Warren Buffett, you may have seen it at the recent Berkshire Hathaway conference, made statements about bitcoin. He said, “If you let me buy all the bitcoin in the world for 25 dollars, I wouldn’t take it.”
‘You know, Warren is 92 years old. I don’t think Warren has spent 100 hours thinking about bitcoin. I don’t think Charlie Munger, at age 98, has spent a hundred hours thinking about bitcoin. I think that if Warren understood bitcoin is digital property, which is a form of digital capital, he would go buy. It’s just a dematerialized apartment. My choice is to either buy a rental apartment or buy a hundred acres in Kansas or buy a bitcoin. That’s my choice.’
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Warren Buffett, the CEO of Berkshire Hathaway, recently reaffirmed his opposition to bitcoin, claiming that it lacks intrinsic value and thus cannot be invested in. The flagship digital currency’s price when Buffett initially referred to it as rat poison on May 5, 2018. The price of admission during the Berkshire Hathaway 2018 annual shareholder meeting was priced at $500. Now with the price of bitcoin trading above $30,000 Speaking at the Berkshire Hathaway annual shareholder meeting on April 20, Buffett explained bitcoin’s lack of tangible value by pointing out that industries such as agriculture and real estate, in contrast to bitcoin, provide greater tangible returns.
‘If you told me you owned all the bitcoin in the world and you offered it to me for twenty-five dollars, I wouldn’t take it because what would I do with it? I have to sell it back to you one way or another, which isn’t going to do anything,’ Warren Buffett said.
He emphasized that even if he were to be paid the lowest possible price for all of his bitcoin, he would most likely sell it back due to the asset’s lack of utility. Meanwhile, Charlie Munger, Berkshire’s vice chairman and long-time Buffett collaborator, said during the 2018 meeting that trading in cryptocurrencies is just dementia. At the recent shareholder meeting, Munger reiterated his sentiments.
‘In my life, I try to avoid things that are stupid, evil, and make me look bad in comparison to somebody else, and bitcoin does all three’, Monger said last year. MicroStrategy’s CEO, Michael Saylor, whose software company owns about 129,218 bitcoins, said the cryptocurrency doesn’t need Warren Buffett’s endorsement to be wildly successful, in response to Warren Buffett’s assertion that bitcoin is basically worthless because it doesn’t produce anything. Saylor pointed out that other assets performed extremely well without Buffett’s backing and suggested bitcoin could flourish if even 5% of institutional investors embraced it. Michael Saylor, in a recent interview with the Money GPS YouTube channel, reacted to Warren Buffett’s recent statement that he would not buy all the bitcoin available for $25.
‘Yeah, I think what Warren misses is that land is a form of physical capital, right, and housing is a form of physical capital, and people will pay you rent on the farmland so they can farm it, and they’ll pay you rent on the housing so they can live in it. People will pay you rent to borrow that as well, so if you had a million dollars in bitcoin, you could loan it out to someone and get a yield on it right now. That’s what makes it desirable.
If I had a million dollars of farmland in Argentina, I could only rent it to a farmer in Argentina. If I had a million dollars worth of apartments in Argentina, I could only rent them to people that wanted to live in Argentina. If I had a million dollars in bitcoin in Argentina, I could loan it to a capitalist in Singapore, who would probably pay me an 8% yield, and then if someone in London heard about it, they might pay me a 9% yield. Occasionally, someone might decide they want to pay me 18% or 4% yield.
It’s just capital, and if you understand it as tokenized capital or digital capital, then the question is do I want to convert my million dollars of capital into pure digital energy and loan it to anybody in the world and rent it to anybody in the world on a network. Do I want to convert it into physical energy like farmland, and then, of course, which country do I want the farmland in?
You can’t move it, and do I want to turn it into an apartment, and the question is what city do I want the apartment to be in, so you know Warren is 92 years old. I don’t think Warren has spent 100 hours thinking about Bitcoin. I don’t think Charlie Munger, at age 98, has spent a hundred hours thinking about Bitcoin. I think that if Warren understood bitcoin was digital property, which is a form of digital capital, he would go. It’s just a dematerialized apartment. My options are to buy a rental apartment, a hundred acres in Kansas, or a bitcoin. That’s my choice. So you see, bitcoin is actually a better property. It’s a better investment. It is better than gold, a better property than property, and a better currency than most currencies. Because it’s digital.
