Bitcoin: every bit as worthless as a baseball card.

whether you are reading a newspaper
article or listening to a report on a radio or talking to your own parents grandparents friends aunts and uncles about politics and economics something to be aware of is the relationship between a thesis and an anecdote because a great deal of what we do as human beings i'm guilty this myself as i'll explain just a moment is that we present someone with a thesis and most of the time if we know the person we're speaking to we know the audience we reach out to we already know what it is they want to believe we know how biased they are in favor of the thesis and then we can present them with a series of anecdotes that will increase their conviction in this thesis without the person really questioning the relationship between the anecdote and the thesis whether or not one actually supports the other whether or not there might not be a wealth of other anecdotes other considerations that are just left out of this conversation or left out of this news report right that would really challenge the relationship between thesis and anecdote so we do this in economics we do this in politics people come onto youtube and they tell you that bitcoin is a great way to get rich quick or they tell you that bitcoin is going to transform the world of finance and economics as we know it they tell you that bitcoin is going to replace government-controlled currency and the banking system entirely these things you know they they put out this thesis for an audience that already wants to believe and then they'll give a bunch of anecdotes and many of those anecdotes may be true but they don't actually support the thesis i would have a pretty easy time convincing you in the audience that richard nixon was a terrible person that richard nixon was a terrible president of states or let's just say richard nixon made a series of decisions that really ruined life on planet earth for the next 50 years after his time enough something like that some kind of thesis that richard nixon was bad and evil i i could write a book i've done enough research i can write a book about richard nixon all right easily and once i've established that thesis for one thing the only people who are going to watch my youtube video or the only people going to listen to me i may just be talking to my friends or my family or about this they're people who probably already sympathize with they're people who are already interested oh oh here's a youtube video about how richard nixon was a terrible person oh here's a youtube video that's going to tell me why richard nixon was the worst president in the united states just the fact that they've chosen to click on that video parallel to someone who chooses to click on a get rich quick video about bitcoin or any other fad idea in free market economics at the moment right the fact that you've chosen to click on the video means that you are very unlikely to scrutinize the relationship between the anecdote and the thesis and the relationship between the anecdote and myself yourself as the member of the listening partner like what does this mean to me what's the relationship between me and the anecdote and me and the thesis the kind of triangular analysis i'm inviting you to imagine here right i can tell you about how richard nixon was an alcoholic i can tell you about richard nixon's prescription drug habits i can tell you about his bizarre religious views i can tell you i can quote verbatim some things he said about black people okay i can tell you some things about his sex life i can tell you some things they're gonna make richard nixon sound like a terrible person all right richard nixon was president united states in a very very difficult period economically and politically there is an argument to be made that if richard nixon were not president of the united states that what happened in american economics it could have been worse it could it could have been worse than the great depression right like it was a bad period for the economy but without the decision richard nixon maker someone else was in power who made even worse decisions it could work very difficult time politically right people tend to forget this now before richard nixon was president united states he had been vice president of the united states he was one of the best educated best prepared people for the role of president united states because he had this long history in elite level politics including global international diplomacy right now i'm i'm a very harsh critic of virtual news i think he made a lot of really bad decisions but what if it was an amateur in that driver's seat what if it was somebody more like jfk who had been president of states at the time where jfk himself who hadn't gotten shot or something like this have to think about some real different pillars you know what you know what really it could have been worse it could have been world war three it could have it could have been worse than world war ii i'm not joking i know enough about the politics all right and i can tell you some anecdotes that are actually positive things about richard nixon one that i like to mention again again actually his relationship to american indians to first nations people to the indigenous people of the united states and canada you show me another president who cared in the slightest down to and including you know george w bush donald trump you know bill clinton you know you show me another president lyft fair all right and we start to get a more complex nuanced view of what richard nixon didn't decide what the what the consequences were but the problem