Every year crypto-critic and fiat-billionaire Warren Buffett auctions off a lunch for eight to support his daughter’s favorite charity, GLIDE in San Francisco. This year, crypto-entrepreneur Justin Sun won Buffett’s Glide charity auction with a record $4.5 million bid. Buffett had previously called bitcoin “rat poison squared” so this ought to be interesting.
Just the fact that Sun has $4.5 million to burn is a little bit of a poke at the old man. Warren Buffett called bitcoin a fraud just a few weeks before the auction.
Sun, founder of cryptocurrency Tron and CEO of file-sharing company BitTorrent, hopes to persuade the billionaire investor to ease up on crypto and to show him the advances the industry has made in the last 10 years. They’ll be doing it in style, too, at New York City’s Smith & Wollensky steakhouse. “Bid for a chance to dine with the Oracle of Omaga at Smith & Wollensky in New York City and 100% of the winning bid will be donated to GLIDE,” the original eBay posting said.
“I look forward to our upcoming lunch with Buffett as an opportunity to seek mutual understanding and respect,” Sun said in an open letter to the Tron community.
But he did get one quick dig in the 88 year old billionaire, “I want to point out, though, that even one of the most successful investors of all times can sometimes miss a coming wave. Buffett has admitted he overpaid for a big investment food giant Kraft Heinz Co., while failing to realize the potential of the likes of Amazon.com Inc., Alphabet, the parent company of Google and even Apple.” Buffett was late on Apple but now owns an estimated $50 billion in stock.
When asked for comment on the lunch, Buffett laughed and told CNBC’s Becky Quick that he was looking forward to it.
GLIDE began as a Church and “temperance hotel” during the depression in 1935. In the 1990s, Buffett’s daughter Suzie Jr. worked with their AIDs and homeless outreach in San Francisco. “It makes a difference,” Buffett says on their website. “It translates into human beings finding that there is hope in life and that something better is there. The rest of the society may have given up on them, but GLIDE is going to give them a chance to find out what their real potential is.”
Sun told MSNBC that he’s a believer and a fan of Buffet and his “long-term value investing strategy.” He added that he wants to pay Buffett “back for his inspiration.” Although Buffett is no fanboy of crypto, Sun and others in the community cite Buffett as an inspiration and a reminder to proceed with caution.
Sun admitted on CNBC’s “Squawk Box” he knows he won’t change Buffett’s mind in a three-hour lunch, but he hopes to offer him a different opinion and show him “how much progress we’ve made” in the cryptocurrency industry. “I want him to learn what the younger generations are doing,” Sun added.
It might not be the biggest $4.5 million waste in the history of crypto. Sometimes a lunch with Buffett leads to a job or future partnerships. Ted Weschler—later hired as a Berkshire investment manager—and Greenlight Capital’s David Einhorn were winners of the auction in previous years.
Warren Buffett has not been so kind on the technology. He often conflates all of crypto with Bitcoin—which, honestly, is fair game at this point. Reporters asked him about it just a month ago on May 4, 2019 at Berkshire Hathaway’s annual meeting at the CHI Health Center in Omaha, Nebraska and he was dismissive. “It’s a gambling device… there’s been a lot of frauds connected with it. There’s been disappearances, so there’s a lot lost on it. Bitcoin hasn’t produced anything.”
[Our editor in chief said the same thing at our publisher’s house last week.]
“It doesn’t do anything. It just sits there. It’s like a seashell or something, and that is not an investment to me,” Buffett added.
He has a pretty good track record of picking winners. In Buffett’s fascinating 852 page biography by Alice Schroeder, he spoke candidly about how not making missteps was more important than all the winners he picked.
Incidentally, his aversion to worthless coins—and the people who claim to understand them—pre-dates Bitcoin by about 60 years. He always said he wanted to avoid what he called “shoe-buttoning.”
“His father commuted daily with the same group of men,” Buffett’s partner Munger told his biographer. “One of them had managed to corner the market in shoe buttons—a really small market, but he had it all. He pontificated on every subject, all subjects imaginable. Cornering the market on shoe buttons made him an expert on everything. Warren and I have always sensed it would be a big mistake to behave that way.”
“I’ll tear off a button here,” he told reporters in May. “What I’ll have here is a little token…I’ll offer it to you for $1,000, and I’ll see if I can get the price up to $2,000 by the end of the day… But the button has one use and it’s a very limited use,” Buffett said.
Before the same a previous annual meeting in 2018, when he heard that Berkshire’s vice chairman Charlie Munger had started trading in cryptocurrencies at age 93, Buffett brushed it off as “just dementia.” In 2017 he called Bitcoin “rat poison squared.”
Buffett has managed to sneak in some good advice for crypto enthusiasts amid the bon mots he drops on the way to meetings.
In an article at the height of the dot-com bubble, Buffett explained why he wasn’t jumping in via a speech and a now-famous essay in Fortune Magazine. According to his biographer, Berkshire Hathaway investors were furious with Buffett that year for holding their money in bonds while all their friends were getting rich off Pets.com. “Investing is laying out money now to get more money back in the future — more money in real terms, after taking inflation into account.” He also pointed out how transforming an industry—which crypto supposedly will do—doesn’t necessarily produce a sound investment opportunity. He often mentions how the airline and auto industries revolutionized transportation, yet neither has ever been a very sound investment.
“There have been over 2,000 car manufacturers in U.S. history,” he is quoted as saying to his biographer. “How many are still around today?”
The same could be said about crypto today. Deadcoin.com lists 1,661 coins that turned out to be scams or never got off the ground.
The lunch itself is a small mea-culpa from Buffett. After years of shunning the internet, he used it to drum up some press and gain some money for his daughter’s favorite charities. In 2003, he auctioned off his battered wallet with a stock tip and a two hour lunch with him. Surprisingly, bidders on eBay decided that lunch with Buffett was worth more than the stock tip.
“To many oohs and aahs, he had recently auctioned his battered wallet with a stock tip inside for $210,000 to benefit Girls Inc., a nonprofit cause of Susie Jr.’s. Next, he had auctioned himself off on eBay—or, rather, lunch for eight people with him—to benefit Glide Memorial Church in San Francisco, Susie’s main cause.1 According to the highest of fifty bidders on eBay, two hours of Buffett’s time and a lunch for eight at Michael’s were worth $250,100—that is, more than the stock tip in his wallet.”Excerpt From: Alice Schroeder. The Snowball: Warren Buffett and the Business of Life.
Many of Buffett’s original maxim’s about the early internet days are true of crypto markets. He’d said in 1999 that the birth of the internet offered a chance for cynical financiers to “monetize the hopes” of the credulous. The resulting “wealth transfer on a massive scale” was only to a few insiders. “Promoters have in recent years moved billions of dollars from the pockets of the public to their own purses (and to those of their friends and associates).…Speculation is most dangerous when it looks easiest.”
He often quotes his Columbia Business School professor and investment idol Benjamin Graham, “Be fearful when others are greedy and be greedy when others are fearful.” Which could have been great advice during both the Mt Gox hack—which put 70% of the crypto market in jeopardy—or at the height of the market in December 2017, when today’s $7,700 BTC sold for almost $20,000.
Sun might be in for a nice surprise, though. In February 2019 Buffett went on “Squawk Box” and sounded more like he might be short-Bitcoin and long-blockchain. “People get their hopes up that something like that is going to change their lives, and it’s a very ingenious thing to figure out how to have a limited supply and make it harder and more expensive to create them as you go along and all that sort of thing but it doesn’t, the function … blockchain does not depend on [bitcoin].”