Bitcoin is the Detector of Imbeciles
On The Cluster of Charlatans, Zero Interest Rate Virgins, & Crypto Tumors
Interview with Laeticia Strauch-Bonart in L’Express (French magazine), translated.
Nassim Nicholas Taleb : "Le bitcoin est un détecteur d'imbéciles"
L'année 2022 ne fut pas de tout repos pour les cryptomonnaies. Alors que le bitcoin a perdu plus de 60 % de sa valeur…
Last year, 2022 was not of much respite for cryptocurrencies. While bitcoin has lost more than 60% of its value, the entire sector is in crisis, punctuated by various bankruptcies such as those of Terra and FTX. The phenomenon is the consequence, according to scholar and former trader Nassim Nicholas Taleb, of the low-interest rate “Disneyland” economy in which we have been living for fifteen years. A “cluster” was formed: Pro-putin, climate and Covid deniers, carnivores, and crypto culties, that Taleb, a former crypto hopeful but a fierce opponent since 2021, has decided to attack head-on.
L’Express: As early as 2021, you warned about the inability of bitcoin to play the role of a real currency. Prophetic remarks…
Nassim Nicholas Taleb: My point in the article I published in 2021 nicknamed “the bitcoin black paper” was that in its current version, despite the hype around it, bitcoin had not managed to satisfy the notion of “currency without government” and that it even turned out to be not a currency at all. It is because it can be neither a short-term nor long-term store of value, cannot function as a reliable cover against inflation and, worse than anything, it does not remotely constitute a shield against government tyranny or a vehicle to protect against catastrophic episodes.
The comparison with gold is quite poor. It cannot be expected that an entry on a register that requires active maintenance by interested and motivated people — this is how bitcoin works — will retain its physical properties, a condition for monetary value, for any period of time. In addition, we are not sure of the interests, mentalities and preferences of future generations. Technology comes and goes, gold stays, at least physically. Once neglected for a brief period, bitcoin would necessarily collapse [The “absorbing barrier”].
The fundamental defect and contradiction at the base of most cryptocurrencies is that initiators, miners and maintainers of the system were making money from the inflation of their currencies rather than the simple volume of the underlying transactions. Thus, the total failure of bitcoin to become a currency has been masked by the inflation of its value, generating profits (on paper) for a sufficiently large number of people. In reality, bitcoin has maintained extremely high volatility throughout its existence and, even worse, at higher prices, which makes its capitalization considerably more volatile.
Let’s add that Bitcoin transactions are considerably more visible than others, which makes it uninteresting for intelligent fraudsters!
Where does the craze for cryptocurrencies come from?
What we have been experiencing for fifteen years is a kind of Disneyland, with near zero, sometimes negative, interest rates and therefore without real market functioning. Lowering rates creates asset bubbles without necessarily helping the economy. Capital no longer costs anything, risk-free returns on investment become too low, even negative, pushing people into speculation. We lose our sense of what a long-term investment is. It is the end of real finance.
Investors get pushed into a Ponzi-like strategies: to invest in the assets of companies whose price was rising. Thus, the majority of technology companies do not produce cash flow but are financed through “funding” which inflates their assets on paper. Another phenomenon, in the past fifteen years, hedge funds that should not normally exist have grown like mushrooms. And then you have malignant tumors like bitcoin.
At first, when cryptos appeared, you seemed rather favorable
At the time, I was very critical of the Fed’s policy. I have always been critical of Ben Bernanke, who in my opinion did not see the structural risks of the system before the 2008 crisis, and overreacted afterwards. Instead of correcting debt and mitigating hidden risks, he covered them with a monetary policy that was only supposed to be transitory. I wrongly thought bitcoin would be a bulwark against the distortions of this monetary policy. By flooding the money market, central banks have created these tumors. Central banks have an advantage: they ultimately show a certain accountability, which is not the case with cryptos.
