The Pomp Podcast - #1431 Dylan LeClair | Michael Saylor's Bitcoin Bet Will Make Him Billions?!

Episode Date: November 4, 2024

Dylan LeClair is the Director of Bitcoin Strategy at Metaplanet & Market Intelligence at UTXO Management. In this conversation, we discuss bitcoin being put on the balance sheet of publicly traded companies, why it has created the best performing stocks in the entire world, what it means for all the individual businesses, and where he sees these companies going moving forward.  ======================= The future is being built today and the future of currency isn’t dollars, euros, pounds, or yen, it’s crypto. And Gemini thinks that’s a great thing. Because a future where money is decentralized, inclusive, and globally accessible, that’s a future that we are anxious to be a part of. Go where dollars won’t. With Gemini. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's going on, guys? Today, we have Dylan LeClaire. He is one of my favorite voices in the Bitcoin community, and he does not hold back. Dylan unpacks the great world of the

corporate treasury strategy, putting Bitcoin on the balance sheets of publicly traded companies, why it has created the best performing stocks in the entire world, and what it means for all these individual businesses. There's different flavors of it. There's different strategies. But Dylan unpacks exactly what these people are doing, how it works, why it's creating value, and where he sees these businesses going over the next 10 to 20 years. There's MicroStrategy, there's Similar Scientific, there's MetaPlanet, and many, many others. These businesses are pioneering corporate finance, and the results speak for themselves. Dylan LeClaire is here to explain it all, so I hope you enjoy my latest conversation with him.

Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Gemini. The future is being built today and the future of currency isn't dollars, euros, pounds, or yen. It's crypto. And Gemini thinks that's a great

thing because a future where money is decentralized, inclusive, and globally accessible, that's a future that we are anxious to be a part of. Gemini teamed up with futurists, technologists, and designers like award-winning artist Matt Griffin, known for his illustrations for Dune, to craft a vision of the future with crypto at its core. The creative theme, Go Where Dollars Won't, emphasizes exploration, growth,

and the crypto market's limitless potential. Whether it's going on that Martian safari to capture an unforgettable photo of a herd of woolly mammoths grazing the red planet, or using Bitcoin to pay for your Lyft pass to go strata skiing down the mountain peak of a breathtaking comet. Whatever adventures we'll be living,

one thing is for sure, in a future this fantastic, the limits of traditional currency simply cannot keep up. Financial innovation will usher in this new frontier and so go where dollars won't with Gemini. Go check them out at gemini.com slash go where dollars won't.

Again, go check it out at gemini.com slash go where dollars won't. So, Dylan, I thought the best place to start this conversation is MicroStrategy is obviously executing a somewhat novel and new corporate finance playbook. You're very involved with MetaPlanet, which is also doing the same thing in Japan. There's a couple of other countries around the world that are now realizing putting Bitcoin on their balance sheet could be this unlock in the public markets. Help me understand, what is the corporate treasury strategy for Bitcoin in these businesses. Yeah. Well, where to begin? I'm sure many of the listeners here

are familiar with the story. I mean, I actually quite vividly remember, I think you were the second one, not to say that, but Saylor came on to your podcast quite early. I think it was Peter's and then yours and basically laid out the realization, the aha moment back in August of 2020. Dylan, I was first. Don't worry. I was first. Fair enough. But even back then, I think the playbook, as you would articulate it today, was quite different, right? It was a defensive move against COVID. There's cash on the balance sheet. We're going to put it into Bitcoin. It's fastest horse. It's digital gold. I think that those things still apply. But the playbook as it is now um as sailor and the micro strategy uh treasury team of which you know they rebranded

yesterday um there's a few iterations of of well what is micro strategy what is what what are you what what is your business and bitcoin bitcoin treasury company btc um is is a i like it's a novel name uh it's a novel label and i think you know that the the strategy of a bitcoin treasury company is is you know much more much more advanced and much more uh of a well-oiled machine than it was the the idea was four years ago of like let's just let's just buy buy this thing and see how it plays out um because you know i think back then no one even even sailor and co admit this that they didn't they didn't really fully understand the opportunity that they were you know walking into um and so you know just two days ago pomp and um you know i'm sure you

you saw everybody did um you know microstrategy announced the the biggest at the money equity uh facility in the history of capital markets to buy bitcoin um you know said with convertible notes and equity issuance uh through the atm they're gonna it's basically you know they're gonna dilute you know over the next three years they plan to dilute the shares outstanding by you know 80 or so and so you know in a traditional financial context the shares would crater at 9 30 open um I mean, that's just that's, you know, if if Costco or AT&T or, you know, any of these kind of legacy companies and S&P 500 or the Dow, like, you know, pick one out of the hat did this, you know, shareholders would would, you know, protest. They would they would sell the stock in a in a rage. But MicroStrategy shares finished slightly right on the day, but outperformed Bitcoin.

