back to article Warren Buffett says cryptocurrency attracts charlatans, AI won’t change investing

Famed investors Warren Buffett and Charlie Munger have strongly criticised cryptocurrencies and machine intelligence at the annual shareholder meeting of Berkshire Hathaway, the holding company they serve as chair and vice-chair respectively. Asked about AI’s potential to improve capital allocation, Munger said “ I think there …

  1. Oengus
    Coffee/keyboard

    ROFLMAO

    Someone else said they are trading turds and you decided I just can’t be left out.

    I wonder what the reaction to this statement was in the shareholder meeting...

    1. Simon Sharwood, Reg APAC Editor (Written by Reg staff)

      Re: ROFLMAO

      Appreciative laughter.

      1. Anonymous Coward
        Anonymous Coward

        Re: ROFLMAO

        I bet. I went to the meeting last year, and if you ever get the opportunity to go (just buy one share of BH and you get an invite), you should. There's nothing quite like it. Part investor event, part carnival. The movie before the meeting is funny as hell - lots of celebs, usually having fun with, and at the expense of, Warren and Charlie, and those two sit there for HOURS answering shareholder and journalist questions. So down-to-earth, so refreshing to hear them rail against "magic" formulas and expensive, useless, "expert" investment advice, and very little spin. They just tell everyone what they're thinking, and talk about learning from mistakes. It's a day well spent.

      2. handleoclast

        Re: ROFLMAO

        If tulip bulbs could shit, they would shit cryptocurrencies.

      3. BillG
        FAIL

        Re: ROFLMAO

        “Cryptocurrencies will come to a bad ending because nothing is being produced in the way of value from an asset. There is also a problem that it draws in a lot of charlatans who are trying to create exchanges or whatever it may be.”

        This is why carbon credits exchanges failed.

    2. katrinab Silver badge
      WTF?

      Re: ROFLMAO

      The first thing I thought when I read that was, I wonder if there is a TurdCoin.

      A quick Google later, of course there is.

      1. handleoclast

        Re: ROFLMAO

        @katrinab

        A quick Google later, of course there is.

        It appears there is also a tulip coin. I hope that it, as well as turdcoin, are satirical. But one never knows: I just found this.

  2. Stork

    I do like that they admit to (some) mistakes.

    See title

    1. Anonymous Coward
      Anonymous Coward

      Re: I do like that they admit to (some) mistakes.

      Which is actually refreshing. Most corner office 'anal'ists on Wall St would never admit to making a mistake.

      These people take a long term view which means that most times they come out ahead. Millisecond trades are not for them. We normal people can't do buy/sell in seconds to make a few quid. We have to take a longer view.

    2. asdf

      Re: I do like that they admit to (some) mistakes.

      When you have generated as much wealth as they have over such a long period easier to cop to mistakes. They are long past having to pump up and sell their brand (name, company, etc) day to day.

      1. strum

        Re: I do like that they admit to (some) mistakes.

        >When you have generated as much wealth as they have

        I admire WB & CM as much as anyone - but they haven't generated any wealth. That's like a schooner captain claiming to have invented wind.

  3. Ken Moorhouse Silver badge

    Investment Formulae can work...

    ...but only in the short term. Once everyone uses that technique then a contrarian strategy would serve you better, or just stick to fundamental valuation principles for the long haul - totally ignoring AI altogether. AI has to have a portfolio of strategies with random selection of choice built in which prevent "lock-in" which would otherwise ultimately be the death of that strategy. AI cannot therefore give a specific person an advantage (in a similar way to the way that evolution works). Following an AI strategy to the letter might cause a severe loss for this reason, but on average the strategy for most followers might be gainful. This has already been demonstrated with automated trading rules which have caused mayhem on the big Stock Exchanges.

    1. julian.smith

      Re: Investment Formulae can work...

      "Investment Formulae can work..."

      It sure can .... just look at Warren and Charlie

      "...but only in the short term"

      Er no, just look at Warren and Charlie - their "formulae" works in the long term

      Perhaps, if you don't know what you are talking about, it's better to STFU

      1. Ken Moorhouse Silver badge

        Re: Perhaps, if you don't know what you are talking about, it's better to STFU

        Eh... If you had read ALL of my post, you might have seen this:-

        "or just stick to fundamental valuation principles for the long haul - totally ignoring AI altogether."

