Remembering Charlie Munger: A Titan's View on the Risks of Bitcoin and Its Impact on Civilization

The recent demise of Charlie Munger, an investment luminary and the vice chairman of Berkshire Hathaway, has brought his long-standing views on cryptocurrencies, particularly Bitcoin, back into the spotlight. Munger, who passed away on November 28, 2023, was known for his candid opinions on various investment trends and his cautionary stance on the rise of digital currencies.

As Munger articulated in his interviews, including his thoughts shared with the Wall Street Journal before his death, he viewed the invention of artificial currencies like Bitcoin to be a possible harbinger of doom for the pillars of civilization. His concerns were rooted in the belief that sovereign currencies, issued by states, have historically played an essential role in fostering societal development.

Munger often expressed his thoughts in straightforward language, dismissing cryptocurrencies as "crazy stupid gambling" and "worthless". He considered the escalation of Bitcoin prices not as a testament to its value but as a growing worry for the financial framework that supports human achievement.

Fundamental to his understanding was the economic philosophy of Adam Smith, who championed the notion that individuals tend to maintain personal property more diligently than that of others. For civilizational growth, a reliable currency system is indispensable—a system that Munger believed is undermined by the unfettered nature of cryptocurrencies.

Cryptocurrencies like Bitcoin, in Munger's view, introduce uncertainty into a well-oiled machine of economic exchange that has transformed humans from primitive hunter-gatherers to modern, thriving societies. To replace the tried-and-true with an artificial, ungoverned currency was akin to introducing chaos into order.

His sentiments resonated during the Daily Journal Corp's annual shareholder meeting, where Munger did not mince words about those opposing his position, calling them "idiots". Despite some advocates highlighting the potential benefits of crypto such as privacy and transaction efficiency, Munger's stance remained steadfast; he saw crypto as a danger, a "currency good for kidnappers", as he once expressed.

Munger also commended China's decision to ban cryptocurrencies under Xi Jinping's leadership in 2021, critiquing the United States for not taking a similar stance, which, to him, appeared as a national failing.

The perspective Munger offered in a Wall Street Journal op-ed outlined his view clearly: crypto represented "wretched excess" symptomatic of regulatory loopholes and misleading innovations such as blockchain. He saw cryptocurrencies not as productive assets but as financially hazardous "gambling contracts" that lack the integrity and security of state-backed currencies.

Additionally, Munger held that the cryptocurrency circuit is powered by a mix of deception and self-delusion; it's a game where the 'house' inevitably prevails, and the participants are caught in the folly of the greater fool theory, hoping to sell their tokens to someone at a higher price than what they paid.

His skepticism of cryptocurrencies is part of a broader reflection on investment and economic principles that shaped his and Warren Buffett's approach at Berkshire Hathaway. While Munger has left behind an indelible legacy, his cautionary words on Bitcoin and the crypto industry remain a parting warning to future generations of investors and policymakers aiming to balance innovation with the stability of civilization's foundational structures.