Right. And then they have a leveraged Bitcoin balance sheet. So I think the point is that that there there is a novel concept that that they, you know, Saylor, the Bitcoin strategy kind of, you know, they've stumbled into the last four years, which is the notion that incremental dilution, as you call it. And I have I almost hesitate now to say dilution because it's not not even dilutive. It's accretive to acquire more Bitcoin. And this is not this this concept of BTC yield, which some people have have said, you know, they don't like the frame, the phrasing of the terms because of, you know, kind of a history of yield in these crypto markets. But their new KPI, MicroStrategy's KPI, which I think the bigger vision is this is 20 years from now, a widely adopted metric, maybe an official accounting metric in the corporate treasury world, in the world of finance. What's your BTC per share, per fully diluted share? Worst case scenario, every convert, employee, stock option, executive comp, all that's baked in.

What's your Bitcoin per fully diluted share? Is that increasing or not? right and in a bitcoin centric framework that's what shareholders care about and so year over year micro strategy is up you know 17 btc yield their bitcoin for fully diluted share is 17 so when you think of like equity markets right the the the crazy thing to think about is like you have to discount growth into the future nvidia is trading on 40x you know price to earnings or whatever the whatever the current um pe ratio is now apple's trading at at 25x 30x amazon's trading at 30x their price to earnings so when microstrategy is saying all we want is more

bitcoin all our shareholders want is more bitcoin and our bitcoin per share is up 20% this year you have to discount that right and so there's this really there's this really interesting thing going on where all the bitcoiners are are cheering the dilution on and all the trad five people on the sideline are saying you know these bitcoin people are idiots and and you know i that MicroStrategy has gone from a $1 billion company to a $50 billion company in four years. So I think this is, you know, remarkably so, this is still early days for the playbook. And, you know, the Bitcoin strategy as we know it is the radical notion that, you know, equity financing and debt financing structured in an intelligent way isn't a bad thing. And it's almost flipped the entire corporate treasury world, you know, debt finance, buybacks, hold no cash, hold no capital, strip it all away, return it to shareholders.

It's turned that on its head. And the remarkable thing is, like, no one has realized it yet, except, you know, basically one or two companies. You know, even the Bitcoin companies, the crypto companies like the Coinbase of the world. Coinbase just announced a billion dollar buyback two days ago. Right. So there's a lot to dig into. But I still think it's crazy enough. It's still early in the recognition that that, you know, this is a big, big, big shift and Bitcoin is bringing a shift. Right. So there's a lot to cover that we can kind of dig into all those details. But I always kind of say that's that's the overview of what we're looking at. Let's talk about this Bitcoin yield being kind of a benchmark. So the idea is if I own one share, there's a certain amount of Bitcoin that I basically have claimed to on the balance sheet.

And even though there are more shares being issued, which usually means that my value of my share should be going down. Instead here, because it is buying more Bitcoin for the balance sheet, the amount of Bitcoin that I have a claim to is actually going up. And that's kind of this idea of this Bitcoin yield. What are the ramifications of this? Does it change the way that people think about investing in microstrategy? Or is this more of something that from a corporate finance standpoint drives the return of the value of the business and shareholders? And so it's purely about optimizing kind of capital appreciation. yeah i mean so let's remove micro strategy out of it and let's just say we're we're in a hyper bitcoinized world and um you know you you you know you're looking at a publicly traded laundromat right and like this company has a bunch of laundromats all over manhattan and wherever else and and all they do is they is they have the facilities and they own them and they own

the machines or maybe they lease them who knows but every single quarter this company spits out cash right and what do they do with the cash do they hold it do they but well there's no there's they already have the saturated the laundromat market what do they do well one of the things they can do is buy bitcoin right and so no shares outstanding no debt just a plain old vanilla laundromat business let's just say it's public market so they're reporting all this stuff right quarter over quarter their cat their cash flow is positive their cash is going up they take that cash they sweep it in to buy bitcoin there's a positive bitcoin btc yield quarter over quarter there's a positive there's a the rate of change of bitcoin per fully diluted share is going up

right and so for a bitcoin denominated investor for an investor that's saying bitcoin is my unit of account it's my store of value this is how i want to measure value in this in this world even though maybe there's a little bit of more volatility even say 10 20 years out than the dollar right which is fine um then then that that is positive bdc yield i think what's what sailor micro strategy and kind of the early the early companies in this sort of phase transition are realizing is and this is something that you know some like someone like myself you know coming from the world of just like oh i can you know me or you or whoever else we log on to coinbase or cash app you send money you buy bitcoin in 10 minutes you can send it to cold storage it doesn't matter like

you know it's it's easy as one two three like getting getting orange pilled and understanding bitcoin yeah that's the step but like once it comes down down to it it's pretty easy to buy bitcoin if you're a pension or a a corporate you know if you have a mandate to own corporate bonds or you are a long only small cap equities fund or and i'm just naming you know kind of ideas but the point is there's trillions of dollars of capital that that can't access they can't even buy the bitcoin etf you can't even buy ibid you know the most best performing etf ever there's a lot of there's a lot of funds that can't even buy microstrategy right but what can you buy well you can you know some of these funds they can allocate 400 million dollars to to corporate

