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If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). They seem to be good at predicting t

If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). They seem to be good at predicting things with known variables, but not with unknown unknowns. I'm making a contrarian bet that experts are wrong this time as well (at least in the near term). People are jumping the gun, trying to look smart and predict the right outcome. The same people that never predicted bitcoin would be this popular. If I'm wrong, so be it, I'll lose a few % of my net wealth.

camillomiller 9y ago
Bitcoin might indeed be a bubble. But what about cryptocurrencies in general? I think that even these economist wouldn't be so sure if they'd been asked a broader question without pinpointing bitcoin.
- codebolt 9y ago
  In the grander scheme, it seems plausible that there will be one or a few cryptocurrencies of the current era that will withstand the test of time and emerge with large-scale adoption rates in various markets. But with BitCoins technical limitations I really don't see it being a mainstream medium of trade one or two decades down the line. With that conclusion in mind, it seems inevitable that the BTC market will cool off eventually. And my I would never put my money into something that I don't believe in over the long term. I would be more interested in an ETF or other derivative that tracked the value of a basket of viable cryptos.
- monochromatic 9y ago
  Blockchain/cryptocurrency is going to be really useful and valuable. It would be an enormous coincidence if much of that value wound up being tied to bitcoin though.
pedrocr 9y ago
>If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). Be very careful with those conclusions. In both cases the predictions were that the elections were very close. Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all.
- Roodgorf 9y ago
  There were also plenty of reputable political science models that actually did predict a Trump win, so, it all depends on who you put your faith in.
- Alex3917 9y ago
  > Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all. How accurate the "best models" were isn't really relevant to the accuracy of the predictions of experts as a whole. The media was running that Clinton had a 98% chance of winning the morning of the race.
  - azinman2 9y ago
    Sounds like the model was correct. We just fell into the 2%.
    - 21 9y ago
      Today: My model says that I have a probability of 98% of making money by buying this stock tomorrow. Tomorrow: I lost money. I guess I just fell into the 2%.
  - tom_mellior 9y ago
    That may be true, but "trusting the media" is a different issue from "trusting the experts".
  - bbctol 9y ago
    "Experts" and "the media" are not the same set.
  - pedrocr 9y ago
    >How accurate the "best models" were isn't really relevant to the accuracy of the predictions of experts as a whole. Only if you include random talking heads as experts. Then you get that 98% chance of Clinton winning result. But you can select actual experts to rely on before the outcome happens. The 538 forecast was extremely accurate the previous election and had the 30% outcome the day before. That's actually comparable to a poll of economists on bitcoin. And to make it even more useful the polling of economists should ask them to give a probability instead of yes/no. It may be true that 96% say "yes it's in a bubble" and the average probability between them of Bitcoin going to 1M$ is actually 20% or more.
pep_guardiola 9y ago
I would advise you to read "The Black Swan: The Impact of the Highly Improbable" by Nassim Taleb if you haven't already. events
- burger_moon 9y ago
  "Predictably Irrational" is also a good read. People aren't good at calculating value differences and will go out of their way to save $1. That's why litecoin and ethereum are skyrocketing. It's simply cheaper in total dollars per coin than bitcoin so people are buying that expecting to to rise to the same dollar value as bitcoin. Coinbase announced they are planning to add more coins to their service next year. Besides dash and monero most of these trade at a fraction of even litecoin. Once that happens expect even more dumb money to flow in with people buying 'cheap' coins because they're 'only' a few dollar a piece.
Evgeniuz 9y ago
> They seem to be good at predicting things with known variables, but not with unknown unknowns. Exactly. 96% consensus on a guess is just as good as 99% or a 1%. It doesn't matter how many experts agree if they base their decision on unreliable information.
0xfeba 9y ago
> If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong But most of the time, they are in fact right. I don't know why a couple instances of wrong-ness proves that experts are unreliable. Other than selection/confirmation bias.
- smokeyj 9y ago
  The experts typically aren't experts in any sense of the word. Columnists get paid to write articles by the word to sell advertisements and get people riled up. Let's not glorify bloggers.
- exceptione 9y ago
  He makes a discrimination between informed/uninformed times. "They seem to be good at predicting things with known variables, but not with unknown unknowns." Bitcoin is a big unknown, for experts and enthusiasts alike.
  - trey-jones 9y ago
    Exactly. The only experts that know what the next year will bring for bitcoin valuation are the liars and the fools.
- quantdev 9y ago
  Your reasoning is an example of failing to understand the difference between a random variable and an exposure to a random variable. Experts are almost always right when the outcome is irrelevant. Economists can accurately predict next year's GDP growth most of time, sure. Except that time they're all somehow wrong at the same time and it's a massive miss and we enter a recession. This is really the only time we care about them being right ("Housing can't be in a bubble"). Until economists are financially harmed or benefited in proportion to how bad or good their predictions are, they won't understand this idea either.
  - parenthephobia 9y ago
    Sounds like reverse survival bias to me. Experts are usually right, so people make financial decisions on that basis. When it turns out the experts were wrong, those decisions don't pan out. The worse the outcome, the more likely we are to hear about it. We don't hear about all the times that following expert advice doesn't lead to an economic disaster, even though it happens nearly every day.
matt4077 9y ago
It's somewhat mythical that the "experts" got Trump and Brexit completely wrong. Fivethirtyeight, the most-famous among the poll aggregators, had Trump at 25% in their last prediction, for example. That's not perfect, but they have literally written hundreds of articles trying to tell everyone that their predictions are just that, predictions. They also have an analysis showing that the polls were more accurate than in previous elections. That's not very helpful when +-0.5% can make all of the difference, but I'd expect HN of all places to have some appreciation for the concept of probabilities and uncertainty. What's more important is that the experts got almost everything right in regard to, for example, the UK/EU negotiations. Which is why you can currently earn more money selling "Told you so!" t-shirts in Brussels than investing in Bitcoin. But ultimately "is bitcoin a bubble?" isn't a popularity contest–it's a question of fact. It's the same as "is their any underlying value that makes a bitcoin worth $20,000?". I'd argue the answer is almost certainly nope, because bitcoin has failed spectacularly at the mission it initially set out on. It is useless for transactions, as shown by $20 fees. It's far less secure than cash under your mattress. And it's not anonymous to any reasonable degree. Basically all of bitcoin in active circulation is held for speculation, which sets it apart from other currencies. The only analogue is gold, and one could reasonably say that gold is in as much of a bubble as bitcoin. The only question remaining is if bitcoin can pull of becoming the second bubble-that-doesn't-pop. It's not impossible. But my guess is the bubble pops as soon as BC stops being in the evening news every day. Take away the FOMO, and people will prefer a store of value they can touch.
sixQuarks 9y ago
it's not really a contrarian bet. If you follow stock bubbles, you'll know that stocks rise on a wall of worry, and fall on a slope of hope. Basically, when everyone is worried about it being a bubble, there's probably still room to grow. The time you gotta watch out is when everyone starts thinking bitcoin is going to keep going up.
sasas 9y ago
Sam Harris just realised an episode on his “waking up” podcast that discusses the concept of experts - https://www.samharris.org/podcast/full_archive https://www.samharris.org/podcast/full_archive

