What does Buffett, who opposes Bitcoin, think of Web 3.0?

At this year's "Spring Festival Gala of the Investment World" Berkshire Hathaway annual shareholders meeting, the stock god Buffett once again explained why he still does not invest in Bitcoin.

"I don't know whether the price of Bitcoin will rise or fall in the next year, five years, or ten years. But one thing I am sure of is that it will not produce any value." Buffett believes that Bitcoin is not a productive asset and will not produce anything tangible. "It has a kind of magic, and people have given magic to many things."

Buffett also said categorically: "If you tell me you own all the bitcoins in the world and you're willing to sell them to me for $25, I won't buy them."

Today, Bitcoin, blockchain, NFT, and the extended metaverse and Web3.0 concepts are all the rage. Is Buffett’s view too conservative? Is it for the benefit of “classical” investors? Or has he already predicted the bubble and crisis in between?

Investment tycoons strongly opposed

This isn’t the first time Buffett has spoken out against Bitcoin.

Previously, Buffett publicly stated that Bitcoin "may be rat poison squared". The reason is that when Bitcoin was more than $100, Buffett called Bitcoin "rat poison"; and when Bitcoin rose to more than $9,000, someone asked Buffett what he thought of Bitcoin now, and Buffett's response was "may be rat poison squared."

"Bitcoin cannot create value" and "it is meaningless" are the views that Buffett insists on. In November 2017, Buffett published an article in Forbes magazine saying that Bitcoin is out of regulation and control, and neither the Federal Reserve nor other central banks can monitor it. "I don't believe in this at all. I think it will collapse sooner or later."

In January 2018, Buffett said in an interview, "It is almost certain that digital currency will end in tragedy, and I will never hold any digital currency myself. But I don't know what form the tragedy will take."

Moreover, Buffett believes that Bitcoin attracts "swindlers": "If you go to the street and sell something to cheat, generally no one will buy it, but if you enter Wall Street, a lot of money will come in."

As Buffett's good partner for decades, Munger and Buffett have similar views, and he is also a staunch critic of Bitcoin.

Munger believes that in life we ​​should try to avoid doing things that are stupid, evil, or bad when compared to others. Bitcoin achieves all three of these points at the same time: its value may be zero so it is stupid, it undermines the Federal Reserve system so it is evil, and China bans Bitcoin so it makes the United States look stupid.

In fact, Munger has also criticized Bitcoin many times in public, and his wording is even sharper.

In 2017, Munger classified Bitcoin as a "plague" and called investing in Bitcoin a "stupid idea" and a "crazy bubble." He believed that Bitcoin lured investors into the illusion of getting rich overnight, and that "people should stay away from the Bitcoin trap as if they were avoiding the plague."

In 2018, Munger said in an interview that Bitcoin reminded him of Oscar Wilde's remarks about fox hunting, "the unspeakable pursue the inedible." Fox hunting originated in England in the 16th century. At first, farmers summoned local hunters to ride horses and follow foxhounds to hunt foxes in order to control the number of foxes. Later, it gradually evolved into a pastime for the rich, and the foxes would not be eaten.

"Worthless artificial gold", Munger also criticized those "Bitcoin vested interests", "Humans have the ability to create more Bitcoins, they tell you the rules, but they can't follow them themselves."

Musk starts building Web 3.0?

Unlike Warren Buffett and Charlie Munger, Musk is extremely enthusiastic about Bitcoin, as well as virtual currencies and new concepts derived from Bitcoin and blockchain.

In February 2021, Tesla said it had purchased $1.5 billion of bitcoin and intended to accept it as payment, sparking a surge in the company's stock and currency.

Interestingly, after Tesla announced the purchase of $1.5 billion worth of Bitcoin, when Munger was asked whether he would follow Tesla's example and include Bitcoin in his balance sheet, he firmly stated: "I never buy gold, and I never buy Bitcoin. The Daily Journal will not follow Tesla's footsteps and enter the Bitcoin market." He also advised others to follow his example.

When asked which is crazier, "Bitcoin reaching $50,000" or "Tesla's fully diluted enterprise value reaching $1 trillion," Munger quoted Samuel Johnson, the editor of "The Collected Works of Shakespeare," "I can't tell the difference between a flea and a louse," and replied: I don't know which is worse.

Musk has been an avid supporter of Bitcoin and Dogecoin, and his comments have influenced the rise and fall of the prices of these popular crypto tokens.

Because of his strong promotion of Dogecoin, which caused the price of the coin to soar, Musk was dubbed the "Father of Dogecoin" by the currency circle players. In May 2021, Musk ridiculed Dogecoin as "a scam" on "Saturday Night Live", causing Dogecoin to plummet by 40% in a short period of time.