convertible notes or jump dead right and so the earnings call yesterday two days ago i highly recommend everybody go check it out um with microstrategy it was was amazing and and the slide deck they went through was was the the it was just one of the the best earnings presentations i had ever seen there was the crazy stuff that the corporate convertible notes issued by micro strategy right the the you know they this is an uh unsecured convertible note you know right now they have 18 billion dollars of bitcoin they have four billion dollars of debt so you know four to one almost five to one over collateralized currently in terms of the you know debts to the assets on the balance sheet um not including the software business um you know that's essentially right

those bonds have outperformed bitcoin they've they've issued six of them if you take the blended return of those and the blended return of where bitcoin the price of bitcoin the price of bitcoin today it outperformed bitcoin but they also have an embedded put option where they're a bond right so so if you if you're a bond holder and six years later bitcoin's gone nowhere you You know, they have to pay you back. Right. And so that's that's pretty crazy. And they've said, like, you know, we don't necessarily expect these bonds or not to outperform Bitcoin into the future. But the point is, MicroStrategy is levered BTC. They're outperforming Bitcoin on the upside and they're accruing more Bitcoin per share. These convertible notes, you know, say at a 40 percent conversion premium, the stock's at a thousand at fourteen hundred.

You're a bondholder. You have access. You know, your your bond converts into shares of the most volatile stock on the market and the best performing stock on the market. That's levered BTC. Right. So the real novel, you know, the low level conversation is, well, here's the NAV, here's a net asset value and here's the premium. And they're playing this ARB and it's fleeting and we'll see how long it lasts. like that's the normie take of like this is game stop it's irrational exuberance it's coming to an end the real you know the big brain take is that you know this this is the first early phase phases of like the bitcoinization of the legacy securities market bitcoin etfs were kind of a line in the sand for the institutional adoption we've you know the the you know the green light has gone on the race just started this you know the starting gun has gone off bitcoin etfs are the best performing etfs

of all time in terms of inflows and so there's now there's not the career risk there was on this and so you know equity securities that are you know quote unquote backed by bitcoin not not in the sense of a mutual fund not in the sense of an etf because an etf candidate to a convertible note an etf can't you know can't sweep excess cash flows they don't have excess cash flows it's overnight deposits but if you're a public operating company you have a lot of flexibility and so i think the point is that that valuing things as they has micro strategies pioneered in a btc denominated framework that all bitcoin maximalists and everybody that's you know thinking in this new world um you know is is benchmarked to and they and they want they want more bitcoin

they want more bitcoin returns and they want leverage bitcoin exposure right and so i think that you know the the issuing equity issuing debt to buy more to buy more bitcoin in a way where you know they're borrowing money for five years at at one percent at zero percent at two percent interest right and and the point is that they're they're not even really paying that debt down because it's just converting into new shares of common stock right so so bitcoin per fully diluted shares going up the solvency ratios are going up as they continue to dilute their shares and the shareholders cheer for it um and so you know the the point they made on the earnings call was you know everybody's having this debate on like well it's here's the premium here's a net

asset value and it's irrational it's not irrational we're a growth company we're a tech company how do you how do you value a company that's gone from 1 billion to 50 billion in four years you know in q1 when fast food is adopted they're going to have a 10 billion dollar earnings print it's like it's like the biggest rate of the biggest you know quarter over quarter change in earnings in the history of capital markets so like the real crazy take is when you think about fasbi adoption and this bitcoin treasury strategy you have essentially kind of like a merging of the the pe multiple world and this and this you know new corporate bitcoin treasury strategy world right where the debate around mna market cap to net asset value and all this stuff sort

of merges with the world of pe ratios right if mstr what think about if bitcoin goes to whatever you think it does in 2025. Do you know the earnings per share that MicroStrategy is going to record in that scenario? Do you know that equity market investors and all these passive flows are going to value that at a multiple of the current earnings? And so this is entirely unprecedented. The MicroStrategy team is writing the history books right now. And so we don't know comes next but i think you know based on the last four years you know past results don't don't equal future performance um but it's clear there's an insatiable amount of demand for these bitcoin backed securities equity securities and debt securities and no one in the world can offer

what they are offering you can't a hedge fund can't offer it a bank can't offer it a public operating company that's 130 exposed to bitcoin on their balance sheet can right so it's super unique it's really not understood even by like very very smart respected you know finance uh pros um so i think there's there's still a ton of opportunity and remarkably it's still like you know only like the third inning here you're involved with meta planet which is a uh japan-based uh company that is pursuing something very similar but what's unique is that japan's borrowing environment is uh is a little bit different than in the United States. Describe maybe the parts of the micro strategy story that can be replicated by

other companies like MetaPlanet, some are scientific, etc. And then also, what are some of the ways that people can take this kind of corporate finance strategy and maybe add their own flavor, like as you guys are doing in Japan, according to the environment, the geography, or maybe the business strategy? Yeah, so I mean, we, you know, Metaplanet is no doubt, and we don't shy from it, was inspired by the MicroStrategy story. I joined the company in May, about a few weeks after the Bitcoin standard was announced and kind of the implementation details were still being figured out. I think, you know, the point is there's going to be a lot of different flavors of this, right? There's going to be you can think of the spectrum of like there's no Bitcoin and then, you know, MSTR is 130 percent levered BTC.

and they're diluting as fast as they can and they're issuing all these debt instruments in the traditional sense, which is risky, right? But there's a spectrum. It's not binary. It's not zero or MSTR. Someone like a Square or Block is taking like X percent of their profits,