I think the crypto universe attracts manipulators and scammers. It also has a generational vice: it is filled with young people who have no experience, who bought bitcoin early and who got temporarily rich without knowing anything except computer programming (but it will not last). This is the difference between our world and that, for example, of the Romans, who did not have the cult of the youth, who even despised it, precisely because it had not experienced much. In fact, young bitcoiners do not understand finance: they do not get that it cannot be a reliable cover against inflation. In any case, what we need is to return to a normal economic life, with interest rates of 4 to 5%. It will clean things up, particularly in the technoparadise
You spend some time fighting on Twitter with crypto advocates…
About 36,000 “people” trolled me— which I had to block all thanks to a bot. Here, we have to do what can be called a “cluster”, which brings together crypto fans, Covid-19 skeptics, climate skeptics, Putinists, and radical carnivores. Many are delusional conspiracy theorists, but naive to the core. I’m not kidding, these people connect and share the same opinions on apparently very distant matters. Their scientific background is zero.
At the height of the disinformation about Covid-19 and the vaccine, a person I respect asked me to intervene: “The mainstream press looks like a boring and moralizing schoolteacher. You are known for being a fiery character who says what he thinks, much more reliable and interesting to listen to. So you have a moral duty to fight against misinformation. In addition, you obviously seem to be having fun so people will trust you.” I then began to attack these charlatans who pose a threat to society, and particularly to this cluster.
I occasionally share the opinions of the cluster, for example against GMOs, interventionism in Libya or Syria, and the Fed, which makes my opinion less suspicious for young people.
This cluster seems strange. What is the link between cryptos and Putin, for example?
There is as much coherence in that universe, located on the right of the right, as in the one, on the very left, who loves state economic control while advocating gender transitions. We can detect generalized lunacies: for example, the cluster is convinced that we are victims of a “great reset” conspiracy. This would be a plan orchestrated by globalized elites, starting with Bill Gates, to control the world following the Covid-19 pandemic, which would have been engineered for that purpose. If you believe in the “great reset”, then there is a chance that you will be wary of any state initiative to fight the pandemic, and that will make you seek Putin’s protection. And you may not know anything about bitcoin, but since it is part of the cluster, you adopt it with the rest! You know, by repeating nonsense, suckers end up believing it.
Isn’t this conspiracy-prone cluster likely to be stimulated by Elon Musk’s acquisition of Twitter?
I know Elon Musk a little bit, I met him several times and publicly discussed Tesla’s flaws with him on Twitter. But since then, he has blocked me! It was in March 2020, when he claimed that he was stupid to panic about Covid-19, to which I replied that it was stupid to say what he said. He got angry — he thought the epidemic would end by the end of March 2020. I maintained that we had to panic immediately, because it didn’t cost much then. When it is not expensive to panic, in any situation, it must be done.
Then, regarding freedom of expression, I don’t like disinformation but I think nothing purifies better than sunlight. We must let all these idiots ridicule themselves and disqualify themselves in public.
What about sensitive issues, such as health? Shouldn’t we set limits?
I agree. On these issues, you do not have the right to give an unfounded opinion. It’s dangerous. We must really be wary of quacky opinions uring medical emergencies. Today, when 100 experts think X and a dissident person thinks non-X, like this quacky Didier Raoult’s or some other false scientist, the charlatan will pass on television much more than the bearers of professional consensus.
Why is non-conformism preferred to scientific conformism?
Because of a phenomenon called salience. Consider the quote attributed to Stalin: “The death of a man is a tragedy. The death of a million men is a statistic.” The former is more prominent than the latter, despite the disproportion between the two. However, in their representations, people do not function statistically but emotionally. But science does not work through public opinion nor any opinion; it is a mechanism of evidence and demonstrations.
Note: More than a million people died of Covid after Musk‘s episode. There is something pathological about people who don’t get that without vaccines we would be in real trouble, and they divert you from these points by nitpicking. So we need safeguards.
Some interpretations see in conspiracy the conspiratists or supporters of the disinformation of narcissists. You too?
It also counts. But conspiracy theory is not necessarily bad for society. I would say that experts and mainstream media are right in 95% of cases, conspiratists in less than 5%, even if unfortunately the public is led to believe that conspiratists are 95% right and the media 5%. So we need them, but we must control them, prevent catastrophes. Will Elon Musk kill them? I don’t know. We must be very careful because when information is suppressed, people tend to believe it even more, which advocates for a very weak regulation of expression. Except, as I have just said, in specific, extreme cases: in the event of a national emergency such as a pandemic or when children are concerned, it is necessary to control false information on the networks, for example by pointing out that such a person is not qualified to express himself on the topic, particularly medicine [Note: People don’t get that nondoctors are not allowed to give specific medical advice; they don’t let truck drivers treat cancer patients, and I haven’t heard too many people complaining of lack of freedom of expression there]. YouTube has done such controls, as did Facebook. But it should not be abused: it should not be used in the case of opinion debates.
