
Buffett bashes Bitcoin as nonproductive, thriving on mystique - zwieback
https://www.reuters.com/article/us-berkshire-buffett-cnbc/buffett-bashes-bitcoin-as-nonproductive-thriving-on-mystique-idUSKBN1I813F?feedType=RSS&feedName=topNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FtopNews+%28News+%2F+US+%2F+Top+News%29
======
sizzzzlerz
Buffet's investing strategy is, and has always been, look for the intrinsic
value in a company, buy them, and then hold on forever. As part of that
intrinsic value is the management teams that are running the companies. A
strong team is as valuable as any other asset. When Buffet does buy a company,
he'll generally leave management in place and not interfere in the day to day
running of the company. Bitcoin has no management and it has no intrinsic
value. It's worth is whatever somebody is willing to pay for it. That is 180
degrees out of phase with the Buffet strategy.

~~~
trixie_
Bitcoin has tons of intrinsic value unique to crypto currencies that
traditional currencies lack. Most importantly it can't be created/destroyed at
will by a central government. Huge sums can be transferred globally at the
speed of light with very low fees. Can't do that with gold or cash. With
normal currency a wire transfer costs money and moving a lot of money from a
bank account usually takes days. Also you can store a lot of it yourself,
relatively securely compared to storing hundreds of thousands of dollars
yourself. Oh and it's also backed up by a global ledger that is country or
government agnostic. The electricity it takes to maintain it is nothing
compared to the rest of the banking system. These properties are the very
nature of crypto, that's why it's intrinsic.

~~~
ggggtez
If you ever studied economics, you'd know that scarcity is not intrinsically
valluable. It might be a useful feature, but intrinsic value means having a
minimum value. Gold can't be created, but it had real usefulness in
manufacturing. Besides, you could make a new buttcoin tomorrow, but you can't
make a new kind of Atom.

Stop proving that Bitcoin enthusiasts don't understand economics.

~~~
trixie_
Scarcity is absolutely an intrinsic value. Gold has value because it is
relatively scarce given the difficulty to mine. In addition to being really
shiny which was valued by our ancestors. There are lots of useful rare
elements used in manufacturing. In terms of a currency though gold has nothing
on bitcoin. Gold is hard to move, hard to validate as authentic, heavy, easy
to steal, etc..

~~~
notahacker
My excrement is several orders of magnitude more scarce than Bitcoins and gold
bars alike, but it has no value because nobody wants it.

Scarcity _relative to demand_ pushes up market prices (i.e. _extrinsic_ value)
but that's something entirely different...

~~~
hndamien
Maybe you can work on drumming up demand for your excrement. Fecal transplants
are a thing now.

------
triviatise
He has always said he doesnt understand technology and has resisted investing
in it. While the value is fluctuating heavily due to speculation, over time it
will stabilize.

Bitcoin will resist inflation and is somewhat out of control of governments or
any central authority. People in countries where the govt has screwed up the
currency can use it to get money out of the country or as a stable store even
if dollars or other physical currency is in scarce supply. My family fled
china carrying their wealth as gold and bank checks. Today, people can
transfer their wealth as bitcoin across international borders.

The fundamental properties of money are:

<<Fungibility: its individual units must be capable of mutual substitution
(i.e., interchangeability). Durability: able to withstand repeated use.
Portability: easily carried and transported. Cognizability: its value must be
easily identified. Stability of value: its value should not fluctuate.>>

It is not unreasonable to argue that fiat currencies around the world are not
stable because of inflationary monetary policies. Buffet always holds billions
in cash which is constantly depreciating in value.

~~~
hudon
> Bitcoin will resist inflation and is somewhat out of control of governments
> or any central authority

Can you back this up? From what I can tell, governments can ban mining, shut
down exchanges and co-erce developers. If the handful of devs that have commit
access to Bitcoin were working for the CIA, would we know? What kind of damage
could they do? Eg. Could they introduce consensus bugs without anyone
noticing?

