Overstock CEO On Bitcoins, Gold, Austrian Economics, And... Zombies
Patrick Byrne, the embattled CEO of Overstock.com, had plenty to say in a recent Fortune interview. The outspoken CEO, whose company recently became the first US retailer to accept Bitcoin (beginning later next year) aligns his beliefs with Ron Paul, holds enough gold that if "zombies walked the Earth," he'd be taken care of. Byrne believes "the long-run value of all fiat money is zero," adding that,"we're not going to get rid of the Federal Reserve any time soon, so bitcoin is a step in the right direction."
Fortune: Do you own any bitcoins?
Patrick Byrne: No. I own gold.
Really, how much gold?
A lot. Let's just say enough that if zombies walked the Earth I will have enough gold that me and mine are taken care of.
I hope you're kidding about the zombies, but let's get back to bitcoin. Do you plan to buy any for yourself?
I'm not investing in bitcoin. I'm just saying we'll accept it. I don't have any opinions on its value, and I don't even know how one would go about finding that out beyond just looking it up everyday and what it's trading at. Overstock accepting bitcoin shouldn't be read as an endorsement or a view that the value of it is going to go up. We're not going to be holding any bitcoin -- it's just a medium of exchange.
But you're obviously a bitcoin fan. Why?
There are business and philosophical reasons. First, the business reason: I think there are a legitimate number of consumers who want to be able to shop with bitcoin. They like the anonymity of the currency. So far, the market has only served them with shady websites, like Silk Road. Also, it saves us about 2% from interchange fees. It's no secret that our net margin is about 2% now. And so the savings would be a very substantial improvement to our bottom line.
As far as the philosophical reason: I am from the Austrian School of Economics, which means we're the guys who hate fiat money. The long-run value of all fiat money is zero. If you believe in limited government, you want to have a monetary system that is based on something where no government mandarin can just create money with a stroke of a pen. Gold is a solution, we're not going to bring back the gold standard any time soon. We're not going to get rid of the Federal Reserve any time soon, so bitcoin is a step in the right direction.
Bitcoin has gotten a lot of attention. Would you say that accepting it at Overstock is just a marketing tool for your company?
Adoption of bitcoin is low, but I think once we and some other major guys start accepting it that could change very quickly.
In December alone, bitcoin fluctuated between $480 and $1,280. This is super volatile. Does that freak you out at all?
No. We're not going to be holding any bitcoin. It's just a medium of exchange. We're just going to be taking bitcoins as payment and converting them into U.S. dollars, at least initially. If we just do the conversion every day, the most risk would be the volatility it experiences in one day, which is still pretty high I know.
There aren't any derivative instruments out there yet to hedge that risk, but we anticipate they will be created in one way or another.
Any other risks you see?
I really don't see any. Plus a certain type of person is using bitcoin -- not just the guys shopping on Silk Road. An increasing population distrusts the government's ability to manage the economy. This is a way of signaling to these people that we stand with them and we share their same doubts.
Washington has been holding Congressional hearings on Bitcoin? Have you talked to anyone about the currency?
I avoid discussions with anyone in Washington, but we have lawyers that talk to them, and they say that in Washington there are questions about bitcoin and how it's going to be regulated, if at all. The concern is primarily the Silk Road kind of crowd and money launderers. We certainly don't want to encourage or condone that kind of behavior and we'll do everything the law requires us to do.
Can the U.S. stop bitcoin from being adopted and used, especially by retailers and consumers?
I don't' see how they can. If anything, I think if usage gets widespread enough, it could have a beautiful effect for the United States. If our current system starts melting down or we start experiencing hyperinflation and systemic risks and all kinds of things we experienced in 2008, then it will provide a very convenient way for people to move to a safe store of value as they lose faith in the current government-run institutions.
A few bitcoin exchange start-ups have emerged. Who are you planning to use?
We're down to negotiating with three companies.
We haven't disclosed that yet.
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