Hey everyone, it’s Whatever Wednesdays again. As you might expect, I’m going to talk about Crypto again, but today we’re going to talk about “Warren Buffett and Bill Gates Hate Bitcoin” and more importantly, the why.
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Warren Buffett and Bill Gates Hate Bitcoin
Honestly, this information is not new. It’s been written about many times before:
Warren Buffett:
“A real bubble sort of thing.” – (10/26/2017 – MarketWatch)
Bitcoin is “Rat Poison Squared” – (5/7/2018 – Fortune)
Charlie Munger (his right hand man):
“Noxious Poison” and “Totally asinine” – (2/14/2018 – CNBC)
‘Bitcoin is worthless, artificial gold’ – (5/7/2018 – CNBC)
Bill Gates:
“I would short bitcoin if I could” – (5/7/2018)
I’m going to throw in an extra one here:
Jack Bogle:
“Avoid bitcoin like the plague. Did I make myself clear?” – (11/29/2017 – CNBC)
If you read any (or all) of the above articles, the advice is clear:
Bitcoin is bad.
All of the people above I have the utmost respect for. In fact, I think their advice is pretty good. On the surface it may seem I am going against what they say by investing a small amount in crypto, but I’m really not.
If you actually read all of those articles and dissect what they have to say, you will see that the majority of their arguments are based around Bitcoin and not about cryptocurrency in general. Although I think in general they believe the cryptocurrencies are too volatile and probably a bubble. However, I think people still tend to believe that Bitcoin and cryptocurrency are one and the same. This is true to a certain extent since they currently move as a unit with Bitcoin able to move prices up or down by itself. However, this is mainly because Bitcoin still remains the strongest entryway into the crypto ecosystem.
Basically, I agree with everyone above.
I have a lot of trouble with Bitcoin as it currently is because of its lack of intrinsic use case or its value proposition. If Bitcoin is to stay as it is, I don’t see much of a future for it. However, if it continues to evolve with Lightning Network and Rootstock, without any problems, then it may someday demonstrate more use cases and more value. For value-based investors like Warren Buffett, Charlie Munger, and John Bogle, there is no way they would invest in something so “weak”.
However, you may remember that Warren Buffett and Charlie Munger failed to invest in both Amazon and Google as well. The reason that is usually cited is because they didn’t understand it. This is reasonable of course. Out of all the tech stocks, how could you pick those two out?
- Amazon: We’re an an online book store.
- Google: We’re a better search engine.
Not exactly the kind of fundamentals you would invest in to make a big return right? Where will they make their money? How will they expand? There is no value proposition here!
I think the same thing is happening now with cryptocurrency.
Hmm… so what’s your take on it?
It’s always been the same — cryptocurrency is a gamble, a big one.
Only put the amount of money you would “put on the roulette table” into crypto. Money you’re willing to lose.
However, I believe that the underlying blockchain technology is strong — and potentially world-changing. Additionally, there are many layers of development on top of the blockchain which we are still looking at. Sharding and Sidechains will eventually come. Problems will definitely arise, but will eventually be solved.
Perhaps I am just an optimistic futurist, but I can see how my children view the world right now and how different it was from me. They don’t understand why everything isn’t touch-capable. They have no idea what a “normal” phone looks like. Our home phone never sees any use. My son thinks I can just magically make “Blaze and the Monster Machines” come on the TV whenever I want. She can point at stuff on the Amazon site, and somehow it gets here in a few days.
In the future….
In much the same way, maybe my children (and grandchildren) won’t have any understanding about what a “credit card” is. Perhaps credit cards as we know them are replaced by something more simple, with lower interest rates, or peer-to-peer lending built in or something.
I think there will always be fiat currency in some shape or form, but the conversion from one to the other will be much simpler. When my daughter Kylie goes on a trip to Europe in college (15 years from now), she won’t need to exchange $ USD to € Euros, it will happen for her automatically on her phone — at the time of transaction.
Then there are things like property management. When Kylie buys her first car, maybe the title of the car will be automatically added to her property blockchain.. and when she buys a house, the same thing will happen. When she sells it, they will finalize the transaction by both confirming the destruction of the title on her blockchain, and creation of it on the buyer’s blockchain.
The list goes on. There are many great use cases for this technology, but it’s still in its infancy.
Technology by itself isn’t inherently good or bad. The people behind it are.
All that said, I believe that there is an Amazon in the sea of cryptocurrencies out there. As such, I’ve allocated a very small amount of money which I consider “gambling money” to put toward the cryptocurrencies that I believe in. The chances of some (or all) of them going to zero is possible. However, I think the chance of one (or more of them) doing well long term is pretty good… but that’s only because I believe in the technology behind it and the vision.
In terms of fundamentals and value investing, it’s very hard or impossible at this stage of the game to know which cryptos to invest in. The majority of them are just testing things out, and even the big guys, Bitcoin and Ethereum don’t have real use cases. However, these use cases will eventually exist, after a lot of failure.
Wait… so do you agree or disagree?
It’s very weird of me to say this, but I think that my heroes, John Bogle and Warren Buffett may be wrong on this one — at least slightly. As it currently stands, I agree with them on Bitcoin. If Bitcoin remains stagnant and doesn’t make any more progress, it will be taken over by other cryptocurrencies with better use cases. However, I think they fail to see the future that blockchain technology can usher in, once the scams and bad coins are weeded out. I think this is similar to the tech boom… “which of these weird things should I invest in?”
As for Bill Gates, I think he purposely states his dislike for Bitcoin specifically, but I think he sees the potential in blockchain technology itself:
As for cryptocurrency, it remains to be seen how Bill Gates feels about that — but if I had to guess, I think he’s looking into how to make it work for Microsoft.
TL;DR
Warren Buffett and John Bogle are my heroes and I agree with them on Bitcoin…
… but not cryptocurrency or blockchain technology.
Technology by itself isn’t inherently good or bad. The people behind it are.
Cryptocurrency is a huge gamble and not “investing”. However, I do think there is an “Amazon” in there somewhere.
Only put the amount of money you would “put on the roulette table” into crypto. Money you’re willing to lose.
Bill Gates hates Bitcoin — but I don’t think he hates blockchain technology. I think we’ll see why eventually.
-Sensei
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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