Bitcoin for Executives
This is a short overview for senior executives, c-suite and board members of some key trends and concepts relating to Bitcoin that will help you remain accountable while identifying bullshit.
Knowing a little about the few things most likely to impact your organisation may save you future embarrassment. Here are three to keep on your radar.
Hospitals, universities, airports, local governments. Basically any critical service or infrastructure with aging IT systems are now targets for ransomware attacks. If your organisation doesn’t fall into one of these categories, you should still consider if you require access to any stored data for the continuation of your business. Yes, I know, that covers pretty much every business.
What Bitcoin did was create digital money that can transacted pseudonymously. This means that there is now a clear way to monetise data vulnerabilities by holding it for ransom or threatening to leak it. Backing up and securing your data has never been more important. Failing to do so has never been more costly.
In simple terms- have some kind of a plan. Even if it’s just a copy of a similar organisation’s plan. You’ll need to be able to prove to employees and shareholders that this was on your radar and you took actual steps to prepare including updating insurance policies. There are lots of great checklists, even if you don’t understand the technical bits, circulating sample checklists (like this, this or this) will help gather feedback to narrow down what parts are relevant to your organisation.
Read about cases of ransomware attacks (here, here and here) so that you’ll be able to recognise when you’re under attack or having your system compromised. There is a crucial window of time in which the damage gets exponentially worse. Every minute of delayed action costs you dearly. They could be the most expensive minutes of your career.
On August 11, 2020 a publicly-traded billion-dollar company announced it was adopting bitcoin as its primary treasury reserve asset and had purchased 21,454 bitcoins at a total cost of $250M. On August 12, 2020 hundreds of treasury committees in boardrooms across the world were talking about it.
Bitcoin exists because government fiat currencies are no longer trusted to preserve their value over the long-tern. If you hold a cash balance, you now have to consider how to protect its purchasing power in the face of central bank money printing and interest rates that are trending negative. As CEO, Michael Saylor, pointed out- the decision was “driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks.”
What MicroStrategy (Nasdaq: MSTR) did has implications for every corporate board. If bitcoin appreciates significantly over cash in the next few years there will certainly be shareholders making their disappointment known to Boards that held cash reserves long-term. In the past it was permissible to say that Bitcoin was a toy used by drug dealers. But that won’t cut it today. There are now registered financial institutions offering insured custody solutions, there’s regulatory clarity from tax authorities, and there are accountants and lawyers who specialise in digital assets like Bitcoin. And now, with the MicroStrategy announcement, the career risk has well and truly been removed.
Though, let’s be real, buying bitcoin on your balance sheet is definitely not a decision to take lightly and it isn’t going to suit 90% of organisations. Firstly, MicroStrategy spent months deliberating the capital allocation strategy as explained in their announcement. Secondly, Saylor is no stranger to technological innovation. He wrote The Mobile Wave: How Mobile Intelligence Will Change Everything in 2012, has over 30 patents to his name, graduated from MIT and founded Alarm.com (NASDAQ: ALRM) valued at $3B. It’s safe to say few people would be better positioned to understand Bitcoin and how it fits into the overall strategy of a corporate treasury. Fewer still will have the internal voting power to take an action like buying up 0.1% of the entire bitcoin supply.
The takeaway is that Bitcoin has been around for over 10 years and grown to $200B+. It’s simply no longer acceptable for capital allocators not to know something about it. Ask most Millennials or Gen Z’ers. They intuitively understanding the value proposition of scarce, friction-less digital value and they (now) buy shares.
Enterprise Snake Oil
Would you have wanted to be the first company ever to adopt a CRM? It might sound like a huge competitive advantage but none of the kinks would have been worked out and clear use cases would yet to be established. You’d have to spend time writing technical manuals and running training workshops (because they don’t exist yet). You’d also need to have very loyal and patient clients that don’t mind being accidentally spammed or having their data leaked when bugs or human error inevitably arise in the early days.
Unless your brand and culture is based around R&D, you probably can’t afford to sink your budget into trying to pioneer fundamental technological shifts in database architecture.
Q: But how do I show that I’m a valuable leader driving my organisation forward?
A: By being patient, methodical, observant and long-term oriented.
On ‘adopting blockchain technology’: If the consultant trying to sell you cannot explain what they mean by ‘blockchain technology’ in a way that you can easily understand, then the chance that they’re going to solve a problem for you is zero. I’m all for running lots of small scale experiments, with limited downside, with the understanding that 90% will fail and 10% will find a better way of doing things. This, however, would be one large and expensive experiment, involving your most valuable assets (your internal and customer data), with massive potential downside.
The first step before even beginning to explore the can of worms that is ‘enterprise blockchain solutions’, is to understand Bitcoin. There’s a reason why Jack Dorsey, Steve Wozniak, Reid Hoffman, Paul Graham, Peter Thiel, Eric Schmidt, Paul Tudor Jones & Marc Andreessen have all publicly praised Bitcoin specifically. It’s a deep rabbit hole encompassing software, hardware, economics, accounting, cryptography, game theory and distributed networks. I’ve been down it for half a decade and there’s still more to learn and appreciate. Playing around with a few dollars worth of bitcoin for experimental purposes will give you a much deeper understanding of how a blockchain works.
There are, and will be, novel business models, enabled by blockchains, custom built for specific niches. If you’re reading this- assume yours is not one them. Here’s a helpful resource I like to point people to when they ask if a blockchain will help an area of their business- http://doyouneedablockchain.com
Ask the Dumb Questions
The quickest way to look smart is to be willing to ask the dumb questions. Without dumb questions you get groupthink. And with groupthink you get lead down the path of least resistance, not the one most helpful to your business.
If you have dumb questions about Bitcoin, you can ask me. You can feel safe in knowing that I won’t judge you because I’m still asking them myself.