Saturday, March 01, 2014

Open Letter to My Old Boss Dave Ramsey About Bitcoin


Let me start by saying I have great respect for you. I worked for you for just under four years, and it was the best job I've ever had. You've helped millions of families, including my own, get out of debt and make sound financial decisions. You're one of the smartest, most successful people I've ever had the privilege of learning from.

I also respectfully think you've made a mistake with your stance on bitcoin.

On April 8th 2013, I sent you an email making myself available as a resource related to Bitcoin. You were kind enough to reply with "I have no idea what you are talking about. I am sadly ignorant of that world." My intention was to help you be a well informed voice in the media on this issue.

I remember when you expressed negative opinions concerning social media, you turned to those with more experience to make a case for its value. Now with over a half a million Twitter followers, you'd probably agree it was wise to change your opinion there.

I believe Bitcoin will be bigger than Twitter, Facebook, and YouTube combined. I've argued it could be more disruptive than the Internet. Investor / entrepreneurs such as Chris Dixon and Marc Andreesen (the creator of the first web browser) feel the same way. Andreesen compares Bitcoin in 2014 to personal computers in 1975 and the Internet in 1993.

The most incredible thing about Bitcoin isn't the currency (bitcoin). It's the protocol (Bitcoin), a system of rules for maintaining a decentralized public consensus network. A trust-less system controlled by math (cryptography), not central planners. It may end up being one of the most transformative inventions of my lifetime.

Someone brought this video to my attention today where you ask, Is Bitcoin a Good Investment? I also found your blog post where you say you don't like it one bit.

I agree with your assessment it's unwise and stupid to keep a life savings in the hands of a third party. MtGox is not Bitcoin. It's a poorly run centralized exchange which the Bitcoin community has been telling people to avoid for many months, if not years.

In the video you mention problems with the pre-FDIC banking system and with trust and transparency in general. You also give a great explanation as to what gives money valuethe extent someone else wants to trade for it. I applaud you for clearly saying our fiat currency paper money "never really had value" either, other than what people are willing to trade for it.

(Side note: I've purchased electronic equipment, a TV, advertising for my company, and a hotel stay using bitcoin).

You start losing me around five and a half minutes in when you start discussing bitcoin and how it's "looking like it's not going to make it." The "death" of bitcoin has been reported so many times over the last few years, it's really becoming ridiculous for the media industry. You further describe "intelligent people, while intelligent are not wise" who have purchased bitcoin. I think much of wisdom comes from experience.

Dave, you have little or no experience when it comes to open source, peer-to-peer cryptographic currencies. As you said in your email last year, you are "ignorant of that world." Your recent comments indicate you haven't yet done your research.

Calling bitcoin the "Iraqi Dinar of the Internet" communicates ignorance of what bitcoin is. You describe it as "something whacko like that" and a "made-up computer game." You're convinced people who believe in this technology (and the currency on top of it) are "stupid and will lose their money."

How can you be so sure? Have you studied how it solves the Byzantine Generals' Problem? Do you know how the Bitcoin protocol could potentially replace centralized financial and trust systems such as notaries, escrows, trust funds, stock exchanges, clearing houses, payment networks, checking and savings accounts, etc...?

Do you know how disruptive and beneficial programmable money could be to society? Have you thought about the opportunities for freedom which will be created when individuals can control their own store of value, even if they are unbanked in a third world country with nothing but a cell phone?

For me, this comment summarizes your current level of understanding: "One of these computer nerds just flips a switch, the whole freaking thing is gone." Did you know the decentralized Bitcoin network has more computing power (be it for a very specific purpose) than the major super computers of the world combined? There is no centralized "switch" to turn off. Also, unlike M0 (physical money) which makes up around 8% of the money supply, most bitcoin are stored in offline wallets also known as paper wallets. This digital currency is more physical that the money you use every day.

Just as peer-to-peer systems disrupted the music industry, this can not be stopped. Blockbuster may have disliked Netflix's approach, but that didn't prevent Blockbuster from becoming irrelevant.

The good news is, you probably have a few years before you have to reevaluate your stance on bitcoin. Bitcoin is very volatile and will probably remain so for years to come. If it becomes as revolutionary as some believe, your current stance could hinder your credibility as a financial guru. As you've helped myself and so many others, I'd hate to see that happen. My hope is you'll follow the same path as other skeptics who did their own research and eventually came to the conclusion bitcoin is here to stay.

My original offer still stands. If you'd like to know more about Bitcoin, please let me know.


Luke Stokes

P.S. With a small investment of time, you can understand the Bitcoin protocol and the bitcoin currency. :)