is it's so easy it's so easy because you want to believe in the thesis and the anecdotes each one of them may be true and may be interesting and may be rewarding for you to listen to right what is bitcoin all right and what is bitcoin as an investment and what is bitcoin as a currency all right bitcoin is not a currency bitcoin is the 21st century equivalent to collecting baseball cards if in the whole world there are only so many mickey mantle baseball cards don't google it he was a famous baseball player many years ago and basically all of the baseball cards with his name and his face are worth some money right not just his rookie card generally speaking mickey mantle baseball cards are valuable how many thousand of them are there in the world number may be unknown but i mean these were not scarce during his lifetime right millions of these little pieces of paper were printed same thing with valuable comic books today valuable video games people collecting video games in the 1980s it's like dude several million of these plastic cartridges were created in the 1980s were not scarce but today they're valuable today they're pers why because they're perceived as valuable because they collect okay there's a finite number of these baseball cards in circulation and they have value because people desire them people want to own them people want to hold on to them and keep them and many of those people one day we'll resell them onto the market right how reliable is it how certain are you that in the future people will still want to buy mickey mantle baseball cards now one thing is certain there won't be more of them made the total number of mickey mantle baseball cards even if there were 21 million mickey mantle baseball cards even if there were 21 million x-men number one comic books x-men number one is not as scarce as batman or superman number one by the way just just mentioning um you know if there were 21 million of them the reality is every year some of them are destroyed some of them are lost they're kept in someone's house and the house burns down they're kept in someone's house and the house is flooded right you know whatever it is mold you know some of them disappear right and also some of them people just take to their grave like people keep and they they never sell again they they disappear for other for other reasons right so there's one thing you can be certain about the supply is not going to expand the supply station but what you can't be certain about is in the future is anybody going to care about mickey mantle is anyone going to care about baseball cards in general or this specific culturally assigned value the desirability of a mickey mantle baseball in the future are people going to care about x-men more or less are these x-men comic books but point of view there are enough of these items that you actually could use x-men comic books or mickey mantle baseball cards someone you could use it as a currency international the same way you're using to a very limited extent the same way people are today using bitcoin right now people buy bitcoin people invest in bitcoin with the assumption that the value will go up and up and up the same way they are now buying into baseball cards pokemon cards video games the assumptions they'll go up and up there's a finite number of these things in the world in the case of bitcoin if you hadn't heard the magic number is approximately 21 million a finite number of bitcoins quote unquote minted and in reality every year there are fewer and fewer of them actually in circulation and the rate of attrition the number of these that just disappear they're not going to be the number of them that are stolen but the number of them that are lost right it's it's unknown probably with time we'll start to get statistics as to what percentage of them are really circulating and what percentage of in this way disappeared there have been a number of headline grabbing newspaper stories of people who lost millions and millions of dollars because the so-called keys to access their bitcoin were on a hard drive and the hard drive is destroyed the hard drive is lost the password to that hard drive is forgotten now to give you a very plausible scenario what if your father bought some bitcoin for you your father's an elderly person and one day he's gonna pass on the bitcoin for you and then he has a heart attack you know you could be it's on a hard drive nobody knows the password nobody's alive who knows the password the bitcoin will in effect cease to exist they'll cease to miss your question so every year if we're starting from 21 million the same way that the number of collectible comic books like a superman or x-men comic or the number of mickey mantle baseballs the way that's getting fewer and fewer right in some ways in some ways you can say the value of any particular bitcoin you have it's reliable in as much as the desirability remains and the scarcity right it's fixed but they're actually going to become more scarce with time right so that's that's the value of bitcoin as a collectible item right neither truly as a currency nor as an investment now it's an unreliable collectible item because you can't even have the sense of security that you have a comic book or a baseball playing card in a safe in your house that it's that that it is located somewhere that's safe again your house could light on fire and burn down you could put it away in a bank vault but the bank is robbed as possible right it's very unlikely but with something physically real like that you can feel certain you've stored it somewhere people do this with paintings they own valuable paintings