Americans Just Don’t Understand Bitcoin – Bitcoin Magazine
This is an opinion editorial by Daniel Feldman, CEO of Green Block Mining.
In 2016, after selling a gaming company I co-founded with a high school friend to a group of former Amaya/PokerStars executives, I was looking for the next thing to do. In 2017 I discovered bitcoin. I would argue with my brother-in-law and father-in-law about the effectiveness of cryptocurrency, but could not effectively support my position. So to learn more and be able to better defend my pro-crypto stance, I started a blockchain and cryptocurrency meetup in New York City. I moderated discussions with curated speakers and organized a dinner after the meeting, allowing time for further discussion and networking. The meeting became popular. Investment banks, family offices, funds, startups, friends and a variety of interesting people participated regularly for three years until COVID-19 hit.
I began each meeting with a play on the “Fresh Prince of Bel Air” theme song, “Parents Just Don’t Understand,” by saying, “North Americans just don’t get it.” It was a way to introduce three stories that demonstrated both the global need for decentralized money and why North Americans do not innately understand this. I only gained this perspective by living outside the US, through my time as a student in Moscow and later as an expat.
History one
In 1984, a teacher said he could teach anyone Russian past tense in fifteen seconds, which convinced me to start studying Russian in high school at Buckingham Browne and Nichols in Cambridge, MA. In 1990, I spent the first semester of my junior year of college in a study abroad program in Moscow, USSR at the Pushkin Institute for the Study of Foreign Languages. Students from all over the world studied and lived together in the two dormitories, separated by socialist and non-socialist countries. It was a fascinating time during the last months of the Soviet Union. The first McDonald’s and a Pizza Hut had opened.
The official ruble/dollar rate was $2 to a ruble, but on the black market you could get 64 times that, 32 rubles to a dollar. You had to do at least one exchange to the official rate to get a bank receipt to show that you had at least a few rubles via a Soviet bank, but afterwards you could trade on the black market. All the foreign students at my institute traded their hard currency for rubles. This was made easy because Mustafa, a much older student from Uganda who lived on the 11th floor of our dorm, was a money trader. We went to his room with our hard currency, in my case US dollars, and he lit some incense, gave us a shot of Russian brandy, and pulled out a suitcase full of neatly stacked Russian rubles from under his bed. He offered the best price in town. I have no idea where he got so many rubles or who he exchanged the money for. Was it the Russian government? The school? The Ugandan government? I will never know, but it provided easy and safe access to rubles. We knew there was a lot of scams involving old, outdated ruble notes or people just taking your money and running away if you tried to shop on the streets of Moscow.
One day our resident assistant said that the American ambassador had called to tell us that all 50-ruble notes would be taken out of circulation by the end of the week. This was not publicly known. Each Soviet could take six notes to the bank, get a domestic passport stamped and get new 50-ruble notes. Since the Soviet Union was a mattress economy, this government action was going to destroy the savings of large sections of the population. No one wanted the government to know how much they had in savings, and no one trusted the state banks to hold their money. With this advance notice from the ambassador, we took our 50 ruble notes and bought Soviet champagne and cognac from a group of Nigerian students who were selling alcohol in the dormitory, and threw a big party for all the students studying at our institute.
Of course, when it became public knowledge that the 50 ruble notes were cancelled, Nigerians were outraged as they immediately knew that the privileged Americans must have had advance notice as we only paid them in 50 ruble notes. I only managed to calm them down when I gave them a Bell Biv DeVoe cassette as a peace offering.
Story two
In 2002, eleven years later, I was now a lawyer. I moved back to Moscow, Russia, no longer the Soviet Union. I worked for Yukos Oil in a new office building near the Paveletsky railway station. My office was on the top floor with a great view of Moscow and the nearby train station. Sometimes, walking to work from the nearby metro station or looking down at the commercial area around the railway station, I would see long queues outside a bank. People would wait for hours in these queues. Russians are notoriously good at waiting in line, but that reputation was mostly earned during the Soviet era when shortages of food and essential goods were more common, so these lines seemed out of place. I asked a Russian colleague why there were lines, and she replied matter-of-factly, “That bank is going out of business and customers are being offered 60 cents on the dollar to get their money out.”
A few weeks later the bank would reopen and another bank would announce it was closing and another line would form. Viewed from above, it was like a game of cruel musical chairs. After the collapse of the Soviet Union in the early 1990s, a middle class slowly developed and an increasing percentage of the population had to use privately run banks to hold their money. They had no choice as their savings were too big to keep under the mattress and they couldn’t afford the 24-hour apartment security they would otherwise need. So they had to rely on unreliable banks and understood that losing some of their money was part of the cost of protecting their savings. This is somewhat analogous to a negative interest rate.
