Who Won The Bet Over Bitcoin? : Planet Money Five years ago, two sides met on our show to make a bet about the future of bitcoin. Today, we announce the winner.

Who Won The Bet Over Bitcoin?

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People make predictions about the future all the time. They write op-eds. They go on TV. They get interviewed on podcasts. And a lot of times, these predictions have this kind of weaselly, unfalsifiable vibe about them. You know, people say, I wouldn't be surprised if we see a recession next year. Or the next hurricane season could be worse than ever. Like, what does that even mean? How do I even know if you're wrong or you're right when you talk that way? And even when people do make predictions that will clearly be true or false - you know, there's no way unemployment will fall below 5 percent in our lifetimes or whatever - everybody forgets about those predictions by the time they're proved wrong. It does not have to be this way. There is a better way to live. When somebody makes a prediction, you can ask them a simple question - want to bet?

DAVID KESTENBAUM, BYLINE: The thing I like about bets is that someone's got to be wrong. And at the end of the day, they have to say they were wrong.

GOLDSTEIN: Yes. And somebody gets to be right.

KESTENBAUM: Oh, there's that, too.

GOLDSTEIN: And that's the end of the day, they get to do the right dance.

KESTENBAUM: I'm more - way more interested in the concession speech.

GOLDSTEIN: (Laughter) That's the one you never get without the bet. So anyway, Kestenbaum, back in January of 2014, bitcoin was this relatively new thing that everybody who thinks about economics and technology was making just wild predictions about. And so, you know, we were interested in the future of bitcoin.

KESTENBAUM: Is it singular? Is it plural? So many questions.

GOLDSTEIN: That alone.

KESTENBAUM: (Laughter).

GOLDSTEIN: So we were interested in it. But, you know, we definitely didn't want to have the weaselly, nonfalsifiable prediction show. So we were thrilled when we found two really smart, really thoughtful people who were making very different predictions about bitcoin and who were willing to come on our show and make a bet.

KESTENBAUM: They decided the bet would run for five years. And now today it's five years. Or around today?

GOLDSTEIN: Yeah, let's say ish.

KESTENBAUM: Today-ish.

GOLDSTEIN: It's been five years. The bet is up. Hello, and welcome to PLANET MONEY. I'm Jacob Goldstein.

KESTENBAUM: And I'm David Kestenbaum.

GOLDSTEIN: Kestenbaum, you and I co-hosted of the original episode about this bet back in 2014. Since then, you've gone off to work at This American Life. But today for a very special episode of PLANET MONEY...

KESTENBAUM: I'm here again.

GOLDSTEIN: You're back. Today on the show, who won and who lost?


KESTENBAUM: This was a bet over the future of money, between two people who had totally opposite views. Each guy was completely convinced he was right. On one side was Ben Horowitz, whose venture capital firm Andreessen Horowitz had bet $50 million on bitcoin.


BEN HOROWITZ: And so I said, well, why don't we just bet?

GOLDSTEIN: And you said that in public?

When Ben came on the show five years ago to make the bet, it was a time when you still heard a lot about the sort of, like, political, libertarian, like, we don't need the government for money kind of talk around bitcoin. But Ben had a much more sort of practical view. He thought, you know, it was clever as a technology. And it just solved this really basic problem with e-commerce. And that is, companies that sell stuff online have to pay a really high fee to accept credit cards, like 2 or 3 percent of every sale. Here's Ben back in 2014.


HOROWITZ: If you look at overstock.com, which just started accepting bitcoin, one of the interesting things about it is their margins are very low. They're - you know, they're operating on, like, 5 to 10 percent margin. So 2.5 percent is a huge chunk of the profits. So their bitcoin transactions are significantly more profitable.

GOLDSTEIN: So, Ben thought, bitcoin was about to take off as a way for people to buy stuff online.

KESTENBAUM: And the guy who bet against Ben was a finance journalist named Felix Salmon.


FELIX SALMON: Being challenged to a bet by Ben Horowitz is kind of the high point of my career. And so...

KESTENBAUM: Today, he writes for rates for Axios, and he hosts the Slate Money podcast. Five years ago, when he made the bet, the price of bitcoin was skyrocketing. But Felix thought the rising price of bitcoin was actually going to be a problem because it was going to make it less likely that people would actually use bitcoin to buy stuff.


