It’s crazy that in hindsight, Bitcoin was one of those super-rare, asymmetric-upside options that should have been a no-brainer to buy, esp. at the <$1k levels.
That’s why most tech HNIs, at least anecdotally from my network, ended up being early adopter buyers of Crypto. They had the right channels of early intel that informed them of why it was worth having at least some exposure to it.
Funnily enough, having these proprietary sources of info didn’t matter much given the long price runway that especially Bitcoin has shown. The dealer showed all the cards, multiple times over several years. Hell, you could have just read this 2011 post from Fred Wilson, trusted the OG who has gotten it right multiple times in tech, and bought maybe just a few thousand dollars of BTC. Do you know what price you would have entered at when this post was written? $2.75!!
And yet, few people bought any Bitcoin over these years, fewer ended up HODLing and even fewer ended up doubling down. Why do you think that is? I believe it’s because people don’t have a prior mental model for how to behave when coming across an asymmetric option.
Conviction comes from having a mesh of these mental models already in place, especially those that are drawn from experiential learning and therefore, become much more deep-rooted than those imbibed from mere academic study.
I don’t blame folks for not knowing what to do with Bitcoin. It is one of those once-in-a-generation movements and therefore, by definition, entire cohorts would have lived their lives without seeing anything similar to it before.
This is where experience becomes important. Ironically, even though Bitcoin is referred to as a Gen Z asset class, the people who have made real money off it are the grey-haired (or no-haired!) Michael Saylor, Mike Novogratz, and Bill Miller. Interestingly, both Saylor and Novogratz are 59 years old while Miller is almost 74!
This is because, over 4 decades of working and investing, these gentlemen have seen enough human behavior in the real world, as well as put skin in the game by taking multiple explosive-payoff bets one after the other, to recognize how the system works and how to leverage these waves to their benefit.
50% of my networth is in Bitcoin.
Bill Miller (born 1950)
In this fascinating interview, Bill Miller talks about how Roosevelt confiscated everyone’s physical gold in the US in 1933 and that’s the mental model that Bill uses to view Bitcoin as digital gold that can’t be confiscated due to the Internet (see my post ‘Bitcoin ETFs and The Challenges of Digital Gold‘). He then nullifies the argument used by the likes of Warren Buffett that Bitcoin has no intrinsic value, by saying that what intrinsic value does a rare baseball card or a Picasso painting have? They still sell for millions as their supply is scarce and people ascribe value to them.
I am actually a Bitcoin observer. I am observing its trajectory as a new technology and comparing it to things like the printing press, or the steam engine, or the railroads, or the automobile, or electricity. And it seems to be following a well-understood path to adoption of any new technology.
Bill Miller
The benefit of age and living through multiple cycles is that one can fit the arc of a new tech wave within a very long historical view of how things have evolved in the past and leading up to this point, as Bill does above. It’s how Millennials like myself will likely use the lived experiences of GFC’08, ZIRP, the pandemic, and the peak of 2021 as mental models for decisions going forward.
Therefore, let’s bookmark this post as a note to self: the next time we encounter an asymmetric option, strongly consider taking a swing at it (after due consideration, of course!).
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