Warren Buffet is not an idiot…

Markets move when Buffet speaks, but the the Omaha Oracle’s comments about Bitcoin following the Berkshire Hathaway 2018 Annual Shareholders Meeting last week border on the moronic. In his CNBC appearance on Monday, May 7th, Buffet reiterated his disdain for Bitcoin and cryptocurrencies, comparing Bitcoin to the historically poor rate of return of Gold over the last 2,000 years.

Buffet is the sage of equities investing, but many agree that he’s dead wrong about Bitcoin and cryptos, ignoring the emerging token-driven economy at our doorsteps. This is not a philosophical position, but a sentiment driven by a misunderstanding of the facts: Buffet stated in his CNBC appearance that “Bitcoin is an asset that creates nothing” which is categorically untrue.

Bitcoin is an asset (Buffet gets that right), of an entirely new class that we haven’t encountered before. Therefore, it does not conform to the behavioral expectations for stock investments, because it’s not a equity, and therefore not an investment, but a utility.

Bitcoin does create something of value — very valuable: it enables the utility of a global autonomous network that converts electricity into money so that it can be transmitted anywhere in the world, in real time, and converted back to any major currency; all with the relative simplicity of sending an email, and absent the usual intermediaries. That’s quite valuable. The future capacity of such utility is profound.

To say that Bitcoin creates nothing is the near equivalent of saying the Internet creates nothing. Fortunately, Buffet is a gracious man who admits he’s been wrong before — “I was wrong about Amazon” he said. I suspect we’ll hear something similar from him about Bitcoin as digital currencies find more price stability through wider adoption, and as the emerging token economy matures.