{"id":5796,"date":"2022-12-03T02:19:00","date_gmt":"2022-12-03T02:19:00","guid":{"rendered":"http:\/\/ci02b1d48db00026b1"},"modified":"2022-12-03T02:19:00","modified_gmt":"2022-12-03T02:19:00","slug":"bitcoin-will-not-submit-to-black-swans","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/culture\/bitcoin-will-not-submit-to-black-swans","title":{"rendered":"Bitcoin Will Not Submit To Black Swans"},"content":{"rendered":"
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This is an opinion editorial by Bernardo Filipe, a life-long thinker, philosopher and author of \u201cThe Straight Science.\u201d<\/em><\/p>\n

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\u201cEarnings-free assets with no residual value are problematic.<\/p>\n

The implication is that, owing to the absence of any explicit yield benefitting the holder of bitcoin, if<\/em> we expect that at any point in the future the value will be zero when miners are extinct, the technology becomes obsolete, or future generations get into other such \u2018assets\u2019 and bitcoin loses its appeal for them, then<\/em> the value must be zero<\/em> now.\u201d \u2014 Nassim Taleb<\/a><\/p>\n<\/blockquote>\n

If bitcoin\u2019s general adoption succeeds, it will be automating most of our financial structure with the aid of power plants, energy and computers. At the very least, it will create a system that is parallel to the current banking one and that would therefore be protected from the latter\u2019s crashes (see 2007-2008 <\/em>financial crisis<\/em><\/a>). Of course it is taking years for this new system to fully mature. Taleb says this mission is worth exactly zero because he lacks the vision.<\/em><\/p>\n

Is it a good time to invest in bitcoin? I believe it is. Besides proper philosophers, who are thinking in terms of centuries, not many can build such a belief, with the exception of the best wealth managers, who think in terms of decades.<\/p>\n

So philosophers, who historically never cared about wealth, and wealth managers, who naturally enough only care about wealth, are uniting here in an interesting turn of events. Philosophers see that the inevitable fate of mankind is to evolve into a cybernetic organism, and they see that any technology that facilitates this process is bound to come to dominate. Wealth managers, on the other hand, realize that an alternative financial system that is thermodynamically closed can be useful to their activities.<\/p>\n

That\u2019s all there is to say about it. But I can say more.<\/p>\n

Because there are indeed other opinions in the marketplace, which are however mostly inconsequential. There\u2019s, for example, the confused Nassim Taleb, who writes 300-page books about trivial ideas that can be summarized in a single paragraph. He talks about \u201cblack swans<\/a>” as if we didn\u2019t already know that a scientific model is merely a rough sketch and not the freaking gospel. He literally wrote 300 pages about this \u2014 that you can\u2019t accurately predict any event with 100% certainty and that accidents and disasters happen. Only instead of calling these events accidents or disasters, which is what they are, he called them \u201cblack swans.\u201d In an utterly exasperating prose riddled with italics<\/em>, moreover, literally italicizing<\/em> at least<\/em> a word in every single paragraph<\/em>, if not sentence<\/em>. And also gratuitously quoting and name-dropping intellectuals for absolutely no reason. So why did people pay attention to him again? Because he made a fortune trading options. Nassim Taleb believes bitcoin is worth exactly zero<\/a> and that bitcoin\u2019s price drop in March 2020 \u201cproves” that it can\u2019t be used to hedge against risk (as if all risks were equal, and as if diversification wasn\u2019t the best general hedge against risk to begin with), showing once and for all that he not understand his own book. You cannot \u201cprove\u201d anything from a single data point, my dear Taleb. The March 2020 lockdown was a freak event\u2060 \u2014 an exception \u2060\u2014 a \u201cblack swan,\u201d to adopt your terminology. If you had paid attention, you\u2019d have also seen that the entire market also collapsed, and you\u2019d have maybe realized that you cannot extrapolate anything worthwhile about bitcoin at this stage from this freak event. But Taleb says that bitcoin collapsed more than the stock market did \u2014 therefore, he thinks, \u201cbitcoin is worthless\u201d. We\u2019re moving now, then, from childish terminology to childish logic. <\/p>\n

But what exactly is his mistake here? The problem is that he has failed to realize that bitcoin is still in development, it is still growing and evolving. The mistake he\u2019s making is equivalent to watching a healthy cat kill a newborn lion, and then concluding from that freak observation that cats are stronger than lions. He seems to think that bitcoin\u2019s future behavior will mirror its current behavior, but how could that be the case when we are this early? So early in fact that no regulation exists for it and most people are still trying to define what exactly bitcoin is. Meaning, practically nobody has a clue about what bitcoin is. Taleb, then, is not considering in his analysis the idea that bitcoin\u2019s maximum utility hinges on a future widespread adoption. He\u2019s analyzing bitcoin at this point in time, myopically, with a total disregard for the effect of future favorable<\/em> conditions in his analysis, as if bitcoin today was already a finished product and process. But it isn\u2019t\u2060 \u2014 because bitcoin is designed to bind itself cyber-symbiotically to mankind, and right now the portion of mankind to which it has bound itself is not significant enough, in terms of raw wealth and investment power. <\/p>\n

