Stan Druckenmiller, renowned former hedge fund manager at Duquesne Capital and George Soros’ Quantum Fund, was interviewed by Charlie Rose last week. The hour-long conversation spanned economics, politics and his personal philosophy.

Stan Druckenmiller
Via Goldman Sachs Research

Philanthropic and educational endeavors

Although he has retired from Wall Street, Druckenmiller is still actively managing family and family foundation funds. Over the last few years he has also become actively involved in a number of philanthropic endeavors, most focusing on education and entitlement reform.

Stan Druckenmiller’s relationship with George Soros

Stan Druckenmiller worked closely with George Soros as the lead portfolio manager at the Quantum Fund for 12 years. After a question from Charlie Rose about who had more “nerve”, Druckenmiller replied, “George has more ice water than I do.” He continued to say, “If there’s one thing I learned from George, it’s not whether you’re right or wrong, it’s how much you make when you’re right and how much you lose when you’re wrong.”

Related to this, Stan Druckenmiller also mentioned working with Soros taught him the importance of making a big bet when you are really convinced you are right.

Sustainability of entitlements

Stan Druckenmiller echoes the now-familiar conservative refrain that the rate of growth in entitlement programs is unsustainable. He adds that the situation has already become so serious that unless we see real reform very soon, even the “rosy growth” scenarios won’t be enough to prevent entitlement programs such as Social Security, Medicare and Medicaid from becoming unmanageable budget busters and a major burden on future generations.

He points out that the ongoing aging of the baby boomer generation means even more “transfer payments” to the elderly in the future, and that leaves less and less money to invest in the future. Stan Druckenmiller points out that we are already cutting education and scientific research funds, and that continuing to do so will reduce innovation and further exacerbate the problem.

Stan Druckenmiller’s potential solutions

While emphasizing that any solution to the complex entitlement problem must emerge from a real national conversation, Druckenmiller suggests the obvious first step in entitlement reform is to test Medicare and Social Security. Beyond that, he also suggests only giving cost-of-living increases to those in the lower income brackets.

Towards the end of the conversation, Stan Druckenmiller also mentioned he is strongly in favor of corporate tax reform, especially given all of the complex tax regulations that enable many major corporations to pay much less than their fair share of taxes.