Disappointingly, Howard Marks' glib dismissal of Bitcoin as 'not real' misses the mark by hundreds of years. A competitive blunder on his part? Probably, as a new generation of money managers that understands crypto will attract a majority of new capital flowing into funds, challenging groups like Oaktree to stay relevant, unless they adapt to the new crypto reality.
Money is catching up to the technological trends transforming all aspects of society and business; entertainment, insurance, health-care, gaming, leisure, retail - all commercial and social verticals are going digital - including money itself. The mandate given to all corporations, from 'C-Suites,’ shareholders, and stake holders is 'go digital’ - and in 2017, eight years since Bitcoin first appeared, this means crypto.
Some context: Twenty years ago, the economy began transitioning dramatically. Costs slipped down the asymptotic cost-slope to zero - as prices for bandwidth, processing, and digital storage plunged.
Bitcoin's 'triple entry' bookkeeping (every transaction is immutably, self-audited via the blockchain every few minutes) taps into this asymptotic trend and in so doing, reinvents money itself. Not since the switch from Gold to paper during medieval times have we seen a change of this magnitude. A new wave of monetary theory, implementation, and money management is taking over. Bankers, lawyers, and money mangers are being ‘disintermediated.’
Paradigms shift, some are left behind
Bitcoin's revolution: an impossible-to-counterfeit digital store of value that can be used as money, that has no sovereign, or central bank involved, that can be sent anywhere instantly at virtually no cost, is irresistible. Anyone who uses it is converted. Denying it’s superiority as money is like denying electric light bulbs will ever be popular or that the internet is more than just a fad (as many in LA told me in 1995).
Firms like Oaktree, if they stick to their digital-denial, will be one of the losers - because having no exposure to an asset class that is climbing by thousands of percentage points - favored by America’s biggest demographic group, Millennials, will result in a trail of redemptions and fatal drawdowns of AUM (Assets Under Management).
Everyone is free to chart an unprofitable course, and clients are free to follow or abandon, but what should annoy everyone is the supercilious tone of Howard Marks’ comments regarding Bitcoin. You get the feeling that he feels the performance of legacy funds like his was NOT the direct result of free, fiat gifts from central bankers.
Does he really think that a Fed-engineered (and government assisted) alpha-boosting heist by the finance industry of hundreds of billions of dollars from pension accounts and savings accounts via financial repression amounts to financial acuity? Does he really think that the government’s era-defining reliquefication of serial financial-fraudsters on Wall St. (the so-called ‘bailout’), resulting in massive insider dealing and hundreds of billions in morally hazardous profits, constitutes proper fiduciary responsibility? #LOL
Legacy players like Oaktree and Howard Marks would like to thwart their new competitor Bitcoin’s ability to bank the unbanked, raise the incomes of those receiving remittances, lower the cost of venture capital, and democratize equity participation in innovation - to continue their rentier ways. We must resist.
We must continue to educate the masses and encourage savings in Bitcoin to truly drain the kleptocratic swamp ruling our financial system.