Monsieur de Norpois' Opinions

MONSIEUR DE NORPOIS’ OPINIONS

Modern times provide us with a depressing story. Self-contradiction is made culturally to be shameful, a matter that can prove disastrous in science. Marcel Proust’s novel In Search of Time Lost features a semiretired diplomat, Marquis de Norpois, who, like all diplomats before the advent of the fax machine, was a socialite who spent considerable time in salons. The narrator of the novel sees Monsieur de Norpois openly contradicting himself on some issue (some prewar rapprochement between France and Germany). When reminded of his previous position, Monsieur de Norpois did not seem to recall it. Proust reviles him:

Monsieur de Norpois was not lying. He had just forgotten. One forgets rather quickly what one has not thought about with depth, what has been dictated to you by imitation, by the passions surrounding you. These change, and with them so do your memories. Even more than diplomats, politicians do not remember opinions they had at some point in their lives and their fibbings are more attributable to an excess of ambition than a lack of memory.

Monsieur de Norpois is made to be ashamed of the fact that he expressed a different opinion. Proust did not consider that the diplomat might have changed his mind. We are supposed to be faithful to our opinions. One becomes a traitor otherwise.

Now I hold that Monsieur de Norpois should be a trader. One of the best traders I have ever encountered in my life, Nigel Babbage, has the remarkable attribute of being completely free of any path dependence in his beliefs. He exhibits absolutely no embarrassment buying a given currency on a pure impulse, when only hours ago he might have voiced a strong opinion as to its future weakness. What changed his mind? He does not feel obligated to explain it.

The public person most visibly endowed with such a trait is George Soros. One of his strengths is that he revises his opinion rather rapidly, without the slightest embarrassment. The following anecdote illustrates Soros’ ability to reverse his opinion in a flash. The French playboy trader Jean-Manuel Rozan discusses the following episode in his autobiography (disguised as a novel in order to avoid legal bills). The protagonist (Rozan) used to play tennis in the Hamptons on Long Island with Georgi Saulos, an “older man with a funny accent,” and sometimes engage in discussions about the market, not initially knowing how important and influential Saulos truly was. One weekend, Saulos exhibited in his discussion a large amount of bearishness, with a complicated series of arguments that the narrator could not follow. He was obviously short the market. A few days later, the market rallied violently, making record highs. The protagonist worried about Saulos, and asked him at their subsequent tennis encounter if he was hurt. “We made a killing,” Saulos said. “I changed my mind. We covered and went very long.”

It was this very trait that, a few years later, affected Rozan negatively and almost cost him a career. Soros gave Rozan in the late 1980s $20 million to speculate with (a sizeable amount at the time), which allowed him to start a trading company (I was almost dragged into it). A few days later, as Soros was visiting Paris, they discussed markets over lunch. Rozan saw Soros becoming distant. He then completely pulled the money, offering no explanation. What characterizes real speculators like Soros from the rest is that their activities are devoid of path dependence. They are totally free from their past actions. Every day is a clean slate.