> Today, people can transfer their wealth as bitcoin across international
> borders.

Again, citation needed. How many Chinese people are doing this? The exchanges
are banned, right? So how could your family buy Bitcoin in China? OTC? What's
the spread on the OTC market in China versus US market? Is it actually worth
it?

~~~
LargeWu
> From what I can tell, governments can ban mining, shut down exchanges and
> co-erce developers.

Cutting off exchanges from financial institutions will likely be the primary
way the government attacks cryptocurrencies. Just look at what happened to
online gambling 10 years ago. Online poker and sports gambling were booming.
What the US did was prevent banking companies from doing business from
gambling companies or intermediaries (e.g. Neteller). Basically overnight,
online gambling became a shell of what it was previously. Sure there are still
ways around it, but it's enough of a hassle that only the most die-hard
players are going to find it worth it.

It doesn't take a huge stretch of the imagination to apply the same strategies
to crypto. If financial institutions are prevented from doing business with
Bitcoin, et al., it's basically game over, as long as its utility is dependent
on buying with fiat currency.

~~~
strypey
> Just look at what happened to online gambling 10 years ago.

And not a moment too soon. Gambling games are designed to be addictive, to
bypass the judgment and decision-making centres in people's brains, and take
their money. Providing places to go and gamble is one thing; people who walk
in there ought to know they will probably lose every bean they walk in there
with, so there's informed consent. Putting gambling games that accept real
money on the web is effectively like putting coin-operated pokie machine in
every living room (and these days every pocket) with a net connection. It's
profoundly exploitative and totally deserved to be starved of financial oxygen
IMHO.

------
simonebrunozzi
Fred Wilson of Union Square Ventures presents a counterargument to Buffett:
[https://avc.com/2018/05/is-buying-crypto-assets-
investing/](https://avc.com/2018/05/is-buying-crypto-assets-investing/)

~~~
fixermark
USV has invested in CryptoKitties
([https://www.usv.com/blog/cryptokitties-1](https://www.usv.com/blog/cryptokitties-1)).

This doesn't invalidate his position, but it's worth remembering he is not an
objective observer in the situation; his company is positioned to directly
gain from a crypto-mania.

~~~
furiousjulius
Agreed but I think the opposite is much too prevalent. People with absolutely
no experience using crypto currencies write articles bashing them without ever
using them first hand. Im not advocating for them but I think to actually
assess their use/value they must be tried.

~~~
jhall1468
That's a silly argument. You don't need to drink Coke to assess it's value. If
you don't see value in Bitcoin on its face, buying a pizza with it won't
change much.

------
bamazizi
I'd argue, cryptocurrencies are the worst thing to happen to such a great
concept, decentralized agreements.

Consensus algorithms have shifted focus away from decentralization and towards
pushing cryptocurrency agendas. Shame!

~~~
fixermark
Yeah, and they haven't been terribly great for the gaming market either, as
they're consuming production of graphics card components.

~~~
drcode
I find this to be such a curious argument: "The graphics card industry would
be so much better off if these cryptocurrency people would stop giving AMD and
Nvidia so much money!"

~~~
zrobotics
From an AMD PR: “The cryptocurrency market is unstable and demand could change
quickly. For example, China and South Korea have recently instituted
restrictions on cryptocurrency trading. If we are unable to manage the risks
related to a decrease in the demand for cryptocurrency mining, our GPU
business could be materially adversely affected.”[1]

The mining market is too unstable to bet trillions of dollars expanding fab
capacity, which is why they haven't been able to increase production to match
demand. So while they are currently sitting atop thrones of cash, they cannot
accurately forecast demand. If either a) ethereum tanks or b) someone cracks
ASIC mining for ETH & curriencies mined w/ GPUs, then all of a sudden they
will see a huge drop in demand. Additionally, there would likely be a massive
surge of fairly new used cards hitting the market, further dropping demand.
That's a scary thought for a manufacturer, they could potentially end up
sitting on large stocks of unsold inventory.

