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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 va

• mcguire 8y ago
  Further, when you buy a part of a company, you are buying a piece of a functioning economic unit. When you loan money, you are finding economic activity. When you buy a Bitcoin, you are helping to convert electricity to heat.
  • piracy1 8y ago
    Electricity into security
    • 45h34jh53k4j 8y ago
      energy into money. We always wanted a universal energy based currency -- it is bitcoin.
      • mcguire 8y ago
        I thought that was energy production.
      • strypey 8y ago
        I think that would be more like SolarCoin: https://solarcoin.org/ https://solarcoin.org/
    • cookiecaper 8y ago
      In practice, it's not very secure because the difficulty mechanism ensures that hash power always centralizes. Any widespread commodity miner will automatically defeat itself -- that's why all of those early ASIC startups fizzled out. As soon as they shipped something, their value proposition was nullified. Add to this that the payout mechanics strongly incentivize pooled mining, even for people with powerful miners, and the "guarantees" get that much flimsier. A small handful of men ultimately control the Bitcoin network because they have authority over 50%+ of the hash power, and they've all been in the same room on multiple occasions. It's no different than the small handful of men who control the Fed / other major financial institutions in our fiat systems. Bitcoin was an excellent thought experiment, but it's no wonder that Satoshi wants nothing to do with what it has become.
      • piracy1 8y ago
        What do you think of the way things like ZCash and Monero solve that problem? They use hashing algorithms that are more or less immune to ASICS. This is especially true in the case of Monero which just tweaked their PoW algo in order to set monero ASICS back. Stopping ASICs promotes the average person mining on their gaming rig or things like that. Also "A small handful of men ultimately control the Bitcoin network because they have authority over 50%+ of the hash power" I think that's a bit hyperbolic. A small handful of men control where the hashing power currently is. However, that can change very quickly. If you don't like what a pool is trying to use your hashing power for, leave that pool.
  • nkrisc 8y ago
    Think of them as shares of entropy.
  • panarky 8y ago
    A thing doesn't have to be "a piece of a functioning economic unit" to be worth owning. Examples: copper, gold, land, art, wireless spectrum, currency. There's a perfectly valid rationale to hold each of these assets, and none of them are "productive" by themselves. Each of these has scarcity and utility. That's what matters.
• sharemywin 8y ago
  I think bitcoin would need to be valued based on it's replacement value. The transaction fees other networks charge to transfer assets. intercontinentalexchange has a value. visa has a value. etc.
  • sharemywin 8y ago
    No company has an intrinsic value either. If I fired all the employees, sold all the assets it would be worth nothing. The transactions are the value. The network has value. If I add up all the times people buy something with bitcoin and sell something for bitcoin and compare that against the fees the would incur it's generated some kind of value. It's just dispersed to the people using it not a central company. Is it a good way to buy and hold...of course not.
    • mateo411 8y ago
      No, that's called the book value of the company. At the end of that process you would have an amount of money worth the book value.
      • sharemywin 8y ago
        And if you sold a book in bitcoin and bought something with it there must have be some value transfer.
    • smt88 8y ago
      I don't understand your point. If you have a functioning company making something and sell it, your company is worth almost nothing. That's true. But those people and assets are still useful to someone else. They have a value. Bitcoin can't be consumed the way assets and labor can.
      • sharemywin 8y ago
        The transactions are the value. The network has value.
    • 8y ago
• trixie_ 8y ago
  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 8y ago
    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.
    • jabits 8y ago
      If you think gold can’t be created, you need to revisit your chemistry and physics books. While not economically feasible yet, with the mastery of fusion energy technologies it one day will be...
      • jhall1468 8y ago
        It can't be created practically which is the same as can't be created for purposes of this discussion. Talking about creating something using a tool that we haven't even created is futurism.
        • notahacker 8y ago
          And of course as soon as it can be created practically and cheaply, the price of gold will drop to [close to] the cost of manipulating atoms to create new gold.
