Compound Collaboration, Month #3
Every month I put aside some money into a portfolio aimed at big bets over the next 20 years. This is a portfolio I will be gifting to my future kids- in the hopes of using it as an educational tool alongside the memos I write to teach them about the world and to have a shared activity to work on together as they grow up.

(I might be overly-optimistic that they will be interested in investing, but hey, it's better than chores, right?)

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‌‌‌(This is me teaching my Lego Engineering Class at a summer-school camp. This is not my kid, but you can see why I'm excited to be a Dad someday 😊)

Anyway, here is the performance so far from the first two months:

‌‌This month I will be departing from the Ark funds and making a much riskier bet: Bitcoin.

With this portfolio I am comfortable making some bets that will go to complete zero. Its an educational portfolio after all, and in 10-20 years there will be fun stories to tell about the bets that didn't work out and why.

Bitcoin is a very polarizing asset, as many people will rightfully argue that it has no intrinsic value. And I am not one to try and convince them otherwise. But in the interest of explaining to my future kid why I bought digital fun-money with their inheritance, allow me to explain my thinking:

Money is merely a medium for exchanging value in a convenient way. The only reason we care about money in the first place is because it can store up value and then be used at a later date. The form of money itself doesn't matter, as long as it does a good job of storing, exchanging, and accounting for value.

Today, the world largely uses dollars to exchange value, which is hugely beneficial for the United States, because we control the ability to print more of it and use that to pay off our debts (over simplification, yes, but remember we're playing with Lego spaceships as we talk about this, so cut me some slack. Pew pew!)

So why would we use something like Bitcoin, if we already have the dollar that works fine, and that dollar is already being used in a digital format? Why would we switch?

Well, we would switch because the rest of the world gets tired of their dollars being devalued. Whoever controls the money wields a lot of power, and if that power is misused, other countries around the world will look for a different form of money that doesn't lose its value whenever the United States wants to spend itself out of a depression.

Bitcoin has some interesting properties that makes it open, public, permissionless, borderless, neutral, and censorship-resistant. The dollar is none of those things, and will never be.

While I personally don't think there is more than a 3% chance that Bitcoin will be the dominant world currency in 20 years, it does seem to have carved out a niche that will not be going away any time soon. It is everything that state-owned currencies cannot be, and that makes it kind of special.

It will be fun to see where this goes.

Josh Worden's avatar
Pew pew! Love it. Bitcoin is worth a shot! Or maybe it's not. Who knows? But that's part of the fun!