5% and just DCing into Bitcoin, right? So every quarter, they're going to announce a little bit more Bitcoin, but I don't think they had the buying from shareholders to triple their shares outstanding to buy Bitcoin. For someone like MetaPlanet, right? And Metaplanet was a legacy budget hotel company that got basically, you know, completely wiped out during COVID, restructured the entire balance sheet and was essentially, you know,

and don't shy away from this, like a zombie in 2023 and 2024. And so the point is, you know, Japan offered a really unique opportunity where there's no Bitcoin exposure anywhere in the equity markets. There's no miners, there's no, you know, Coinbase or MicroStrategy, there's no ETFs. and the tax rate on crypto right now in japan is like the highest in the world um it's treated as miscellaneous income so it's up to like 55 percent uh but listed securities are 20 so there was never mind the the interest rate and the currency story and the debt to gdp so there's a there's like a bunch of stars that align that made this a really unique interesting opportunity

um and so you know so far metaplanet has has gone from you know 11 million shares outstanding to $36 million in six months, right? And, you know, right now we have MetaPlanet has five times the amount of Bitcoin on its balance sheet with no debt as the market cap was six months ago. So the point is, you know, the scale is obviously like multiple orders of magnitude smaller than like, say, a MicroStrategy to start. But the playbook and the story is similar. And we openly state that, right?

Like MicroStrategy adopted BTC yield as a KPI, a key performance indicator. We're not trying to reinvent the wheel, right? So we said early on in April, we said, you know, we want to increase our BTC per share. But, you know, when you read MicroStrategy's disclosures, they're saying, here's our fully diluted shares outstanding. Here's what they are. Here's our converts. You know, it's like full, it's like overly transparent, right? And so we're like, you know, I think we're going to do that same thing.

And we've, you know, MicroStrategy openly is saying we want, we don't want to, we're not gatekeeping this. We want this to be the standard. We want our transparency and we want our, you know, our KPI, this BTC yield to be the standard. And so we adopted that. And now our, you know, our measure of whether we're doing, you know, a good job for our shareholders, for our partners, is whether our total Bitcoin per fully deleted share is going up. And if it's not, then we're not doing our job. Right. And so I think that, you know, this is still super, super early days.

But, you know, I would imagine, right, we, you know, Pomp, we've had 20 conversations, just me and you. You've had 400, 500 podcasts on Bitcoin alone. We think both of us all the time on what this world looks like on the other side of like this Bitcoin event horizon. Right. And I think what was a little fuzzy but is now coming more into focus is like, okay, if we go to the furthest extreme of what this Bitcoinized world looks like, right, and Bitcoin is like the benchmark for value, then what is a measure of performance or excellence look like in that world for finance, right? And I think it's clear what it looks like is, well, per share on a relative basis, is your Bitcoin holdings going up or down, right? Because you can increase aggregate Bitcoin holdings while diluting your shareholders, right? But Bitcoin per share is going down, right?

So, like, you know, a lot of the miners have a lot of Bitcoin, right? But mining is a really tough business and, you know, there's many things in ASICs to appreciate. So a lot of these miners have way more Bitcoin than they had four years ago, the public miners, but their Bitcoin per fully diluted share has gone down. And I understand they're building sites and they're doing much more than just buying Bitcoin. But the point is that that's kind of the true cut through the noise benchmark of what success looks like, or at least to some. And so for us, we've openly stated that we are inspired by MicroStrategy and looking to implement that as well and i think you know that's if i had to guess i would you know say that there's

going to be five and then 10 and then 20 and then 100 companies that are you know using this as a benchmark for performance um but for a variety of reasons you know btc yield is a benchmark right it sort of it sort of pigeonholes you into into one thing right because if you're using btc yield as a benchmark and then all of a sudden you want to go make an acquisition right or if you you know you are a tech company and you want to go buy out to startup or, well, all of a sudden, if you use shares to do that, your BTC per share goes down. So if your shareholders only want one thing and they only want Bitcoin, that introduces an interesting element. So there's pros and there's cons, but I think for us, this is the story and that's our one goal. We want to hold

as much Bitcoin as possible. And I think the interesting thing is that for the first time, um not for the first time but in a way that wasn't as clear and transparent and quantifiable as it is today dilution can be nearly instantly accretive right you can dilute your shareholders in in almost near instantly your your you know uh per share value incrementally ratchets upward and it's just a new dynamic right i mean if you're a real estate public company or whatever and you you dilute shareholders to make an acquisition or to invest in a new property, it takes a few years to figure out whether that was a good acquisition or if the real estate portfolio is giving you a positive ROI. You might never know. With Bitcoin, you know in three days, right? So the investment cycle,

if you will, is a lot faster. So yeah, there's a lot of interesting elements and things to pick at. But I think the moral of the story is that this is a one-way train in terms of Bitcoin adoption in terms of more companies adopting it. But I don't think you should expect there to be 2,000 MicroStrategy copycats exactly as they are. There's going to be 10. There's going to be a lot of them. But I think a lot more companies, maybe a big tech company, maybe Microsoft, they're going to... I mean, Microsoft could buy $10 billion of Bitcoin and it's irrelevant to their balance sheet, right? And that's a lot of money. But relative to their $3 trillion market cap they're not a bitcoin proxy right so that's where sailor that's where micro strategy story

