Buffet Rules of Investing Apply to ICO's, Too

in #business4 years ago

There have been literally thousands of new companies springing up on the blockchain and using ICOs - Initial Coin Offerings - as a way to finance their endeavors without the roadblocks and time lags that conventional startup financing has in place. These offerings can often be bought and sold on cryptocurrency trading platforms, or directly through the offering company’s website.

But startups aren’t always a good investment. The headlines are full of stories about tokens that are now worth about as much as a piece of tissue paper. Yet ICO investing is very similar to stock investing. There will always be winners and losers, and thousands of financial pundits and “experts” ready to give advice on which company is a good bet for future growth.

Some of the best advice has come from a man who “put his money where his mouth is” - Warren Buffet. He has given some of the most logical and sound investment advice ever spoken and it doesn’t rely on math wonks and charts with pretty colors to interpret it.

I’m not talking about the widely quoted

“Rule #1 - Never Lose Money."
"Rule #2 - Never Forget Rule #1”.

He also had other advice that should be quoted even more often than the famous Buffet Rules of Investment.

 1. Only invest in industries and companies that you understand.
 2. Only invest in companies that share your values.
 3. Only invest in companies that will solve an existing problem.
 4. Only invest in companies that have good leadership.

If you follow this advice, first given decades ago, with ICO’s, it’s fairly easy to cut through the hype and get to the important markers that give an indication of whether a company will succeed or fail and whether your investment in that company will payoff over time.

Let’s look at a company that is in the midst of a token presale just announced last week - simplyBrand - from this Buffet perspective of future value. While you may not understand the blockchain, or AI, or even cryptocurrency, those are just the mechanics behind what simplyBrand has set out to do.

“Making digital commerce trustworthy through blockchain, AI, and you.”

ANY company that can sum up their vision in one sentence has a clear and concise goal and can laser focus on that goal. Skip the whitepaper full of droning, same old, same old language and look for the simple, clear, statement of purpose. If the company doesn’t know where it’s going, it won’t know why it exists in the first place. If it isn’t goal oriented, it won’t make money in the long term. In short, simplyBrand KNOWS why it exists, and what it hopes to accomplish.

Just checking out their website not only gives the visitor a look at those goals - eliminating brand counterfeiting in the online marketplace, they also SHOW the visitor how it can be done on the blockchain using peer to peer input and AI tech and machine learning to verify product information. Adding to the easy to understand diagrams are interactive tools like the Impact Calculator, the Counterfeit Risk Detector, and the Dapp MVP that can be tried out by website visitors. WARING: These tools can be addictive and chew up large amounts of your online time!

Let’s take a look at the management team. The first thing that jumps off the page is how diverse the team is. If you’ve looked at many blockchain based companies, most management team photos are pretty interchangeable. Young and old white men, with at least one obligatory beard, one female - almost always the head of marketing.

Scrolling down, there’s a robust advisory board covering all the necessary slots from financial to tech. The team and advisors certainly seems to tick the “good leadership” box! Scrolling even further down, the list of partners is also impressive. Rather than spending time and resources in areas where the team might not have the required expertise, they went outside the company to partner with those who did have the expertise. For example, rather than handling their own token launch, they enlisted the aid of a cryptocurrency trading platform partner - Cobinhood. Resource management and knowing when you don’t know enough to be effective in a specific area is a hallmark of good management.

Using the Buffet Rules, and this simplyBrand example for choosing a company to back, works for conventional stock investment and for the cryptocurrency/blockchain ecosystem. It also makes it easier to follow what Warren Buffet considers the most important rule of all:

“What’s the holding period for an investment?” "Forever”.

Disclaimer: The author is not a financial advisor and this article should not be taken as investment or financial advice. Investment in the securities of smaller companies can involve greater risk than is generally associated with investment in larger, more established companies that can result in significant capital losses. You should not buy an initial token offering unless you are prepared to sustain a total loss of the money you have invested plus any commission or other transaction charges.

All images courtesy of Pixabay


Many things can be gleaned from this writeup, although I cracked up at your description of the management team of many blockchain-based companies.
Warren Buffet's advice though given decades ago, according to you, should be taught as investment 101.
simplyBrand's vision being in one sentence says a lot about them. Here's why.
I was researching recently about setting goals and writing them down. I found out that the clearer and more understandable it is, the higher the tendency to achieve it.
Though you are not a financial advisor, I agree with you.

This is a great article @ascorphat

I'm not going to lie to you, prior to being part of the world of blockchain, I use to get scared at anything that had to do with investment.

I like the idea if having a simple statement that tells the reader in simple terms what the company offers, just like you said, going through the white paper with all that "english" can be stressful. Making it simple to understand will attract the "unlearned" like myself

Nicely written @ascorphat 👌🏼👌🏼
I believe with this, anyone pondering on which company's ICO he or she wants to invest in should properly be cleared now.

  1. invest in industries and companies that you understand.
  2. Only invest in companies that share your values.
  3. Only invest in companies that will solve an existing problem.
  4. Only invest in companies that have good leadership.

You have selected the best rules Warren buffet gave rather than "Never loose money". Taking a close look at simplyBrand, it is glaring the team values us and are its ready to solve our problems. While i was going through their whitepapper, i had no doubt that they know what they want to achieve.
Firstly, they took a deep look into the global e-commerce market as a whole considering the case of counterfeit product that has been a threat to the e-commerce market. Then they considered how this could be eliminated listing and explaining in details. I strongly believe this will be a great success.

@ascorphat you have just helped a brother out! Thanks 😀

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Hi @ascorphat, thanks for the insight about choosing an ICO apparently they are so many pump- and -dump projects that can easily entice you into investing especially if you do not have rules that govern your investments. On a side note, Simply brand looks to be a very cool project and it is solving a real-world issue that no one has come up yet to help with the indelible blockchain technology. Kudos to simply brand and all the best

Quite an insightful and educative piece. A second look at the Warren Buffet quotes and one can see why he is one of the most successful businessmen currently existing. Such an ingenious piece of advice. I will allow that to guide my investment decision henceforth.

The proliferation of ICOs in 2018 has actually made a lot of people to be wary of cryptocurrency-based projects. The few successful ones definitely have a lot in common with the points you have highlighted, especially the clear and concise goal. There is no doubt that even a layman would understand the goal of #simplybrand but your post actually educated me more on how the goal is set to be achieved. This is a beautiful write-up @ascorphat, thumbs-up to you.

This Buffet's rule easily applies to Simplybrand:

Only invest in companies that will solve an existing problem.

When it comes to investments it is always wise to pay attention to the advice given by other more experienced people, and it is clear that Buffet is one of the greatest investors of all time, so paying attention to his rules and acting according to them is a good strategy, especially to people that don't have proper experience in these topics.

Why, thank you Mr Buffet. And yeah, simplyBrand looks like a winner. Counterfeiting is a global problem and I hope they succeed at mitigating it.

Well said my fellow steemian @ascorphat, pertaining to Buffett's words of advice to any startups or upcoming ICO projects I'd say it's a win win. And with @simplybrand eliminating all traces of counterfeit activities, I'm sure Buffett's advise will come in handy.