I’ll Take That

Building wealth is the easy part, securing and storing it for use by subsequent generations is very difficult.

Half a millennium ago, a wealthy family needed a private army to secure its land and wealth. If you couldn’t project violence in the defence of your assets, they would be forcibly taken by an opportunistic person.

As civilisations evolved and we entered the age of the nation state, society agreed that a centralised government should have a legal license to kill in order to secure the interests of property owners. Regardless of the economic “ism” a government claims to practice, the goal is the same. Protect a small group of asset holders against the hoard of commoners who might like to improve their lot at the expense of the elites.

Today the richest humans don’t command standing armies, and their holdings include financial and real assets. Stock and bond ownership relies on a central depository to affirm that you indeed are the owner. Government deed offices proclaim a piece of land or real estate is yours.

You are rich as long as the government allows you to be. The trappings of wealth can be taken at a whim. Should your actions upset a powerful state actor, your bank accounts will be frozen, and assets confiscated through the courts.

The recent Saudi corruption drive is case and point. Mohammad bin Salman (MBS), the crown prince of Saudi Arabia, is on a mission to wean the country off of oil. This is harder said than done, especially since the general population only complies because of generous government handouts. To beef up the government coffers, MBS did what all governments do, go after certain rich people.

MBS certainly wouldn’t subject himself to austerity. Last year he purchased a yacht worth over $500 million while at the same time slashing government spending.

Overnight some of the country’s richest members were herded to the Ritz Carlton, and placed under arrest owing to “corruption” charges. The most famous billionaire ensnared was Prince Alwaleed bin Talal. This Price is a world famous investor and has large stakes in some of the biggest tech darlings globally.

After a few days cooped up in the Ritz, MBS presented his chattel with a choice. Liquidate your assets and give the Saudi government up to 70%, or stay locked up. Even if a large percentage of your wealth is held offshore, due to information sharing between governments, MBS likely knows where the biggest nuggets are held. If he doesn’t think you have been forthcoming enough with the true state of your offshore wealth, well the Yemeni front line is awful fun these days.

Bitcoin presents a different way to secure wealth. Instead of trusting a government staffed with capricious humans, holders of Bitcoin trust cryptography and a decentralised network of profit motivated miners.

Bitcoin is less than a decade old, and is still very much an experiment. But if you possess a sum of wealth, it is prudent to diversify the networks used to secure it. Many people believe if they follow the “law”, they will be alright. However, laws change to serve the growth and power of the government writing them.

The government failures in Venezuela and Zimbabwe illustrate that in times of crisis Bitcoin can be used to grease the wheels of commerce. Unfortunately for most, it takes a time of crisis to elucidate the fatal flaws of a particular economic system. Only then will people take concrete actions, which only moments ago, were diametrically opposed to their belief system. At that point it’s too late.