Letter to followers
Artwork by Crayonsmell
Last year, I wrote about energy and the many ways we can compound it—or at least prevent it from leaking. I described my investments as akin to observing the horizon and seeing what waves the sea presents to us.
I spent a month in Hawaii, watching surfers near the pier, trying to understand the most promising approach. They are patient, knowing their energy is limited. Their goal is simply to find the best wave—one that offers them the greatest opportunity to have fun and showcase their skills.
Our society is dynamic. Means of communication are evolving, barriers are being dismantled, and new territories are emerging. The old adage “This time isn’t different” carries a stigma among investors, often signaling an euphoric moment destined to revert to the mean. However, I believe it’s the scale at which we observe reality that shapes our perception of change.
“This time is different” is frequently misused, but from the perspective of a human lifespan, time can indeed be different—not in absolute terms, but from the observer’s point of view.
New empires bring new challenges, new cultures, and new monetary systems.
Why does this happen? Because the old regime exploited central authority to its own detriment.
What Dalio overlooks in his analysis is the emergence of new territories. It may seem improbable, but we are witnessing the rise of the internet, its tribes, and its digital currencies—monetary systems with native bearer assets capable of transcending space and time while remaining linked to our physical world and its scarcity through a thermodynamic security system1.
I consider myself a psychohistorian. Readers familiar with Isaac Asimov’s works will recognize Hari Seldon, a central figure in his narratives. Psychohistorians analyze human behavior and, by formulating mathematical functions, attempt to forecast the future.
A good investor’s role parallels this approach; it’s insufficient to merely examine price-to-earnings ratios and purchase seemingly undervalued companies. In reality, an excess of money in the system distorts markets and influences participants’ perceptions. Empires rise and fall, leading to the emergence of new aristocracies and forms of governance.
“The metallic and economic deterioration of the solidus into the lowly sou illustrates the general rise of prices, and depreciation of currencies, through history, and suggests that thrift is a virtue which, like most others, must be practiced with discrimination.”
Will Durant, The Age of Faith – Byzantine Empire
Artwork by Crayonsmell
“Rather than remove your labor from a corrupt economy you should remove your money from a corrupt economy.”
Michael Saylor
To position yourself as a professional surfer, you must understand our species at scale—specifically, evolution and how everything is tied to this notion, and how incentives shape our perceptions.
Only this way can you see the waves coming and position yourself in the right place at the right moment.
Evolution implies adaptation. How can we adapt to a rapidly changing world?
- Understand Human Evolution: Recognize that humans are the most adaptive species to have walked the Earth, primarily due to our ability to develop ideas and build devices.
- Invention and Communication: While invention is a hallmark of Homo sapiens, its value is nullified if others are unaware of its existence or application.
- Coordination and Sharing: Beyond invention, our ability to coordinate, share ideas, and utilize tools for common goals is crucial.
- Protocols as Tools: We organize ourselves through protocols—instructions on behavior and tool usage—that transcend space and time.
However, these protocols can be both empowering and limiting. Myths and cults are intrinsic to human nature. People gather at Berkshire meetings and Bitcoin conferences just as they once did for pagan rituals, Christian churches, or political rallies.
Cults are powerful—they bootstrap knowledge, tools, and workforces. I learned almost everything I know about investing thanks to Buffett and invested in Berkshire; meanwhile, I had no problem realizing the value of Bitcoin as an asset.
“Do you want to have an easy life?
Then always stay with the herd and lose yourself in the herd.”
F Nietzsche
To achieve success, you must go beyond mere belief; you need to understand deeply.
Rise above the herd you analyze, transcending your species and their instincts.
You need to be able to withstand Buffett, Satoshi Nakamoto (Bitcoin), and also Sun Tzu (Alibaba) without becoming emotionally attached to one side or the other. Otherwise, you’re just being manipulated by some divine figure who has likely weaponized tools, ideas, or charisma to elevate themselves as the priest of a belief system.
The goal isn’t faithful believing; the goal is to understand the value of something from a societal level. Guess what modern divine figures, political and religious leaders use to communicate with the plebs? They use social media feeds—in other words, a way to speak directly with their followers through a smartphone feed orchestrated by a language model that is anything other than an abstraction, which shows us that reality has its advantages and its masters (someone said META? They literally own the distribution of the modern religious and political preachers; they sell stages—pick and shovel—to them).
But if you criticize something without investing the time to at least read a few books on the subject, you’re probably part of a cult that demonizes anything outside the tribe—anything foreign or strange in the eyes of the so-called superior judge.
Many people criticizing Bitcoin have never taken time to seriously understand it. Nobody forces you to invest or to learn about something, but if you want to enter the arena of opinion, at least take time to read a few books on the matter.
The reality is that functional human beings don’t change things; they just adapt and position themselves in the right place given the current situation. In other words, they analyze history from 10,000 feet and, instead of trying to change unbeatable forces, they just accept them and try to get as much as they can, leveraging the resources obtained to survive and thrive.
