So, I was watching the Pomp podcast, who had on his show Jim Cramer from CNBC’s Mad Money. The episode is roughly an hour long, but it’s a great episode to watch as Jim seeks guidance and education on the basics of Bitcoin, and how to go about getting exposure to it.
As the show went on, he seemed to be getting warmer to the idea of purchasing some bitcoin, and even seemed OK with allocating 1% of his portfolio into bitcoin. Now we don’t really know if he did it or not, but we know he’s still thinking about it.
He also had a very interesting analogy, and throughout the show was really concerned about not leaving something for his children that didn’t make sense.
I think this is legacy planning at it’s best.
Bringing a knife to a gunfight
He’s a traditional Gold bug. And in his “hedging inflation” handbook, he has 3 items in there. Gold, Masterpieces (art) and Mansions (real estate). He has exposure to all 3 now, but he told Pomp that he thinks crypto is becoming a very attractive 4th addition.
One of his concerns was to leave something that was viable, and that made sense for his children. And bitcoin, rather than gold, seemed to make more sense, from an innovation, technological and even practical point of view.
Physical gold was bulky to lug around. Burying it in the ground just makes it more likely that the gardener will be the one to benefit from it. Bitcoin on the other hand, is easy, portable and has many other use cases.
What happened next was what spurred this post.
He said that in wanting to pass gold to his children, he pondered if he was in fact just passing on a typewriter to them. A typewriter had immense value to generations prior, and probably has some sentimental value to some collectors as memorabilia, but it has long passed any practical value.
The more I thought about it, the more I feel how apt the analogy was. The typewriter is bulky and hard to lug around (vs a laptop or a mobile), the output which is information on a piece of paper can be passed around, but because it is also physical, the delivery of it is severely hampered by you having to physically pass it around, as opposed to bitcoin or an electronic piece of document that can be sent anywhere across the world instantly.
At one point in the conversation, he even said “I need to do this for my kids”.
The History of Money
We like to think of money as this stable thing that never changes. The one constant in our lives that we need to chase and hoard as much of as possible. Sure, the more money the better. Afterall, it is my belief that the lack of money is the root of most evil.
But money has changed more than we care to admit or research about. Let’s look at the core of what money is. Money, at its core, is a medium of exchange. Long before the invention of money as we know it, things were bartered.
A medium of exchange. I have 1 cow. I would like to have 10 of your chickens for my 1 cow. If you’re agreeable, we have a deal. Anything of perceived value could be used as a medium of exchange. Beads, shells, grains, barley, livestock.
The ancient empires of Egypt, Rome and China then started having tokens as evidence of a claim to goods in warehouses. Workers started getting paid with tokens, which can be used to claim for goods.
Common and precious metals then entered the picture. Standardised coinage, then banknotes became the next evolution.
Even as we talk about digital money. In effect, we are all currently users of digital money. We pay each other via PayPal and Square. Our networth is represented by digits in a bank app that we trust is there, simply because the digits reflect that on our screens.
However, we have to trust that the bank will give us what they promise. And, for some strange reason, the money that we have, even if we didn’t use them, will decrease in value, year over year, year after year, in what’s known as inflation.
Why? Why do we have to live in an inflationary world where our hard earned and even harder saved money diminishes ever so perceptibly in an extremely predictable manner?
Today, fiat currency is backed by the respective government of the country, and while it seemed stable, we all know what happens when governments are toppled and corruption runs rampant in the political realm.
Bitcoin, the new entrant to come in and try to unseat fiat as the world denominated currency, is by design deflationary, with a finite supply at 21 million, is trying to solve for a few things:
- Inflation: It is deflationary by nature because of its scarcity property, and therefore, if demand for bitcoin is high, the value should proportionately reflect that.
- Seizure: It is not owned nor controlled by any government body. In fact, it cannot be shut down by any government. Your bitcoin belongs only to you. The government can freeze your bank assets, but it cannot freeze your bitcoin.
- Cross border transactions and fees: Currently, cross border transactions involving foreign currencies incur a rather high cost. Bitcoin makes it easier, and with lower transaction fees.
Exactly how high will bitcoin go is anyone’s guess. But the awareness is only becoming stronger, and I strongly believe in the upside of bitcoin over the next decade, as it has been the last decade.
If you compare the value of bitcoin to the marketcap of other assets in the world, you can see that we’re still early, and the runway is still long in terms of valuing bitcoin in the longer term.
Pomp Jim Cramer podcast
I think this episode is definitely worth a watch.
He also had a tip for buying beach houses. Don’t get a beach house. Buy a house 5 houses in. Because when your kids inherit the house, it will be a beach house. (climate change joke here, except it’s not a joke)
Things change over time. And the rate of change goes up exponentially as the rate of technology evolves. My dad doesn’t know how to google for anything, yet Google counts as one of the most valuable companies in the world.
It doesn’t matter what we like or don’t like. What’s going to be valuable, will be what our next generation likes. Will they prefer gold or bitcoin?
I’m not putting my money on gold, and I most definitely hope I won’t be giving my kids any typewriters.
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