People often buy Bitcoin because they want to be part of something exciting and new, and they want to learn from the experience. This motivation is particularly strong because of the underlying story, the narrative that computers are poised to replace many of our jobs. But computers can’t replace all of our jobs. Somebody has to control those computers, and there is a narrative today that the people in charge of the new technology will be the winners. Very few people feel secure that they will be on the winning end of this curve. Even taking a degree in computer science doesn’t seem to be a sure path to success today, because it may lead to a humdrum job as a low-level programmer, or even to no job at all. A desire to be on the finance side of the tech business, where Bitcoin sits, is popular because there are so many stories illustrating that financiers take control of things. Bitcoin enthusiasts may think that experimenting with Bitcoin will put them in touch with the people who are going to be winners in the new world, will give them insight about how to stay in (or gain) control. It is easy to jump-start one’s connection to this new reality by buying some Bitcoin. Best of all, one doesn’t have to understand Bitcoin to buy it. Vending machines at convenience stores now sell Bitcoins and other cryptocurrencies. This “Be a part of the future” narrative, enhanced by regular news of exciting fluctuations in the price of Bitcoins, gives them value. It generates fluctuations in Bitcoin prices in terms of national currencies, and these fluctuations thrive on and produce contagious narratives.
Understanding narratives and how they spread is key to being able to explain the many seeming erratic economics changes we see in the world today. In this book, Robert Shiller studies how word of mouth ideas and stories as well as people’s efforts to make these stories more contagious can have a huge impact on economic events.
One example is the how the attractive and contagious story of Bitcoin, or cryptocurrency in general, appeals to people and drives even more contagion in terms new narratives. To Shiller, the way economic narratives spread is akin to how a virus (like what we have now) spreads in an epidemic or pandemic.
