It’s Personal: Why Nassim Taleb (Now) Hates Bitcoin
When Nassim Taleb changes his mind, it’s personal, and he makes sure it echoes through the world. And his stance on Bitcoin has certainly changed. After a barrage of (mostly) tweets and a recent CNBC appearance, the song rang loud and clear that, for Taleb, Bitcoin is “an open Ponzi scheme,” “not a single reasonable argument that #BTC is a hedge against inflation,” “not a currency” etc.
This all comes, of course, after 1) his 2018 Forward to The Bitcoin Standard, and 2) an August 2020 tweet (now deleted)—among others—responding to a screen shot of himself relaxing in the luxurious security of his own hedges (including gold and/or BTC) at an online #RWRI conference .
Now, 1) before we begin, we must first establish that whether Taleb is right or wrong, his name is definitively etched in marble for centuries to come. But impeccable work does not imply personal infallibility—the cycles of hubris always find their way. And 2) while I wish I could argue against his points, they are, for the most part solid: Bitcoin no longer really functions as a currency (although, no one really buys a Happy Meal with gold); Bitcoin does function as a type of Ponzi scheme (though this term could apply to all limited supply assets thought to be valuable, regardless of digital or physical instantiation: early South American adopters of gold found this out the hard way at the hands of the Spanish); and yes, Bitcoin twitter does seem to be run by loud-mouthed extremists (but, is any division of twitter any different?).
So, let’s set aside Taleb’s fundamental arguments against Bitcoin, and examine a different element of the story. Taleb’s recent opposition to Bitcoin seems to go beyond money, beyond markets and trading—it seems personal. But why?
1) His Beef with Saifedean Ammous (and Bitcoiners in General)
The first reason Taleb now hates Bitcoin deals with moral association. Let me explain. The idea of freedom bounces around the echo-chambers of the Bitcoin Maximalists ad nauseam. “Bitcoin is a peaceful protest,” “Bitcoin gives real power to the people,” “Bitcoin is the solution to all governmental problems.” To every hard-core Bitcoin Maximalist, Bitcoin is manna from Heaven sent for those who were early (crazy) enough to adopt it. While these claims may yet be true, many Bitcoin Maximalists take the idea too far. Many express a utopic sense of unbound libertarian freedom with no limits and no restrictions, and no apparent sense of reality. Because freedom without restriction is just chaos. True freedom requires limitation—the limits of Truth and moral Virtue. This notion of unbound freedom becomes the first fundamental element of divergence between Taleb and Bitcoin(ers).
Among the ranks of this brand of Bitcoin Maximalist stands Saifedean Ammous, a fellow Lebanese academic who wrote The Bitcoin Standard, the fore-most authorial work on Bitcoin as a legitimate monetary system and/or store of value. Ammous too, is a Bitcoin/freedom evangelist. And during much of 2020 (like many true Bitcoiners), Ammous took to Twitter to voice the supposed absurdity of the COVID lockdowns and mask mandates. At the same time, Taleb worked to prove scientifically and mathematically the supposed validity of masks and said lockdowns. Taleb continues to argue for the multiplicative consequences of the virus (which I experienced first hand as a Kansas resident contracting a Las Vegas strain in Utah from residents of Michigan) and staked his claim on that hill. And there, it seems, he will die.
Across the way, on top the other hill, stands Ammous (and many Bitcoiners): a meat-only, veggie-exclusionary extremist with steel-iron confidence, who claims that masks are bogus, lockdowns unnecessary and unconstitutional. You can imagine Taleb might find this opinion contrarian to his own, and as a self-proclaimed man of Honor before all else, he publicly disavowed himself of his little brother.
Now, whether Taleb and Ammous kiss and make-up is beyond the point (spoiler alert: they probably won’t). What matters is that, for Taleb, it’s personal; for Taleb there is a fundamental sense of morality at stake with lives in play in the Real world, not the digital. With the Forward to The Bitcoin Standard, Taleb’s name sat tied to Ammous and his kook-ish extremism—thus a complete and total dissociation with the same was required, Bitcoin and all. No price—at least according to his (Taleb’s) writing—is worthy of your honor. And, ironically, Taleb makes this known digitally.
