336: Own What Is Real

Welcome to Money For the Rest of Us. This is a personal finance show on money, how it works, how to invest it and how to live without worrying about it. I’m your host, David Stein. Today’s episode, 336. It’s titled “Own what is real.”

Using Bitcoin to Buy a Watch

Almost 15 years ago I bought a Panerai mechanical watch, which I wear every day. I bought it so I could keep it for the rest of my life. There’s no battery to change, and every 5–8 years I send it in to be cleaned and serviced. The watch is real, it’s physical, it’s beautifully made. It has scratches, nicks, patina. It had been eight years since I had it serviced; it was still working fine, but I decided to send it into Panerai to service the movement, the gears that make the watch work.

I took it to UPS, I ensured the package, I sent it two-day. That was last Thursday. It was supposed to arrive on Saturday. Then they said it was supposed to arrive on Monday, yesterday. Today it’s Tuesday. The package has been in Goodyear, Arizona the entire time. I don’t know if the watch has been lost, stolen. I went on the website; it now says it will arrive on Wednesday. I’m a little concerned, I like my watch.

I tried calling UPS. For ten minutes I went back and forth through different automated voice assistants. No one would ever pick up the phone. All I wanted was to talk to a real person. Somebody that would have a sense of empathy regarding my situation. Not that they would be able to solve it, but just to listen.

Last Saturday I decided that I wanted to get a second watch so that I could have a watch to wear when my other one is being serviced. I went to Oliver Smith Jeweler in Phoenix. I bought a second Panerai, a different model. 

And this is where it gets interesting. 

I paid with Bitcoin. Not in the sense I did early this year, when I sold Bitcoin, converted it to dollars, and then used it to purchase some replacement windows for our house here in Tucson. No, in this case, I actually paid with Bitcoin.

The jeweler emailed me an invoice via Coinbase, which had the Bitcoin address where I needed to send the Bitcoin. I copied and pasted the address on my Jaxx Liberty app, where I have some Bitcoin stored, and I sent it. About 15 minutes later, the transaction was verified, and I walked out with a brand new watch, that I paid for with digital currency, that has no intrinsic value. Useless digits.

The Best Forms of Money 

Peter L. Bernstein, in his book The Power of Gold, mentioned that the best forms of money are rare, useless things, that are easily divisible. They’re fungible. He wrote:

“Seen from the perspective of uselessness, the electronic blips on computer screens that comprise most of the money in the modern world are the best form of money. We have no other use for them. They are readily recognizable as money. They weigh a lot less than gold or even paper. They’re easily transferable. They can be broken down into any amount we choose, from a penny to trillions of dollars and even beyond. They are as durable as we wish them to be, and they have a kind of magic that commands our respect.”

It felt kind of magical to pay for a watch with Bitcoin. It didn’t even seem real. Dollars and cryptocurrencies have some similarities. The Internal Revenue Service writes that virtual currency (cryptocurrency) is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. That’s the definition of money, a medium of exchange, a unit of account, a store of value. The IRS is saying virtual currency is a form of money. But they go on, “In some environments, it operates like “real” currency.” What is it that they define as real? In this case, real currency for them is a currency that is legal tender.

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