Applying Buffett investment philosophy to cryptocurrency.
Obligatory Disclaimer: I am NOT a financial advisor, and none of this advice should be taken without speaking to a qualified professional first. Further, do NOT invest more than you’re willing to lose, and do your own research first.
Warren Buffett and Bill Gates have been friends a long time. They have vacationed together, given to philanthropic causes together, and have publicly bashed Bitcoin together.
Shortly after describing Bitcoin as “rat poison” and “creating nothing,” Buffett was quickly joined in his criticism of the prominent cryptocurrency by Gates, who added it’s a “kind of a pure ‘greater fool theory’ type of investment.”
(Side note: Bill received some Bitcoin for his birthday and “sold it a few years later?” Ok Bill…how much money has Bitcoin actually made you?)
Now although you may expect me to counter these statements with facts and statistics on why Bitcoin is one of the most incredible economic advancements since the advent of the computer, I’d instead like to point you to Buffett’s own words he penned to his investment partners circa 1967:
We will not go into businesses where technology which is way over my head is crucial to the investment decision. I know about as much about semi-conductors or integrated circuits as I do of the mating habits of the chrzaszcz.
(Apparently chrzaszcz is the Polish term for “beetle.”)
This was Buffett’s reasoning behind avoiding most investments in technology throughout the years, and to me, it stacks up with his investment strategy. For those of you who aren’t familiar, I’ve written several articles on his value investing methods. You can find the first of those here. Essentially, Buffett’s financial plan boils down to one simple point:
Or, translated into crypto-ese:
Traditionally, Buffett has been a fan of maintaining a strict sense of integrity with his investments. Consider, for instance, his full cooperation with the SEC in 1991 over the Salomon debacle. Or his early push against American Express Executives to ensure shareholders were properly compensated after the famous seawater scandal.
Throughout his life, Buffett has seen his fair share of trial through which his integrity has proceeded unscathed. But take just a moment to peruse this list of Berkshire Hathaway assets. Do a quick control-F search for the word “bank.” Or even “finance.”
Bitcoin and decentralized cryptocurrency by definition will change the way banking is done forever, and it stands to reason that, should Bitcoin succeed, Buffett, Gates, and Berkshire Hathaway stand to lose quite a bit of money. Potential losses though, have never incited Buffett to belittle competition through name-calling. Bitcoin and cryptocurrency should be no different.
I owe much of my personal success in the cryptocurrency space to my study of Warren Buffett, and I am disappointed that he has reverted to trash talking competition instead of pointing people back to the personal mantras that have enriched him and the people who have followed his example thus far.
Perhaps, instead of calling Bitcoin “rat poison,” the Oracle of Omaha could have quoted himself from 1967. Perhaps, instead of discouraging people away from innovative and financially empowering technology, Buffett could have pointed eager young investors towards value investing principals. Because at the end of the day, we’re all better off when we’re all financially liberated. And Bitcoin may provide just that.
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