Something For Nothing

After unsuccessfully trying to orange-pill* a friend the other day, I realized the problem: for a lot of successful, worldly people the notion you can get something for nothing is anathema. It reeks of a scam, and no matter how persuasive or trustworthy their interlocutor, they tend to close their minds to it.

*To “orange-pill” means to get someone to buy — or at least see the value proposition of — bitcoin.

Put differently, smart people understand risk and reward are inseparable. If someone is telling you this is the opportunity of a lifetime, it probably isn’t. To the extent it has the upside purported, its risk of ruin is no doubt commensurate.

But that is only the case when there is information symmetry. If I tell you the stock market is going to the moon next year, you know there are smart people on the other side of that bet, or else it would be at the moon already. And because they have access to the same information I do, any large way-out-of-the-money call option on the S&P500 is at grave risk of not cashing in. Hence you would be wise to ignore my advice.

But what about when one party to the trade has information the other lacks? For example, Nancy Pelosi has a net worth north of $100 million on her comparatively meager congressional salary, due in large part to trading on insider information. She has been such an uncannily successful trader there’s a Twitter account with nearly 500K followers tracking her (and her colleagues’) investments. Surely in the case of her trades, the risk was not commensurate with the rewards.

Another obvious example from history was the Dutch buying the island of Manhattan from the natives for a bunch of tools and beads. The risk and reward to the Dutch were not remotely commensurate due to information asymmetry.

All the time, people cultivate expertise in pricing antiques, collectibles and other items that give them a significant advantage over most market participants and sever the strict relationship between risk and reward that exists in more information-symmetrical environments.

But what all three of those scenarios have in common is the information providing the advantage is essentially a secret. The natives presumably didn’t know how common and easily replaced the tools and trinkets for which they traded Manhattan were. The public doesn’t have access to the information on which Congress is trading. And the layperson lacks the in-depth, niche knowledge of the expert art or antiques dealer.

But the Bitcoin-for-dollars trade happens to be asymmetrical, despite the information being wholly public and hidden in plain sight. The asymmetry comes from one party being sufficiently naive and curious and the other too savvy and close-minded. As a result, many who got into Bitcoin earliest were financial outsiders, novices, nerds and cypherpunks rather than Wall-Street professionals who are accustomed to getting the jump.

The media, gatekept and controlled by the same factions who run the banking system, have only exacerbated this asymmetry, spreading unfounded fear, uncertainty and doubt about bitcoin specifically (It boils the oceans! It’s backed by nothing!) and layperson curiosity generally (“trust the experts” “don’t ‘do your own research’”, “disinformation!”) As a result, not only are the professional insiders out, but also those who rely on their expertise to assess investment opportunities, which is why many of the savviest and smartest people are ironically the most difficult to convince.

. . .

Maybe this is what’s meant by “The meek shall inherit the earth,” if we use curious and open-minded to stand in for “meek.” In this way grasping bitcoin is not unlike spiritual awakening — it’s not necessarily the smartest or most experienced who come to understand it, but the earnest, the curious, the person who doesn’t presume he already knows.