• kolbe 8y ago
  This is totally reasonable, and I get why Warren should stay away from 'investments' in BTC. It's extremely wise to stay away from investments you don't understand, especially when you're a target like Buffett. But what I can't get behind is his active and vocal bearishness. If he has a well-reasoned argument to make, then he should make it. If not, lay off.
  • ThalesX 8y ago
    I’m not a succesfull investor with decades of won bets but the amount of people pitching Bitcoin to me and wanting to talk about it drove me crazy for awhile. I can’t imagine the frustration Warren Buffet feels when surrounded on all sides by digital snake oil peddlers.
    • kolbe 8y ago
      Well, my point is that Buffett usually just uses some sound byte to bash it, like 'rat poison squared'. Give us an actual argument. Or convince us that he's done significant research into BTC to come to this conclusion. It's just frustrating to hear him make a very outlandish claim like this, and then not educate us with the explanation.
      • csa 8y ago
        His argument against it, much like gold, would be that it is merely a store of value rather than a productive asset (e.g., crop-yielding land, companies, etc.). If you read up on his comments on hold (someone copy-pasted it elsewhere in this thread), you will see that this is nothing more than his investment thesis. It seems to work well for him.
        • kolbe 8y ago
          I understand why he doesn't invest in them. I mentioned that in my original post. I want to know why he is so extremely bearish. Not why it fails to meet his investment criteria. Statements like "rat poison squared" are not the same thing as disliking non-productive assets. I'm sure he doesn't think gold is going to $0. I want to hear why he thinks that Bitcoin is particularly destined for a price of zero. This is the analysis that he never gives us.
• bmcusick 8y ago
  Bingo. He's also a value investor. He understands cash flows. Bitcoin produces no cash flow. Also, Buffet is the insider's insider. Banks work for him. He has exactly a 0.00000% chance of having his accounts frozen. The US Congress would hesitate to pick fights with his companies. When you have those kind of connections and power, you're not well placed to understand the benefits decentralized sources of authority provides. What Buffet is missing is that bitcoin is an alternative to cash, and when lightning networks and side chains are widely deployed it will be very, very competitive with cash on most axes. Eventually (if hyperbitcoinization actually happens) even the variability will be less than any one national currency, since global demand and stabilizers will buffer it against any localized shock.
  • jhall1468 8y ago
    I think he understands it better than you give him credit for. He just doesn't see a future for it. To most investors the promise of Bitcoin is the same promise of snake oil. Everything about Bitcoin is new and untested and most institutional investors abhor anything they can't quantify. Bitcoin is a huge gamble, and people like Gates and Buffet don't gamble.
    • solean 8y ago
      It's been tested for over 10 years with the biggest bug bounty in the world.
      • jhall1468 8y ago
        Not security testing, I'm talking about testing economically. Decentralized currency has never been tested at scale. It's worked locally for many cultures, but never globally.
      • sizzzzlerz 8y ago
        Not the point. Besides, 10 years of testing still doesn't prove it's secure. Intel and AMD CPUs, manufactured since 1995 have the Meltdown and Spectre flaws that were only discovered recently.
• deleted 8y ago
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• dnomad 8y ago
  I think this is basically it. Good ol' Buffet. His argument against gold is similar [1]. It's always interesting to note the fundamental differences between these types of investors. Some investors place their faith only in things -- hard assets and hard money -- gold, bonds, and now bitcoin. Others like Buffet have maintained that the best thing to invest in is other human beings, specifically human ingenuity and sweat. This question -- whether wealth resides in things or in relations between people -- seems to drive a lot of investor psychology. [1] http://www.businessinsider.com/warren-buf http://www.businessinsider.com/warren-buf
  • berberous 8y ago
    Your link is broken. What makes Buffet's annual letters so great though is the quality of his writing, so rather than fix your link I'll post his position on gold in his own words: "The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century. This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future. The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end. What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while. Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end. Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B." Source: http://www.berkshirehathaway.com/letters/2011ltr.pdf http://www.berkshirehathaway.com/letters/2011ltr.pdf