Charlie Munger: In Defence & Memory of the Almost-Centenarian Crypto Critic
It's a sad day for the finance world, which mourns the loss of a true investment great: Charlie Munger. At the ripe age of 99, Munger reportedly died peacefully at a California hospital, just one month shy of his 100th birthday.
Second only to his partner in crime, Warren Buffet, he amassed personal wealth of a net worth of about $2.7 billion, which is about the same size as Ethereum Classic's market cap and even bigger than BUSD's.
Although the investment guru earned immeasurable respect among the traditional investment world, Munger gained notoriety among the Web3 community for his unapologetic, unfiltered and often brash outspoken views on crypto.
To commemorate the finance hero, Blockhead is paying tribute to the investment legend by respectfully reviewing his crypto quotes, for better or worse.
Crypto Crappo
At the annual shareholders meeting of the Daily Journal Corporation in February this year, Munger likened crypto to crap.
"Sometimes I call it crypto crappo, sometimes I call it crypto sh-t. It’s just ridiculous that anybody would buy this stuff,” the late great profoundly said. “I’m not proud of my country for allowing this crap,”
A cryptocurrency is “worthless. It’s no good. It’s crazy. It does nothing but harm and it’s antisocial," he added.
Investment in Nothing
Last year, Munger shrugged off crypto as "an investment in nothing," adding, "I regard it as almost insane to buy this stuff or to trade in it."
Describing the "crypto craze" as a "mass folly," Munger also took a shot at crypto investors. “I think anybody that sells this stuff is either delusional or evil," he said. "I won’t touch the crypto. I’m not interested in undermining the national currencies of the world.”
“Never touch it. Never buy it. Let it pass by," he advised. "Shares in real cash-generating companies are a much better investment. Stocks have a real interest in real businesses. Crypto is an investment in nothing, and the guy who’s trying to sell you an investment in nothing says, ‘I have a special kind of nothing that’s difficult to make more of’.
“I don’t want to buy a piece of nothing, even if somebody tells me they can’t make more of it. I regard it as almost insane to buy this stuff or to trade in it. I just avoid it as if it were an open sewer, full of malicious organisms. I just totally avoid and recommended everybody else follow my example.”
He was 98 at the time, so perhaps it was just his youth talking.
Good for Kidnappers
Speaking to CNBC’s Becky Quick in December 2022, Munger said highlighted the dark side of crypto. “This is a very, very bad thing. The country did not need a currency that was good for kidnappers,” Munger said.
“There are people who think they’ve got to be on every deal that’s hot. I think that’s totally crazy. They don’t care whether it’s child prostitution or Bitcoin.”
“You are seeing a lot of delusion. Partly fraud and partly delusion. That’s a bad combination,” Munger said in response to the FTX crash.
“Good ideas, carried to wretched excess, become bad ideas,” Munger said. “Nobody’s gonna say I got some s*** that I want to sell you. They say – it’s blockchain!”
In 2021, Munger also said, "I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out of your extra billions of billions of dollars to somebody who just invented a new financial product out of thin air."
Rat Poison
This one dates back over a decade but is proving to be timeless. In 2013, Munger equated Bitcoin to rat poison, simply stating "I think it's rat poison." At the time, Bitcoin was worth $150. Five years later when Bitcoin hit $9,000, he coldly responded, "So it's more expensive rat poison."
Other similes Munger used to describe cryptocurrencies include "trading turds," "an open sewer full of malicious organisms," and "a venereal disease."
Munger Might Have Been Right
Not wishing to speak ill of the dead, now would be a good time to evaluate whether there was any truth to Munger's scepticism. Rooted in Munger's crypto "thesis" was his grave concern for the industry's absence of regulation. Calling on the US to ban crypto might have been extreme but Munger repeatedly expressed concern for America to tighten regulation.
“It’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity,” Munger said. “Obviously the US should now enact a new federal law that prevents this from happening.”
Munger was not alone in his fear of crypto. His concerns were widely shared in the TradFi space. As recently as December 2022, chief executive of HSBC, Noel Quinn said the bank is "not getting into the crypto world, crypto trading, crypto exchanges."
“I do worry about the sustainability of the valuations of crypto and I have done for a while. I’m not going to predict where it will go in the future," Quinn stated.
Fast forward a few months and HSBC is launching crypto ETF support, making it the first bank in Hong Kong to do so.
Let us also not forget how BlackRock CEO Larry Fink was the poster child for crypto naysayers. He likened Bitcoin to "money laundering" and dismissed it as an "index of money laundering."
Now with BlackRock filing for Bitcoin ETFs, Fink has drastically changed his tune. “I think the rally today is about a flight to quality,” Fink said in October 2023, putting crypto in the same category as Treasuries and gold. (Fink has previously stated that he cannot use "bitcoin" because of the ongoing ETF filing, and uses "crypto" to mean the same.)
He added that the rally was "an example of the pent-up interest in crypto.” “We are hearing from clients around the world about the need for crypto,” Fink added.
Fink's flip-flop on crypto isn't just a personal epiphany. It's a reflection of the broader shift in the financial world. The bigwigs are realizing that they can't ignore the crypto wave any longer.
With the fall of the likes of Do Kwon, SBF, and now CZ, it's clear that the lack of regulation in crypto was its Achilles heel. But as both TradFi and Web3 warmly welcome Bitcoin ETFs into the frame, a new wave of regulations and expectations will be ushered in. Sure, the SEC has struggled to implement efficient regulation but the industry is making its own strides to clear house and tidy up.
Unlike Fink and HSBC, Munger never joined the dark side. But perhaps if Munger made it to triple figures, he might have reconsidered appreciating crypto a bit more as regulation slowly falls into place. After all, Buffett's best performer was crypto-friendly bank Nubank, which has earned him over a 93% return this year.