is unique i think for us that's where we're unique where we're not focusing on anything else um but for an established corporate conglomerate right that's not gonna you're not gonna go all in right relatively it's gonna be quite small even if your absolute position size is big so i think it comes in all flavors all shapes and sizes but you know it's a one-way uh you know street for adoption. MicroStrategy has announced a $42 billion kind of capital raise. It's both equity and debt. Part of that equity raise is the largest ATM in history. For those that don't know, ATM is like an at-the-market offering where you basically are selling shares into the market to raise capital from the business. They can do so when they choose to do it once the ATM has been

approved and they can choose to do it on good days, bad days, anywhere in between. What is the significance of this ATM that MicroStrategy has announced? And do you think that more and more companies will realize that these ATMs, which the Bitcoin miners have been using pretty aggressively to fund growth, is the path and the kind of lowest hanging fruit to be able to raise capital and then go buy Bitcoin for themselves? Yeah, I mean, I think, you know, for a lot of these companies, the first entrance, right? Like if you think about a company that, you know, whatever, you could choose any company in the world if if they just instantly just kind of jumped on you know the next earnings call or they release an 8k and they said hey uh we're diluting shares by 10% to

buy bitcoin and uh you know here's your first time hearing about it it wouldn't go over well right um especially if you're a big corporate like you just can't do that you can't just bring that upon your shareholders you know it's it's kind of a process of like hey should we do this okay here we're gonna take a we're gonna take a one percent stake a five percent stake that five percent stake grows to 10 hey maybe we should buy more um hey maybe we should increase bitcoin per share how do we do that well we could issue new shares look what this company did right they've done it they've done it eight separate times um so i think that's kind of how how it'll look um but yeah like right if you think about the you know you because of the interest rate environment

because of even even during from like say 2000 to 2020 before you know the inflation wave that that hit after covid there was there was still a prolonged period of negative real interest rates you know the the interest rates were zero and um you know the the inflation rate was to two three percent in cpi terms you know the the real hurdle rate and say like the sp500 if you're measuring that or bitcoin was a lot higher but let maybe you could you could say m2 but let's just use cpi right like you have a negative two three percent real interest rate in that world so why would a corporation ever hold cash and the the the fact of the matter is the smart ones didn't right the smart ones are borrowing as much money as they can long dated and they're buying back their stock

right like the you know post steve jobs like apple's biggest innovation is the i buy back and that's and that's fine i think the the important thing to recognize is that you know it's a it's just a matter of incentives they're not doing anything wrong it's it's you know it's what most anybody else would do in their shoes um right like that's how you return value tax efficiently to shareholders in this world right because like with it with a dividend you know both sides are getting taxed with a buyback you know it's just it's just you know kind of increasing the valuation of your shares it's not it's not a taxable event directly until you sell um and so that world right it's like you're decapitalizing your balance sheet you're getting

rid of capital as fast as you can because capital you're that cash asset's a liability which is like in you know it's like how's the cash a liability well it is in a world where it decreases in real terms every single year it's a liability um so bitcoin you know the the idea that that bitcoin capital again can be an asset and that volatility itself is an asset right which is like wait what say that again and the and the the real crazy thing and my micro strategy just stumbled into this was you know they bought a bunch of bitcoin and the bitcoin went up and the bitcoin became a bigger and bigger percent of their market cap and all of a sudden you know micro strategies like realized volatility had doubled right so so and and for the cfo right like the most you don't

want balance sheet volatility you don't want stock volatility these things are scary and you should avoid them right wall street why would you ever buy bitcoin it's volatile it's way too risky stay away um but the the real crazy thing you know the egg that was cracked with with micro strategy is that this volatility is an asset that's being leveraged. So, you know, MicroStrategy is, you know, as volatile or now twice as volatile as Bitcoin. Well, because of this, they can borrow for basically, you know, free for four or five, six years. Because how?

How do they do that? Well, you know, if I if I if you pull up the, you know, options on E-Trade or Robinhood or Interactive Brokers or Schwab or whatever brokerage you use and you just look at, you know tesla stock and you go to the furthest out and you want to buy a call option not for for out of the money just for today's price you want to buy tesla for today's price five years from now well like that's that option costs a lot of cost a lot of money even buying it say you have to pay a pretty fat premium to buy it 50 higher than the price is today five years from now well why because that optionality is really worth is really valuable if the stock you know doubles or triples

And the more volatile a stock, the more uncertainty there is, the more you have to pay, the fatter that premium is. And so volatility in the world of options is value. And so a convertible note is just a debt instrument and basically a call option on a company wrapped into one instrument. And so this option, this micro strategy common stock option is the hottest thing in debt markets. Because traditionally, a convertible note on Berkshire Hathaway or a convertible note on just like a stock that barely trades, there's almost no value there. I guess it depends where the conversion price is. But MicroStrategy is saying, hey, 40% out of the money, five years, plug those values

into a black controls model. It's basically a fair value of the expected distribution and a bunch of mathy stuff. But the point is that the volatility is valuable to them. And so they've leaned into it and they said, okay, we want more volatility, more returns. We're going to manage this in a way where we're not going to be forced to sell. I think they learned lessons, MicroStrategy learned lessons in 21 and 22 on the size of their debt versus their assets, kind of fine tuning this to the point where they can... Bitcoin's going to draw down by what, 50, 60% at some point, 70%.

