During a recent keynote speech for Zoom’s Zoomtopia 2023 conference, Berkshire’s vice chairman said Bitcoin was “the stupidest investment I’ve ever seen.”
But he didn’t stop there. Charlie Munger continued to say that most cryptocurrencies are not only unprofitable, but he thinks bag holders will eventually lose all their money:
“Don’t get me started on Bitcoins. Most of these investments will be zero.
Now, he’s not entirely wrong on that second point.
Charlie Munger: Most cryptos are ‘going to zero’
Referring to all cryptocurrencies as “Bitcoins,” Munger is correct that most cryptocurrencies will likely go to zero. At least until now, this has always been true for cryptocurrency projects.
Thousands of new crypto projects have been created since the genesis of Bitcoin and its decentralized computing cousin, Ethereum.
The bottom line is that most new crypto projects fail. In fact, 80% of new altcoins fail in a year.
Even Ripple’s Brad Garlinghouse says 99% of cryptos will probably be go to zero.
But let’s put these numbers in context. This is not unlike the failure rate of new restaurants or new businesses in any segment. Just ask any venture capitalist or angel investor.
This is not to say that the industry is completely useless or stupid.
This shows how difficult it is to make a new business profitable and that picking winners is easier said than done, even for savvy experts like venture capitalists and angel investors.
But successful new restaurants, tech startups, and blockchain projects – are so successful that their profits pay for the losses that capitalists suffer on their failing investments.
Is Bitcoin really the stupidest investment Munger has ever seen?
As for Bitcoin, it’s certainly not the stupidest investment Charlie Munger has ever seen. Even though Berkshire Hathaway’s longtime vice chairman used hyperbole, he’s seen worse investments.
Like in 2019 when Berkshire Hathaway lost $4.5 billion in a single day on its 2015 investment in Kraft Heinz.
It must be recognized that Warren Buffett quickly admitted having paid too much for the acquisition.
But if Berkshire’s owners are willing to invest in high-flying stocks like Kraft Heinz in 2015 to own a piece of the cheese and ketchup business, what’s so stupid about the price volatility of a digital currency without borders, deflationary and secured by peer-to-peer? -peer network?