Warren Buffett and all of his 20th Century pre Bitcoin era colleagues are computer illiterate and cannot understand the value proposition of this new tool. We explain why they are all wrong.
Bitcoin is a very new technology, even though the concept that it brings to life is decades old. The double spending problem has been solved; this means that it is possible to use a digital certificate to stand in the place of money or any property and be sure that no one else can “spend” that certificate other than you as long as you hold it. This is an unprecedented paradigm shift, the implications of which are not yet fully understood, and for which the tools do not yet exist to fully take advantage of this new idea.
Warren Buffett is a 20th Century computer illiterate, that cannot understand the internet, cryptography or their application in peer to peer dynamics. He cannot understand Bitcoin. This is why all his pronouncements on it are entirely and fundamentally wrong.
This new technology requires some new thinking, of the type that Warren Buffett cannot muster, when it comes to developing businesses that are built upon it. In the same way that the pioneer providers of email did not correctly understand the service they were selling for many years, new and correct thinking about Bitcoin is needed, and will emerge, so that it reaches its full potential and becomes ubiquitous.
Hotmail used familiar technologies (the browser, email) to create a better way of accessing and delivering email; the idea of using an email client like Outlook Express has been superseded by web interfaces and email ‘in the cloud’ that provides many advantages over a dedicated client with your mail in your own local storage.
Bitcoin, which will transform the way you transfer money, needs to be understood on its own terms, and not as an on-line form of money. Thinking about Bitcoin as money is as absurd as thinking about email as another form of sending letters by post
one not only replaces the other but it profoundly changes the way people send and consume messages. It is not a simple substitution or one dimensional improvement of an existing idea or service.
As I have explained previously, Bitcoin is not money. Bitcoin is a protocol. If you treat it in this way, with the correct assumptions, you can start the process of putting Bitcoin in a proper context, allowing you to make rational suggestions about the sort of services that might be profitable based on it.
Think about this in relation to email. When you type in an email on your Gmail account, you are inputting your ‘letter’. You press send, it goes through your ISP, over the “internets”, into the ISP of your recipient and then it is outputted on your recipient’s machine. The same is true of Bitcoin; you input money on one end through a service and then send the Bitcoin to your recipient, without an intermediary to handle the transfer. Once Bitcoin does its job of moving your value across the globe to its recipient it needs to be ‘read out’, i.e. turned back into money, in the same way that your letter is displayed to its recipient in an email.
In the email scenario, once the transfer happens and the email you have received conveys its information to you, it has no use other than to be a record of the information that was sent (accounting), and you archive that information. Bitcoin does this accounting in the block chain for you, and a good service built on it will store extended transaction details for you locally, but what you as a consumer need to have, as the recipient of Bitcoin, is money or goods not Bitcoin itself.
Bitcoin’s true nature is as an instant way to transmit money anywhere in the world. It is not an investment, or money itself, and holding on to it in the hopes that it will become valuable is like holding on to an email or a PDF in the hopes it will be come valuable in the future; it doesn’t make any sense. The only people who have a need to hold on to Bitcoin are the people who supply it as a part of the services they provide to consumers. For consumers, the price of Bitcoin doesn't matter.
