Warren Buffett： Why You Should NEVER Invest In Bitcoin

In terms of cryptocurrencies, generally, I can say almost with certainty that they will come to a bad ending. It's ingenious, and blockchain is important, but Bitcoin has no unique value at all. It doesn't produce anything. You can stare at it all day and no little Bitcoins come out or anything like that. It's a delusion, basically. If I could buy long-term puts, if I could buy a five-year put on every one of the cryptocurrencies, I'd be glad to do it, but I would never short it. Warren Buffett is the greatest investor of all time. Today, we will hear his opinion on Bitcoin. This video is a must-watch all the way through, regardless of your attitude to cryptocurrencies. As Charlie Munger says, if you disagree with somebody, you want to be able to state their case better than they can, and at that point, you've earned the right to disagree with them. If you end up liking this video, consider subscribing to Free Investing. It's free, and you can always change your mind. Enjoy the video. He is an expressive sort, isn't he? Maybe when he gets a little older, he'll mature. I just want to ask you about that because it sparks so much controversy, particularly on Twitter and some of the places where you might expect people who are trading in cryptocurrency to be pretty loud about what they heard. What is it about Bitcoin that gets you guys so fired up? Well, when you buy a farm, you look at the crop every year and what prices are, and you decide whether it was a satisfactory investment. I mean, you look to the asset itself and what it produces for you. When we buy a business, we look at what the business earns and decide how we feel about it in terms of what we paid. But we are buying something that at the end of the period, we not only have what we bought in the first place, but we have something that the asset produced. And when you buy non-productive assets, all you're counting on is whether the next person is going to pay you more because they're even more excited about another next person coming along. But the asset itself is creating nothing. One of the interesting things, for example, is gold. If you go back to the time of Christ and you look at how many hours of labor you had to give up in order to buy an ounce of gold, and you take it forward to now, you'll find the compound, right? Maybe a tenth or two tenths of 1%. And then you have to insure it during that time and make sure somebody doesn't steal it from you and everything. But it doesn't produce anything. And productive assets, you can pay too much for a productive asset. But I bought a farm in the 1980s. And every year, look at how much it produced, the way of soybeans and corn. And at the end of that period, I've still got the farm. And I've gotten some significant income off of it, apartment house, operating business. But if you and I buy various cryptocurrencies, they're not going to be a bunch of rabbits sitting there in front of us. They're just going to sit there. And I got to hope next time you get more excited after I bought it from you, and then maybe I'll get more excited and buy it from you. And actually, we could sit in the house by ourselves, and we could keep running up the price. But at the end of the time, there's one Bitcoin sitting there, and now we've got to find somebody else. And they come to an end. I mean, that's a greater fool theory. That's what you're saying. Well, yeah, it's buying something because you expect the pool of people who want to buy it because they want to sell it to somebody else will grow. And it's wonderful because it does create a rising price, does create more buyers. And people think, I've got to get in on this. And it's better if they don't understand it. That's the other thing about if you don't understand it, you get much more excited than if you understand it. If you buy a bond and say she's going to pay you 4% a year, you're not going to get any pleasant surprises. She's going to pay you 4% a year. But you can have anything you want to imagine. If you just look at something and say, that's magic, you can do it with shark's teeth or seashells or anything. And they did it with tulips in the 17th century in Amsterdam. And they'll do it again. I mean, people, they like to speculate. They like to gamble. And if you can get something, you can have something half plausible going on. If you had bought gold in 1942 and you said, we might lose the war and we might have to run off to some other country and, you know, so let's put our assets in gold. You would have less than a penny for every dollar you got from owning stocks. Less than a penny. Now, if somebody calls that a store of value, I mean, I think they're delusionary. OK. Andrew has a question too. Andrew. Hey, Warren, related to this issue of Bitcoin, you saw that Goldman Sachs just last week announced they were going to create effectively a trading operation around cryptocurrencies and Bitcoin in particular. You've been an investor in Goldman. What do you think of their decision to do that? Well, they probably think that lots of people are going to get very excited about it. And maybe already are, but they think there's money to be made trading