Now, it looks like the central part of my letter is simply to buy Bitcoin. The point is to challenge your ideas and your tribe—in other words, update your mental model of the world. I see many people just stuck to their value investing idea and suffering from heavy cognitive dissonance, realizing that the market is valuing something they hate.
That’s the problem: emotion has to be put outside the investing world, and I would say it has to be put outside anything meaningful you want to accomplish in your life.
“The superiority of man,”
Said Akbar
“Rests on the jewel of reason”
We are superior monkeys; we are rational; we are inventors. Therefore, we should behave accordingly, transcending tribal instincts. Understand our nature, but strive to transcend the need for a superior judge, be it Buffett or Satoshi.
As psychohistorians, we analyze data to comprehend societal evolution. The powerful movement of the open-source community exemplifies a collective intelligence—a hive mind—that iteratively refines evolutionary attempts, such as the development of Bitcoin, to adapt to new environments. This fascinates me about our species and guides how I invest my time and resources.
Bitcoin: The Nation States Epoch
Collaborative Genesis: Bitcoin’s emergence resulted from the concerted efforts of numerous scientists and developers over decades, culminating in a digital-native monetary system that appeared precisely when needed.
The research extended beyond purely technological and mathematical efforts. Nick Szabo, developer of BitGold—a precursor to Bitcoin—delves into deep anthropological concepts related to values and the evolution of means of exchange throughout human history.
“Collectibles augmented our large brains and language as solutions to the Prisoner’s Dilemma that keeps almost all animals from cooperating via delayed reciprocation with nonkin.”
Nick Szabo
https://nakamotoinstitute.org/library/shelling-out
I want to point out an old tweet I shared some years ago about this.
The notion of value is challenging, but as you can see, behind Bitcoin, there is substantial value: the opportunity to unlock a trustless settlement layer for transactions and to build open-source projects like Lightning channels on top of it.
In the meantime, here we are—the nation-state adoption epoch has begun.
As has occurred many times in history, the implicit trust in fiat currencies as stores of value is deteriorating, along with our faith in the institutions backing them. Consequently, other societies are seeking more reliable alternatives, and a transparent code that everyone can verify seems to be a promising candidate for enforcing laws in a fair and trustworthy manner.
Don’t be misled by these memecoins and altcoins; instead, remain open-minded and strive to understand what Bitcoin truly represents. A good starting point is “Mastering Bitcoin” by Andreas Antonopoulos.
What about altcoins? Forget about them; technologically speaking, they are just expensive spreadsheets keeping track of accounting for useless digital tokens. They don’t share the divine origin of Bitcoin; we don’t know who invented it, and that gives it an aura of mysticism and untouchability.
Instead, stablecoins serve as a means of exchange and a bridge to a new monetary system by exporting digitized USD, printing it, and using it to buy hard assets.
As I wrote it almost five years ago.
“A smart contract can literally vaporize the financial and bureaucratic complexity of our times, allowing a plumber in Mumbai to make reliable contracts with his customers without being backed by the institutions.”
dscompounding, 2020, Cryptocurrency
Meta
Meta’s platforms are designed to be highly engaging, and the company’s ability to deploy artificial intelligence (AI) across a vast user base serves as its competitive advantage. By open-sourcing their models, Meta has commoditized AI, setting industry standards and leveraging their extensive network to provide users with the latest advancements in large language models (LLMs). Notably, Meta released Llama 3.1, an open-source AI model that outperforms many competitors.
The investment thesis remains consistent with previous years, as many anticipated AI catalysts have materialized. Meta’s business model is robust, generating substantial revenue, and Mark Zuckerberg exemplifies the qualities of an ‘Outsider’ founder and CEO. Allowing the investment to compound and grow is a prudent strategy; should the stock become undervalued in the future, it would present a favorable opportunity to allocate additional capital.
Alibaba
I’m long-term oriented; in an impatient world, I’ve trained myself to be a contrarian at heart. I believe Alibaba is a great business with numerous opportunities, and they are working diligently to remain competitive. Qwen is among the best AI models available. In many respects, Alibaba mirrors Meta in terms of AI and infrastructure. The current management is actively striving to unlock value by repurchasing substantial amounts of shares, and this, coupled with their ability to generate free cash flow, forms the core of my investment thesis. Given my background in computer science, I’m closely monitoring the evolution of open-source language models. It seems to me that many are overlooking the opportunity to invest in this gem in plain sight, much like the initial undervaluation of Meta.
Berkshire
Given that I can position myself between Buffett and Satoshi, I remain a proud shareholder of Berkshire Hathaway. From the outset, my goal has been to heavily invest in as few assets as possible and let them compound over time. If you’ve followed me for some time, you’re aware that I’ve authored numerous articles on value investing and accounting. This background led me to recognize early on that Berkshire would be one of my long-term holdings. Over the years, Buffett has curated an impressive portfolio of exceptional businesses that are foundational to the U.S. economy. I trust Buffett to continue his proven investment approach.