Story three
I worked directly for an oligarch who was the richest Russian. I was also friendly with other expats who worked for wealthy Russians, ranging from billionaire oligarchs to mini-archs worth only hundreds of millions of dollars. They had good stories. One was once called into the manager’s office where he was met with a harsh question: “Who is this Mr. Dow Jones and how can I meet him?” Another friend worked for a mini-garch who was told he had five days to leave the country. His businesses were to be taken from him without compensation, but he was not going to be arrested and would be allowed to leave Russia to live in exile. He was given less than a week to pack up and leave. There was no appeals process; that was it.
However, there was a problem. Like many wealthy Russians, he had full-time armed bodyguards and kept US dollars in his apartment for large transactions such as buying a car or property, or to pay bribes to stay in business. The minigarch had $7 million in cash and no way to get it out of the apartment, let alone the country, by the end of the week. Three police cars stood guard 24 hours a day in front of his building, a guard stood at the door of the apartment and at least one followed him wherever he went.
My friend arranged for two Western Europeans to fly to Moscow the next day. They met in the minigar’s apartment. The two men arrived in slim black suits with white shirts, monochromatic black ties and stunning shoes.1 Each carried a thin black leather briefcase. No change of clothes. No extra luggage. They didn’t book a hotel room. They ate their meals in the apartment. They spent 44 hours in the apartment and were then driven directly back to Sheremetyevo Airport, one of the two commercial international airports in Moscow. Nothing was left and nothing was taken. Soon after, the mini-garch, accompanied by my friend and bodyguards, left the building. The minigark tapped on one of the police car windows with a toothbrush and said, “Gotov, poyekhali,” meaning, “I’m ready, let’s go.” He got into his Mercedes G wagon, with no luggage, and was driven to Domodedovo Airport, the second commercial international airport, and left Russia. Two of the police cars escorted him to the airport. The third car stopped and the officers got out of the car and went into the apartment building, and I assume they went straight to the minigar’s apartment. So much money has a distinct smell, it smells like vomit after being handled so many times. I’m sure they could smell the money that had been in the apartment. They probably looked for it, but I know they didn’t find it. It wasn’t in the walls. It wasn’t in the furniture. It wasn’t under the floorboards. It wasn’t on the roof and it hadn’t been thrown out of a window. It was gone.
Conclusion
As a reminder, I tell these three stories to demonstrate why “North Americans just don’t understand.” The first story is an example of life in a country where the government controlled currency is not to be trusted. We have no concept of it here in North America with our access to the almighty dollar that serves as the world’s reserve currency, but try to imagine how disturbing it would be without that stability.
The second story serves as an example of living in a society where banks cannot be trusted and where FDIC insurance does not exist. Saving money is discouraged because you cannot store it safely. Not having a safe store of value means that keeping liquidity has a massive effect on both daily life and long-term planning. The government has the ability to control its population if the people do not have a backstop for savings. Bitcoin creates a trustless ability to save and move money.
The latest story underscores the difficulty of not being able to store valuables, while also limiting the ability to quickly flee with your possessions. These issues are taken for granted by North Americans, but are common concerns in many other countries. Gold can be used to solve some of these problems, but not all. It is cumbersome to move, buy and sell, and it is not easy to share.
Bitcoin solves all these problems. You can easily store your wealth without relying on a third party. You can easily move around the world with it, without having to transport anything tangible. You can split it without damaging the remaining amount, and you can spend it or convert it to fiat currency at the touch of a button. All without having to physically carry it anywhere. There is no trying to carry a sack of gold on a plane, no hiding it in a suitcase with a false bottom, no burying it in the backyard, no going to a gold dealer to try to sell it.
I hope you enjoyed these stories. What happened to the $7 million? The solution came from ingenious out-of-the-box thinking, which has helped guide my approach to problem solving. No one I’ve told this story to has guessed the answer. If you have a guess, please contact me because I would love to complete the story for you.
Final note
1 I mention wonderful shoes, as the customs officials, usually older women, at Moscow airports are trained to look at the shoes of arriving passengers to see if they match those wearing an expensive watch. If the shoes are undersized, the officials assume that the person has been paid to bring the watch to Moscow without paying the new goods tax. The box and papers would be carried by someone else.
This is a guest post by Daniel Feldman. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