This is difficult, because the current alternative opposes radicals of freedom of expression to people who want to limit all speech for fear of offending certain categories of people.
You have to be in the middle. And when you censor, you have to treat people fairly. Either you censor everyone or no one. I don’t like the toxic and unhealthy utopianism of the wokes, and they, no one censors them. Overall, censorship remains limited to a few and unbearable trolls continue to thrive on this social network. Being on Twitter is like going to a café that brings together the entire population and you don’t know which one is a fool and who is a professor of medicine. In general, when you go to a real café, you know if you are at the truck stop or at the Deux magots. Twitter is a mess, a mix.
You find yourself at a table with Einstein on your left and a truck driver on your right who comments on IMF policy or discuss whether the people of Davos are trying to put chips in our brains…
What could happen is that Twitter becomes such chaos that people spontaneously flee to networks where trade moderation is stronger. In any case, I think things will eventually settle: you will have a Twitter for Einstein and his friends, and a Twitter for others. There is already Parler, which brings together Trump fans.
We find this dynamic in France, except that at home, the center exists, with Emmanuel Macron.
I note that the right is no longer conservative in the sense given to it by the British Edmund Burke: respect for institutions, traditions and the defense of prudence in progression. Traditionally, the two American parties were Burkians, one progressive, the other conservative: their ideal pace of progress was not the same. Now you have two clusters of fools, both on the left and on the right. Because of Trump, the real American conservatism has nearly evaporated. Moderate Democrats now have the advantage, and some people who voted Republican for years have started to vote Democrat.
In France, this right-wing shift translates into the rise of Eric Zemmour, who is completely xenophobic. It is even possible that he is anti-Semitic. The extreme right really makes me think of what some call the “ Nigerian scam” [a form of scam by which someone is promised a large sum of money in exchange for a small initial payment, supposed to have to be used to get the big amount. When the victim makes the payment, the fraudster invents a series of other fees to be paid or disappears.]
Well, the message sent by fraudsters is so primitive that most people immediately detect the fraud. But it still works because it filters a certain category of people: idiots. It’s the same with the extreme right: what they say is so stupid or weird that only fools or idiots believe in it. However, in a large population you will always have a few hundred thousand idiots. Bitcoin has had the same effect, it is now a magnet for idiots, a fool detector.
What do you think of Zemmour’s words on immigration and integration?
Christian Lebanese like me assimilate very well in the West, much better than in the East, but Zemmour makes me uncomfortable. Some appreciate it because it represents a very radical version of assimilation — we see it with its obsession with French first names. The problem is that Zemmour does not understand that in a more individualized world like ours, we cannot coerce people into specific names and identities. They rebel.
Look at the difference between Algeria and India: in Algeria, French colonizers were violent and sought to dispossess locals of their land and culture, unlike the British in India. As a result, the current relationships are very different. To the point where their current Prime Minister, Rishi Sunak, is of Indian origin. The British even had a Sephardic prime minister, Disraeli, a century before the United States had its first Catholic president!
The British manage to integrate differences as long as they have a commercial basis. It is not the State that manages national identities, as in France, so integration is more organic, especially thanks to business. This is why immigrants are generally conservative in the United Kingdom, and especially in the United States. These people have immigrated in order to succeed and want to protect what they have acquired.
It is difficult to imagine the French right dealing with immigration in this way…
This is because the French right is not liberal in the classic sense of freedom of trade and limited state (Adam Smith, Jean-Baptiste Say, Margaret Thatcher, Ronald Reagan). The French right is nationalist, centralist and in favor of the big state. It’s like the opposition between Zelensky and Putin. Recall De Gaulle saying “Maintenance will follow” (l’intendance suivra). This denotes a planning-oriented vision of political and economic life. On the contrary, what is the cardinal value of the British right? Free enterprise. They are both called “right”, but they don’t have much to do with one another.