It’s dematerialized. It’s programmable; you can move it at the speed of light; it’s indestructible. It’s incorruptible. You’re not going to have to worry about waking up and finding that your house that you own in Barbuda got wiped out by the hurricane. You’re not going to find out that the mayor of some city rent controlled your apartment. You’re not going to find out that, uh, nobody knows that there’s a drought. How much is your farmland worth when there’s a drought? You know, not that much.
So you take on all sorts of risks and constraints with physical properties. Warren understands him because he can touch them and feel them. He doesn’t understand Bitcoin because he doesn’t have the motivation to think about it, but you know, Warren does understand one other thing, which is Coca-Cola, and Warren has held Coca-Cola. He’s been a coca-cola maximalist and a hodler for 40 years, and when you ask Warren can you improve on the Coca-Cola protocol? It was invented a long time ago. How many people have come up with a sweeter, better, more interesting drink than Coca-Cola? You know, it’s not a complicated idea, and yet Coca-Cola reigns dominant.’
‘…What the value proposition of Coca-Cola is? It’s the greatest beverage brand in the world, maybe other than water. You’ve got water. And then you walk into a restaurant and they say, “What do you want to drink?” You say coke or diet coke and they have it. Now try ordering a diet Dr. Pepper or a diet Mr. Pibb or a diet, you know, strawberry sarsaparilla, and they’ll look at you like you’re crazy.
Now here’s the big idea. The idea of Coca-Cola is embedded in the heads of billions of people. If I wiped out all of the bottling plants of Coca-Cola, if I wiped out the manufacturing, the corporation, the executives, everything and all the contracts, would Coca-Cola still have value? The answer is yes. The only way for Coca-Cola not to have value is if you have to rip it out of the heads of 8 billion people. If you could telepathically reach into the heads of all 8 billion people on the planet and blank Coca-Cola from their minds, then maybe you’ve destroyed the brand. The fact is people think Coca-Cola is synonymous with something that’s safe to drink that I can order that I can get and bitcoin is synonymous with money and it’s the greatest monetary brand right now, so certainly not. If you know, water is to Coca-Cola as the dollar is to Bitcoin in a way.
Some people just don’t take the time to figure it out. I mean, you can’t begrudge, you know, two business people that lived into their 90s for not grasping the new thing that the 20-somethings are figuring out. It’s not you know when I If I’m 90 years old, or 92, or 98, and you come along with some great telepathic, you know, implant and ask me my opinion, I might say, “You know, it kind of scares me.” I’m not so sure about it, but you know, so be it right. ” I mean, it’s not my job to be up on every technology you know every minute of my life. People should be thinking for themselves on this matter and come to their own conclusions.’
In addition to Michael Saylor, many people in the crypto space, including Elon Musk and Binance’s CEO, Changpeng Zhao, responded to Warren Buffett’s criticism of Bitcoin finance. CEO Changpeng Zhao said that Bitcoin and Buffett don’t need each other:
CZ tweeted in response to Warren Buffett’s criticism of Bitcoin. In addition, Tesla and SpaceX CEO Elon Musk seemed to make fun of Buffett’s reply, saying, ‘Haha he says bitcoin so many times’. In a Twitter discussion with venture capitalist Mark Andreessen.” Musk was reacting to a clip of Buffett and Andreessen’s caption that said:
Andreessen was referring to boxes of candies that surrounded Buffett as he spoke on stage. As long as bitcoin has always divided people, and things are not about to change, there will always be intransitive people who say that the king of cryptocurrencies is only a speculative asset and a tool for criminals seeking to launder their assets. Above all, it is a coin that allows anyone, regardless of social background, race, gender, or residence, to participate in the financial system. While it is possible to convince the anti-bitcoin to go the way of the supporters of the coin, it is very rare that it happens in the opposite direction. We are convinced that bitcoin will win in the end and more and more people will keep getting into the crypto space with time. However, it might be too late for Warren Buffett and Charlie Munger because they are probably too old to understand blockchain technology.
[This article is a transcription of a video made by Savvy Finance]
Original video: https://youtu.be/K_uqSRxjHSU ]