Henry Ford, Dot.com & Bitcoins

Submitted by Viktor Shvets of Macquarie

Why history matters

Is ‘history more or less bunk?’ It provides valuable lessons

  • Henry Ford once said that “history is more or less bunk. It’s tradition. We don’t want tradition. We want to live in the present, and the only history that is worth a tinker’s damn is the history that we make today”. And yet, Ford was aware that he was making history, and his remarks were aimed at the orthodoxy.
  • What has Henry Ford to do with bitcoins? In 1900 when he was experimenting with cars, there were around 2,000 car makers globally that were producing 10,000 vehicles (some powered by steam). However by 1920, the number of car makers shrunk to around 200, and the industry was manufacturing 2.5m cars and by the 1930s in most DMs, horses were dead and buggy makers were out of business. By the 1980s, the number of car makers dropped below 50 and the industry was making over 30m vehicles. Today, there are over 1,000 cryptocurrencies and their combined value (depending on time of day) is ~US$600-800bn, or ~1% of global money in circulation. Will cryptos follow the same trajectory as their early 20th century cousin and within a decade or so become the dominant force in transactions and store of value?
  • The key that links cryptos with Henry Ford and the main difference between (say) bitcoin and tulips is that cryptocurrencies are based on sustainable and evolving technological foundations (just as cars were in the early 20th century). To argue that the blockchain is good but cryptos bad is to forget that without various forms of ledger balances (or cryptocurrencies), blockchain is an empty vessel. As in the case of the 17th century Dutch Tulip Mania, the growth of cryptocurrencies is also turbocharged by creeping monetary debasement. It is the marriage of technology and the perceived need for insurance that is likely to guarantee cryptos’ LT role, irrespective what the governments think.

Does it mean that cryptos are a reliable store of value?

  • If one indiscriminately invested in hundreds of car makers in 1900, the chances are that one would have sustained significant losses. It was still a time for venture capitalists rather than conventional investors. However, by the 1920s, investment in the surviving automakers would have yielded considerable returns while buying buggies (even at low PERs) would have led to losses. It was a similar process in the dot.com bubble. Although there were hundreds of new companies and the shape of the future was becoming clear, neither hardware, networks nor software were ready. As in the case of cars in 1900, it was a time for venture capitalists. But by 2010-15, most elements for technological progression were in place. Hence, investment in tech today is akin to buying car makers in 1920s, not speculating on start-ups in 1900.

Currencies are not like other assets. Perception = value

  • Money is anything that is commonly recognized as a medium of exchange and store of value. Most societies used seashells, rocks, severed skulls or metals. China invented paper money during Tang dynasty and with fits and starts, it gradually became the standard. Fiat money can’t be consumed and neither can it be used in production. Hence currencies do not have intrinsic value but rather trade on perception of value. As discussed (here), unlike fiat currencies, cryptos are more difficult to inflate, cost money & time to produce and are built around mathematics rather than fraud or politics. Hence, they already reflect the essence of money better than existing money. However, we are still closer to the 1900s than 1920s. There are serious challenges (e.g. depth, acceptance, custody etc). But cryptos & blockchain are the future

Comments

jmack Thu, 01/11/2018 - 23:56 Permalink

LOL, another bullshit article by socialist Tyler. Tang was not invented until the 1960's US moon shot program.  Tang dynasty, what horse shit.

 

     update:  It is well known fact that the first currency was invented by the poontang dynasty, which existed well before recorded history, and is still dominant today, most notably in the #metoo incarnation.

giovanni_f Mister Ponzi Fri, 01/12/2018 - 03:14 Permalink

Since every Tom Dick and Harry has now boarded the bc/cc train the number of lousy pieces on this matter has exploded. Reminds me the funny times of the dotcom bubble. bc/cc are here to stay but they are in no way a overall game changer.

I decided to sell yesterday after having come across a similar nonsensical piece of crap on bc/cc. Might be too early but who cares. Sayonara Bitcoin, the Wallstreet assholes successfully hijacked and killed you. Maybe Monero will survive. Fuck the rest, including Ethereum, Ripple, Dash, Iota, Cardano, Verge and all the other enrichment schemes.

In reply to by Mister Ponzi

quesnay Fri, 01/12/2018 - 00:10 Permalink

Show me don't tell me. It's the future, you say? Prove it. Tired about the endless talk about how awesome it is.

So far all I see a lot of people buying and HODLING and very little else.

die standing Fri, 01/12/2018 - 01:05 Permalink

there are no crypto currencies

there are no cars

there are only humans

which are but temporary expressions

just ask Henry Ford

oh..

but also there are cars

and there are crypto currencies

imagine.. the electromagnetic field must have seemed very strange in the 19th century

ease into the financial future by unshackling from Aristotelian logic, assimilating paradox and bootstrapping yourself to metaphysical money and mathematical connectivity

consciously engineer your own change

clearly you are self-selected for reading this.. 

otherwise you wouldn't be.. 

(but also you are not reading this)

 

 

 

Yellow_Snow Fri, 01/12/2018 - 02:29 Permalink

Good little piece Tyler's...

"... unlike fiat currencies, cryptos are more difficult to inflate, cost money & time to produce and are built around mathematics rather than fraud or politics. Hence, they already reflect the essence of money better than existing money... cryptos & blockchain are the future"

Sums things up nicely  !!!

mosfet Fri, 01/12/2018 - 03:39 Permalink

Crypto has one and only one attribute that will matter in the future.

It's the laziest form of monetary exchange one can conduct outside of the banking system.

None of this 'store of value' or 'safe haven' BS will matter when the very first 'First World' country enters hyperinflation.  All that will matter is whether you can trade your local devaluing currency for it, and back again to buy stuff from a smartphone.

That's it...Crypto is and will continue to have value because the masses are lazy.  Which crypto?  That's the hard question but my money's not on Bitcoin.

EconoIdiot Fri, 01/12/2018 - 04:02 Permalink

A global state of confusion, Brilliant.

lack of understanding; uncertainty.

"there seems to be some confusion about which system does what"

exceptionally clever or talented. "a brilliant young mathematician"

Go Figure.

salvatorem Fri, 01/12/2018 - 05:57 Permalink

Until a major country allows (or requires) its citizens to pay their taxes in cryptos, this "currency" will remain as nothing more than a commodity, and a commodity that has no useful purpose other than a means for avoiding legal or reportable transactions.  Comparing it to the history of the automobile is ridiculous.

swampmanlives Fri, 01/12/2018 - 08:32 Permalink

As long as everyone and their pet goldfish pump fiat cash into crypto, we can all get rich! What happens when all of us become millionaires though? Or perhaps, if crypto is the future, then early buys and holders will become trillionaires, and anyone who is unlucky enough to be born in the future will have missed out and will be poor motherfuckers. Crypto could lead to an even wider gap between the rich and poor.

g1n3k Fri, 01/12/2018 - 09:38 Permalink

Another bullshit crypto article, where the author is trying to convince his rational mind (and all the others) of all the fallacy (and wrong "investments") his more sane subconscious mind is fearing off.  It's not the technology that makes a currency, it never has been.

JibjeResearch Fri, 01/12/2018 - 12:31 Permalink

Blockchain is like the engine.  The evolution of cryptocurrencies will be like cars.  There will be about 100 useful blockchain networks (cryptos).  The rest of the cryptos are useless or duplication. 

 

Just like the current fiats, there are hundreds, but only about 10 are relevant.

 

The trick is to pick the right combination of cryptos. 

See you guys in the future with all of your richness.