Three Types of Investors

There are three types of investors: those who know nothing, those who know some things, and those who know everything.

IQ bell curve with crying wojak at the median

People on the left don’t know much. They know what they see on Fin Tok. They know that Doge is going to the moon. They live and die by the meme. And right now, the meme is pure alpha.

People on the right have read all the white papers. They understand each blockchain, how it is built and secured, and how cryptocurrencies are transferred. They understand the frictions involved and the arbitrage opportunities. They understand it in a way that few others do. They have the informational edge.

The people in the middle overthink everything. They’re bearish when Bitcoin goes down and feel like idiots for missing out when it goes up. They understand that it’s a decentralized, peer-to-peer, permissionless network. They understand the immutable nature of the blockchain. They know all the buzzwords. But they don’t have conviction. Their opinion changes three times a day. They’re completely paralyzed.

How much information do you really need to make an informed investment decision? I really do think this image captures it pretty well. The middle is dangerous. You know enough to know that you don’t know anything everyone else already knows.

And then some investors can see the forest through the trees. They know so much that they are the Jedi at the right, but ultimately come full circle and end up on the left. Bill Miller’s description of why he owns Bitcoin is a perfect example of this. It’s hard to make it look this easy.

You’ve made a killing on Bitcoin. What’s the rationale for owning it?

Bitcoin is a decentralized, permissionless, peer-to-peer network of computers that’s permanent and unhackable. When you buy a Bitcoin, you’re buying a slot on that database, and almost all of those slots have been allocated. There’s only going to be 21 million Bitcoins in the world, and 18.5 million have already been mined and circulated. So we’ve got 2.5 million to go. It’s Economics 101. The supply grew 2.5% last year; it’s growing 2% this year. Is demand growing faster or slower than 2%?

There’s no edge in the middle. Know nothing, or know everything.


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