LETTER #18: HOW TO MOVE VALUE ACROSS TIME?
Everything else is an ineffective way to move value across time.... except Bitcoin.
Is it possible to save 100% of your wealth for the next 100 years?
If it is, then below are the conventional ways of storing wealth:
Cash, Real Estate, and Gold.
Let’s evaluate them one by one.
CASH:
Over the past 100 years, hundreds of currencies have gone to zero.
Had you chosen to keep your wealth in currencies like the Venezuelan bolivar, German mark, Argentinian pesos, Zimbabwean dollar, you’d have received 0% of your savings. Because these are some of the many currencies that have collapsed during the past 100 years.
What about the US dollar?
Even the strongest currency in the world has lost 99% of its purchasing power since the 1920s. That means even the dollar, at best, will give you less than 1% of your initial investment in terms of purchasing power.
REAL ESTATE
You can do what most of our parents did. Buy a house.
The problem is you have to buy it at a location that will be the most demanded location for the next 100 years, How do you figure that out?
Other problems are you have to pay property taxes, incur maintenance costs, find tenants, make mortgage payments on time, etc.
If somehow, you don’t pay your property taxes or don’t make the mortgage payment, the gov. will take it away from you.
In addition, housebuilders are heavily incentivized to build more houses. As they build more houses, the value of your house keeps getting diluted.
GOLD
Gold always gets seized.
There are high chances that the government will confiscate it as soon as they feel that gold is posing risk to their monopoly over money OR you will most probably lose it during times of war.
Churchill did it. Roosevelt did it. Germany did it. Japan did it. And so on.
That means you have to find a place on Earth where nobody can steal your gold. SPOILER ALERT: You can’t.
Aside from this, the total supply of gold increases by roughly 2% every year. This means you’ll lose half of your wealth in gold in 35 years and 85-90% of it in 100 years.
That’s only if its total supply increases by 2% every year. With the advancement in technology, its supply can be increased as much as we want. Because gold doesn’t have absolute scarcity. Instead, it has narrative scarcity.
It’s clear that all the conventional strategies to store wealth won’t work for the next 100 years.
We need something that has a fixed supply unlike currencies, can’t be seized like gold, is portable unlike Real Estate, Or we need Bitcoin.
Bitcoin is the invention of digital and absolute scarcity.
We never had digital scarcity until Bitcoin came along. You can copy a music file a million times and send it to a million people. But you can’t copy Bitcoin in order to send it to somebody else.
We never had absolute scarcity until Bitcoin. Everything else - gold, currencies, trains, planes, houses, cars, bikes, etc. - can be manufactured/printed infinitely if we devote enough time and energy to doing so. In the case of Bitcoin, the harder you try, the difficult it gets to mine it.
There will never be more than 21 million bitcoins.
If you own 1 today, you own it out of 21M forever let alone the next 100 years. You can’t say the similar for other assets or currencies or commodities.
Never even try to undermine the fact that for the first time, we have discovered something whose supply stays the same even when its demand explodes by a factor of, say, 1000.
Now that we know Bitcoin is the answer, what should we do?
Simply buy Bitcoin, keep it in your custody, never sell, and enjoy your life along the way.