CURRENCIES': Bitcoin, the Gambler's Fallacy, and Navigating the Millennial Malaise
The best investment philosophy I’ve ever encountered was posted in a closed Facebook group full of deranged investment bois furiously attempting to collectively process the fallout from one of Bitcoin’s infamous “market corrections.” These threads, much like the currency they exist to discuss, live short lives packed full of action and insane parabolic swings.
The armchair experts get to comment what their mother’s second cousin Jeb told them right next to the advice of seasoned business professionals, and the posts encompass the full range of human emotion, from those gloating in the fall of the false god of cryptocurrency to those stubbornly refusing to acknowledge the hundreds of billions in lost value as anything other than a new opportunity to buy in and ride the coaster on the way back up. Without fail someone will interject the Dutch tulip mania of 1637, failing both to realize that it is not a pop quiz and that most other members of a closed investment shop-talk group might be aware of the most common example of a speculative bubble in existence.
That particular day Bitcoin was in the midst of falling from ten thousand five hundred dollars to under nine thousand in a matter of four hours, a drop of around fifteen percent. If you want to understand the Bitcoin experience, just know that there were many hardened crypto vets (affectionately known as HODLs for the courage they show in Holding On for Dear Life) trying to calm the panic of the peasantry with stories of the much more catastrophic Bitcoin falls of the past.
The inspirational quote in question was posted by a paunchy, balding young man whose profile picture informed me that he is self-conscious about his looks, probably likes to hang out at sports bars, and is definitely insensitive to the plight of those offended by the Cleveland Indian’s Chief Wahoo logo: “I don’t know where crypto is going. Just don’t lose all your money.”
This sage advice reminded me of the opportunity I once had to receive several free Bitcoins. It was 2011, a time when three and a half million people still got their internet from AOL disks in the mail, and I was slogging unsteadily through my sophomore year at Cornell University. My roommate at the time always insisted on pushing the latest technological innovations on everyone within reach. We’re talking about a kid who used to compensate for the lack of bass on campus by lugging his entire desktop rig out to the fifth floor balcony and blasting Major Lazer into the stratosphere.
A lovable man-boy who entered university fluent in two programming languages and would code entire tower defense games for fun. Whereas I had come to the Ivy League because that is supposed to be the easy route to purpose, direction, and attaining the Good Life, my friend had arrived as a fully operational programming juggernaut, in need of just a brief knowledge fueling and university system stamp of approval before rocketing off to massive and inevitable success.
It shouldn’t come as a surprise that this guy was one of the first in the world mining Bitcoin. That’s right, the Bitcoin mining that means Bitcoin is currently consuming the same amount of energy as Denmark? He was doing it when you could snag whole Bitcoins with a desktop computer. He preached the Gospel of the blockchain with a reverence and awe reminiscent of a wide-eyed 19th-century faith healer just returned from the revival campground. My heart believed what he was preaching, but when he offered to give me five coins for free it was my pride and fragile ego, still raw from the gaping mental wound left by both my recent severing of the religious organ and growing disillusionment with the university system as a whole, that sabotaged my efforts. I wanted them, but I turned him down. That’s the funny thing about depression.
If I hadn’t been immersed in the tunnel-vision of depression, I would have a net worth infinitely higher than I have now, as, like many Americans in the prime of their life, I am saddled with a heavy burden of student loan debt. Whose fault is that? I could blame my mother and my upbringing and the shortcomings I discovered in that value system for the choices that left me not only without Bitcoin but stuck with all that debt I had created. In return I was halfway to achieving a degree that, at its best, allows me freedom and, at worst, is totally useless.
It would be perfectly natural for me to have folded to the insane twin pressures of bitterness and self-loathing that grow within anyone who feels like a failure. Thankfully, I am not of my mother’s generation. I was raised at the height of the nineties self-esteem movement, and like most youthful American dreamers coming of age in the Obama era I truly believed that I, like the nation I loved, would eventually overcome my issues and discover within myself the capacity to change the world. Her generation sought to twist themselves to fit reality just as painfully as mine fights to reshape reality to fit what we see in ourselves.
About seven years later I finally bought myself some Bitcoin, an amount of time that meant that, when I did buy, it was hard not to worry that I was taking a huge gamble. My mother didn’t raise me to gamble. My mother didn’t raise me to place my hopes for the future on the back of a poorly conceived, ill-timed, get-rich-quick scheme. My mother raised me to believe in the transcendent and enduring value of hard work. This strong and hearty Midwestern transplant—raised as your typical hard- drinking rough and tumble apathetic Catholic—fled Wisconsin for the balmy Southern California coast in the late ‘80s, leaving behind a fiancé, a handful of college credits, and her parent’s broken marriage. It wasn’t long after that when on a warm Sunday morning, hungover and resentful after a long weekend in Mexico, her friend introduced her to the man who was going to save her life.
