How I’d Sell Warren Buffett on Crypto

Invaluable.

That’s what time is worth to the 88-year-old Warren Buffett.

Though, he does auction it off from time to time.

Each year, anyone can bid for a three-hour lunch with the Oracle. And each year, the value of Warren’s time goes up.

In 2000, a three-hour lunch with Warren cost US$25,000. In 2010, someone bid US$2.6 million for the same three hours.

This year, the winning bid was US$4.6 million. A three-hour lunch with Warren was worth US$4.6 million to someone…

Source: Bloomberg

That someone was crypto tycoon, Justin Sun. And he plans to change Warren’s mind on crypto.

Buffett doesn’t have the right sources

God knows, Justin has his work cut out for him.

Rat poison squared…that’s what Buffett thinks of bitcoin and the like.

It’s not hard to see why he thinks that way, either.

The media portrays everyone in cryptos as shady gambling-addicted youths that would throw their lives away for a bit of extra coin.

I’m sure those kinds of people do exist. And those purely speculating on prices have their days numbered.

Those over at Guru Focus think this $4.6 million lunch might be all just a big waste of time. ‘Buffett is fundamentally still a value guy,’ Guru Focus penned.

If Sun thinks he can speak to Buffett as if he gives a hoot about money-losing “growth” stocks and other such ephemera, he is sorely mistaken. The Oracle of Omaha is not going to buy into the crypto story anytime soon. It is fundamentally not an investment asset, but a tool of speculation. That has never been — nor likely ever will be — his style.

But there’s a whole other movement — a large group of enthusiasts that believe crypto and blockchain could be something more…a solution to problems within our financial system, perhaps…

This is what I expect the ever-respectful Justin wants to communicate to Warren.

In a CNBC interview with Becky Quick, Justin said, ‘Warren Buffett doesn’t have the right sources for the blockchain industry, news and he’s misled by the media most of the time.

Maybe it will be Justin who creates that bridge. A bridge between the traditional investor and the crypto world?

Warren did say he was ‘delighted’ that Justin won the lunch. I’m sure he’ll also have an open mind for the three hours.

But maybe Guru Focus is right. Maybe three hours is just not enough time.

If it was me, though, I’d try and emphasise problems close to Warren’s heart, and explain how cryptos could be the solution, not just prices to trade.

How I’d change Warren’s mind…

Warren is not a man of change.

He’s a card-carrying capitalist. But the investments he looks for are anti-capitalist.

He likes strong businesses, with powerful cash-generating abilities and an immunity to competition.

So, trying to sell Warren on new groundbreaking technology, with change right around the corner, probably won’t work.

But, what might work is talking about something Warren is passionate about…

While Warren is a capitalist, his political views are close to market socialism.

In a country as well off as the US, Warren thinks it’s crazy for anyone to be left behind. So welfare, taking care of those who cannot take care of themselves, is a big one for Buffett.

He’s also voiced his concerns on the wealth inequality, saying something’s got to be done about this issue.

I’m sure Mr Buffett knows, the rich get richer and the poor stagnate because of central and commercial banks.

It’s the central banks that pump boat loads of money into the financial system, causing asset prices to rise (a lot of which is owned by the rich).

Then it’s the commercial banks who keep the poor poor by charging compounding interest, offering no-fee refinancing and generally keeping the working class in debt.

The solution to all this, perhaps…is crypto and blockchain.

A step in the right direction maybe…?

If one of the problems is central banks and their careless money printing, why not create a digital currency, backed by commodities, which would create fewer boom/bust cycles in the financial system?

This was actually an idea that Warren’s mentor, Ben Graham, developed back in the 1930s (sans crypto).

Here’s how it could work…

When commodities prices are cheap, central banks could issue commodity-backed tokens to buy baskets of commodities. This would give producers cash, even as demand reduced.

Then, as commodity prices rose, the central bank could redeem these tokens by selling down their inventory and damping irrational exuberance.

The ultimate goal is to get money in the hands of producers, even when prices are low. And with that cash, producers can then pay suppliers, workers and continue to invest.

Of course, it’s not foolproof.

But it does reduce the amount of cash central banks pump into financial assets, and may reduce the amount of debt that commercial banks shovel onto the average Joe…

Something Warren may consider being a step in the right direction…

Your friend,

Harje Ronngard


Harje Ronngard is one of the editors at Money Morning New Zealand. With an academic background in finance and investments, Harje knows how difficult investing is. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. There are two questions Harje likes to ask of any investment. What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Money Morning New Zealand readers.


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