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

null One, Munger and Buffett’s Long-Term Thinking Models and Their Key Value for Web3

As the blockchain industry enters a high-speed cycle from 2020 to 2026, its core contradictions remain unchanged: cutting-edge technology cycles, strong early-stage speculation; genuine long-term value creation remains scarce and difficult to quantify, or in other words, the concept of value is understood differently. This is highly similar to the early stages of tech stocks in the last century and directly contrasts with the decades-long investment frameworks of Munger and Buffett. Although Buffett and Munger have always publicly opposed BTC, or it’s a well-kept secret, their opposition seems partly due to a long-standing habit of the Old Money model, and partly because they oppose “high premiums under extreme uncertainty,” and “valuation logic without cash flow support.” This perspective offers significant lessons for the long-term healthy development of the future blockchain industry, especially project ecosystems.

Munger and Buffett repeatedly emphasize:

A company’s value derives from the discounted future free cash flows it can continuously generate, rather than from market sentiment, storytelling, or temporary price fluctuations driven by consensus. Although valuation logic and risk appetite in the tech industry differ completely from traditional sales sectors, the fundamental essence remains the same. When mapping this long-term framework onto Web3, three very critical judgment standards emerge:

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

Many new projects around 2026 fall into a misconception: for short-term stimulation and short-seller tasks, they allocate most budgets to marketing. Coupled with exchanges using social media platforms like Twitter as listing standards and a vicious cycle driven by meme coins, some public chain projects even prioritize short-term TVL for market operations that are not aligned with long-term platform development. Many projects appear prosperous before launch, but after three months, there’s no news, almost no real transactions—only bots and no genuine human activity. For long-term value, it’s not about seeking short-term incentives to boost TVL, nor about false prosperity driven by miner rewards, but about “core functionalities that users are willing to use even without subsidies.”

Examples include:

• Gas costs on Ethereum and mainstream public chains in normal use are direct economic outputs
• Revenue from some Rollups gradually shifts to real user transactions rather than airdrop whales
• Certain AI × Web3 projects have quantifiable income or clear potential as computing demands grow rapidly
• Future metaverse models that could replicate real-world economic systems
• Paid revenue streams from social apps and similar platforms

These indicators are closer to the “basic output” of value investing, and can also promote the development motivation and long-term growth logic of foundational blockchain projects.

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

Many Web3 projects perform well in bull markets but decay significantly in bear markets; those that can survive through cycles often possess “compound effects” and long-term development potential.

Typical features include:

• Larger ecosystem scale reduces unit costs (scale advantage)
• Data, assets, and liquidity become more concentrated, making it harder for competitors to shake the network (network effects)
• Increasing user migration costs (moats)

This aligns with Munger’s emphasis on “finding outstanding companies, not cheap ones”: what you need is strong compounding, not just low valuation. Good companies may experience periods of undervaluation due to market policies and exchange strategies, but only if they are fundamentally good projects.

3. Can the tokenomics system carry value without dilution?

This involves the essence of Tokenomics:

• Does the token have a “revenue sharing,” “buyback,” “governance voting,” and other value loops?
• Is the token supply curve reasonable, avoiding long-term dilution?
• Is the token superficially decentralized but actually highly concentrated?
• Does it have quantifiable future cash flows?

Buffett once said “Bitcoin doesn’t generate value,” similar to his view that gold has no intrinsic value, but everyone has different definitions of value. Assets like gold store value, which is a form of value, but may not fit the cash flow growth model in value investing. As BTC blockchain development progresses, and other cryptocurrencies are included, if some chains or protocols can enable tokens to receive stable income and rights distribution, their valuation systems could significantly approach or even create new valuation models similar to traditional enterprises.

Thus, the logic of value investing does not exclude Web3; what it excludes is hollow Tokenomics.

Second, Munger’s “Reverse Thinking” and Its Great Reference Value for Web3

Participants in the Web3 industry often indulge in stacking technical jargon—zero-knowledge proofs, account abstraction, sharding technology—but tend to overlook underlying economic principles and human nature. Munger’s thinking model emphasizes interdisciplinary integration, advocating examining systems from psychology, physiology, mathematics, engineering, biology, physics, and other perspectives (Lollapalooza Effect). The lack of this multi-dimensional view is the fundamental reason behind Terra (LUNA)’s death spiral, the collapse of the FTX empire, and countless DeFi protocols being hacked. One of Munger’s most important and valuable mental models is: avoid areas you don’t understand and don’t bet outside your circle of competence. Most losses in Web3, aside from the uncontrollable macro bear market, stem from:

1. Information asymmetry, deliberately manipulated by those with informational advantages
2. Overconfidence, thinking oneself a genius after a few lucky wins
3. FOMO-driven emotions
4. Lack of understanding of mechanisms, only looking at short-term charts and news
5. Lack of awareness of protocol risks, governance risks, token inflation risks

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?

• Architecture logic
• Technical route
• User needs
• Cost structure
• Competitor models
• Token incentives and fee models

If any one of these is incomprehensible, it’s equivalent to betting outside your circle of competence.

2. Have you assessed the most critical systemic risks?

For example:

• Changes in Layer1 unlock mechanisms, major leadership shifts
• CEX asset opacity, risk of moving user assets (e.g., FTX incident)
• Existence of death spiral mechanisms (e.g., UST and LUNA’s peg algorithm in the LUNA collapse)
• DAO governance being hijacked by a few large holders
• Forced unlock periods of staked assets (if the protocol collapses, can the unlocked assets maintain value?)
• Ecosystem collapse caused by token incentive decay (is the token’s value merely a game of stimulation incentives?)
• Long-term infeasibility of the technical route (sustainability of team’s technical foundation and vision)

Munger emphasizes that “avoiding stupid things is more important than doing smart things”: with our wisdom, the principle is that planning ahead prevents failure, and knowing oneself and the opponent ensures victory in every battle. When you can accept the worst-case scenario and do your best to avoid it, your chances of success increase. This thinking model is especially valuable in the Web3 market, where alpha is larger, bubbles are easier to form, and multiple fluctuations are more exaggerated.

3. Can you survive bull-bear cycles?

Munger’s clear investment logic states: excellent assets will improve over the long term, while poor assets will deteriorate.

Every cycle in the blockchain industry accelerates this truth:

• Chains with stronger technical foundations have greater long-term growth potential, and the actual results confirm this
• Chains without strong resources and background, with hollow narratives, are highly likely to go to zero in bear markets
• Applications with genuine user demand will gradually achieve stable revenue, usage frequency, and smooth user experience
• Meme strategies that only serve to quench thirst will worsen the mainstream market and further drain liquidity
• Fake prosperity driven by incentives will be washed out after listing or FOMO cycles, leading to declining interest

Long-termism is essentially a “filtering mechanism” that offers the fairest chance for everyone, allowing investors to more easily access high-quality targets and management teams after passing through multiple severe bubbles and cycles.