been through a few cycles, right? Like we know that at the point where we think this is hyper Bitcoinization and no, it'll never go down again, you know, we'll get it, we'll get a nice 50, 60% pullback. And so the point is that they're structuring it out where the liabilities are not going to be forced to sell. This, you know, this ATM, this $21 billion ATM, they're going to be in the market every single day. And the point is like MicroStrategy's volume has gone from, I actually don't know what it was pre-Bitcoin, but right now it's about $5 billion a day. And so that's the same as the Magnificent Seven. That's the same as NVIDIA or Tesla or Meta or Amazon.

But those are trillion-dollar companies. MicroStrategy is $50 billion. So MicroStrategy options are the hottest, the biggest options chain in the U.S. markets. So the point is that they can dilute because of the volume, because of the volatility, because of the uncertainty, because of the traders and speculators and arbitragers, their financing options for today compared to four years ago is otherworldly. you know the options chain and micro strategy in 2020 was 3 million and now it's it's like 25 billion right so so like that's it's just the the volatility and uh you know that uncertainty paradoxically opens up a lot of doors and so when you know particularly for leaning into this bitcoin strategy um in a way that you know it really isn't comparable to anybody else at this

phase um you know they they have figured out on almost an engineering uh feat right in financial markets that has never been seen before and so that is basically completely opposite completely inverse to the the current meta right the current corporate finance meta of get rid of capital no volatility buy back your stock right like they they want the opposite they want high volatility They want more capital and they want, you know, higher performance because of it. So I think, you know, that that world is it's a new idea. It's a radical idea. And I think it's one that makes a lot of the you know, if you would never read that in an efficient market hypothesis textbook. Right. You would never learn this in a Harvard MBA. Right.

So a lot of the people in the C-suites, right, like you're a C-suite executive, you're a CFO at a public company. you like you have a four-year term you have vested stock options like you just don't want to rock the boat right there's no incentive like sailor he's like founder he's got over 50 of the voting shares like we're doing this right but for others you know you who owns your shares well fidelity and black rock and vanguard and state street and and you know four other pensions and you know we each we each own one percent of the share so like we're not going to do a bitcoin standard because We don't want to blow this up. But I think that's changing, right? The career risk has really been diminished. I wouldn't say it's fully wiped out yet in the minds of everybody. But I mean, the results speak for itself. MicroStrategy has outperformed every company in the S&P 500 by a long shot in the last four years. You mentioned something that I think is worth elaborating on, which is the U.S. dollar is actually a liability. And this is something that may be popular and known in the Bitcoin community. But I think most people in finance, most entrepreneurs, they don't see that. They don't understand what that means. Can you explain?

well yeah i you know i think if you can look in the past you can look in the last four years or 10 years but i think really you know the especially the savvy investors the paul jones the drunken millers um you know they're saying that these macro guys they're looking at the debt to gdp in the u.s and every g7 nation and they're saying there's no way fixed income bonds even short duration treasuries uh debt instruments have a positive roi um because you know because functionally like these these countries these sovereigns are are insolvent um so so like traditionally there's you know there's two ways to go about this on a gold standard they you know confiscate the gold or revalue the gold higher it diminishes the real

value of the debts on a debt-based system you know the only option is to basically you know print your way out the only option is to inflate your way out which means by definition just you simple arithmetic the the year-over-year percentage change in inflation has to be higher than the interest rate right so that's the way to devalue the real value of the debt is is financial repression inflation above interest rates um so in that world okay great your treasury earns four percent right but your treasury earning four percent while inflation is six means you're losing value in real terms so like the the this entire finance world is baked around you know for projections and multiples and and you know you're saying okay well the company makes

this amount of cat or this amount of earnings or cash flow this year so we're gonna value it you know on our 10-year projection and i think you know basically because of the the there's a lot of second order effects but because of this this mass monetary experiment because of this fiat currency induced, you know, malaise almost, the investing world is no longer, I mean, there's many that are doing this, but the vast majority of investment capital, they're not going in and they're not putting up an Excel sheet and saying, well, okay, so here's the debt and the liabilities and here's the cashflow and here's, you know, all the things to look at and here's our model on how to value this and the stock's worth this. No, no, like the average person, the average

retiree, the average, you know, corporate worker is plowing money 52 weeks a year into a basket of 500 companies or a basket of every company in the US at any price, right? And disproportionately it goes to the biggest companies, but like passive, the passive, you know, zombification of investing flows, right? That's came as a result of ETFs, right? I think that it's not a bad thing a vacuum but the the reason that this has happened is because the the original instrument that's to be used for savings money no longer can function as a store of value right in a in a hypothetical world where the dollar you know your unit of currency whatever it is doesn't programmatically you know it's not politically programmed to lose value every year in that world investing as we

