Bitcoin and the Return of Long-term Time Preference
Thoughts on Bitcoin and how it allows us to leapfrog our fiat world.
If you know me well, then you’ve probably figured out that I’m a Bitcoiner. I’m using this word because I embrace the ethos and ideas behind it, not because I own the asset.
Like many Bitcoiners, my journey started by reading about Austrian economics and libertarian ideas. It doesn’t take long to realize the world we live in has been corrupted by centralized powers and our medium of exchange (money) at the heart of our economy is fundamentally broken. The downstream consequences are many: inflation, zero interest rates, bailouts, debt bubbles, etc. (For an excellent history of this I recommend Saifedean Ammous’s book “The Bitcoin Standard”).
Hard Money
Bitcoin as an innovation is both genius and simple. By utilizing computation (proof-of-work) a ledger is kept in a network without needing any trusted parties. The result is a digital form of money that cannot be corrupted.
The creation of Bitcoin has ushered in the hardest form of money since gold. The supply of Bitcoin is more finite than that of Gold. And historically, the hardest form of money always wins, it’s just a matter of time.
Ironically, the technology behind Bitcoin (blockchain) has created an explosion of copycats and monkey coins. It took myself two speculative bubbles (the last one in 2017) to realize that only Bitcoin is the real deal.
There have been many attempts at centralizing or co-opting Bitcoin, but every “attack” on Bitcoin has made it stronger. In this sense Bitcoin truly is an anti-fragile system.
Long-Term Time Preference
The corruption of money has contributed to a lot of ailments in our modern society. To name just a few:
Wage stagnation and difficulty in attaining home ownership. People living paycheck to paycheck.
Popularity of gambling such as meme coins, sports betting and day trading.
Inflation at all aspects of life: construction quality, food, service, etc.
The inability for governments to stop spending. (Nothing stops this train).
The overarching theme here is that since August 15, 1971 (the end of the gold standard) our world has increasingly been dominated by short-term time preference - spend now, worry later. When we say “Bitcoin fixes this” we mean that Bitcoin has the potential to reorient people and the world back towards long-term time preference. The ability to save money and reap rewards by investing on a long timeframe.
The idea of long-term time preference and seeking endurance in investing is not new, but it is rare and has been largely forgotten in a world obsessed with growth and “price action”. Once a year I re-watch Grant Williams’ 2018 interview with legendary value investor Anthony Deden. It takes place in Grindelwald, a small town where I used to go on ski vacations. The interview takes you on a fascinating tour of forgotten values: stewardship, humility, endurance, permanence and thinking from first principles.
Navigating the Storm
The world is at an inflection point. Geopolitical alliances are shifting, governments are practically insolvent, civil unrest is in the air and the war drums are beating. Yet at the same time we have powerful new technologies and a hyperconnected lifestyle that make us question what it means to be human.
I suspect that long-term time preference and the values behind it are going to be instrumental in navigating the next decade. These timeless values don’t just apply to investing. They apply to family, relationships, personal well-being, raising kids, communities, work, lifestyle, etc.
How has long-term time preference, or the lack thereof, affected your life?
(to be continued)