Stories about the future(ˈfyo͞oCHər)

Stories about the future(ˈfyo͞oCHər)

By John Gordon

Whenever we invest(inˈvest) in something, we’re trying to predict(priˈdikt) the future. We’re telling ourselves a story that we think or hope will come true.

If I put money in a US Treasury(ˈtreZHərē) bond(bond), one story I might be telling myself is that the US government will pay me back with interest(ˈint(ə)rist) when the bond is due(d(y)o͞o), and that they US dollar is likely to remain(riˈmān) relatively(ˈrelətivlē) stable through the maturity(məˈCHo͝oritē,məˈt(y)o͝or-) of the bond.

If I put money in bitcoin(ˈbitˌkoin), one story I might be telling myself is that I think bitcoin is becoming “digital(ˈdijitl) gold”, and has a lot of room to appreciate(əˈprēSHēˌāt). Another story I might be telling myself is that bitcoin is likely to become a world reserve(riˈzərv) currency(ˈkə-rənsē,ˈkərənsē). Another story might be that I don’t know enough(iˈnəf), but I feel that there is enough of a chance that one of the above might happen that I want to allocate(ˈaləˌkāt) a small percentage(pərˈsentij) of my assets(ˈaset) to bitcoin.

So our investment decisions are often based on our assessments(əˈsesmənt) of the probabilities(ˌpräbəˈbilətē) of different futures.

But it’s hard to predict(priˈdikt) the future.

I have a very clear memory from the late fall of 1999, when I was a freshman(ˈfreSHmən) in college(ˈkälij), of realizing(ˈrē(ə)ˌlīz) that all of my friends were buying Christmas presents(priˈzent,ˈprezənt) on Amazon(-zən,ˈaməˌzän). Hmm… I thought, this is so clearly the future. I should buy some Amazon stock(stäk).

I didn’t, of course(kôrs), and periodically(ˌpi(ə)rēˈädikəl) over the last 20 years I’ve looked back and thought that that was a time that I missed a good investment because I didn’t act on my intuition(ˌint(y)o͞oˈiSHən) (or even my “special knowledge” as a college student in 1998).

But then the other day I looked at Amazon’s price chart, and I realized that I could have bought Amazon in 2008 for about the same price that I could have bought it for in 1998. So, even though my story was right, I would likely have had to have been very patient to get a good return.

In some ways more interesting than the question of whether I should have bought Amazon in 1998 is whether I would have been able to hold it through 10 years of middling performance. While I could see pretty(ˈpritē) clearly in 1998 that we were going to be buying a lot more things online, I certainly(ˈsərtnlē) couldn’t have predicted that Amazon would become what it has become today, and I don’t know if I would have had the patience to wait.

For many of us who are bullish(ˈbo͝oliSH) on bitcoin and other cryptocurrencies(ˈkriptō ˈkə-rənsē,ˈkərənsē), we see a future in which value is transferred using blockchains(CHān) (or similar(ˈsimələr) applications of cryptography(kripˈtägrəfē)). Just like it seemed clear to college students in 1998 that it made sense(sens) to buy books online, it seems clear to many who have transacted(-ˈzakt,tranˈsakt) in cryptocurrency that this method(ˈmeTHəd) of transacting, and this method of storing value, is the future.

What’s less clear, and much more difficult to predict, is exactly how that future will play out, and how long it will take. What does it mean that bitcoin was first? How will cryptocurrency and blockchain applications interact with existing institutions and infrastructure(ˈinfrəˌstrəkCHər)?

The truth is, no one knows for sure the answers to these questions (and many others). All we can do is make the best judgements we can about the probabilities(ˌpräbəˈbilətē) of different futures, continually(kənˈtinyo͞oəlē) adjust our judgments based on new information and learning, and make investment decisions accordingly.

https://medium.com/@jagordon/stories-about-the-future-a01d5502e130