No. of Recommendations: 36
Mr Buffett called BTC a "mirage" in 2014 when it was trading around $500. Making him exactly wrong for ten years in a row and missing out on a 130 bagger. One of the worst calls in history. Not a record to be proud of, and yet, some people act like he was right.
There is no law of nature preventing the price of mirages from going up for a while : )
The main lesson has been discussed here many times, but few take it to heart.
There is a very big difference between a good bet and a winning bet.
A good bet is one with a positive expected value: the chances of a win times the size of the win is greater than the chances of a loss times the size of the loss, summed across all outcomes and their probabilities. In short you'll probably make money, but it's not certain.
A winning bet is merely one that paid off. It might have been a good bet, or it might have been a bad bet that got lucky.
Mr Buffett specializes in good bets. He doesn't always win, but he does his darnedest (better than anyone else I know) at assessing the odds of a big loss, and either skipping the opportunity or sizing appropriately when the chance of loss is material. In the last half century he has never realized a loss of more than 1% of the then-current portfolio value, which boggles my mind.
The fact that he skipped putting money into crypto was definitely a "good bet" decision. Bitcoin isn't money, and isn't an investment, it's a capital good like a Rembrandt. The prices of capital goods are determined solely by supply and demand, as there can never be earnings or (by extension) investment intrinsic value, or a rise in the intrinsic value. Consequently it is extremely hard to make any case in the "good bet" category, since the value can't go up, only the price. For non-investment goods it's hard to predict the future demand, so it's nigh impossible to predict the future price.
None of this is to say that the price can't go up. It has. That doesn't make it dumb to have sat it out, which would be the scariest possible form of bad FOMO thinking. Wagers in roulette are very close to fair bets, but I still wouldn't conclude "it was foolish not to have put all your money on #23 on that roulette wheel a few minutes ago before the ball landed there".
Jim