them. I don't think they're expressing an opinion on the ultimate value. I would be very surprised if the top partners of Goldman are selling their Goldman stock and putting it into Bitcoin. But I want to cover this subject now because my friend Charlie will come on at eight o'clock and he'll tell you what he will say. That's my whole entire point. I do want to ask Charlie about it because I think when he talked about the turds, he was referring to this. He said, if you're trading this, it's like watching other people trading turds and deciding you want to get a piece of that. Well, you're not going to get me to comment on that. Hopefully Charlie's not awake and not watching right now. Well, the truth is people do trade on very crazy things over time. Imagine people selling their homes to buy a tulip in Amsterdam. I could whisper something on this program. And kind of the more silly it was, the more it might react because there's no quantitative limits. If you buy a stock, you say, well, I'll buy it at 15 times earnings, but I won't buy it at 20 times earnings. But when you get into something that doesn't produce anything, there's no there's no checkpoints there. There's nothing to reference it to. It's just it's gone up. So it'll keep going. Well, those who know me well are just waving the red flag of the bull. Of course, I hate the Bitcoin success. And I don't welcome a currency that's so useful and kidnappers and extortionists and so forth. Nor do I like just shuffling out a few extra billions and billions and billions of dollars to somebody who just invented a new financial product out of thin air. I think I should say modestly that I think the whole damn development is disgusting and contrary to the interests of civilization. And I'll leave the criticism to others. I'm all right on that one. So what factors caused you to say that it's a bubble? Well, generally, nonproductive assets remain. If you bought gold at the time of Christ and you figure the compound rate on it, it may be a couple of tenths of one percent essentially is not going to deliver anything other than supposed scarcity because you can only mine so many. But so what? I mean, what does it produce itself? The check is a wonderful idea. Just imagine how the world would be without being able to write checks or have wire transfer of funds. But it doesn't make the check intrinsically itself worth a lot of money. And if you said you can't use something called check with a little piece of paper, you'd do something else to transfer money. I think that any time you buy a nonproductive asset, you are counting on somebody else later on to buy a nonproductive asset because they think they can sell it to somebody for more money. And it's been tried with tulips and it's been tried with various things over time. And it does come to a bad ending. I'm having you have a hard time. You can you can think of think of raw land. I mean, the Louisiana purchase was, say, $15 million for 800,000 or so square miles of land. In fact, you're sitting on land that came with the Louisiana purchase. And so what we pay, we paid 20 bucks a square mile and, you know, 640 acres in a square mile. And you're down to three cents or something. So that was a pretty good purchase of what was then a nonproductive property. But it depends. It's very hard. You can buy stamps. Bill Gross got, you know, collected a wonderful stamp collection and it sold for more money in the end. But it's dependent on somebody else wanting to buy, hoping they will sell it for more money and so on. And in the end, you make your money out of productive assets. If you buy a farm, you try to estimate what the crops, what amount per acre of soybeans or corn or whatever may be raised and how much you have to pay the farmer that farms it for you and what your taxes will be and various things. And you make a conclusion based on what the asset itself will produce over time. And that's an investment. When you buy something because you're hoping tomorrow morning you're going to wake up, you know, and the price will be higher, you know, you need more people coming and do it than are leaving. And you can get that and it will feed on itself for a while and sometimes for a long while and sometimes to extraordinary numbers. But in the end, but they come to bad endings and cryptocurrencies will come to bad endings. And along with the fact that there's nothing being produced in the way of value from the asset that you also have the problem that it draws in a lot of charlatans and that sort of thing who are trying to create various sorts of exchanges or whatever it may be. It, you know, it's something where people who are of less than stellar character see an opportunity to clip people who are trying to get rich because their neighbors are getting rich buying the stuff that neither one of them understands. It will come to a bad ending. Charlie? Well, I like cryptocurrencies a lot less than you do. And so to me, it's just dementia. And I think that people who are professional traders that go into trading cryptocurrencies, it's just disgusting. It's like somebody else's trading turds and you decide I can't be left out. To the extent that this brought, we're being