and they're kept in a warehouse and they pay a lot of money and it's a secure warehouse where they feel certain it can't get stolen and so on and so forth it can't get damaged by the water sprinklers turning on you know even if there isn't a fire the sprinklers turn on a ruin you're ruining your painting so and so forth right but with something physical bro there's some level certain if you look into the reality of what theft means for the world of bitcoin and digital currency how these things are lost sometimes just lost but sometimes how they're stolen right it's not safe it's not reliable and its value will only continue to rise or even continue to remain stable in as much as it continues to be perceived as desirable if people lose interest in x-men if people lose interest in baseball players like mickey mantle the value of these collectible items will evaporate because they have absolutely no utility value it's hard to see that right now because of the cultural currency that bitcoin has in the imagination but bitcoin could become another joke that people just laugh about 10 or 20 years from now oh yeah right remember bitcoin remember when we're fast cultural fads come and go this could cease to be perceived to be something valuable to hold on to right now the other sense in which this is just not an investment is very simple very important to keep in mind okay saudi aramco gas corporation gazprom in russia okay if you give these companies one million dollars you got one million dollars to exist they will take your one million dollars and use it to produce something they're going to pump oil out of the ground they're going to refine it they're going to put it in a pipeline they're going to send it to people's houses it's going to get burned they're going to send it to car factories that burn the oil to manufacture cars they make a product that has a knock-on effect of making other products it's part of productivity in our society okay if you buy baseball cards if you buy x-men comic books or you buy superman comic books or you buy bitcoin you are buying something that produces absolutely nothing now is something a product a productive investment is something productive you can answer this question very simply by posing the question negatively what is the productivity of a bridge right now you may be investing in a bridge building company you might be investing in the actual bridge itself depending on okay this is not as obvious as a company that pumps gasoline out of the ground and burns it right but you can say okay if there is no bridge if we demolish the bridge like subtract the bridge or if we never built the bridge what would happen well people would have to spend money instead having a boat go back and forth there'd be several companies doing fair right well what really is the productivity of this munitions company that makes missiles and bombs and bullets for the american army well if that company goes bankrupt if we delete that company company the us army is gonna have to buy bombs from somewhere else they're gonna have to find another way to make the bombs and missiles they need right so if you think about it negatively this way what is the function in the market what is the type of productivity what's its stage in the cycle of production that has to be replaced if you delete it whether it's a bridge or a bond manufacturing company okay if you delete all of the mickey mantle baseball cards from planet earth if there is if there is a fire in a warehouse and every single if there's somebody has a magical wish from a genie and the genie flies around the world and burns every single mickey mantle baseball card on earth there is nothing to be replaced there is no equivalent to burning down a bridge and then needing to have a boat having a ferry company run a boat back and forth there is no function to be replaced there if there is a magical genie that flies around the world and destroys all the bitcoin which is not that improbable technologically right there bitcoin can be discredited bitcoin can be hacked right there there are things you could have a scandal there have already been several scandals that discredited bitcoin temporarily though not permanently right with theft at the uh trading company in japan it was first family and so on uh mount gox it was called you know okay if all of the bitcoin in the world disappears what function is lost that will need to be replaced who would step up and say oh well now we have to invent something new to replace the function bitcoin play the mark the answer is there's absolutely nothing okay bitcoin does not have use value it doesn't have true productivity it is not like investing in a company that makes something and then makes a profit it is like speculating on the buying and selling of baseball cards you're buying a baseball card or you're buying a comic book and making the bet that a few months from now or a few years from now it is going to appreciate in value it's not a scam it's not a fraud fundamentally it is just silly and what you see now are headlines about all the people who have gotten rich off of bitcoin there are no headlines for the people who have lost money doing bitcoin there are headlines every time a mickey mantle rookie card goes on sale and is worth millions of dollars it does it's covered in the newspapers once in a while superman call him like a batman comic an x-men oh wow a million dollars 10 million dollars at this auction right and there were no news stories about the millions of people who wasted money or lost money trafficking in something that is fundamentally unproductive and intrinsically worthless