To Nassim Taleb, bitcoin seems to function like a Ponzi scheme, but I say it will resemble a Ponzi only if it fails to develop into maturity. Otherwise, it will be nothing like a Ponzi and very much like an extremely awesome asset with great utility. I could also say that most life on planet Earth is a \u201cPonzi,\u201d because a few billion years down the line the Sun will expand and destroy the entire planet, destroying with it, for example, all the real estate contained in it. At that time, the real estate bag-holders might perhaps say that real estate investment was always a Ponzi to begin with, especially after they see every bitcoin holder safely move their bitcoin out of the planet. In this scenario, what exactly is the Ponzi? So we see that Taleb\u2019s quote above is meaningless: in a sufficiently advanced future, everything<\/em> is fated to go to zero, but of course that doesn\u2019t mean there\u2019s no value to anything. <\/p>\n

Right now we are, then, entering bitcoin\u2019s \u201cdevelopment into maturity\u201d phase (having already gone through ten years of its infancy) which is the final and protracted phase that will reduce price volatility and effectively bring to the table its store of value capabilities. Can this phase fail to be completed? Sure. In nature, lifeforms occasionally fail to develop into maturity. That doesn\u2019t stop me or any other person from trying to imagine what a particular lifeform can look and behave like if favorable conditions emerge that guarantee its prosperous development. This is, of course, a basic idea from biology. In the technological realm, however, the same principles from biological and evolutionary thought can be applied because tools are created, they grow, they mutate, they clash with each other, and eventually evolve or become obsolete in a manner that resembles that of lifeforms in nature; only in the technological realm it is mankind which dictates the fate of the tool, while in the biological realm, it is nature. The point is that this \u201cdevelopment into maturity\u201d phase that I\u2019m referring to is of course in the case of bitcoin the \u201cwidespread adoption of bitcoin\u201d phase: the phase in which all worthwhile wealth managers agree that bitcoin\u2019s rules are great and decide to play by them\u2060\u2014allocating a small portion of their capital to it, initially\u2060\u2014and gradually but steadily adding some more whenever they see fit. For it will be this phase that will put the cybernetic symbiosis between bitcoin and mankind in full swing. <\/p>\n

As of right now, bitcoin is useful for wealth transfers and that\u2019s about it. However, bitcoin can potentially, i.e., in theory, under favorable conditions, be much more useful than it currently is. For we are envisioning, after all, a radical optimization of the entire financial structure with the aid of automation. It\u2019s on this coming, higher utility that we are betting, dear Taleb \u2060\u2014 and this is why we couldn\u2019t care less now about volatility or fragility or your \u201cconvex curve responses to stressors<\/a>.\u201d I know you wrote an entire book about randomness, and even tried to create a theory on how to utilize randomness to our benefit. But at the end of the day this entire theoretical endeavor is pointless because the purpose of theory is to predict the future, while randomness is defined precisely as that which cannot be predicted. Sure, yes, of course we want to minimize the harmful effects of randomness (=chance,=accidents, =disasters). It\u2019s called risk management. But until the non-predictable accident (see the pleonasm?) actually happens nobody knows how fragile our process-activity-asset stands relative to said accident\u2060\u2014otherwise the event wouldn\u2019t be by definition an accident and we\u2019d have been able to factor it in our theories and models! But not only do you fail to see this triviality, you even give lectures about it, as if randomness could be in anyway intelligible, as if we hadn\u2019t already defined it<\/em> as unintelligible! And as if the book\u2019s message was something profound instead of obvious, as obvious as saying the sky is blue or that birds fly.<\/p>\n

If you think I am being too tough on Taleb, dear reader, I\u2019ll just say that he was asking to get such a reply when he started gratuitously quoting philosophers for no reason, hundreds of pages in a row. He invoked the spirit of philosophy\u2060\u2014so here it is now biting him back\u2060\u2014a proper case of a wizard\u2019s spell turning against the caster. Hope you like it, Taleb!<\/p>\n

So that\u2019s that. Philosophers, wealth managers and a few visionaries agree that bitcoin is awesome. Then, there\u2019s the rest of humanity who simply doesn\u2019t care about this stuff. Finally, there are thinkers like Nassim Taleb who aren\u2019t thinking straight. In short: the potential gains far over-shadow the, in my view, laughably low risk of bitcoin going to zero.<\/p>\n

This is a guest post by Bernardo Filipe. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Bitcoin\u2019s responses to black swans are irrelevant to its continued success as a protocol used around the world.<\/p>\n","protected":false},"author":2831,"featured_media":4087,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[33],"tags":[1803,1802,59],"class_list":{"0":"post-5796","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-culture","8":"tag-black-swan","9":"tag-nassim-taleb","10":"tag-opinion"},"author_data":{"id":2831,"name":"Bernardo Filipe","nicename":"bernardo-filipe","avatar_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/12\/2f09a715-3704-4ece-921e-c6b72dcbae17-96x96.jpg"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/individual-challenge-climb-peak-flag-mountain-top-photo.png","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/5796","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/2831"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=5796"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/5796\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/4087"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=5796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=5796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=5796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}