camillomiller 9y ago

Bitcoin might indeed be a bubble. But what about cryptocurrencies in general? I think that even these economist wouldn't be so sure if they'd been asked a broader question without pinpointing bitcoin.

codebolt 9y ago
In the grander scheme, it seems plausible that there will be one or a few cryptocurrencies of the current era that will withstand the test of time and emerge with large-scale adoption rates in various markets. But with BitCoins technical limitations I really don't see it being a mainstream medium of trade one or two decades down the line. With that conclusion in mind, it seems inevitable that the BTC market will cool off eventually. And my I would never put my money into something that I don't believe in over the long term. I would be more interested in an ETF or other derivative that tracked the value of a basket of viable cryptos.
monochromatic 9y ago
Blockchain/cryptocurrency is going to be really useful and valuable. It would be an enormous coincidence if much of that value wound up being tied to bitcoin though.

pedrocr 9y ago

>If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). Be very careful with those conclusions. In both cases the predictions were that the elections were very close. Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all.

Roodgorf 9y ago
There were also plenty of reputable political science models that actually did predict a Trump win, so, it all depends on who you put your faith in.
Alex3917 9y ago
> Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all. How accurate the "best models" were isn't really relevant to the accuracy of the predictions of experts as a whole. The media was running that Clinton had a 98% chance of winning the morning of the race.
- azinman2 9y ago
  Sounds like the model was correct. We just fell into the 2%.
  - 21 9y ago
    Today: My model says that I have a probability of 98% of making money by buying this stock tomorrow. Tomorrow: I lost money. I guess I just fell into the 2%.
- tom_mellior 9y ago
  That may be true, but "trusting the media" is a different issue from "trusting the experts".
- bbctol 9y ago
  "Experts" and "the media" are not the same set.
- pedrocr 9y ago
  >How accurate the "best models" were isn't really relevant to the accuracy of the predictions of experts as a whole. Only if you include random talking heads as experts. Then you get that 98% chance of Clinton winning result. But you can select actual experts to rely on before the outcome happens. The 538 forecast was extremely accurate the previous election and had the 30% outcome the day before. That's actually comparable to a poll of economists on bitcoin. And to make it even more useful the polling of economists should ask them to give a probability instead of yes/no. It may be true that 96% say "yes it's in a bubble" and the average probability between them of Bitcoin going to 1M$ is actually 20% or more.

