Dear Reader,

The strange case of James Howells's hard drive reached a judge this week, which should be cause for all of us to pause and reflect. In case you're not familiar with the heart-rending tale, Mr. Howells had quite a sum of cryptocurrency back in 2013, with his private keys stored on a hard drive that he removed from his computer and placed in a black bag [1]. His partner at the time came across the bag in the hallway and thought it was trash, so she threw it out, or so his story goes. His former partner has acknowledged her role in the incident but says Howells "begged" her to toss out the trash in the inconspicuous black bag [2].

But the he said/she said details are not pertinent to the matter at hand. What matters is that the Bitcoin in that bag is currently worth an estimated $800 million, and now, 11 years later, Mr. Howells wants it back from the landfill. So far the Newport, Wales city council has been dismissive of his efforts, claiming that as soon as the hard drive was thrown away, Howells lost any claim to it, and further asserting that it would be environmentally disruptive to dig up the whole landfill to look for one bag. Howells's team, on the other hand, says it knows exactly where to search, having retained the consulting services of the former landfill superintendent.

The whole story reminds me of Horton the elephant, digging up a clover field to look for the clover with the precious dust speck. Mere persistence paid off for Horton. For Howells, it might take something more.

This story has gotten lots of coverage as a hapless tale of cartoonish catastrophe – a devilish reminder of the snafus that lurk behind every effort to get rich. But it also seems like a chance for a more nuanced assessment of the crypto economy.

In the investment universe, unless you get really lucky, greater profit comes with greater risk. If you buy a bond with a lower rating, you get a higher return. If you buy shares in a startup, you could make a fortune, or you could lose everything. A stable and steady blue chip stock, on the other hand, delivers reliable returns, but won't make you rich overnight. Economists do not believe an investment with higher or lower earnings is "better" – they are more interested in the ratio of risk to reward.

Crytocurrencies sparked a revolution by cutting out the middle man: the banks. Removing the need for the global financial system eliminated lots of gatekeepers and fees, allowing the owner to keep a bigger share of the pie. But the risks get stowed away in quirky and unexpected places that aren't reflected in the equations. James Howells's hard drive is an extreme example, but how many other Bitcoin buyers recorded their key in a file they can't find today? How many got cheated out of their money in ways the banking system would have prevented? How many stuck their coin in an exchange like Mt. Gox that was raided and drained [3]? I don't mean to be negative about it – cryptocurrencies have their benefits, but the reason why they save you money is also the reason why they increase risk: because you're operating without the safeguards of the financial system. It is not better or worse – it's just different.

So if you're working in crypto, you better run a tight ship. You can't be a person like me, who could lose a shopping list on the way to the front door and is known to leave tools out in the rain. Attention matters. The black-bottomed eagle of Murphy's law is circling overhead, ready to fly away with your clover.