we know it becomes much more of an active game. You have to pick winners and losers, right? It's a stock picker's market, right? The last 20 years, or let's just say 10, 20 years, it's not a stock picker's market. It's a momentum market, right? The people that have won are the people that are chasing beta, they're chasing tech, right? They've outperformed. They've outperformed the active managers, the value fund guys. And I think the value investors, the reason they're underperforming the value guys it's not because they're dumb they're not they're really smart you know these guys are warren buffett disciples and they're getting performed every year by by teenagers punting qqq right well why well it's not because they're dumb again it's because the thing that

they're the the denominator that they're using for all this calculus there's an error term baked in there there's an there's an error the error is the the value of the currency is going down right so So in a world where the money is, you know, debasing at maybe an increasing rate, we'll slap whatever multiple you want on all these tech companies. It doesn't matter. They'll grow into it. You know, like that's and that's the world we're in. Right. And a lot of people don't recognize that. And so whether that continues or not, you know, that's a that's a topic for debate. I think it does. I think we have to debase to get out of this. You know, we had we had a biggest inflation shock in 50 years. We were talking about it all of 21 and 22. The debt to GDP ratios didn't go down. right? The point was in 2020, the Fed chairs and everyone else was clamoring for high inflation.

We need inflation higher. We need to shock markets. We want just to let it run hot. That's what they were saying, right? They did. They definitely let it run hot. Inflation wasn't transitory, no matter how many times they said it. The cost of goods now is the base effect. It's 30% higher. Everything's 30% more expensive, depending on average. But debt to GDP didn't go down. It's flat. It may be ticked up in places. So the point is that the debasement is still guaranteed to come. So in the world of investing, whether you're just a stock picker or investing in a Robinhood brokerage, or you're a CFO, or you're a value fund CIO, the implicit assumption is that you make in all of this financial analysis is that, you know, the ruler is accurate and the

ruler is the dollar. The ruler is a dollar on a one year, five year, 10 year, 30 year, you know, expected value. But in the world where that's broken, in a world where, you know, 10 years from now, the money is going to debase by, you know, it's going to debase by 50% more than the value you're going to get on the interest rates and cash. How do you measure things? And I think the Bitcoiners are saying, you know, the crazy radical Bitcoiners are saying, well, guys, you're using the wrong unit, right? It's not clear to everybody that Bitcoin is the unit to measure because it's too volatile. There's too much noise. You know, it's too small.

But increasingly, right, there's now one or two companies. There's now a small country. There's now a few kind of radical people that are saying, well, guys, we've been telling you that this is a new benchmark, BTC. see. But look around. And so I don't think we're there yet in the sense that everybody's going to finally say, okay, well, we get it. The money's broken. But this game can only go on for so long. I know it's politically polarizing. It's the orange man, it's blue team, it's red team. The reality is it's structural. And so in that world where the dollar is broken, things are in disarray um and a lot of it gets fixed and the second and third order effects get

fixed when that that you know that base error is no longer uh gone array right so the dollar the dollar is ultimately broken um and you know a lot of people don't see it you don't see it with you know the cpi only going up two percent a year but we really we all know that the real inflation rate's higher than two percent right like there's just an implicit understanding that it's a lot higher so yeah i think that you know that the corporate treasures of the world and the cfos are still operating you know they're saying hey we grew we grew six percent year over year it's like yeah well you know in 2022 the inflation rate was nine right so you didn't grow you you shrunk right um so that's that's still you know not widely understood um or at least not

it's kind of not spoken about but i think we all know it's happening what is this going to look like 10 years from now 20 years from now this kind of bitcoin treasury strategy how do you think about this you know there's the guys uh that are doing the micro strategy true north uh podcast and content um there's people who are you know making large investments in these companies that that obviously believe is going to be higher or better in the future but like what does it actually look like a decade or two from now yeah i think you know The well, you're going to have a lot of companies that are operating on Bitcoin standards. You're going to have, you know, micro I think MicroStrategy truly is going to be one of the biggest companies in the world.

You know, they're going to be in the conversation of, you know, mag seven, right? Fang, mag seven, whatever you want to call it. I think, you know, MicroStrategy could ultimately be a five hundred billion, a trillion dollar company. You know, I don't think you know how to value like how do you how do you value that growth? How does the market value a 20% increase in Bitcoin per share year over year in a forward-looking discounting equities market? No one knows. But more so, the real big pools of capital is fixed income. And so these convertible notes are the first ever, it's not a Bitcoin bond, it's a micro-strategy convertible bond, but it's implicitly backed by Bitcoin.

