Warren Buffet is one of the most well-known investors in world. He has been in the news a great deal over the last few years after he publicly criticized the wealthiest members of society for paying lower income tax rates than most people. In March of this year, Buffet came out as an opponent of Bitcoin, as revisited in a recent article in Business Insider.
Buffet’s pronouncements should come as no surprise to anyone who knows him. He has a well-known aversion to anything tech related. He recently began to shift course on this issue, with large purchases of IBM stock. Bitcoin, however, is not only new technology (and IBM has not had a new idea since Bill Gates was still working in his garage), but it is a technology that is being used by investors.
Warren Buffet is all about investment. He began his career in 1956 by investing only US$700 of his own money into an investment company that used other people’s money to gamble on the stock market, taking a commission whether he won or lost.
Buffet’s problem with Bitcoin is that he simply does not understand it. He told CNBC in March that because, in his mind, Bitcoin has no value; it cannot be considered an investment. He said:
“Stay away from it. It’s a mirage, basically. … It’s a method of transmitting money. It’s a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope Bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view.”
It is very difficult to believe that Buffet, a man who has made a fortune in the financial sector, seems to have no understanding of the concept of value. This is the same man who said, “Price is what you pay, value is what you get.” But with respect to bitcoin, the currency, he fails to see that there is no difference between fiat currency stored in a bank and virtual currency stored in a wallet. Both can be traded for good and services, and obtaining those goods and services are any currency’s real purpose.
Warren Buffett, the Oracle of Omaha, certainly understands the stock market. But he is also a lot like the old-school bookkeeper when Quicken first hit the market. They refused to follow the rest of the world into the future, and soon found themselves edged out of the job market. Buffet called Bitcoin a “mirage,” but if that were true, then some of the largest retailers in the world, many federal and state courts, and the US Internal Revenue Service fell victim to it in 2014.