Let me start off by saying that I respect Warren Buffett and his patience is amazing. He is an investment icon, and I've learned a lot from him. I think he's made some very smart moves, and I applaud him for it.
However, with that being said, just because somebody is successful doesn't mean you should listen to them, and he is only preaching what has made him successful over 70 years of investing. While his advice can be good for some, there are many ways to be successful, and bashing everything else that doesn't fit his plan is extremely childish.
I disagree with his stance on Bitcoin and crypto, and I'm a little puzzled at the lack of substance in his arguments against them.
I've seen an influx of articles discussing Warren Buffett recently, the most recent being his claim that, if he invested the $114 he had when he first started into the S&P 500, that would be worth about $400,000 today.
Well isn't that great, Warren. Making a pick in hindsight that took 70 years to materialize would get you into the mid 6 figure club. While 400k is nothing to sneeze at, I'm not sure how this number is impressive. First of all, as I mentioned, this was a hindsight pick, and we all know these are pretty easy to make. Basically, this pick is investing in the greatness that is America, which was certainly more present during this time period than it is now. America was often considered the greatest country in the world back then, and claiming that the next 70 years would yield the same results seems like a bit of a stretch considering the current condition of the United States.
But okay, let's say history will repeat itself. I've got a hindsight pick of my own. Had we invested that same $114 into Bitcoin, and not gone back over 70 years, but instead only 1/10 of that time, we would still have over 400k, but in a fraction of the time.
Oh, and $114 was worth a lot less 7 years ago than it was in 1942. Inflation is a bitch when talking about those long term investments, and young Warren was actually investing close to 2k if inflation is factored in.
I get it, compound interest is awesome, and it's one of the main things that I tell people when I try to convince them to start investing. However, had Warren Buffet had the opportunity to invest his $114 into Bitcoin, then switch to his long game strategy into adulthood, well, he would be the richest man in the world by a long shot.
Another article I read has Buffett saying that buying Bitcoin is not investing, but gambling. While I do agree that it is a gamble, I believe this is true of every investment, and Bitcoin is no different. While admitting that he knows very little about crypto currencies (that's always a good way to validate your point), he says you're just playing a game, hoping the next guy pays more. While this is ironic, considering this is somewhat true of anything that relies on supply and demand, he then claims that crypto does not produce anything, and one is simply speculating, which is not investing. Again, speculating is something you do with every investment, and to say that crypto doesn't produce anything is completely false.
Ultimately, it seems like he has no clue what Bitcoin or any crypto is, which is absolutely fine. However, to continuously bash something publicly which you have no knowledge about, while being possibly the most influential investor of all time, is just atrocious. For a man in his 80s, I would expect a little more maturity here.
To make an argument against Bitcoin's value is a much better approach, considering the current state of crypto has very little value at all.
I decided to change the direction of this piece, but I initially started writing this about what is considered valuable, and how Buffett's implied argument here that Bitcoin doesn't really provide much value has a lot of truth in it. While I plan to write an article about what value actually is and where we can find it, I thought I would keep this focused more on a response to his words for now. However, one thing I do want to bring up is the question of Bitcoin's value.
I wrote in an earlier piece, when vouching for Ethereum's value, that Bitcoin's true value is derived from it's presence in trading against other crypto currencies. What is interesting, however, is that everyone who doesn't use Bitcoin questions the true nature of Bitcoin's value, while they don't do the same for things that everyone considers valuable. Again, I want to write a different piece about how different assets are given value, but ultimately, any currency can be given value overnight, but the maintenance of that value can only be preserved if we structure other assets around it and make them dependent on its value.
At the end of the day, I don't think many of these coins are good long term picks. In fact, I believe the vast majority of these tokens will lose most of their value in the long term, as the coins that are able to structure themselves into our economy will increase massively in price. However, I think the odds that pretty much any given coin can go up significantly in price while we figure out how we want to use the blockchain are much more in your favor than any other gamble you can make.
Yes, every investment is a gamble, but I don't think you're going to see a better risk:reward ratio in your lifetime.
Just remember, every investment has an ideal time frame, and one should treat each one independently.
The "safe" route is always there if you want to take it, but I'm not going to pass up this opportunity.