The talk around bitcoin, cryptocurrency and blockchain is getting silly.
This is because now that the mainstream business media has hold of the story, they’re desperately trying to fit it into past patterns. History may rhyme, but it never repeats.
The TV machine trots out so-called “experts,” employees of large companies and salesmen, who are just as clueless as you or I about what will happen. Instead, they trot out theories and talk analogies. It’s 1994 for blockchain, they say (maybe). They say some of the dot-com winners went on to great things — look at Amazon.com, Inc. (NASDAQ:AMZN) (name three more).
I was there. In 1999, I was an “e-commerce expert” with a six-figure paycheck. In 2002, I made precisely zero dollars. Same in 2003.
The truth is that almost every company we thought would be worth something in 1999 turned out to be worth nothing. It even took Amazon 10 years to get back to its 1999 price. If you were near retirement in 1999, you probably weren’t around to see it.
What about Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and Facebook, Inc. (NASDAQ:FB)? Google didn’t become public until 2004. Facebook didn’t exist in 1999. Apple Inc. (NASDAQ:AAPL)? The iPhone was still eight years away.
Forget first-mover advantage. Look for second-mover advantage — the guy who learns what the first mover is doing wrong and takes over from him (or her).
One of the more hilarious calls of the dot-com “experts” in the 1990s was to tell Yahoo! to stop focusing on mere “search” and become a “portal.” Buy GeoCities, they said. Buy Broadcast.com. Yahoo! did.
What we know, from history, is that first-mover advantage in the internet age wasn’t worth a thing. Even Bill Gates knew nothing. If you want to chuckle, read Gates’ 1995 “magnum opus,” The Road Ahead. He barely had a clue. And if Bill Gates didn’t have a clue in 1995, neither do you.
I’ll take your questions now.
Is bitcoin a bubble?
Are the other alt-coins bubbles?
Does that mean they’ll all be worth nothing in a year?
No, but most will.
Can I tell the difference, right now, between the winners and losers?
Not bloody likely.
What about ICOs?
You mean you want to buy something you can’t value, that’s completely unregulated, and that might be as phony as Bitconnect, which closed Jan. 17 after being accused (repeatedly) of running a Ponzi scheme? Have fun!
What about blockchain? Is blockchain like the internet in 1994? Is it going to create enormous value over the next 20 years?
Why, yes. It will also destroy millions of jobs, including high-salary jobs — especially for those in the business of making premature predictions.
How, then, do I get ready for blockchain?
The only stock I can recommend is Microsoft Corporation (NASDAQ:MSFT). The combination of blockchain and the cloud is the raw material from which a lot of great stuff is going to come. We just don’t know what it is yet.
If you want to go out on a limb, try some IBM (NYSE:IBM). It’s grabbing on to blockchain like a dying man grabs for a cancer cure. It also has cloud-related business. Maybe something will come of it.
Beyond that, understand what blockchain does, and in the future, look for companies that prove an ability to make markets with it.
Here is all you really need to know.
Blockchain automates trust.
It does this by encrypting each block of a database, organized as a general ledger. Buyers and sellers can be tied to transactions, bids and asks, without being identified until after the deal is done, if then.
All that paper you shuffled to get a car loan or a mortgage and all those forms you filled out at a doctor’s office or for the government? They’re just blocks in a chain. We can find them, we can refer to them, and we can make them legally enforceable so you never need to fill out a form again.
Let that help you get to sleep at night.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance, The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in MSFT and AMZN.