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Is Warren Buffett a “sociopathic grandpa”?

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Although the comments were made in April, I only just found this article about Peter Thiel’s presentation at the Miami bitcoin conference.

Peter Thiel is a billionaire friend of Elon Musk, who both founded PayPal. Peter’s more behind the scenes investing these days, with SpaceX and Stripe amongst his key holdings as well as a big stake in bitcoin.

Directly targeting Warren Buffett, the Oracle of Omaha, Thiel said:

“I think the sociopathic grandpa from Omaha is the most honest and direct in it [trying to halt the spread of Bitcoin]. It is the finance gerontocracy that runs the country versus a revolutionary youth movement. And we have to go out from this conference and take over the world.”

He also displayed pictures of top businessmen to the crowd, saying JPMorgan chief executive Jamie Dimon and Larry Fink, boss of BlackRock, were part of Mr Buffett’s apparent conspiracy against Bitcoin.

Interestingly, Thiel's friend Elon also mocks Buffett:

Old versus young.

Physical versus digital.

Born in an office versus born on the internet.

State versus libertarian.

Centralised versus decentralised.

Growth versus degrowth.

This friction I’ve been feeling every day, especially as some accuse me of being part of the gerontocracy, which I reject. I am totally open to DeFi and libertarian views and ideas, but I just constantly come back to questioning how it works. When I see Celsius, terraUSD, Luna and more taking billions in Ponzi schemes, there is this constant question as to how a new, open, decentralised financial system can work. That is all I question, and it is nothing to do with age. It’s to do with experience.

The financial system works the way it does for a reason.

It is not like the banks stuck their hands up and said please regulate us more harshly. They are regulated harshly for a reason. It’s called security, stability and trust.

The problem for the youth movement is that they’ve seen that system fail many times. The 2008 financial crisis followed by Europe’s sovereign debt crisis and, right now, the wobbles of Credit Suisse and Deutsche Bank take confidence out of the system.

You can compare this with an airline industry. If a plane crashes once, you go wow. If there are two crashes, you go what. If there are regular crashes, you don’t fly. That’s the issue that the financial system has today.

In other words, we have two broken systems. Both the central systems and decentralised systems have strengths and weaknesses. The weakness of the centralised system is when it over leverages and loses control; the weakness of the decentralised system is when governance of the network is undermined by bad actors, of which there are many.

Result: you have to choose which is right for you.

For me, the right way is to have some insurance. In the centralised systems, there are guarantees against losses. €100,000 in Europe or $250,000 in America. Most financial systems that are controlled by governments through central banks provide that security. That’s why the Statist model is trusted.

In the decentralised world, the choice is to find your own methods of security, such as using a cold wallet, or using a regulated exchange like Coinbase. Even in the latter case, things can go wrong as evidenced by the example of Quadriga CX.

Oh, and the reason I stumbled over the Warren Buffett article is due to my post the other day, and some pushback about Warren Buffett. A specific comment on LinkedIn by Andrew Abbotsford-Smith:

The two most important growth engines are high return on capital employed and capital allocation flexibility. Buffett once thought IBM had both and bought more than $10B worth of its shares, and then had to sell in 2017 at a loss.

Well, Buffett’s view of the world is value-investing and focusing on firms that are gateways into markets like The Washington Post, Coca-Cola and … IBM. That strategy has worked for his over nine decades of life, and still works in the pre-internet world. I’m not so sure it works today, although Buffett has just doubled down on Berkshire Hathaway’s investment in the Brazilian challenger bank, Nubank.

Either way, I would avoid dissing a man who has enough risk appetite to invest and possibly lose $10 billion.

 

 

 

 

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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