You may have heard of this man. Goes by the name of Jesus Christ. I never actually met him, although I spent fifteen futile years trying, mostly because my Mom could never shut up about him. Every Sunday she would spend two hours herding her four children (five, if you count my father) into our converted Chevy delivery van to drive us to his house. I never saw him there, either, but there were always lots of people like my mom, which made me feel like all this was completely normal, and that there was something flawed in me that meant I couldn’t perceive what they all saw and felt so strongly.
As it turns out, Jesus is quite the popular guy among people like my mother who reach a point where they feel like they have ruined their lives as a result of their foolish decisions. Within a few years she settled down with a nice Jewish boy (who had also found Christ a remarkably convenient and effective solution in his own quest to let go of his issues with his parents/self) and threw her entire being into a ruthless, lifelong quest to live up to the model of a perfect woman and mother which we find so vividly inscribed in the Good Book.
Things were going well until the day that I came home from my first day of pre-K and told my brother that I was going to smash his face in. My mother promptly pulled me out of the system and spent the next ten years protecting me from the sin and evil of the outside world in the hope that I could then not only maintain my purity and innocence, but help to spread the Gospel of Christ throughout the world, for which purpose God had endowed me with great talent, she assured me.
Now, if you know anything about the evangelical community, you’ll be familiar with the fact that homeschool mothers are put on a nice lofty pedestal above the rest of the mothers. The expectation and hope of these powerful, strong young women (believe me, homeschooling requires a certain toughness and strength of the will) is that their little boy or girl will grow up to be Tim Tebow.
Tebow might only be remembered by our culture at large as a thoroughly mediocre sports player, but among homeschoolers he is one of the biggest success stories of all time. Nothing warms a religious mother’s heart like a boy who not only honors the Lord with every touchdown and homerun but also simultaneously settles down with a nice Christian girl to start a family. Though even dishonorably supplied grandchildren are welcome into the fold—pragmatism is not a totally foreign concept even to the most faithful science-denying evangelical. It was pragmatic thinking that led them to vote for Donald Trump.
A good investor hedges against the inevitability of failure by spreading his bets out between dozens of good investments, all of which they are confident in to varying degrees, a process known as diversification. When a mother invests all her resources, knowledge and skill in the raising of her children, her own sense of well-being and personal worth become irrevocably entangled in their fate. This invariably creates a relationship filled with a lot of pressure, which doesn’t necessarily have to be a bad thing for the child. Pressure creates diamonds. But not all carbon is created equal.
This constant pressure to succeed is one of the fundamental root causes of my mother’s belief in the saving grace of hard work. According to the version of reality to which my mother and people like her subscribe, it is only hard work that allows you to make something of yourself, only hard work that will leave you satisfied with the future that you have built and the steps that have brought you there. Laziness isn’t just a bother. Laziness is sin. And if one overarching foundational principle of life was pounded into my skull over the decades I spent going to church, praying, and reading the Bible it was that sin results in only two things: failure and depression.
When I fail to exercise self-control, that is directly attributable to my rejection of the saving grace and everlasting peace offered in the loving arms of Christ. I’ve never seen my mother look sadder than when I told her that I had never felt the presence of Christ in my life. Well, sorry mom, I’m an apostate, and even worse, I’ve replaced Christ with an unrighteous combo of Bitcoin and Bernie Sanders.
Bernie Sanders is the man who finally compelled me to get off my ass and buy Bitcoin. Who can forget the emergence of that prophet on the national stage, the wild-haired preacher come out of the wilderness to give voice to the concerns and fears of the new common man, who for the first time in American history doesn’t pretend to be a Christian? He painted a bleak picture of current reality, but his vision of the future was pure and harmonious and worth fighting for. He said he was here to give a voice to the forgotten and oppressed, which strangely enough is almost exactly the words Donald Trump used. He differed from Donald Trump not in their words but in the image they hold in their minds both of what America was in the past and what America can be. Bernie was the oxymoronic representative of America’s youthful
diversity next to Donald Trump’s moneyed Wall Street white male brigade. His stump speeches to make America “Feel the Bern” were just as fantastical with their tales of evil corporate overlords as Donald Trump’s majestic glittering industrial America. Both movements relied less on facts (pragmatism squarely the domain of Hillary) and more on the unadulterated passion of their followers and cult-like worship of the Dear Leader. To put it bluntly, they were both movements with strongly religious characteristics, both movements which require faith of their adherents. In fact, Sanders himself is one of the few members of the left who will admit that he does not think that Donald Trump is lacking in basic intelligence, not surprising for a fellow man of the cloth, a man who was preaching to the same broken-hearted Americans.