And so I think this is the first, you know, it's the first crack of the dam, if you will, right? Like, there's all of this capital that, especially in the long end, not the short end, you know, okay, the Fed fund rates 5% and inflation 6%. Okay, it's fine. It's one year, your short duration cash, who cares? The real pain, and there was already been the biggest, you know, Treasury's bear market in the history of modern finance in 22 and 23, right? The long end already repriced from 1% to 5%. But now, I think the realization the bond market is now coming to, especially with maybe a higher chance of a Trump term or really either candidate, is that the long end is going to be quasi-sacrificed. We have to onshore all this

manufacturing. We have to get out of this debt bubble in relative terms. We have to devalue. All right, well, we're going to pin this long end and we're going to let it rip. And so in that world, where does all this capital go? Well, there's $100 trillion of fixed income capital. They can't buy Bitcoin on Coinbase. They can't buy the Bitcoin ETF. They can't buy MicroStrategy stock. They can't buy Apple or Google stock. They have to buy bonds. And so I think the point is that all these banks are coming to the Bitcoin world. Not yet, but they're all going to want to custody Bitcoin. They all seen what happened with iBit. i think there's the realization that that bitcoin is collateral is perfect collateral if done right

segregate the collateral no rehypothecation you know yada yada yada um the you know someone like canter coming out in july and saying you had a a great podcast with howard by the way um you know he's a big big big bitcoin bull um they have a two two billion dollar bitcoin collateralized loan facility and so you know that that's a big signal to the tradfi world right um and so all of these companies or all of these banks are going to say well you know bitcoin is is wait this is perfect collateral it trades 24 7 365 we can over collateralize it it's a no loss loan business okay yeah i mean let's let's put the bitcoin you know the bitcoin borrow the borrow rate against your bitcoin at so for plus 100 basis

points right like there's no reason that i should be able to borrow against my apple stock or tesla stock or whatever stock at Goldman or JP Morgan at 75 basis points higher than the Fed funds rate. But Bitcoin is 500 basis points above the Fed funds rate right now for Bitcoin backed lending. Like the problem isn't the unchained capitals and the hodl hodls and the Cantor Fitzgeralds of the world being greedy. The problem is like the credit, the private credit world, the fixed income world hasn't

understood the Bitcoin story yet. You know, Bitcoin is perfect collateral. So I think there's a two prong kind of approach. There's, there's the world of fixed income is realizing the power of Bitcoin now, which means that stuff like MSGR convertible notes, Bitcoin treasury company, convertible notes, I would say, you know, we're meta planet is following in the steps. So we're going to we're branding as a Bitcoin treasury company. And so I think that that that world, right, there's going to be convertible note issuers, you know, backed by BTC. That risk profile is very, very different. Right. You want five percent of the Bitcoin downside, but 50 percent of the upside. That's a pretty strong risk profile. You know, corporate BTC company, Bitcoin treasury company, convertible notes. Well, on the other side, you have all these banks, right, that are just going to begin to custody Bitcoin, we think, in 2025.

well what are they going to do it you think they're just going to custody it no thanks the banks are in the business of lending right so once bitcoin as it gets entrenched into this world of finance you know the the hyper financialization of bitcoin is hyper bitcoinization right it you know getting bitcoin on the asset side of the global balance sheet you know sufficient in sufficient size tying it to the global you know the the waves of liquidity this this is hyper bitcoinization um and so you know it's i think like we're we're 12 months in if that to maybe nine months into the institutionalization like we we had 2020 to 2024 but that was it was still not touchable to like the the the suits wall street you know you're wearing a suit but the

point is like i think that you know the big money right the trillions of dollars of capital are now finally at the gate. And so Bitcoin, it was crypto, high-flying, kind of hot money. We had kind of four years of crypto Bitcoin equities, Coinbase, the miners, MicroStrategy. We're in the early stages of Bitcoin and fixed income, and that's the biggest capital pool in the world. So you're going to be able to use Bitcoin to get a mortgage. You're going to be able to use Bitcoin to borrow at JP Morgan. There's going to be underwriters of Bitcoin convertible notes, like all of these things have yet to come. And, you know, I think it's profoundly bullish. So that's kind of how I view it 10 years out is that, you know, we're going to have a bunch

of companies on a Bitcoin standard. I think BTC yield is a benchmark for a lot of Bitcoin forward companies. It's clear that the fixed income world has an insatiable demand for this. And I don't think that stops anytime soon. And so, yeah, I think that's, you know, that these are the big leagues and you know it's still it's still early days in 30 seconds or less tell us what is the meta planet pitch meta planet pitch is we are the only bitcoin treasury company in japan and um you know we are doing everything we can to increase uh btc per share so q3 we bitcoin perfectly diluted share was 40 41 and q4 so far is 155 percent um so we are you know we are going to dilute as fast as possible to accrete value to shareholders.

And I think we're early days of the execution, so we're excited. That is fantastic. And Dylan, where can we send people to find you online? Yeah, I'm mostly active still on Twitter. So at Dylan LeClair underscore, doing stuff with MetaPlanets and a few other things. So yeah, I appreciate coming on, Pomp. It's been a while, at least a year. So appreciate your time.

And yeah, it's early days. Excited to maybe you guys talk to the team at HUD. And the energy dealer role turns into a Bitcoin role as well. I think that you're all over this. I think that you are on the right side of history. And I feel like you and I are going to be talking a lot more as all this starts to get exciting here in this bull market. So I appreciate the time and we'll definitely do it again soon.

Appreciate it, Bob. Cheers. What's up, guys? I hope you're enjoying this episode. but I got a quick message for you. I just released my very first book. It's called How to Live an Extraordinary Life. In this book, there are 65 life lessons

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