Wrong on Rat Poison, Right on Reputation

Warren Buffett needs little introduction. His multi-decade success as an investor has rightly earned him exalted status. But both Buffett and Berkshire Hathaway vice chairman Charlie Munger are no fans of crypto.

Commenting recently at the Berkshire Hathaway annual shareholders meeting, Buffett claimed he would “not buy all the bitcoin in the world for $25”, and in 2018 said “bitcoin is probably rat poison squared”. And Munger went a step further to compare crypto to a venereal disease. How charming.

No doubt the last few months of steep declines in crypto markets, and more recently the spectacular implosion of UST, will have done nothing to endear the likes of Buffett & Co to crypto.

I happen to think that Buffett is spectacularly wrong on crypto, and as someone who has read every single one of his letters to shareholders dating back to 1965 I find his acerbic and total dismissal of crypto hard to digest (albeit unsurprising).

But Buffett’s views on reputation remain as pertinent today as ever, and all those busy building crypto projects and businesses today should at least heed his advice here.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently” he once said.

100% correct.

Building a sound reputation in the crypto sector should be seen as a deliberate, long-term and painstaking process. And if crypto is going to truly achieve its wide-reaching and extraordinary potential, then we all have a responsibility to articulate the sector’s long-term relevance and value in a way that is truly accessible and understandable. This is even more important as crypto winter sets in.

Not only that, there needs to be a much more active focus on managing reputational risks. The reality is that for most crypto companies today there is a massive imbalance of promotion over protection. Far too little tends to be done to guard against that five minutes that can destroy reputation and an entity’s long-term chance of success.

People will be forgiven for ignoring Buffett on crypto, but ignore his advice on reputation at your peril.

[This article was originally published in the June edition of Due Diligence Matters by perfORM].