By far the most frequent question, as well as the most divisive one, that I get asked is about the future of cryptocurrencies. Spectacular gains of over 3000% in 2017 followed by spectacular volatility in 2018 make this asset class stand out. On one side, digital currency libertarians and techies herald the arrival of financial freedom from the establishment: governments, central banks and large financial institutions. On the other hand, the kings of finance criticize the space: Jamie Dimon called advocators of digital currencies “stupid,” while Ray Dalio warned against “a bubble.”
In today’s column, I wanted to share our thinking about digital currencies through the prism of disruption. In “Asset Managers Prepare to Be Disrupted,” my co-authors, David Teten and Brent Beardsley, and I argue that the investment industry has changed very little, while other industries have undergone dramatic disruption. Factors such as technological innovation, social change and political constructs often drive change in unexpected ways. Today’s viewpoints of traditional finance toward digital currency remind us of past infamous quotes from the establishment when faced with disruption. In 1977, Ken Olson, founder and CEO of Digital Equipment Corp, famously said, “There is no reason for any individual to have a computer in his home,” which has become a warning against the blind spot that prevents many successful business leaders from seeing disruption.