[1]:[https://usethebitcoin.com/amd-worried-business-
cryptocurrenc...](https://usethebitcoin.com/amd-worried-business-
cryptocurrency-miners-dont-buy-gpus/)

~~~
drcode
That is a very well formulated rebuttal to my argument- I agree there is some
truth in this.

------
AndrewKemendo
Buffett/Munger have always argued that Gold and other commodities are equally
worthless investments based on fear and ponzi like attributes[1]. No surprise
then they feel even worse about Bitcoin.

The interesting thing here is that the common response here is: "Hey that's a
great theory, but in real life, I just paid off my mortgage with my proceeds
from bitcoin."

While perhaps true, such rebuttals ignore the arguments being made by folks
like Buffett around predictability, likelihood of a return, confidence in
underlying asset value, volatility etc... So the argument isn't about whether
or not you can make money on these things, it whether it's a prudent
instrument to invest your money into.

[1] [http://www.minyanville.com/trading-and-
investing/commodities...](http://www.minyanville.com/trading-and-
investing/commodities/articles/Warren-Buffett-brka-gold-investing-
investing/10/3/2012/id/44617)

~~~
voidpointer
> The interesting thing here is that the common response here is: "Hey that's
> a great theory, but in real life, I just paid off my mortgage with my
> proceeds from bitcoin."

Mortgages have been payed off with lottery wins. That doesn't make lottery
tickets a good investment.

~~~
AndrewKemendo
Yea that's basically the point, it's a terrible argument to say that it
worked.

~~~
hndamien
Maybe it depends how many mortgages it pays off?

------
radoslawc
'Billionaire investor Warren Buffett on Monday said buyers of bitcoin, which
he has characterized as “rat poison squared,” thrive on the hope they’ll find
other people who will pay more for it.'

isn't this in a nutshell stock market form 'normal person' perspective? Or
antiques market, or any other from thousands 'buy cheap - sell for more' types
of market?

~~~
dharma1
To some degree, but the valuation of shares is (in theory) based on
fundamentals - price to earnings ratio for instance - as well as speculation
of how well it will be doing in the future. Companies can also choose to pay
dividends if they have made a lot of cash, and choose to issue some of it to
shareholders.

Valuation of Bitcoin to a large degree is purely based on market psychology,
and it doesn't pay dividends.

~~~
hndamien
It is actually used to replace banks and remitters and central banks. You
know, it performs some utility like companies do.

~~~
strypey
> it performs some utility like companies do.

Pipes perform utilities, not companies. What companies do is manage the social
and financial infrastructure around making, or delivering, or laying, or
servicing pipes. See the difference? What Buffet is saying is that when people
speculate on BitCoin, they're buying over-priced pipes, in the hopes that some
other sucker will pay even more for the same pipes. The companies that will
make money out of crypto-$ long term are the ones sell services (like the
hoteliers and general store owners in the gold rush), not the ones spending
money (or god forbid going into dept) to buy crypto-tokens. Those service
companies can pivot to selling similar services to another sector if (when)
the crypto bubble bursts. They are the ones the likes of Buffet consider an
investment.

------
panarky
Curious that both Buffett and Bill Gates [0] are publicly criticizing Bitcoin
right now.

People make big dumb investments every day, and you don't see Buffett and
Gates talking to the media about it.

What's their objective? And why together? And why now?

[0] [https://www.cnbc.com/2018/05/07/bill-gates-i-would-short-
bit...](https://www.cnbc.com/2018/05/07/bill-gates-i-would-short-bitcoin-if-i-
could.html)