Much like the candidacies of these dueling populists, Bitcoin’s value resides in the hearts and minds of the people who support it. Among supporters this creates a fanatical level of belief, but perhaps uniquely in the history of mankind it also creates the opportunity for a massive redistribution of wealth. If crypto is worth whatever people believe, then all people have to do is believe, and its value is quite literally limitless as long as the population continues to grow. However, due to physics, there is a perfectly opposite counterargument, which says that since Bitcoin’s value is tied to nothing tangible, that it’s true value is zero.
Of course, given any amount of thought it becomes clear that no currency in the modern era is tied to anything more tangible than a sense of national identity. Our sense of national identity may seem to be crumbling as the fissures between left and right America deepen, but there is something better propping up our currency. Lots and lots and lots of soldiers, guns, and bombs. More advanced weaponry and warfare strategy than (as far as we know) has ever been seen anywhere in the entire history of the universe. I don’t know about you, but when I compare the quantity of global hope necessary for a highly valued Bitcoin, I feel much better than when I consider what protects the dollar’s value. It feels like we might just have accidentally stumbled upon a better way.
It’s four thirty-five in the morning. I’m in the snow and it’s fifteen degrees out but my cigarette and phone screen help me retain just enough motor control to hit Buy. This is the moment of a crucial philosophical decision. I’m up big. Over thirty percent big. My first bet was right. Now what a rational person does in that moment is sell and walk away merrily, pocketing the profit. If there is one principle I actually understand about the investing world it is that an intelligent investor emotionally distances himself from his choices in favor of the most logical action. That’s what I should have done. But I don’t do that, because this isn’t the stock market, this is Bitcoin.
Bitcoin is very different. Bitcoin is magic. The rules don’t apply to Bitcoin. Bitcoin is going to change the world for the better. And while all the Warren Buffets and Richard Bransons and Jamie Dimons of the finance world badmouth it in public, I have no doubt these almost incomprehensible wealthy men are too smart not to have a small sum invested into cryptocurrency. Nothing that would severely impact their net worth, mind you, these are titans of industry, men who didn’t get to where they are by gambling it all on risky bets. No, they have only a tiny little sliver invested as a hedge, maybe a few hundred thousand dollars apiece. It’s all relative.
There are by some estimates as many as 23 million Bitcoin owners in the world and the vast majority of them are in my position, which is to say, broke and playing games with money they don’t have, driven by the fantasy engendered by the lifestyles of the very men warning about the impending collapse of the infamous Bitcoin bubble. As the old way in to the system— college followed by a lucrative career, with a couple of good old American risks taken on a few promising American companies thrown in for good measure—fails us, maybe it’s not surprising that so many young (mostly) men are gambling on crypto. My own net worth is already negative, and although credit cards have allowed me to throw about two thousand more down the well in the past week, they’ve graciously granted me an equal stake of hope. But I know better than to leave everything to hope, and my financial predicament makes the fact that I’m currently winning all the more glaring.
I should sell. I should, but I can’t pull the trigger. The pressure of my dream girl’s dreams is getting to me. I’m not feeling very rational or calm and dueling voices are active within me, whispering harsh realities and untruths in my ear. The experts are skeptical. But what if the experts are wrong? Come on, you know that this thing is going to crash. The picture couldn’t look any more like the Speculative Bubble graph in Google image search. You don’t want to be one of those losers left holding the bag when the bubble gets bigger than reality can bear. But what if it’s not a bubble? If I sell and it keeps rocketing upwards I will never forgive myself. What if I can make a real profit? People would have to respect that. They wouldn’t have a choice.
In the end, the most vivid warning to me was not any thought I had, or any vestige of my upbringing or element of good judgment. It was witnessing myself mindlessly pressing the filter of my cigarette in an attempt to unlock my phone and exchange hundreds of debt dollars for a bright shiny one percent piece of digital magic money. (In retrospect, all of my biggest humiliation milestones in life have had an audience of one.) When I finally managed to log in I saw that Bitcoin had dipped four percent in the last hour to finally fall below the 9,999k buy threshold I had targeted. I hesitate just a few seconds too long before pressing buy: “Error - Purchase cannot be completed due to change in price.” Let’s try that again. Again I hesitate, this time because I’m losing ground. Bitcoin is already back above 10k. So that should have been it, right?
The logical action is clear. The highly paid and trained money managers are skeptical. The loony ultra-partisan Facebook loners are skeptical. I’m skeptical. But despite all that I buy anyway because my heart knows that this could be the move that delivers that delicious money jolt that frees you from a lifetime of financial worry, granting you the power to actually do what you want in life. What is logic in the face of such a vivid, appealing fantasy? All it takes is one final leap of mental gymnastics. This is a long- term investment. This is not gambling because this is a long-term investment. This is your grandfather checking how his blue chip holdings have done every morning, not your father blowing four thousand dollars he didn’t have on the horses in two days. This is a long-term investment. The deed is done. The seed is planted, and only time will tell if it will bear fruit or suck me down in the dust with it.
Written by James Frichner