If Matt Levine Doesn't Agree with Warren Buffett, Then What Chance Does My Daughter Have?
It’s about time we establish consensus on what investing means
It was a late Saturday morning in January and I was typing away in my office. I heard my daughter shout out to her younger brother.
“I want to invest in crypto. Can you help me?”
My ears perked up. My son said something back, but I wasn’t not close enough to hear it. I left the room and asked my daughter what he said as my son came upstairs to see what was going on.
My daughter told me that he had said: “First of all, that’s not investing.”
I thought to myself, “Well done, son, you give me hope. One of my biggest goals in life is providing your generation the opportunity to realize what’s going on in finance, so they can make the right decisions for themselves and prosper.”
My daughter is very bright, but she does not have much interest in money matters. Acting is much more interesting to her. Apparently, her friend suggested to her that she might consider investing in crypto. She doesn’t know much about it, so she was looking for some help.
My son, on the other hand, likes finance. He sometimes gets up at 6:30 just so he can check the market. He saves up his allowance. He owns Tesla stock. He just sold his Berkshire and Starbucks stock for a profit. We discuss investment theses all the time. He comes to me with ideas for a stock purchase and I push him. Why this stock? What do you see? Is this a good price? I understand your expectations about this business but are you sure those expectations are not already priced in? I want to make sure he understands investing is a hard, long process. No, we don’t sit down and crank out discounted cash flow valuation models but I want him to start asking the right questions. He listens and refines his thesis, trying to convince me how the new tariffs might be good for a stock he is eyeing.
He dabbles with other financial instruments too. He and his good friends developed a liking to Monopoly so he wanted to explore real estate. I told him he is far from having the capital to own real estate but suggested that he look into fractional real estate investing. We found a platform that we both liked and he purchased a fraction of a house in New Mexico. There is a tenant in the house already, so he collects a check for $11 or so, every month. It’s not so much about the amount of money right now but more so about understanding the concept of cash flows.
He also owns some crypto. I’m not against him exploring and buying crypto so long as he continues to realize that is not investing. A casual reading of our work here at NFI may make you think we’re anti-crypto, but we’re not. In many ways, we’re actually pro crypto. If blockchain technology will make our lives easier, and cryptocurrencies native to that chain will help that system run smoothly, great.
We just don’t like it when people and organizations engage in false advertising by misrepresenting purchasing crypto as investing. If the crypto actually does something, the focus should be on its utility. If the focus is on making money, then it should be marketed as speculation. Either way, it’s not investing. This is the best outcome for crypto and arguably the only one that is consistent with President Trump’s Executive Order, which said:
It is therefore the policy of my Administration to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy.
Why, you might ask? Well, selling speculation as investing is:) irresponsible; and ii) is not good for growth because the speculative frenzy might crowd out the cryptos that actually do something. Calling a spade a spade, i.e. labeling crypto trading as speculation will provide the proper incentives to developers. Crypto trading, on the other hand, won’t go away but it will be done by the people who want to try and get rich and are willing to take the risks that come with those trades.
For many other people, however, who just want to preserve what they have and are ok with the concept of getting rich over time, crypto will stop being an alternative. They will continue to have the liberty to do whatever they want, but only after they are fully informed.
Who prevents that vision from becoming reality? On some days, it seems like most everyone other than just a handful of people. It breaks our hearts to see that the ‘most everyone’ group also seems to include one of our favorite finance writers: Matt Levine…
Levine loves finance. Naturally, crypto features heavily in his column, Money Stuff. Heck, the guy actually did a Bloomberg magazine issue that was solely dedicated to crypto, called The Crypto Story. He is unquestionably bright, is an avid reader, a non-stop thinker and he has a knack for turning complex concepts into entertaining pieces. Yet, we don’t feel he appreciates what investing really means.
Alarm bells should have gone off when the person (Gary Gensler) heading the agency whose mission is to protect investors (the SEC) fully disagreed with Warren Buffett, the most successful investor of modern times, on whether one can invest in crypto. Buffett, of course, was the fifth richest American in 2024 according to Forbes and sat at the top of the Finance and Investments category. Let’s be very clear about what happened here. Someone made his way into the Forbes 5 by investing, and his conclusion on Bitcoin was diametrically opposed to the agency whose mission is to protect investors.
Please take a second to reflect on that. Imagine your son comes home and tells you that his science teacher told him the Earth is round. Your daughter comes home and tells you that her science teacher taught her the world is flat. Two completely opposing statements where there is no room for disagreement whatsoever. What would you do? Wouldn’t you call the school principal right away and demand an explanation?
The same thing is happening in finance all day, every day. Yet, there is no principal to call, you are on your own. It is still puzzling to us why a discrepancy of that magnitude didn’t bother anybody.
It still doesn’t, so it’s about time to ring those alarm bells again. Gary Gensler is out as the Chairman of the SEC, and back at MIT. His views on crypto will likely matter less. Levine, on the other hand, continues to reach many people. When he talks, people listen. He is arguably the best finance writer of modern times, but, he too, completely disagrees with the best investor of modern times. This is a major cause for concern. Other people may not have had the opportunity to think deeply about these issues, but Matt Levine is not one of them; we hold him to a higher standard.
There is one explanation that hopelessly tries to reconcile this tension between the man who became extremely rich through investing, and what sometimes seems to be the entire world. It is this idea that Buffett is too old, a sociopathic grandpa from Omaha, who simply can’t keep up with technology.
The alternative explanation is much scarier; that we all live in an alternate universe of finance where every trade, regardless of what is being traded, is considered an investment. Said differently, investing and making money became the same thing. They are synonyms now.
We are convinced the latter is exactly what is happening.
We believe this is one of the biggest problems that this generation faces. So, we will keep writing. Our books will expound on these topics. Court of Finance will tell you exactly what investing is and Fictionary will share with you what investment has become, and more importantly, why. But you are here today, and the books are not out yet, so we will take you through the executive summary. Keep following us, you don’t want to miss what we have in store for you.
