It's not often that billionaire investor Warren Buffett gets called out for being clueless.
But that's essentially what venture capitalist Marc Andreessen did this week at a virtual currency conference when he said, in reference to Warren Buffet's advice that investors stay away from Bitcoin, that "The historical track record of old white men crapping on new technology they don't understand is at, I think, 100%." Andreessen was responding to an appearance on CNBC where Buffett opined:
"Stay away. Bitcoin is a mirage. It's a method of transmitting money. It's a very effective way of transmitting money, and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view."
And yesterday Business Insider's Henry Blodget entered the fray, defending Buffett's skepticism of Bitcoin, saying it wasn't based on ignorance of the technology as Andreessen asserts, but a healthy skepticism of all new technologies. To back up his argument, Blodget quoted at length from a Buffett-penned article, which appeared in Fortune in 1999. The article was written during the height of dotcom mania, as Buffett explained why he avoided investing in the flurry of new technologies that were then hitting the market. Wrote Buffett:
"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage."
In other words, it's not that Buffett is ignorant about technology. It's just that he understands that it's impossible to know which specific investments will benefit from a technology's widespread adoption, even if you are prescient enough to know what technologies will revolutionize the world and how they will do so. Buffett chooses the examples of the car and aviation industries. Many people saw the revolutionary potential of these inventions, but such clairvoyance would be worthless to an investor if he chose the wrong car company. The same goes for aviation -- which has notoriously been a difficult industry to profit from, despite its revolutionary effect on society.