I should be so lucky….

Wednesday, 14th March 2018

I should be so lucky….

The time to buy Bitcoin was back in 2012 when it was selling for $10 per unit….

Those guys who bought then – the smart operators – got in right at the very bottom….

Bitcoin eventually rose to a high-water mark of $20,000 in December 2017….

Not everybody would have been smart enough to get out right at the top. Calling the top of any market is notoriously difficult….

But plenty of those $10 investors would have been smart enough to get out at some point on the way up that steep curve – and bank a life-changing fortune in the process….

Many of those smart guys live in big houses now. They probably drive Aston Martins too. Money is no object. Most will never need to work again or want for anything….

I’m not jealous, of course. Those guys are real smart. They’ve proved that, and they deserve their rewards. Full credit to them….

I just wish I’d been so smart….

  • A meritocracy that rewards ‘smart’….

That’s how we generally see these things isn’t it?

We see those people who do well financially as the smart guys….

Those guys are cleverer than the rest. More talented than the rest. More creative, more analytical, more far-sighted than the rest….

And because we live in a meritocracy that rewards people for intelligence, talent, creativity, skills and all the rest of it, it is those guys – the guys with the most smarts to call on – who get their hands on the largest proportion of the material rewards on offer….

That’s how the story goes, isn’t it?

Intelligence, skill, talent and creativity beget wealth. It pays to be smart. And it’s a narrative that makes total sense….

Or does it?

  • Dumb luck rules….

What if I told you that if you really want to get wealthy, then dumb luck is the commodity you are going to need most of….

Dumb luck is more important than how much brainpower you have in your possession. Dumb luck is more important than how much natural talent you have at your disposal….

The wealthiest individuals are not always the cleverest or the most talented. They are not always the most skillful or the most creative….

Instead, dumb luck is the raw commodity wealthy people tend to possess in the greatest quantity. It is the sheer scale of dumb luck the wealthy have enjoyed that separates them from the rest….

Random and dumb luck – rather than brains or skill or talent or creativity – is the factor or variable that tends to have most influence on who gets wealthy and who does not….

That’s the conclusion of a study conducted by Alessandro Pluchino and his colleagues at the University of Catania in Italy – it’s called Talent vs Luck: the role of randomness in success and failure. You can check it out here….

Depending on which side of the rich/poor divide you sit, Pluchino’s findings will either cause you to thank your lucky stars or to feel a bit better about yourself….

  • Pretty dumb for guys so smart….

I know rich and successful people who would argue vehemently with Pluchino’s conclusions. I know guys who haven’t done so well who would find plenty to agree with in his ideas….

The truth, as it always does, will lie somewhere in-between the two extremes. Success – financial or otherwise – almost always requires a combination of talent and luck. That’s my take….

But, I have to say, some of those early-doors Bitcoin investors do seem a tad dumb for guys who are supposed to be so smart….

Take James Howells, for instance. The British IT worker managed to send a hard-drive containing 7500 Bitcoin to a local refuse tip. And he never got it back….

Those Bitcoins now lie buried beneath 20,000 tons of rubbish in a landfill site – never to be seen again….

Or consider David Kitchen. The London-based developer mined 50 Bitcoins back in 2010, stashed them on a USB stick and then thought very little about them until the Bitcoin price started to take-off….

At the time his coins were worth approximately £50,000. It would have been a nice little windfall – if only he’d been able to liquidate his holdings….

He couldn’t find the USB stick holding the cryptocurrency. He’d either lost it or over-written it in the intervening years….

Or take, Philip Neumeier. In 2013, he purchased 15 bitcoins for approximately $260. Those crypto-coins increased in value and were worth almost $200,000 at the point when Neumeier realized he couldn’t remember the password required to access his stash….

He tore his hair out. He considered hypnosis. He considered building a super-computer to crack the password….

In the end, he got lucky and stumbled across a 15-year-old hacker who was able to break into his wallet by exploiting security issues….

And these are just the guys who did dumb things that we know about. There will be plenty more we don’t….

  • Lost property….

According to estimates from blockchain analysis company Chainalysis (they used age and transaction metrics to work out which Bitcoins haven’t been moved for a protracted period) between 2.78 million and 3.79 million Bitcoins are already lost – for good….

Some will belong to dead people. Some will be simply parked-up….

But many will belong to early-doors investors who have forgotten about them, lost the devices containing them or forgotten the complex passwords required to gain access to wallets holding them….

Maybe a good portion of the early-doors Bitcoin investors weren’t really as smart as we first thought….

If you’re smart enough to figure out these new coins are going to be worth something in the future, then it is reasonable enough for us to expect you to be smart enough to hang on to them until such time you are proved right….

Maybe some of these guys didn’t really know or realize exactly what they were getting into….

Maybe it wasn’t about being ultra-smart. Maybe they just got lucky….

Maybe they were just in the right place at the right time….

  • Everything you don’t understand….

John Oliver might agree.

The Last Week Tonight host was explaining to his audience last week how investing in cryptocurrencies is more like gambling than investing….

And how many people are getting involved in the cryptocurrency sector simply because they are following the crowd….

‘Many people are buying coins for no reason other than other people are buying them.’

Summing up what Bitcoin is to the average person, Oliver said this….

‘[Bitcoin is] everything you don’t understand about money combined with everything you don’t understand about computers….’

In other words, some of the money heading into the cryptocurrency markets belongs to uneducated and uninformed investors who don’t really know what they are doing or what they are getting into….

Maybe some of them will get rich….

If they do, it will not be because they are cleverer than the rest of us. It will be because they got lucky.

That’s how it looks from here….

All the best,

Dave Gibson

Money Truths