The Key Value of Munger and Buffett's Long-Term Thinking Model for Web3

1. The Key Value of Munger and Buffett's Long-Term Thinking Model for Web3

As the blockchain industry enters its high-speed cycle from 2020 to 2026, its core contradiction remains unchanged: cutting-edge technology is characterized by strong cycles and intense early-stage speculation; genuine long-term value creation is still scarce and difficult to quantify, or rather, the conceptual understanding of value differs. This is highly similar to the early stages of tech stocks in the last century and stands in direct contrast to the investment framework consistently upheld by Munger and Buffett over decades. Although both Buffett and Munger have publicly expressed opposition to BTC, or perhaps it's an unspoken secret, it seems that on one hand, this stems from a long-standing habit of the Old Money model, and on the other hand, they oppose "high premium expectations under extreme uncertainty" and "valuation logic unsupported by cash flow." This point holds significant reference value for the long-term healthy development of the future blockchain industry, especially for project ecosystems.

Munger and Buffett have repeatedly emphasized:

The value of a company stems from the discounted present value of the free cash flow it can consistently generate in the future, not from temporary price anomalies caused by market sentiment, narratives, or consensus. Although the valuation logic and risk style of the tech industry differ completely from the rhythm of traditional sales sectors, their ultimate core essence is the same. Mapping this long-term framework to Web3 reveals three crucial judgment criteria:

1. Does the public chain/application have genuine long-term demand?

Around 2026, many new projects fell into a misconception: allocating significant budgets to marketing for short-term stimulation and airdrop tasks. Coupled with exchanges using platforms like Twitter for listing criteria and the vicious cycle created by numerous meme coins, even some public chain projects adopted market operation strategies detrimental to long-term platform development for short-term TVL. Many projects appear prosperous before launch but fade into obscurity three months post-launch, with almost no real user transactions beyond bot activity. For long-term value, the focus should not be on TVL driven by short-term incentives or false prosperity from miner rewards, but on core functionalities that users are "willing to use even without subsidies."

For example:

• Gas consumption fees on Ethereum and mainstream public chains for normal use are direct outputs of economic activity.
• Some Rollups are gradually shifting revenue towards real user transactions, away from airdrop farming.
• Certain AI × Web3 projects possess quantifiable revenue or clear potential during rapid growth in computing power demand.
• The potential future replication of direct real-world economic models by the metaverse.
• Revenue from payment channels in social applications, etc.

These indicators are closer to the "fundamental output" of value investing. They can also better promote the development momentum and long-term growth logic of foundational blockchain projects.

2. Does the project have a compoundable business model or long-term growth network effects?

Many Web3 projects show impressive metrics during bull markets but experience significant declines in bear markets; projects that can endure through market cycles often possess "compound effects" and long-term development potential.

Typical characteristics include:

• Larger ecosystem scale leads to lower unit costs (scale advantage).
• Greater concentration of data, assets, and liquidity makes it harder for competitors to challenge (network effects).
• Increasingly higher user migration costs (moat).

This aligns with the essence of Munger's emphasis on "looking for outstanding companies, not cheap companies": what you need is strong compounding, not simply low valuation. Good companies may experience periods of undervaluation due to market policies and exchange strategies, but the prerequisite is that they are good projects.

3. Can the token system carry value rather than dilute it?

This touches on the fundamental issue of Tokenomics:

• Does the token have a value-closing loop such as "revenue distribution," "fee buybacks," or "governance voting"?
• Is the token supply curve reasonable, avoiding long-term dilution?
• Is the token seemingly decentralized but actually highly concentrated?
• Does it have quantifiable future cash flow?

Buffett once said, "Bitcoin doesn't produce value," similar to his view on gold lacking value. However, everyone has a different concept of value, and the value of the same asset varies completely across different time cycles and external environments. Gold storing value is also a form of value, though it may not fit the cash flow growth value target within the concept of value investing. With the development of the BTC public chain and other digital currencies included, if certain chains or protocols can enable Tokens to obtain stable revenue distribution and equity allocation in the future, their valuation systems will significantly approach traditional enterprises or even generate new valuation models.

Thus, value investment logic does not reject Web3; it rejects hollow Tokenomics.

2. The Great Reference Value of Munger's "Inverse Thinking" for Web3

Participants in the Web3 industry are often obsessed with piling up technical jargon—zero-knowledge proofs, account abstraction, sharding technology—yet often overlook underlying economic laws and human nature. Munger's thinking model emphasizes interdisciplinary integration, advocating for examining systems from multiple perspectives such as psychology, physiology, mathematics, engineering, biology, and physics (Lollapalooza Effect). The lack of this multi-dimensional perspective is precisely the root cause of Terra (LUNA)'s death spiral, the collapse of the FTX empire, and countless DeFi protocol hacks. One of Munger's most important and valuable thinking models is: avoid areas you don't understand; don't bet outside your circle of competence. Apart from uncontrollable factors like overall bear market trends, the vast majority of losses in Web3 actually stem from:

1. Information asymmetry, being deliberately led by those with information advantages. 2. Overconfidence, mistaking a few lucky gains for genius. 3. FOMO-driven emotional impulses. 4. Not understanding mechanisms, only looking at short-term charts and news. 5. Lack of awareness regarding protocol risk, governance risk, and token inflation risk.

Munger's circle of competence framework can be broken down into three long-term judgment indicators for Web3:

1. Do you truly understand how the protocol creates value?

• Architectural logic
• Technical roadmap
• User demand
• Cost structure
• Competitor models
• Token incentives and fee models

If you don't understand any one point, you are betting outside your circle of competence.

2. Have you assessed the most fatal systemic risks?

For example, consider the following dimensions:

• Changes in Layer1's unlocking mechanism, significant changes in core executive team.
• CEX asset opacity, risk of misappropriating user assets (e.g., FTX incident).
• Existence of death spiral mechanisms (e.g., UST and LUNA peg ratio algorithmic stablecoin leading to LUNA crash).
• DAO governance hijacked by a few large holders.
• Forced unlocking periods for staked assets (whether asset value can be preserved upon protocol collapse).
• Ecosystem collapse due to token incentive decay (whether token value is merely a game of stimulation incentives).
• Long-term infeasibility of the technical roadmap (whether the team's technical foundation and vision are sustainable).

Munger emphasizes that "avoiding stupidity is more important than being brilliant." In our wisdom, this means preparedness ensures success, while lack thereof spells failure; knowing yourself and your enemy ensures victory in every battle. When you can accept the worst-case scenario and make every effort to avoid it, your probability of relative success and victory is higher. Such a thinking model holds even greater value in the Web3 market, where Alpha is larger, bubbles form more easily, and volatility multiples are more exaggerated.

3. Can it endure through bull and bear cycles?

Munger's investment principles clearly point out: excellent assets improve over the long term, while inferior assets deteriorate.

Each cycle in the blockchain industry accelerates the validation of this:

• Chains with increasingly stronger technical foundations have greater long-term growth potential, and actual results reflect this.
• Chains with hollow narratives lacking strong resources and background have an extremely high probability of going to zero in bear markets.
• Applications with genuine user demand gradually move towards stable revenue, usage frequency, and smooth user experience.
• Meme-like strategies of quenching thirst with poison only worsen the mainstream market, further draining liquidity.
• Incentive-driven false prosperity gets washed out after listing or FOMO cycles end, gradually becoming neglected.

Long-termism, in fact, provides everyone with a relatively fairest "screening mechanism" after enduring several intense bubbles and market cycles. It反而 allows investors to more easily obtain high-quality assets and management teams that have been filtered by the market.