~~~
drcode
Good question... Though likely the answer is pretty mundane: It's probably
something they keep being asked about in interviews, and they feel some
obligation to dampen the hype on cryptcurrency- Also, there's a "survivorship
bias" issue, in that both guys got very successful using business strategies
involving an unrelated domain, so of course they would say "If you want to
build wealth, maybe instead focus on these other asset classes that worked
really well for me."

~~~
tim333
Yeah that and I think an effort to stop the public getting burnt.

------
throwaway5752
_Berkshire vice chairman and longtime Buffett confidant Charlie Munger was
even more blunt.

"I like cryptocurrencies a lot less than you do," Munger said to Buffett. "To
me, it's just dementia. It's like somebody else is trading turds and you
decide you can't be left out."_

[http://money.cnn.com/2018/05/07/investing/warren-buffett-
bit...](http://money.cnn.com/2018/05/07/investing/warren-buffett-
bitcoin/index.html)

------
Talyen42
He's thinking of it in investing terms, underlying asset value, cash flows,
etc. Because the media asks him "Should we buy bitcoin?" every damn day of the
year.

I'd be more interested to hear what he thinks makes for a good currency,
inflation vs. deflation, freedom of transfer, protection against forfeiture,
etc.

Does he also think that the US Dollar is rat poison because it's not a
productive asset? He holds like $80b cash.

"But bitcoin has high fees" well yeah, there are 1,000 newer cryptos with
lower fees. (and plenty of scams)

"But local stores don't use it" well yeah, nobody used credit cards in the 40s
either. (and now cash is dead)

"But it's not user friendly" well yeah, neither was the internet until ~2000.
(i've seen nearly zero progress in crypto here, btw)

~~~
sincerely
>cash is dead

lol

~~~
dmix
Somewhat of a class-based statement, definitely not dead among the
working/lower class.

If anything it was the 'tap-to-pay' feature of debit/credit cards that is
finally putting some death-knell pressure on cash. It's so much faster than
paying with a pin card or cash...

~~~
loeg
> If anything it was the 'tap-to-pay' feature of debit/credit cards that is
> finally putting some death-knell pressure on cash. It's so much faster than
> paying with a pin card or cash...

Is it just me or aren't debit/credit cards much faster than paying with cash,
too? Making change and then dealing with all of the coins is way higher effort
than swipe, maybe pin or sign, and move on. And the sign step is going away,
at least in the US, soon.

~~~
dominotw
A large portion of US workforce works for cash.

~~~
loeg
I don't see what that's got to do with speed of payment.

------
whack
> _Buffett said investors would instead be much better off investing in U.S.
> stocks, which in turn are also a far better investment than 10- or 30-year
> U.S. government bonds... He said he would much rather have Berkshire’s pile
> of cash and equivalents be $30 billion, rather than the $108.6 billion it
> was at the end of March, but good deals have not emerged._

$100B is a colossal amount of money to have sitting around in the form of cash
equivalents. I wonder why he hasn't just put it into the S&P 500, given that
he belives the stock market is currently a good investment. Given the index's
liquidity, I would think he'll still be able to sell it off quickly, if he
needs the cash for an acquisition.

~~~
kolbe
S&P tracking ETFs are the most liquid equity instruments, but $100b is large
even for them. The largest ETF by assets is SPY, with $250b. 'Liquid' for you
or me or even Stevie Cohen isn't even close to the same thing as 'liquid' for
Warren Buffett.

[http://etfdb.com/compare/market-cap/](http://etfdb.com/compare/market-cap/)

~~~
whack
SPY has a daily trading volume of $25B. I would have thought that this would
allow someone to liquidate ~$1B every day, without distorting the market. This
would have allowed Buffett to raise the cash needed for any acquisitions, in a
relatively short period of time. Is there any hard data on how big a trade
would have to be, to cause significant price distortion?

Speaking of which, it's also common for acquisitions to be carried out using
stock, instead of cash. Given that acquirees are open to getting paid in
stock, I would have thought they would be open to getting paid in SPY.