But later, Musk said that SpaceX will launch the "DOGE-1 lunar mission" in 2022 and will accept Dogecoin as the exclusive payment method for launching lunar satellites. Musk also used the favorite phrase of cryptocurrency users at the end of his tweet, "To the mooooonnn!!", which is a pun.

On April 25 this year, Twitter chose to accept Elon Musk's acquisition agreement. After three months, Musk's "conspiracy" finally succeeded. After the news was confirmed, the price of Dogecoin soared by about 27%.

In addition to virtual currencies, Musk has also begun to pay attention to NFT. Recently, Musk briefly changed his Twitter avatar to a picture of "Bored Ape", which once again sparked heated discussions in the market.

After acquiring Twitter, Musk also began to make changes.

He excitedly said on social media: I hope even the worst critics can stay on Twitter, because this is the meaning of freedom of speech. Musk also said in a statement: "Twitter is a digital town square where people discuss issues that are critical to the future of mankind."

This is in line with the concept of Web 3.0. In the concept of Web 3.0, every user in the future will be a creator who participates in operating the Internet environment, rather than a tool for the platform to generate traffic and earn advertising fees. Web 3.0 has important features that are conducive to the "elimination of authority" of the Internet. There is even a saying that Web 3.0 will be a comprehensive victory of the public against the giants.

This makes people wonder whether Twitter, which is about to be privatized, will eventually become a decentralized social product of Web3.0?

Jack Dorsey, the founder of Twitter who actively embraces Web 3.0, also expressed his dissatisfaction with Twitter's current business model that relies on Wall Street and advertisers: "Musk took Twitter back from Wall Street, which is the first step in the right direction for Twitter. In principle, I think Twitter should not be owned or operated by anyone. Twitter should be a public product at the protocol level, not a company."

He also supports Musk's changes: "Musk is the only solution I trust. Musk will create a platform with maximum trust and broad inclusion. This goal is right and that's why I chose him."

However, Musk has previously criticized Web 3.0 many times, saying, "I don't think Web3 is real - it's more like marketing nonsense than reality." But he did not completely deny the concept. He added, "But we are very curious about what the world will look like in 10, 20, or 30 years."

One user commented that "the best way to predict the future is to start building it," to which Musk replied "yes."

Who is right and who is wrong?

Although Buffett strongly opposes Bitcoin, he also admitted that the technology behind Bitcoin, blockchain, is "important", but he emphasized that the success of this technology does not depend on encrypted digital currencies.

Blockchain is also an essential infrastructure for Web 3.0 applications. In 2014, Gavin Wood, co-founder of Ethereum, first clearly proposed the concept of Web 3.0, proposing a new Internet operation model: information will be published and kept by users themselves, untraceable and never leaked, and any user behavior will not require any intermediary agency to help transmit.

The reason why Buffett is not optimistic about Bitcoin has a lot to do with his inherent investment philosophy. He prefers "productive assets", that is, the assets themselves not only have long-term appreciation potential, but can also continuously produce other asset value.

Following the classic "moat" theory, Buffett has many successful cases, such as Coca-Cola, General Dynamics, and Berkshire Hathaway. Buffett prefers large companies with controlling rights, "these companies' franchises are difficult to replicate and have great or permanent sustainable operating capabilities."

From this theory, the "decentralized" Web3.0 does not seem to be in line with Buffett's investment philosophy.

However, Buffett did not ignore new technologies. Buffett also invested in IBM, which is one of the few technology companies he has invested heavily in. However, in 2017, after IBM's revenue performance had declined for five consecutive years, Buffett publicly admitted that he was wrong. Buffett is a major shareholder of Apple, but he regarded Apple as a "consumer product company" before investing, and he also followed the "moat" theory.

Buffett and Marx clashed in 2018 because of their completely different views on the Internet industry.

Musk directly criticized the "moat" theory as "frustrating" in a conference call: "If your only way to fight intruders is the moat, you won't last long. What's important is the pace of innovation, which is the fundamental factor that determines competitiveness."

In this regard, Buffett admitted that the acceleration of technological progress has made many moats fragile and unable to resist "invasion", but he still insisted that the concept of moat is very important and that some companies' moats are stronger.

This debate also had an interesting ending. Buffett said: "Musk may disrupt certain areas, but he will never beat us in the candy industry." Because Buffett owns a popular candy brand "See's Candies", Musk responded on Twitter that he would build a moat "and fill it with candy."

Nowadays, the concept of Web3.0 has attracted more and more attention, and blockchain has also developed a new direction as the underlying technology and economic reward. But will Web3.0 grow into the "moat" that Buffett likes, will it become the future built by Musk, or will it become the next "crazy bubble"? It is still difficult to tell who is right and who is wrong.