SALMON: And because Bitcoin offers the potential for so much profit just by sitting on it and because it's an inherently deflationary currency, which means that the longer you don't spend it, the more you benefit, then everyone has an incentive to not spend their bitcoins. And you can't have an effective payments mechanism if you're not spending the currency.

KESTENBAUM: So the question was, were lots of Americans about to start using bitcoin to buy stuff? Back in 2014, we proposed a bet. Let's wait five years to see what happens. And then let's take a poll across the country and find out if people are actually using bitcoin.


SALMON: I like this. I like this a lot. Let's take a representative poll of people and ask them this question, have you used bitcoin to pay for goods in the past - yeah, I think month. A month is good. We could say a week, but let's say a month because I want to be generous to Ben here. What number, Ben? What percentage of people are going to say, yes, in five years' time to that question?

HOROWITZ: If 5 to 10 percent of the people who made payments used bitcoin, like, that's a lot of payments.

SALMON: Well, it depends how much they use it. Because if you only used it once a month...

HOROWITZ: (Laughter) But you're saying it's going to disappear.

SALMON: To be frank...

GOLDSTEIN: Eventually, they settled on a number. If 10 percent of Americans or more said they bought something with bitcoin in the past month, Ben would win. If the number was lower, Felix would win.

KESTENBAUM: The main stakes, of course, would be one person's right and one person is wrong.

GOLDSTEIN: They get to brag.

KESTENBAUM: They get to brag. But they also decided they were going to - they would bet some object. And they decided on - one of the first things you could buy with bitcoin - it became kind of famous for this. They decided to bet a pair of alpaca socks.


GOLDSTEIN: So one last thing. Will you guys both agree to come back on our show, hopefully graciously, and talk with us five years from now in 2019?

HOROWITZ: Oh, yeah. Looking forward to it.

SALMON: Absolutely.

KESTENBAUM: Five years passed.


GOLDSTEIN: We got everybody back together. Oh, hello. Hello?

SALMON: Margaret (ph). How are you?

MARGARET: I'm great.

SALMON: Happy New Year.

MARGARET: Happy New Year.

HOROWITZ: We're all here. Hey, Felix.

SALMON: Hi, Ben.

HOROWITZ: How are you?

SALMON: I'm great. You sound like you're at the bottom of a well, but I'm sure they'll fix that in post.

KESTENBAUM: When they made the bet, five years felt like a really long time. And then, as I was walking over to the studio to do the interview with you, I was just looking around at the world and being like, how does the world look different from five years ago? And the only thing I saw were these motorized skateboards. I was like, those weren't there. Basically the same.


KESTENBAUM: And bitcoin - it did not go away like Felix thought.

GOLDSTEIN: In fact, the value of bitcoin actually went, you know, went crazy, right? It went - it was less than $1,000 when we first made the bet. It went all the way up to almost $20,000. It fell back down. Now it's around, like, $3,500, which, to be clear, is way higher than it was when they made the bet.

KESTENBAUM: But the question was, did people actually use bitcoin to buy stuff? And I didn't know what the answer was. And that is what we did the poll about.

GOLDSTEIN: As promised, we went out and got Ipsos, a real polling firm, to ask 900-and-some Americans - a representative sample of Americans this question. Have you purchased anything using bitcoin as your payment in the last month? The percentage of Americans who said, yes, is three - three.

HOROWITZ: All right.

GOLDSTEIN: Now, they did ask those people - the people who said they had, they said, at what merchant did you make the purchase? And I have some of those answers. And it suggests that the 3 percent is a little high.


GOLDSTEIN: If you go down this list, somebody said Gaia Ethnobotanical, which I looked up - in fact, does accept bitcoin. Subway - I think some Subways accept bitcoin. But there's also a bunch that say - this one says Litecoin. A few say Coinbase, which is a bitcoin cryptocurrency exchange. So these people are using bitcoin to buy other cryptocurrency.

KESTENBAUM: Walmart is on there.

GOLDSTEIN: Yeah, Walmart is on there, does not accept bitcoin. So I think the 3 percent we can take safely as a ceiling. And I feel like the real number is probably lower.

HOROWITZ: Sure. Sure.

KESTENBAUM: Well, so, Ben, you lost.

HOROWITZ: I did. I did. And I actually would like to start the conversation by giving full credit to Felix. And, Felix, please, let me know your sock size so I can get you those socks.

SALMON: I will accept any socks in the sort of, you know, 11ish range.


HOROWITZ: All right. OK. All right. Well, those are on their way.

SALMON: Thank you very much. So, Ben, were you wrong?