*As a fun aside, Ammous’ reaction to Taleb’s public denouncement is priceless.
2) Coinbase Humiliation
The second reason Bitcoin no longer sits well with Taleb concerns his pride. The incident with Coinbase is a perfect example. Coinbase is (sadly) the most widely recognized crypto exchange in the US—with a recent IPO which launched it even further into popular collective awareness. Yet, despite being such a large company with so many customers, over the course of 2020, every large price action move of BTC (up and down) would inevitably lead to a Coinbase crash (cue the conspiracy theories). Forget about buying, selling, withdrawing, you name it—no access. It became a joke to the point that once “Coinbase down” started trending on Twitter, you knew Bitcoin was moving.
For a public figure like Taleb, privy to any and every back door (even Umberto Eco’s personal library[!]), this type of customer service is unacceptable at best, and foreign to say the least. A real stab at your pride. You can see in the above interaction that Taleb (like most people of his social status) holds very little tolerance for this kind of treatment—it mocks his pride. As the so-called authority in exchanges of cryptocurrencies, Coinbase unfortunately sets the standard for the space in the collective understanding of the mainstream. And Coinbase, in essence, is digitized fragility.
This means that if the “best” platform of exchange for cryptocurrencies can’t aid someone like Nassim Taleb in carrying out a simple transaction or provide personalized customer service, it becomes anti-taleb; it rips at his pride. For Taleb, Coinbase becomes noxious noise, left to the hum of the everyday cacophony. And, as Coinbase tightly aligns with Bitcoin, the largest and most important cryptocurrency in the space, he will gladly divorce himself from it all, hopefully at the expense and loss of Coinbase and all Bitcoin-enemies in general. Coinbase—and Bitcoin, for that matter—got at Taleb’s pride, and he seems to feel it in the skin.
3) Skin in the Game
The last point of departure for Taleb and Bitcoin comes from its digital nature. For Taleb, the old is the beautiful, and the old is the physical. This is true for him in everything, even religion. In Skin in the Game, Taleb describes the nature of Christ and the importance of His physical instantiation: “[the] human nature of Christ makes the divine possible for all of us” (120). So for Taleb, the physical is the Real.
In same vein, Taleb has branded himself as one of the greatest authorities on the notions of risk and probability. But for Taleb, risk requires peril, and peril must be instantiated in the Real in order to be perilous (you can’t give an eye for an eye in the digital). Bitcoin cuts against this philosophy twofold: 1) there is no real physical instantiation of Bitcoin (that’s that point, and its strength/potential weakness), and 2) there are many Bitcoin Maximalists who bought $50 worth of BTC in 2009 and now have a net-worth BTC/USD value of around 300 million. Where is the real world risk in that kind of profit? I am coming to find that many traditional stock traders absolutely hate cryptocurrencies for this very reason: where was the effort for so much reward?
And it’s a valid point. There are many crypto millionaires who are now rich simply because of their ideological bent. But none of this changes the fact that Bitcoin and cryptocurrencies are substantially changing the landscape of our collective reality (Doge coin as a precursor to many future changes, both good and bad). Because the digital is now the Real. Our lives are largely digital. Post 2020, work will be done digitally. Our communication and entertainment will come digitally. And now, money is finding its native digital instantiation with Bitcoin. The great innovation of Satoshi Nakamoto was not Bitcoin as a peaceful protest against corrupt government, it was the blending of the physical with the digital—the finite physical world with the infinitude (including all the religious connotations) of the digital. Is it any coincidence that Bitcoin adoption correlates to the digital boom of the economy in which we live? Taleb wants a correlation of Bitcoin to inflation, but that’s not the right question—they don’t correlate. Bitcoin runs with the digitization of our lived reality, and that’s here to stay.
So, for Taleb, above all, the question at hand is personal. And I admire him for that—even if he has no monetary need for gains in the crypto markets. But that doesn’t negate the substantial changes that cryptocurrencies will enact in our society. And those changes, like COVID, are exponential. While we admire Taleb for his nearly 100% track record in predictions (I guess he got Trump wrong, though), what’s the probability, given 100% accuracy, combined with hubris, that his record stays perfect?
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For more detailed fundamental arguments with Taleb and Bitcoin read Allen Farrington.