webcaster on the world. I hope some of our stuff doesn't translate very well, actually. In terms of cryptocurrencies, generally, I can say almost with certainty that they will come to a bad ending. Now, when it happens or how or anything else, I don't know. But I know this, if I could buy long term puts, if I could buy a five year put on every one of the cryptocurrencies, I'd be glad to do it. But I would never short a dime's worth. Have you thought about trading the futures to take a negative position on Bitcoin? No. You would not do that? No. There's no reason. I get into enough trouble with things I think I know something about. Why in the world should I take a long or short position on something I don't know anything about? So, you know, we don't have to know what cocoa beans are going to do or any cryptocurrencies. We just have to focus on eight or 10 stocks that businesses basically that we think are decent businesses. But I do think that I think what's going on definitely will come to a bad ending. I mean, you've got virtually everybody. I have a class, I have 11 schools coming on Friday. The questions will be on Bitcoin and I won't know the answers. Although when we sat down, Warren, you did say, I should have announced that we were getting involved in Bitcoin this morning. Well, that is true. I mean, that would be much more interesting to the audience that we were going to issue a whole series of cryptocurrencies tomorrow. We aren't, believe me. And we don't own any. We're not short any. We'll never have a position in them. Lucas writes in. He said, did Justin Sun change your mind on cryptocurrencies? For anybody who doesn't know, Justin Sun bought the dinner or the lunch that you just had from the last Glide Foundation fundraiser. He is actively involved in Bitcoin. After that meeting, his PR people put out some notes saying that, you know, you kind of listened to cryptocurrency and maybe you're a little more in tune with the idea of Bitcoin now. Well, I would say this. When Justin and four friends came, they behaved perfectly and we had a good three and a half hour dinner and the whole thing was a very friendly exchange of ideas. But cryptocurrencies basically have no value and they don't produce anything. So you can look at your little ledger item for the next 20 years and it says you've got X of this cryptocurrency or that. It doesn't reproduce. It doesn't. It doesn't deliver. It can't mail you a check. It can't do anything. And what you hope is that somebody else comes along and pays you more money for it later on. But then that person's got the problem. But in terms of value, you know, zero. So it sounds like he did not change your position. No, but I didn't change his either. And I had a very pleasant dinner and those people were, they behaved more than well. And they gave four point six or Justin gave four point six million to Goliath and that will buy a lot of meals and provide a lot of beds for people in San Francisco. So I thank him. He gave you some Bitcoin. What's it feel like to be a Bitcoin? I don't have any Bitcoin. You don't? No. Okay. You don't own Bitcoin? No, I do not own one. I don't own any cryptocurrency. I never will. And you know, in the end, I may start a war on currency. You know, maybe I can create one and I'll say there's only gonna be 21 million of them and you can have a little ledger sheet from me and everything that says you have it. And you're gonna have it after I die. But you can't do anything with it except sell it to somebody else. And the interesting thing, of course, is that Bitcoin's been out there a long time and people talked about how it would be used and in various kinds of exchange. But none of our companies are doing business in Bitcoin or anything. Bitcoin has been used, I think, to move around a fair amount of money illegally. So maybe in countries where you have a hard time. So the logical move from the introduction of Bitcoin is to go short suitcases, because the money that was taken in suitcases from one country to another, suitcases will probably fall off in demand. I mean, so you can look at that as the economic contribution of Bitcoin to the society. I'll ask this very fleetingly. Has your position changed on Bitcoin? No. I mean, it's too bad. But Bitcoin, it's ingenious. And blockchain is important. But Bitcoin has no unique value at all. It doesn't produce anything. You can stare at it all day and no little bitcoins come out or anything like that. It's a delusion, basically. So we've gone from rat poison squared to a delusion. It's kind of an upgrade. I don't know. Who knows where we'll be next year. But I'm really sorry it happens, because people get their hopes up that something like that is going to change their lives. And it's a very ingenious thing to figure out how to have a limited supply and make it harder, more expensive to create them as you go along, and all that sort of thing. But it doesn't, the function, and this is explained to me by people a lot smarter than I am, but they say blockchain does not depend. And JP Morgan is talking about creating their own JPM, and it'll be worth a dollar. I mean, it's matched to the dollar to dollar, and I'm sympathetic to people that own it.