The Pomp Podcast - #716 Bitcoin Is The Best Asset w/ Michael Saylor

Episode Date: November 9, 2021

Michael Saylor is an entrepreneur and business executive, who co-founded and leads MicroStrategy, a company which provides business intelligence, mobile software, and cloud-based services. He has become well known in the Bitcoin community for using the company's balance sheet to purchase more than $7 billion in bitcoin. In this conversation, we discuss bitcoin, MicroStrategy’s bitcoin allocation, politics, monetary policy, and how individuals should think about bitcoin.  ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit compassmining.io to start mining bitcoin today! ======================= AG1 by Athletic Greens, the category-leading superfood product, brings comprehensive and convenient daily nutrition to everybody. Keeping up with the research, knowing what to do, and taking a bunch of pills and capsules is hard on the stomach and hard to keep up with. To help each of us be at our best, they simplify the path to better nutrition by giving you the one thing with all the best things.                                                                                                   ONE scoop of AG1 contains 75 vitamins, minerals and whole food-sourced ingredients, including a multivitamin, multimineral, probiotic, greens superfood blend and more in one convenient daily serving. The special blend of high-quality, bioavailable ingredients in a scoop of AG1 work together to fill the nutritional gaps in your diet, support energy and focus, aid with gut health and digestion, and support a healthy immune system, - effectively replacing multiple products or pills with one healthy, delicious drink.                  To make it easy, Athletic Greens is going to give you an immune supporting FREE 1 year supply of Vitamin D AND 5 free travel packs with your first purchase if you visit athleticgreens.com/pomp today. Again, simply visit athleticgreens.com/pomp to take control of your health and give AG1 a try. =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Michael Saylor is an entrepreneur and business executive who co-founded and leads MicroStrategy, a company which provides business intelligence, mobile software, and cloud-based services. He's become well-known in the Bitcoin community for using the company's balance sheet to purchase more than $7 billion in Bitcoin. In this conversation, we discuss Bitcoin, MicroStrategy's Bitcoin allocation, politics, monetary policy, and how individuals should think about Bitcoin. I really enjoyed this conversation with Michael, as I always do, and I hope you do as well.

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Visit circle.com slash Pomp to book a meeting with one of their experts. Again, circle.com slash Pomp. Go there if you want to earn yield on your balance sheet. Circle.com slash Pomp. All right, let's get this episode with Michael. I hope you guys enjoyed this one. 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. Good morning, everyone. Welcome back to the best business show. I'm super excited today. We have a very special episode, myself and Michael Saylor sitting down for a two hour

in-person conversation. Michael and I recorded a podcast episode about a year ago, right after he announced that he was going to put a very material portion of his company's balance sheet into Bitcoin. And so maybe, Michael, we can start with kind of a one-year update from when you actually decided to make that decision and how things have been going so far with MicroStrategy. Sure. Well, if you roll the clock back to July, we had $500 million of capital in our treasury. we were holding short dated treasury securities and generating effectively like 20 basis points of yield on it. We'd seen a K-shaped recovery. Wall Street came back with a vengeance. Main Street was flat on its back. And it was clear there's monetary inflation. So we decided that we

we're going to lose a large portion of the 500 million in purchasing power if we didn't do something. My forecast then was probably like 25% inflation. And you could have got there just by looking at the S&P index. So I thought, you know, 500 million minus 25%, like losing $125 million in 12 months is kind of like losing money at two to three X the rate that the 2000 people in the company were making money. So we either needed to give the money back to the shareholders, or we needed to invest it in something. So, you know, the thought was, well, if we're a company, a Main Street company struggling against all the lockdowns with all the uncertainty, and we are doing it minus $500 million, yeah, it feels like a university giving up its endowment as it

goes into a crisis, right? So decapitalizing the company, it was a way to give the 500 million of shareholders, they would have put it in the S&P 500 and they would have got 34% on it if we had done that. But we would have, in essence, left ourselves defenseless without any capital. So that was one strategy. The second was invest it all. I would have bought $500 million worth of Bitcoin if I was a private company. I just would have walked out, bought all $500 million, and I would have done it at whatever, $10,000 a coin. But as a public company, you've got to think about your outside shareholders.

And it's not like there's 10. You can't just go to the 10 and ask them what they want to do and get their buy-in. When you're public, you've got a shifting set of outside shareholders that are changing every minute of the day when the stock market is open. So the way that you actually handle this is a bit more sophisticated. What we did is we transparently,

we telegraphed that we were looking at this. Our first press release was an announcement that we were going to buy back $250 million worth of our stock over the course of 12 months. And we were going to invest $250 million of our capital in hard assets. And we said, we're looking at everything under the sun and Bitcoin was one of the things.