GOLDSTEIN: Can I say I was kind of disappointed by Ben's, I was wrong, 'cause he just said, I was wrong? Like, I have a really hard time saying, I was wrong. I usually say it really fast, or I say, I was wrong, but.


GOLDSTEIN: He just said, like, I was wrong.

KESTENBAUM: Yes. And not only did he cop to being wrong, he had, like, this whole analysis of why he was wrong. It was actually an impressive way to be wrong.

HOROWITZ: And I was wrong in two dimensions. And let me kind of go into that. One was timing, which I...

GOLDSTEIN: So the first way in which he said he was wrong is the classic way people say they are wrong, which is like, I just didn't have enough time. Like, a longer-term bet, I would've won. Eventually, I am right.

KESTENBAUM: But the second mistake is a little bit more complicated. Also, it's much more interesting. And this is - Ben thought bitcoin would work like other big, open source technology projects. What you see with those kinds of projects, Ben says, is developers - you know, coders - they just start solving one problem after another. So the projects just get better and better. I mean, he said that's the way the Internet itself developed.

HOROWITZ: Yeah. It started out with no security, but, you know, like, we got security. It started out with no naming, but we got that. There was no way to distribute addresses. We got that. So, like, it just kept evolving along because it just met the needs of the user community.

KESTENBAUM: That's what Ben thought would happen with bitcoin. He thought the code that powers bitcoin would just get better and better and, very quickly, it would obviously be this safer, faster, more private, cheaper way for people to buy stuff online. That did not happen.

GOLDSTEIN: No. Bitcoins just became so valuable that the people who worked on the system didn't want to make it any better. They just wanted to lock everything down and keep it the way it was.

HOROWITZ: I think that what happened with bitcoin is that there is kind of one very, very strong need among the kind of investors/miners, which is that the code and the meaning of the code would not change.

GOLDSTEIN: So basically, Felix was right. The thing that he thought was going to happen happened. The fact that bitcoins became so valuable meant that people didn't really want to use them to buy stuff. They'd rather just hang onto them. But even Felix is surprised by the way things actually turned out.

SALMON: I - honestly, I was looking back. I mean, there were two things which I expected would happen which didn't happen. One is I expected the price would probably go to zero, and it didn't. It went way up and to the right.

And the other is that I expected that there would actually be use cases over the following five years that, even if people weren't using it to buy stuff in stores, and that was my side of the bet, I imagined it would be used for remittances, or, somewhere along the line, it would have evolved. Especially if it had grown to be worth thousands of dollars per bitcoin, then it would be used for something.

GOLDSTEIN: So it's more valuable and less useful than you thought.


KESTENBAUM: Ben, I have to say, didn't seem that, like, upset about losing our bet. I have a theory about that.

GOLDSTEIN: Yes, right. So in the real world, his firm invested tons of money in bitcoin companies. And they seem to have done great on those investments. They seem to have made a tremendous amount of money. We don't know exactly how they've done, but one thing we do know is they were an early investor in this company Coinbase, which we mentioned. Recently, Coinbase was valued at $8 billion.

You were wrong about the bet on alpaca socks but right about the bet of $50 million.

HOROWITZ: Yes. Yes, I'm ahead, I think.


KESTENBAUM: Ben is still investing in companies that work with cryptocurrencies.

GOLDSTEIN: Do you think then that in X number of years - you know, whatever - five years from now, lots of people will use some cryptocurrency to buy stuff on a regular basis?

HOROWITZ: Oh, yeah. I definitely do.


SALMON: Really? Really?

GOLDSTEIN: Bet, bet, bet, bet, bet.

SALMON: I mean, hang on a sec, Ben. I mean...

HOROWITZ: Yeah. No. Yeah.

SALMON: I feel like this is like taking candy from a baby. But seriously? You are willing to take the same bet all over again?

HOROWITZ: Yes. Yes. Yes. I think there will be a bear (ph) instrument on the Internet.

SALMON: OK. Can we just rinse and repeat the exact same bet for another five years?

HOROWITZ: As long as it's not tied to bitcoin specifically, yes.

GOLDSTEIN: Ben today is less convinced than he used to be that bitcoin, in particular, will be the cryptocurrency that people actually use to buy stuff. So this time, for this bet, he wanted to make it about cryptocurrency more generally.

