Bitcoin, by Nassim Taleb

Why Bitcoin is good. (SLL has also posted articles about why Bitcoin is bad, and why Bitcoin is a mixed bag. SLL has not yet made up its mind. Needless to say, SLL hasn’t made a dime on bitcoin or any other cryptocurrency.) SLL is not qualifed to argue with Nassim Taleb on cryptocurrencies, but would fight to the death on Taleb’s notion that markets are rational. From Taleb at

Foreword to the book by Saifedean Ammous

Let us follow the logic of things from the beginning. Or, rather, from the end: modern times. We are, as I am writing these lines, witnessing a complete riot against some class of experts, in domains that are too difficult for us to understand, such as macroeconomic reality, and in which not only the expert is not an expert, but he doesn’t know it. That previous Federal Reserve bosses, Greenspan and Bernanke, had little grasp of empirical reality is something we only discovered a bit too late: one can macroBS longer than microBS, which is why we need to be careful on who to endow with centralized macro decisions.

What makes it worse is that all central banks operated under the same model, making it a perfect monoculture.

In the complex domain, expertise doesn’t concentrate: under organic reality, things work in a distributed way, as Hayek has convincingly demonstrated. But Hayek used the notion of distributed knowledge. Well, it looks like we do not even need that thing called knowledge for things to work well. Nor do we need individual rationality. All we need is structure.

It doesn’t mean all participants have a democratic sharing of decisions. One motivated participant can disproportionately move the needle (what I have studied as the asymmetry of the minority rule). But every participant has the option to be that player.

Somehow, under scale transformation, emerges a miraculous effect: rational markets do not require any individual trader to be rational. In fact they work well under zero-intelligence –a zero intelligence crowd, under the right design, works better than a Soviet-style management composed to maximally intelligent humans.

Which is why Bitcoin is an excellent idea. It fulfills the needs of the complex system, not because it is a cryptocurrency, but precisely because it has no owner, no authority that can decide on its fate. It is owned by the crowd, its users. And it has now a track record of several years, enough for it to be an animal in its own right.

To continue reading; Bitcoin


One response to “Bitcoin, by Nassim Taleb

  1. Bob:
    After reading Taleb’s usual excellent observations, I am compelled to repost a response I had to an earlier article on crypto-currencies.

    Individual awareness and opinion, together with the judgement upon which said opinion is presumed to be based, precipitates values. These in turn precipitate whatever action(s) might be taken in response, to gain or keep them. To the extent such judgement is in accord with the facts of reality, the action taken in response will then be confirmed or refuted as rational (“wise”).

    When viewed not individually, but collectively, such actions constitute a market – THE market, for ANY presumed value. The market for money is no different.

    I generally agree with the article’s view of crypto-currencies. It served to remind me however, of a common mistake made by many advocates of political freedom.

    Such advocates correctly identify the coercion and injustice that flow therefrom, that an absence of freedom precipitates. They then embrace a “collective” response to it. In error, they elevate said response to where it becomes THE solution, as opposed to it being but a contextual solution – one existing because of the context in which the thought-to-be solution deals with temporal facts. Temporal, because of the temporary absence of what would otherwise be “the natural order of things,” invariably arising when freedom prevails.

    The “black market” is a perfect illustration of this phenomenon. It is a collective response to a temporary absence of “the natural order of things.” Consequently, a return to the “natural” from the temporary “unnatural,” would immediately end said market.

    Gold and silver became, and have remained, their role(s) as money because of individual awareness, opinion, and judgment – the resulting actions taken by billions of individuals over time. Just as importantly, the actions taken by others in response, is equally relevant. The former group acting in concert with their freedom to do so, the latter seeking to impose consequences arising from freedom’s absence.

    Gold and/or silver in one’s possession need no other values in one’s possession to be recognized and accepted as an “intrinsic” (contextually) value – specifically, as a stand-alone medium of exchange. Crypto-currencies require the existence and “certainty” of a profound technological infrastructure.

    Should I have the freedom to exercise my opinion, judgment, and remain free to pursue my values in response, I know which form of money of the two I will use. Use to best represent, secure, and protect the time and effort that constitutes the term of my life.

    During freedom’s hiatus, I may be forced to act differently, but upon its return, I will once again demonstrate through opinion, judgment, and actions, why Aristotle’s insights – now of over two-thousand years, remain timelessly instructive.

    For Bitcoin, or any other crypto-currency, to serve as a substitute for actual “money,” it will have to, at a minimum, be easily convertible into,………………., wait for it,…………., “the money of Aristotle.”



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