pep_guardiola 9y ago

I would advise you to read "The Black Swan: The Impact of the Highly Improbable" by Nassim Taleb if you haven't already. events

burger_moon 9y ago
"Predictably Irrational" is also a good read. People aren't good at calculating value differences and will go out of their way to save $1. That's why litecoin and ethereum are skyrocketing. It's simply cheaper in total dollars per coin than bitcoin so people are buying that expecting to to rise to the same dollar value as bitcoin. Coinbase announced they are planning to add more coins to their service next year. Besides dash and monero most of these trade at a fraction of even litecoin. Once that happens expect even more dumb money to flow in with people buying 'cheap' coins because they're 'only' a few dollar a piece.

Evgeniuz 9y ago

> They seem to be good at predicting things with known variables, but not with unknown unknowns. Exactly. 96% consensus on a guess is just as good as 99% or a 1%. It doesn't matter how many experts agree if they base their decision on unreliable information.

0xfeba 9y ago

> If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong But most of the time, they are in fact right. I don't know why a couple instances of wrong-ness proves that experts are unreliable. Other than selection/confirmation bias.

smokeyj 9y ago
The experts typically aren't experts in any sense of the word. Columnists get paid to write articles by the word to sell advertisements and get people riled up. Let's not glorify bloggers.
exceptione 9y ago
He makes a discrimination between informed/uninformed times. "They seem to be good at predicting things with known variables, but not with unknown unknowns." Bitcoin is a big unknown, for experts and enthusiasts alike.
- trey-jones 9y ago
  Exactly. The only experts that know what the next year will bring for bitcoin valuation are the liars and the fools.
quantdev 9y ago
Your reasoning is an example of failing to understand the difference between a random variable and an exposure to a random variable. Experts are almost always right when the outcome is irrelevant. Economists can accurately predict next year's GDP growth most of time, sure. Except that time they're all somehow wrong at the same time and it's a massive miss and we enter a recession. This is really the only time we care about them being right ("Housing can't be in a bubble"). Until economists are financially harmed or benefited in proportion to how bad or good their predictions are, they won't understand this idea either.
- parenthephobia 9y ago
  Sounds like reverse survival bias to me. Experts are usually right, so people make financial decisions on that basis. When it turns out the experts were wrong, those decisions don't pan out. The worse the outcome, the more likely we are to hear about it. We don't hear about all the times that following expert advice doesn't lead to an economic disaster, even though it happens nearly every day.

matt4077 9y ago

It's somewhat mythical that the "experts" got Trump and Brexit completely wrong. Fivethirtyeight, the most-famous among the poll aggregators, had Trump at 25% in their last prediction, for example. That's not perfect, but they have literally written hundreds of articles trying to tell everyone that their predictions are just that, predictions. They also have an analysis showing that the polls were more accurate than in previous elections. That's not very helpful when +-0.5% can make all of the difference, but I'd expect HN of all places to have some appreciation for the concept of probabilities and uncertainty. What's more important is that the experts got almost everything right in regard to, for example, the UK/EU negotiations. Which is why you can currently earn more money selling "Told you so!" t-shirts in Brussels than investing in Bitcoin. But ultimately "is bitcoin a bubble?" isn't a popularity contest–it's a question of fact. It's the same as "is their any underlying value that makes a bitcoin worth $20,000?". I'd argue the answer is almost certainly nope, because bitcoin has failed spectacularly at the mission it initially set out on. It is useless for transactions, as shown by $20 fees. It's far less secure than cash under your mattress. And it's not anonymous to any reasonable degree. Basically all of bitcoin in active circulation is held for speculation, which sets it apart from other currencies. The only analogue is gold, and one could reasonably say that gold is in as much of a bubble as bitcoin. The only question remaining is if bitcoin can pull of becoming the second bubble-that-doesn't-pop. It's not impossible. But my guess is the bubble pops as soon as BC stops being in the evening news every day. Take away the FOMO, and people will prefer a store of value they can touch.

sixQuarks 9y ago

it's not really a contrarian bet. If you follow stock bubbles, you'll know that stocks rise on a wall of worry, and fall on a slope of hope. Basically, when everyone is worried about it being a bubble, there's probably still room to grow. The time you gotta watch out is when everyone starts thinking bitcoin is going to keep going up.

sasas 9y ago

Sam Harris just realised an episode on his “waking up” podcast that discusses the concept of experts - https://www.samharris.org/podcast/full_archive https://www.samharris.org/podcast/full_archive