KESTENBAUM: So there was that. And then there was one other change he wanted to make to the bet, and that was he wanted to move it outside of the U.S. because he said, yes, credit card fees are high in the U.S. But let's be honest. Credit cards work really well here, so there's not that much of an incentive for people to switch to some cryptocurrency.

GOLDSTEIN: So he wanted to do it in some country where credit cards were not so widespread and where, if there were some new, simple app on your phone, you didn't have to apply for a credit card, you could just pay instantly and easily like that, you know, it might really take off.

KESTENBAUM: So he said, let's do the bet for Mexico.

SALMON: I'm perfectly happy to change it to Mexico.



SALMON: It's very rare that you win a bet, and then you get to just win it again. Ben, what are the stakes this time around?

HOROWITZ: Well, whatever you like.

SALMON: We'll do something serious. We'll do it for a hundred-year-old bottle of Madeira.

HOROWITZ: A hundred-year-old bottle of Madeira.

SALMON: Something which has actually maintained its value for over a century is fine Portuguese fortified wine called Madeira. And it gets better with age. And if you buy it, you can drink it, and that's - and you're a very happy person because it's delicious. And if you don't drink it, you can keep it in your cellar, and it retains its value. And it's got - it's a much better store of value than any cryptocurrency will ever be.

So I will bet you a 100-year-old bottle of Madeira that you will not be able to find 10 percent of Mexicans using cryptocurrency to buy anything in five years' time.

HOROWITZ: OK, perfect.

GOLDSTEIN: Kestenbaum, you really wanted them also to include some kind of cryptocurrency in the bet.

KESTENBAUM: Because that's what we know cryptocurrencies are good for - betting.



KESTENBAUM: Also, I just like the idea that he gets, like, a bottle of wine and, like, some invisible coin. Like, I don't know. I just like the pairing.

GOLDSTEIN: So they did add a cryptocurrency. They decided, in addition to the bottle of Madeira, to bet something called an ether, which is one of the big cryptocurrencies that's popped up in the last few years.

SALMON: Yeah. One bottle of Madeira and one ether.

GOLDSTEIN: Now it just got more...

HOROWITZ: Perfect.


KESTENBAUM: I like that.


GOLDSTEIN: Right now, just for the record, a bottle of hundred-year-old Madeira costs between $500 and $1,000, and an ether costs around a hundred dollars.

KESTENBAUM: That may change by the time you're listening to this. Madeira - probably not.

GOLDSTEIN: And Felix could really win because it's possible that no cryptocurrency is used in Mexico to buy stuff. But still, people are betting like crazy with ether, and it's worth a ton of money, in which case, he gets the best of both. Or he could lose.

Can I say that's what's kind of frustrating about this bet for me? It's very gentlemanly. I want somebody to, like - to admit total and utter complete failure, you know?

KESTENBAUM: Yes. Well, it's tough when the guy who lost the bet made millions of dollars.

GOLDSTEIN: Made a bunch of money. In fact, last year, Ben's firm, Andreessen Horowitz, actually bet much more on crypto than they have before. They launched this new $300 million fund to invest in crypto-related companies. So obviously, a slightly bigger bet than a bottle of Madeira and an ether, and we will be tracking that bet as well.

KESTENBAUM: I think, with a few more iterations of this bet, it's going to be hard for Ben to make the case. 2029 - no way.


GOLDSTEIN: I would love to do some more bet-based shows. If you have heard people making wild predictions about the future and you think we should have them on and make them commit to a bet, please tell us. You can email us at planetmoney@npr.org, or you can find us on Twitter, Facebook or Instagram - @planetmoney. Today's show was produced by Sally Helm. Alex Goldmark is our supervising producer. Bryant Urstadt edits the show.

Kestenbaum, thanks for coming back.

KESTENBAUM: No problem.

GOLDSTEIN: I'm Jacob Goldstein.

KESTENBAUM: I'm David Kestenbaum. Oh, thanks for listening.



SALMON: Hello.

GOLDSTEIN: Felix, are you ready to open the package?

SALMON: I'm ready to open it. I have scissors in my hand.

GOLDSTEIN: OK. Open the package.

SALMON: All right. OK. Here we go. It goes, hi, Felix. Enjoy your socks. I got you an extra pair in case you wear a hole in one doing the victory dance.

GOLDSTEIN: (Laughter).

SALMON: Oh, wow.

GOLDSTEIN: OK, Felix, would you put the socks on your feet?

SALMON: (Laughter) OK. OK, so they do feel very soft, I have to say. They're cozy. And they - yeah - they're very comfortable.

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