility and reflexivity.

The Postmodern Fallacy’s Influence:
The postmodern fallacy guided the Bush administration’s policies and has emerged in the Obama administration. The “confidence multiplier” extols the benefits of boosting financial markets, but it neglects the possibility of disappointment if reality doesn’t meet expectations. Deploying the confidence multiplier may make President Obama responsible for any economic relapse.

Core Objective Reality and Reflexivity:
A “hardcore” of objective reality exists, such as the inevitability of death, that can’t be manipulated. Reflexivity introduces uncertainty into thinking and events, making perfect understanding impossible. Uncertainty allows the framework to be self-consistent and consistent with reality while remaining open to improvement.

Expanding the Framework to Values:
Soros’s framework initially focused on understanding reality, but adding the requirement for truthfulness and punishing deception entered the field of values. In the field of values, uncertainty is even more prevalent than in cognition, necessitating further thinking. Avoiding unpleasant realities and rewarding deception can threaten open societies.

Challenges Facing the United States:
The U.S. faces unpleasant realities after the financial crisis, including overspending, consumer debt, a collapsed banking system, and the Iraq War. The Obama administration’s use of the confidence multiplier raises hopes that might not align with objective reality. Political opposition may exploit these circumstances, making it difficult for the electorate to pursue truth.

The Need for a Stronger Argument for Open Society:
The current state of democracy in America weakens the case for open society as a superior social organization. Soros needs a stronger argument to support open society’s value. The founding fathers’ emphasis on individual freedom provides a better case, but their epistemological argument was flawed.

Constitutional Checks and Balances:
The Constitution protects against tyranny by dividing powers among different branches of government. This division of powers recognizes competing interests and different interpretations of reality within society, which need to be reconciled through a political process. The constitutional checks and balances prevent the formation of absolute power that claims to possess the ultimate truth.

Open Society and Freedom of Speech:
Open society prevails when people can speak truth to power. The rule of law guarantees freedom of speech and press, association and assembly, and other rights and freedoms. These empower citizens to defend themselves against the state’s absolute power and utilize the judicial branch for such defense.

Instrumental and Intrinsic Value of Open Society:
Open society is desirable as a means to an end (instrumental value) and as an end in itself (intrinsic value). It enables society to understand and deal with problems more effectively than other forms of social organization. The instrumental value of democracy depends on the qualities of the electorate. Open society has intrinsic value in the freedom of the individual, applicable even in non-flourishing open societies. This intrinsic value must be balanced with the public interest and the freedom of others.

Changing Power Relations:
With the changing power relations between the United States and China, the value of individual freedom is becoming increasingly important. This subject will be addressed in a subsequent lecture.