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The magic-bean industry – oops, I mean the cryptocurrency sector – continues to serve up a steady stream of entertainment. Even if you don’t own any crypto, it’s worth tuning into the show for its wider investing lessons.

This past week, we learned that Sam Bankman-Fried, founder of the now collapsed FTX Trading Ltd., ran an operation that resembled a frat-house beer-pong tournament more than a serious business. There was a “complete failure of corporate controls” and “a complete absence of trustworthy financial information” at the cryptocurrency exchange, according to John Ray III, FTX’s newly appointed chief executive. He wrote in a bankruptcy court filing that it was the worst mess he had seen in his four decades of restructuring failed firms.

Clients may be out a billion dollars or more. Exactly how much is difficult to say because the galaxy-brained crypto dudes behind the catastrophe were apparently so busy pondering the future of money that they couldn’t be bothered with something so prosaic as keeping tabs on who owed what to whom.

The key question is whether the gaping hole in FTX’s balance sheet is the result of larcenous intent or simply the residue of a toxic slurry of carelessness and ego. Sadly, this is not a new question in crypto-land.

The collapse of the Mt. Gox bitcoin exchange in Japan in 2014, the blowup of Canada’s own Quadriga crypto exchange in 2019, the fiasco at payment-platform Terraform Labs earlier this year, as well as a long list of other crypto failures, all display a similar pattern. Stuff goes missing. Systems don’t work as planned. Small investors lose. Senior executives of the failed platform shrug (or go missing, too).

Why should you care if you’re a sensible person who has always avoided crypto? Because the failures offer up a good lesson in how investors sabotage themselves.

The major selling point for FTX and for crypto in general was their lottery-like appeal. People wanted big payoffs fast. They loved the notion that digital tokens could soar in value, making them rich overnight. To put that another way, wild volatility wasn’t a bug in the crypto system. It was a feature.

This does not seen entirely rational. A highly volatile asset should be less attractive than a more stable one, everything else being equal. But volatility’s allure makes perfect sense psychologically. What do people want? Huge returns. When do they want them? Now.

The possibility of a quick payoff has the ability to hypnotize non-crypto investors just as quickly as it does crypto bros. Junior miners, cannabis retailers and online merchandisers have all enjoyed bursts of popularity in recent years. The common thread that linked all these booms to the crypto craze was the widespread dream that maybe, just maybe, these high-risk ventures could reward lucky investors with near-instant lottery-like payoffs.

In a few cases that worked. Most of the time it didn’t. Over the long haul, drab and dependable won.

Railways and banks, two of the more boring industries in existence, have been the long-term winners in the Canadian stock market, according to figures compiled by Ian de Verteuil, head of portfolio strategy at CIBC Capital Markets. In a report this week, he demonstrated how impressively these sectors, as well as a few others, have dominated the market in recent decades.

Over the past 20 years, the most rewarding areas for Canadian investors have been railways, banks, utilities, telecoms and consumer staples companies (think grocers, convenience stores and the like). In contrast, lagging sectors included information technology, precious metals producers, exploration-and-production companies in the energy sector and health care businesses.

To sum up: You would have done very well over this period by investing in Canada’s most humdrum industries, especially those dominated by a handful of powerful companies catering to predictable everyday needs. You would have fallen far behind by taking a chance on riskier, more speculative, more early-stage ventures.

This flies in the face of conventional wisdom, which holds that risk should equal reward. However, it aligns with academic research that shows stocks with high volatility tend to do worse than the overall market. In contrast, low volatility stocks tend to perform about as well as the market as a whole, despite their lower risk.

To be sure, this pattern holds true only over the long haul. There are periods, like the past decade in the United States, when volatile sectors, such as technology, produce outstanding results.

Even there, though, there are signs that the glow is fading. One-time stars like Meta Platforms Inc. (the former Facebook) have suffered huge losses in market value over the past year. The share prices of newer disrupters such as Uber Technologies Inc. and Airbnb Inc. have fizzled. Rather remarkably, investors’ returns over the past decade on tech superstar Alphabet Inc. (parent of Google) are now very similar to the returns on the far less glamorous Costco Wholesale Corp.

If there is a lesson here, it is that boring works better than you may think. You may never have the thrill of watching your investments soar overnight. Then again, you are far less likely them to see them abruptly wither. Over the long haul, the race goes to the mundane, not the magic beans.

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