        I think this is the "formula" Buffett tends to find useful, which is based on common sense, rather than the magic recipe stuff dreamed up by tipsters.

        P.S. It was NOT me that downvoted you.

      2. BeardyOldUnixGit

        Re: Investment Formulae can work...

        Berkshire Hathaway owns most of the big re-insurers. This means they have people queueing up to give them money in the form of premiums, resulting in a lower cost-of-funds than everyone else. They don't *need* a magic formula because that lower cost-of-funds means they can make the same investments as everyone else and still make more profit.

    2. This post has been deleted by its author

  4. John Smith 19 Gold badge
    Thumb Up

    " “You are missing a lot of very remunerative fee-earning twaddle.”"

    That does sound about right.

    Likewise the very expensive to enter automated man in the middle attacks of "High Frequency" trading.

  5. redpawn Silver badge

    This reminds me of POGs

    the paper milk caps which were used for gaming purposes many years ago. They became collectors items. Adults and children bought into collecting limited edition cardboard discs with hopes of cashing in. Shops opened and sales expanded exponentially. But since they were intrinsically useless and new supplies could be created by anyone, though not exactly the same as the next entrepreneur's, the market crashed.

  6. amanfromMars 1 Silver badge

    Ostrich/head/sand/buried in.....

    Asked about AI’s potential to improve capital allocation, Munger said “ I think there is more hype in that field [AI] than there is achievement. I do not think the world will be changed that much by machine intelligence.”

    Munger having a I did not have sexual relations with that woman, Miss Lewinsky. type moment/breakdown.

    And that makes Berkshire Hathaway Inc systemically vulnerable to markets reorganisation/AI alignment.

    1. julian.smith

      Re: Ostrich/head/sand/buried in.....

      @amanfromMars 1

      "Munger having a I did not have sexual relations with that woman, Miss Lewinsky. type moment/breakdown."

      Er no, amanfromMars 1 having:

      a) a brain snap

      b) an, I don't understand but I'll comment anyway, moment

      c) both of the above

      Warren and Charlie have got serious form in capital allocation - it's what they do.

      They've forgotten more about capital markets than you'll ever know.

      They also have very robust crap detectors.

      Perhaps you could post a brief outline of your capabilities in capital markets

      I suggest that you go all in on "markets reorganisation/AI alignment", whatever that means.

      Drop us a line when your net worth exceeds USD 1 billion

      1. amanfromMars 1 Silver badge

        Re: Ostrich/head/sand/buried in.....

        Perhaps you could post a brief outline of your capabilities in capital markets ... julian.smith

        Happy to oblige, j.s

        Greater IntelAIgent Game Players.... with Heavenly Friends, which can All too Easily become Unwelcome Cosmic Fiends.

        The AIMission is to Follow and Driver the Immaculate Source Provision .... and from Heavenly Cores, Rewarded with Instant TransPortation to the Virtually Real Domain of True Kings and Queens ... Trailing Right Royal Blood Lines to Virtual Ecstasy Drivering AI Nirvana.

        That's as far as I discovered down that parallel course of another source. And if there be Two there be Many Other Sources Practising Skills to be Heard and Heeded with LOVE ACTioN

        Capture and Enjoy Live LOVE ACTioNs... with a Simpler Faster Tracked Goods Experiencing the Turned On Being and Quite Heavenly and Demonstrably So in Any Naked Houses of the Perfumed Garden.

        I would rate that as a Case for/of COSMIC Addiction because of NEUKlearer HyperRadioProACTive IT, ... and that's only the Start of the Beginning Again. What are your Plans to Make Futures Different, and from the likes of here be able to launch AISupportShips.

        And it is definitely something the likes of a Berkshire Hathaway Inc.should be all over, SMARTR IT Snapping up the Future Wholesale and Contracted to Provide Continuity of Progress with Almighty Secured Protection Streaming SMARTR IT Supply of Alternate Realities for, well...... I was thinking that was just what Charlie and Warren should be seeding with their chickenfeed/billions.

        1. gnasher729 Silver badge

          Re: Ostrich/head/sand/buried in.....

          The Martian: Artificial maybe, but certainly no intelligence.

  7. Chris G Silver badge

    I think AI does have the potential to improve capital allocation.

