By Livingstone Mukasa
When it comes to issues of business and finance, I consider myself above average. Actually my friends, students and mentees coined a moniker “The People’s Professor” for me for sharing candidly about matters related to money and finance.
But I have to admit that I have struggled to understand what all this craze about digital currencies is. For that matter, I have not invested my own resources in such things as Bitcoin which makes it perfectly logical that I should not recommend you do either.
What I did was to understand the technology that powers Digital Currencies called Block chain. This, I agree could incrementally improve efficiency especially in the technology space, but not a revolution as many are predicting.
So if traditional financial advisors (so is JP Morgan & Goldman Sachs) like me are skeptical, what explains the surge in Bitcoin and other digital currencies?
It happens that the answer might lie in psychology. You see many people don’t care who get hurt as long as they can out on top. Look in our traffic jams and see those clogging the road as long as they make progress as you get stuck.
Consider the corrupt civil servants that steal money for mosquito nets and the babies die while they sleep in a swanky mansion in Muyenga!
Welcome to the Greater Fool Theory. In simple terms, people can buy anything for any amount as long as they hope to find a greater fool that will buy it from them at an even higher price!
So you (sorry to say a fool) buy a bitcoin at $10,000 with a hope that there will be a greater fool to buy it from you at $15,000.
One day either the world runs of fools or Icarus realizes that he flew too close to the sun!
Livingstone Mukasa is an author and CEO at Mazima Retirement Plan. Twitter@MukasaMulya FaceBook@Livingstone Mukasa
I love the analysis. Thx professor.