Microstrategy
My initial investment in MicroStrategy was well-timed, aligning with my thesis on leveraging Bitcoin exposure. Since then, I’ve allowed Michael Saylor to execute his strategy. I stay informed about the various financial products they offer and am keen to learn more about financial engineering. Early in my investment journey, I was wary of the term “financial engineering,” but I’ve chosen to explore its complexities from a secure vantage point, considering my favorable entry point and my belief in Bitcoin’s strong tailwinds. I purchased MicroStrategy shares during Bitcoin’s downturn, observing that many in the financial community, including figures like Bloomstran and Taleb, were skeptical of Saylor’s approach. Time has proven Saylor’s strategy effective; not only did they survive, but they also thrived, validating the market’s confidence in him. Some Bitcoin maximalists argue that Saylor is attempting to shift Bitcoin’s narrative to emphasize its role as a financial asset over its original intent as a peer-to-peer payment system. This perspective resonates with a sentiment expressed by Hal Finney, one of Bitcoin’s earliest developers, who noted the potential for a peer-to-peer electronic cash system to facilitate direct online payments without relying on financial institutions.
“Most Bitcoin transactions will occur between banks, to settle net transfers.” – Hal Finney Dec. 2010.
It’s important to note that Hal Finney was not aware of the potential for creating payment channels, as the Lightning Network had not yet been developed. However, it’s also true that we cannot definitively assess whether the Lightning Network can currently scale to a global level. Even if it can, it’s unlikely that major powers would adopt it as their primary payment system. Nonetheless, the concept of a digital form of hard money, akin to gold, is more palatable to governments, as it doesn’t directly challenge their sovereignty. This approach lays the foundation for a base protocol for value that is thermodynamically sound and has the potential to underpin various forms of currency in the future.
Coinbase
The first public company specializing in the crypto economy has offered secure Bitcoin custody solutions since its inception, serving as a trusted partner for institutions that want to own crypto assets but lack the secure infrastructure or expertise to do so safely.
Their core business revolves around operating a crypto exchange, while their Layer 2 solutions on Base show particular promise for an industry still striving to demonstrate real-world utility.
Let me clarify my perspective:
When I first explored the crypto ecosystem years ago, I was optimistic about Ethereum’s potential. Over time, however, I realized its ecosystem often prioritizes speculative ventures—casino-style platforms and exploitative systems—over meaningful innovation.
Bitcoin, by contrast, is a robust proof-of-work protocol that not only serves as a store of value but also provides a settlement layer for Layer 2 payment solutions like the Lightning Network. I’ve been delving deeply into Bitcoin’s capabilities, inspired by Andreas Antonopoulos’ foundational work in Mastering the Lightning Network.
Disney
The U.S. political landscape has grown increasingly polarized in recent years, with social policies like wokeness, DEI (Diversity, Equity, and Inclusion), and cultural narratives undergoing dramatic shifts under new administrations. Disney, for instance, has heavily aligned itself with progressive social initiatives, investing billions in inclusivity-themed content and political activism.
This hyper-politicization has made it challenging to parse corporate motivations objectively—nearly every corporate decision became a partisan flashpoint, often weaponized to fuel division between ideological “tribes.”
Yet despite these cultural headwinds, Disney’s fundamentals remain compelling. Its unparalleled intellectual property (Marvel, Star Wars, Pixar), theme park dominance, and cross-generational brand loyalty still merit consideration for long-term investors. That said, I’m mindful of shifting media consumption patterns: audiences increasingly gravitate toward independent creators on YouTube, TikTok, and streaming platforms, which could pressure traditional entertainment giants.
Baidu
I hold a small position in Baidu but am considering swapping it for Tencent. After planning a trip to China, I’ve realized how deeply ingrained Tencent’s ecosystem is in daily life—its apps (WeChat, Alipay) are essential for everything from payments to travel logistics. For tourists wanting a seamless experience in China, Tencent’s dominance feels almost inescapable.
Petrobras
This Brazilian energy giant delivers massive, reliable dividends—every payout so far has landed as promised. Its undervalued reserves and infrastructure assets trade at a discount due to political risks, but I’m indifferent to the noise. Both the government and I enjoy those hefty dividends, which are comfortably backed by the company’s free cash flow.
Patience and Volatility
After a decade of studying markets and companies, I’ve realized—as Warren Buffett often emphasizes—that investing ultimately hinges on patience and temperament. True wealth-building is a slow, deliberate process. It requires courage not just to wait, but to endure volatility: markets will test your resolve with gut-wrenching swings, even if your thesis remains intact.
In today’s hyper-connected, dopamine-driven world, these traits are rare. Cultivate them deliberately:
- Lifestyle adjustments: Prioritize sleep, reduce caffeine, and adopt habits (meditation, exercise) that steady your mindset.
- Intellectual rigor: Study assets deeply—know their intrinsic value so you can act decisively when volatility creates opportunity.
- Buffett’s mantra: “Be fearful when others are greedy, and greedy when others are fearful.” Use market panic as a tool.
Patience isn’t passive waiting—it’s the discipline to ignore noise and act only when odds favor you.
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Bitcoin’s thermodynamic security system relies on proof-of-work (PoW), where miners expend real-world energy to solve cryptographic puzzles, ensuring network integrity, resistance to attacks, and decentralization by converting electricity into immutable ledger security.
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