Bitcoin Will Not Submit to Black Swans

This opinion editorial is by Bernardo Filipe. Filipe is a philosopher, thinker, and author of “The Straight Science.” “Earnings-free assets without any residual value are problematic. This means that if we expect that bitcoin’s value will drop in value at any time in the future, when miners become extinct, technology becomes obsolete, or if future generations acquire other such ‘assets,’ then bitcoin’s value must be zero right now. If bitcoin’s widespread adoption is successful, it will automate most of our financial structures with the help of power plants, energy, and computers. It will create a parallel system to the current banking system and would protect it from crashes (see 2007-2008 financial crises). It will take years for the new system to mature fully. Taleb claims that this mission is worth nothing because he lacks vision. Is it a good time for bitcoin investments? It is, I believe. It is true. Philosophers believe that mankind will eventually evolve into a cybernetic organism. Any technology that facilitates this process will be dominant. Wealth managers, however, recognize that a thermodynamically closed alternative financial system can be beneficial to their activities. There are many opinions out there, but they are mostly irrelevant. For example, there’s Nassim Taleb who writes 300-page books on trivial ideas that can be summarized with one paragraph. He speaks of “black swans” as if he didn’t know that a scientific model was merely a sketch and not the complete gospel. He wrote 300 pages about it — that you cannot accurately predict every event with 100% certainty, and that disasters and accidents happen. These events were not called disasters or accidents, but he called them “black Swans”. Italicizing every word in every paragraph, if any sentence, is a tedious and exasperating way to express his frustration. Also, gratuitously quoting or name-dropping intellectuals without any reason. Why did people pay attention again to him? Because he made a fortune trading options. Nassim Taleb believes that bitcoin is worth zero and that bitcoin’s March 2020 price drop “proves” that it cannot be used to hedge against risks (as though all risks were equal and diversification wasn’t the best general hedge against all risk). This shows that he doesn’t understand his own book. My dear Taleb, you cannot prove anything from one data point. The March 2020 lockdown was a rare event, a “black Swan”, to use your terminology. If you had been paying attention, you would have seen that the entire stock market collapsed as well. You might also have realized that bitcoin is not worth anything at this stage. Taleb claims that bitcoin collapsed faster than the stock market, so he believes that “bitcoin has no value”. We are moving now from childish terminology towards childish logic. But what is his mistake? He has not realized that bitcoin is still in its development and is constantly evolving. He is making the same mistake as watching a healthy cat kill an infant lion and then concluding that cats are stronger than animals. He seems to believe that bitcoin’s future behavior would mirror its current behavior. But, how can that be possible when we are so young? It is so early that there is no regulation for bitcoin and many people are still trying define what it is. It is a mystery to most people what bitcoin is. Taleb isn’t considering the possibility that bitcoin’s greatest utility will depend on widespread adoption in his analysis. Taleb is analyzing bitcoin at this moment in time, myopically, without considering the impact of future favorable circumstances in his analysis. It’s as if bitcoin were a finished product or process. It isn’t, because bitcoin is designed cyber-symbiotically with mankind. Right now, the amount of humanity to which it has bound itself isn’t significant enough in terms of investment power and raw wealth. Bitcoin seems to be functioning like a Ponzi scheme to Nassim Taleb. However, I believe it will look more Ponzi-like if it does not mature. It will not function like a Ponzi scheme and it will be a very useful asset. I could also argue that most of the life on Earth is a Ponzi, as the Sun will eventually expand and destroy the planet. This will result in the destruction of all its real estate. The real estate bag-holders may then claim that real estate investment was always an Ponzi, especially after seeing every bitcoin holder move their bitcoins out of the planet. What is the Ponzi in this scenario? We see that Taleb’s above quote is meaningless. In a sufficiently advanced future everything is fated for zero, but that doesn’t necessarily mean that there is no value to anything. We are now in bitcoin’s “development to maturity” phase. This is the last and most prolonged phase that will reduce volatility and bring to the table its value capabilities. Can this phase not be completed? Sure. Nature sometimes fails to produce mature lifeforms. I, like anyone else, can imagine what a lifeform could look and behave if there are favorable conditions that allow for its successful development. This is a basic idea from biology. The same principles of biological and evolutionary thought can be applied to the technological realm. Tools are created, they mutate, clash with one another, and eventually evolve or become obsolete in ways that resemble the fate of lifeforms within nature. In the technological realm, however it is humanity that determines the fate of the tool’s fate, while in nature it is nature. This “development into maturity” phase is what I mean in bitcoin. It is the phase when all worthwhile wealth managers agree that Bitcoin’s rules are great and decide that they will play by them. They will allocate a small amount of their capital initially, and then gradually but steadily add more as they feel it is necessary. This phase will bring about the cybernetic symbiosis of bitcoin and humanity. Bitcoin is currently only useful for wealth transfers. Bitcoin could theoretically, or in theory, under favorable circumstances, be more useful than it is currently. We envision a radical optimization of the entire finance structure through automation. Dear Taleb, it’s on this future, higher utility that are we betting — and this is why volatility or fragility, or your “convex curvature responses to stressors” are not important to us. I know that you wrote a book on randomness and tried to develop a theory about how to use randomness to our advantage. This theoretical effort is futile because theory is meant to predict the future. Randomness, however, is something that cannot be predicted. Yes, we want to minimize the negative effects of randomness (=chances,=accidents and =disasters). This is called risk management. The problem is that it’s impossible to predict the outcome of an unpredicted accident (see the pleonasm?). actually happens nobody knows how fragile our process-activity-asset stands relative to said accident–otherwise the event wouldn’t be by definition an accident and we’d have been able to factor it in our theories and models! You not only fail to see this triviality but you also give lectures about it, almost as if randomness could possibly be intelligible. As if the book’s message were something more profound than obvious. He invoked the spirit and philosophy, so here it is now biting him in the back. It’s a classic case of a wizard’s spell against the caster. Taleb, I hope you enjoy it! Bitcoin is a great idea, according to visionaries, wealth managers, and philosophers. The rest of humanity doesn’t seem to care about this stuff. There are also thinkers like Nassim Talab who don’t think straight. The potential gains outweigh the laughably low chance of bitcoin going to zero. This is Bernardo Filipe’s guest post. These opinions are not necessarily those of Bitcoin Magazine or BTC Inc.

 

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