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wide that it brings catastrophic collapse. Static disequilibrium is characterized by very rigid, dogmatic thinking and very rigid social conditions.

Soros puts dynamic and static disequilibrium at the two extremes, with near-equilibrium conditions in between. In a normal state, reflexivity is not important. When they approach or reach far-from-equilibrium conditions, reflexivity becomes important and you have what Soros calls a boom/bust sequence.37

Soros says he does not "play" (invest) with a given set of rules. "I look for changes in the rules of the game. I look for conditions of disequilibrium. They send out certain signals that activate me."38

Soros says he is ahead of the curve. "I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded."39

Some memorable moments in Soros's trading:

Black Wednesday

Armed with a theory that perceptions count for everything and that faulty perceptions can trigger reflexive behavior in the marketplace, Soros was able to identify a key misapprehension on the eve of the Exchange Rate Mechanism crisis: the false expectation that the Bundes-bank would support the British pound under any circumstance.

In the summer of 1992, it became known that Soros funds were selling the British pound short. Other investors followed suit.

On Wednesday, September 16, 1992, Soros made close to $2 billion—$1 billion from the pound and another $1 billion out of the chaos of the Italian and Swedish currencies and in the Tokyo Stock Exchange. The Financial Times dubbed Soros "the man who broke the pound."40

Saint Valentine's Day Massacre

Soros suffered a $600 million loss on February 14, 1994, when he was short $8 billion of Japanese yen. Many managers thought that the Japanese yen would decrease in value. The thinking was that President Clinton and Prime Minister Morihiro Hosokawa would reach a settlement on their trade dispute, and this would lead the U.S. government to allow the Japanese yen to fall. Previously, the U.S. government had