    Just not today, tomorrow or quite a lot of the following days/years.

    1. Bob Ajob

      Capital allocation

      I'm not sure if I even understand what that means but real, general and strong AI could introduce far more important concerns, such as the rapid replacement of humanity with whatever comes next. It may never happen but if it does it could accelerate much faster than anticipated. Machine learning is only a small part of AI and is only enjoying a mini boom due to clever folks designing software tools to exploit the parallelism of GPUs. My expectation is that real, general AI is more likely to start out of the labs doing nanotech research on self-assembling structures (or artificial life by another name).

    2. julian.smith

      "I think AI does have the potential to improve capital allocation"

      Paraphrasing Charles de Gaulle (on Brazil) "AI is the capital allocation of the future and always will be"

    3. vtcodger Silver badge

      There's a possibility that if AI actually did improve capital allocation significantly (whatever that means), that could be bad for financial markets rather than good. If everyone invested rationally wouldn't the real rate of return on "good" investments likely sag to some quite low value?

      1. Ken Moorhouse Silver badge

        Re: If everyone invested rationally

        What investors are doing is to forecast the future. Everyone's perspective on the future is different. Someone who likes to take risks might put their money into Musk's ventures. Opportunity for growth could be out of this world (sorry), but conversely the risks are immensely high too. Someone who wants a steady income with low risk might pile on into the National Grid (sorry), but is that really such a safe investment? In fundamental terms NG might be considered overvalued, and if Corbyn gets elected then there might be a rerate of the shares. At the end of the day even rational choices become fraught with complexity. If everyone's perspective were the same then indeed there would be no arbitrage situations arising and the profit opportunities would be small, meaning that gilts/bonds might be just as effective, with less risk.

  8. LDS Silver badge

    Does AI have the potential to improve capital allocation?

    No, until someone devise a bullshit detector, and bakes it into AI.

    I read a few days ago about the big name investors who were deceived by Theranos. I guess any "AI" would have been skewed by the hype everywhere to invest into Theranos as well...

    I guess this old guys didn't...

    PS: IMHO a BS detector would be the greatest advance in technology - but I guess many companies would buy the technology just to bury it as deep as they could.

  9. c1ue

    Berkshire Hathaway/Buffet/Munger doesn't invest the same way as even your typical hedge fund manager.

    For one thing, they are using free money. Unlike just about every other non-government in the world, BRK is investing free money via the enormous float from their insurance operations.

    And also unlike just about every other non-government in the world, BRK's only objective is return *of* investment first, followed by return *on* investment.

    Since they don't have a time limit (i.e. annual returns to compare to other hedge fund/mutual fund/whatever managers), they invest for 20+ year time frames. Nobody else does that.

    Combine enormous scale with enormous time frames, you get a fundamentally different investment framework. Kudos to them for executing very well since other insurance companies are not able to generate even 1/4 the annual returns irregardless of time frame.

  10. Nolveys
    Windows

    Good Ol' Buffett

    He brings such decency and integrity to selling poor and foolish people predatory mortgages on mobile homes.

    1. Ken Moorhouse Silver badge

      Re: predatory mortgages

      Thank you for posting that insight.

  11. emmanuel goldstein

    In fact Munger went even further, even more bat-shit crazy in his hate for Bitcoin:

    “Suppose you could make a lot of money trading freshly harvested baby brains. Would you do it?” Munger asked.

    “To me bitcoin is almost as bad.”

    The more the likes of Buffet and Munger display this kind of weird, pathological hatred of crypto, the more I think it may be the future.

    1. gnasher729 Silver badge

      Completely illogical. If as you say Buffet and Mumger are weird and pathological, then you can ignore what they say - but not take it as evidence of anything.

      In reality, they are right. You are in about the same state of mind as all the Albanians who lost their money to pyramid schemes.

      1. emmanuel goldstein

        Except I've made enough money from investing early in Bitcoin that I am financially secure for life. It's not for everyone though, I get that.

  12. Pascal Monett Silver badge

    "Asked about AI’s potential..."

    Artificial Intelligence likely has immense potential.

    We don't have AI though, and we won't for many, many years.

    What we have now is statistical analysis and, as impressive as that may be, it doesn't hold a candle to true AI.

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