[https://seekingalpha.com/article/4164368-spy-cost-
liquidity](https://seekingalpha.com/article/4164368-spy-cost-liquidity)

[https://www.investopedia.com/ask/answers/06/macashstockequit...](https://www.investopedia.com/ask/answers/06/macashstockequity.asp)

------
rdiddly
Kind of started me thinking it was going to be a "Variety" headline...
Something like "Berkshire's Buffett Blasts Bitcoin Buffoonery"

------
hd4
>rat poison squared

Very poor choice of words, heh.

~~~
arkona3
I don’t get his metaphor. Rat poison is not necessarily a negative thing as it
helps people keep vermin under control.

~~~
hd4
I don't get how he didn't see making such a comment as an own goal, given how
the average person sees the financial system these days.

------
internetman55
I can't agree or disagree on any investment recommendations as I have no
expertise in the area, but I have that is pretty much what my gut reaction to
Bitcoin/crypto has always been

~~~
ashoon
As I've learned a bit about blockchain, I feel cryptocurrency is distracting
from the broader implications of the technology. It's going to be hard enough
for non-technical users to see the underlying value of immutable, distributed
data and applications, so that conflation is unfortunate.

~~~
Mithorium
The technology has existed for many years already, and it has already made
'broader implications', see git. The only thing new about it is that people
now call it 'blockchain' instead of a merkle tree. The reason banks and
governments don't use better technology to track land titles or whatever other
applications is that they're always slow to adopt technology, not because
'blockchain' is a new concept

~~~
davnicwil
But this isn't really the case. Both git and blockchain track a history of
actions, true, the difference is that in git anyone can rewrite history at any
time and there is then no way to agree amongst untrusted parties whose history
is the true one. With blockchain, there is. That's the innovation, that's what
makes blockchain novel.

------
cryptoz
The experimentation of ideas around what money is is certainly not
"nonproductive" and to dismiss it like that is silly. He might not like it for
any reason at all and that's fine, but to call it nonproductive is ridiculous.

~~~
tomdell
All right, then - how is it productive?

~~~
brosirmandude
It depends on your definition of productive but in my opinion it's creating
wealth, companies, & jobs.

People are going into work every day to work on crypto-related products.
Bitcoin & other cryptocurrencies are putting food on the table for those
people.

~~~
bena
That's a rather low bar.

Scamming people can also put food on your table. Stealing can put food on your
table. Neither is particularly productive.

~~~
kolbe
But then we get to hire policemen and prison wardens!

------
crasch4
Buffett should follow his own advice, and stick to commenting on things that
he understands.

~~~
asdsa5325
He seems to understand intrinsic value pretty well.

~~~
drcode
If there's one thing I've learned in my 45 years, it's that actually no one
has figured yet what the term "intrinsic value" really means. The more you dig
into that term it just ends up meaning "what someone else is willing to pay
for it" blended together with some fuzzy subjective notions of morality.

~~~
asdsa5325
No. What _someone else_ will pay for something is _ex_ trinsic value.

~~~
drcode
Exactly, now just add some subjective moralizing to it and now you'll reach
parity with most people's notion of "intrinsic value".

------
hapnin
This is like two old investors in buggy whips talking scaring people off of
internal combustion engines. They have no idea what they're looking at but
they'll make pronouncements anyway.

Bitcoin etc are currencies native to the network environment just as cash is
native to the meatspace. Both have their advantages and shortcomings.

Wisdom is found in using things if they serve you and leaving them alone if
they don't. Cash serves its purpose in the meatspace, cryptos serve their
purpose on the network. Use them as they're useful.

I don't find it wise for anyone, Buffett or otherwise, to expound on things
they don't know anything about. It's even less wise to take advice from those
who speak from ignorance.

~~~
bdcravens
> It's even less wise to take advice from those who speak from ignorance.

Being in Bitcoin since 2011, I've found most Bitcoin advocates tend to be of
the ignorant sort with regard to both the technology and the economics. They
tend to gather their information from what they're told to think on places
like Reddit, and are quicker to communicate via memes than have an actual real
conversation.

~~~
hapnin
We've been in it about the same length of time. I agree with your assessment.

A lot of trade in the stock markets is based on similar dynamics: lack of clue
on the investor's part, just go with what someone told you.

