Wasn't expecting another one so soon but I was introducing crypto to an elderly relative and they brought up Charlie Munger's recent comments about Bitcoin and crypto as a reason why they didn't want to invest in crypto.
Not even a tiny portion...and why? Because Charlie Munger said so. What exactly did Charlie say? He called the development of Bitcoin 'disgusting and contrary to the interest of civilization'. Wow... there's a lot to unpack here.
The argument
- Charlie Munger is a good investor
- Charlie Munger thinks that Bitcoin is a bad investment
1>2> Bitcoin is a bad investment
Appeal to authority
The fallacy in my relative's argument is that of an appeal to authority. Basically, if the opinion of an authority figure or star/celebrity is the primary means of supporting an argument, then it is considered a fallacy.
There are exceptions to this, particularly if both sides agree on the reliability of the authority. This is why we have 'expert witnesses' providing their testimony in courts.
Is Charlie An Expert Investor?
Look, there's no doubt that Charlie Munger's one of the greatest investors out there with a track record that spans many decades and most likely one that will last till the day he dies. Sure, there are others with higher rates of return but not all last the course like Bill Hwang and Archegos.
But here's the thing, Charlie and Berkshire Hathaway famously said they don't invest in tech because 'they don't understand it'. He's good when it comes to investing in banks, oil companies, insurance companies, but tech? That's outside of his 'circle of competence'.
Ultimately, there are two major styles of investing that was highlighted in the big fight between Andreesen and Buffett:
- Investing like the world stays the same
- Investing like the world is changing
Charlie Munger is clearly in the former camp while those investing in Bitcoin are in the latter. His opinions about crypto aren't really well-informed and shouldn't form the basis of one's argument about crypto.