So my first love of the Bitcoin community was, the way that I knew I liked all the Bitcoiners was one day later, some cyber hornet, some Bitcoiner goes, MicroStrategy is considering buying Bitcoin with $250 million. Now, as Bitcoin merged in there with gold, silver, commodities, equity, property, real estate, anything you could have imagined.

But the Bitcoin community immediately picked up on that. I don't know how they do that, right? They must be scanning for this. Nobody else picked up on it. The stock was trading $120 a share. A week goes by. Literally, you announce you're going to spend $250 million and buy your stock, like you'd think it would move. Nope. Crickets. But the market had a week of notice. And then a week later, we stepped it up into the next gear, which is, okay, we're going to buy $250 million worth of Bitcoin. We made the decision. We're not splitting it across six assets, right? And it's a good thing we did, right? Because Bitcoin's up 332% in 12 months. Gold is down seven percent if we'd split it 50 50 125 million of gold 125 million of bitcoin right it would have

cost us billions if we'd gone all gold it would have cost us many many many billion billions we'll come back to that in a second so so we had to do something but the question is what so we just picked bitcoin we made the decision but we thought this is going to be jarring for some people stock is around 122 at the time, right? To put this in perspective, the company's $500 million revenue generator generating cash flow. And we have more than 500 million in cash

and about 10 million shares. So the company's trading at one times revenue plus cash. We give back all the cash, the company trades at one times revenue, the stock goes to 60 bucks a share, right? So we're like 122. No one's really paying attention. But we said, well, maybe people think this is offensive.

They're not going to like this or it's too risky. How do you actually orange pill every one of your outside shareholders at the same time? Well, you can't. So the next best thing is we just offered to buy them out. So the idea is if you don't like this, we're going to buy you out. We're going to post $250 million to buy back shares at a premium. So we offered to do the buyback at up to $140 a share, which is, you know, buyout premium. If you don't like it, then you sell your shares back to us at a profit.

We wait 20 days. So the market trades for 20 days. And, you know, in the first week, the market's trading on $135. So they're not even quite sure about the buyout. Then after a while, they start thinking. And they're like, well, if I can put it back to the company at 140, then presumably maybe it's worth more. So the stock trades up a bit past the 140. And at the end of the tender period, we have about $60 million worth of shares tendered.

Everyone that didn't like the strategy had 20 days to sell into the open market. And if you sold in the open market above 140, then why wouldn't you? And if you're still holding the shares at the end of the tender period and you don't like the strategy, you sell into the tender. So the result of the Dutch auction is we had $175 million of extra capital. You know, we thought about it. We put in another press release. Okay, this is our primary treasury reserve asset.

So the first notch was this is a treasury reserve asset. The second step is this is the primary treasury reserve asset that we bought 175 million more Bitcoin. So at that point, we're up to 425 million. The first tranche is in the 11,500 range. That was a little bit difficult. It was more difficult to do the second tranche because Bitcoin traded down.

We had a loss. It traded down to like, you know, into the tens and even, you know, you remember that. So the second tranche we bought at $10,000 something because we're committed, right? And, you know, if you go pull the Twitter stream, there's all sorts of interesting commentary on our, you know, strategy. So you basically had done, let's call it up to that point, $425 million of a $500 million balance sheet. And you had rotated your shareholder base to people who were aligned with the strategy. and you had also planted the flag in the ground as the first publicly traded business in the United

States to identify a treasury strategy that would leverage Bitcoin as the primary currency or the primary asset that you would use in your treasury. When you do all that, I know that there's been a whole bunch of conversations behind the curtain. I don't need names, but what are other fellow publicly traded companies, other finance executives, people on Wall Street? At that point, Are they saying you're crazy? Are they, oh, wait, this is really interesting. Tell me more about it. Trying to learn.

Like, what was the reaction after the first $425 million? I think it was largely ignored by every other publicly traded company. I don't think there's a lot of awareness to it. When we did our due diligence checks, we found Overstock, two or three years ago, had a few million dollars of Bitcoin on his balance sheet. And that's it, right? We couldn't find anybody else. um and uh and so this is off the beaten path but it seemed like so rational to me like it seems so obvious bitcoin is is digital gold it's basically engineered to be digital gold what do you need in

a in a inflationary environment you need something that's like gold but better than gold you have to make a choice uh it was obvious that the institutions were coming right i mean And you had companies like Fidelity getting into the space just six months earlier or whatever. But the fact that we're institutional custodians was a big checkbox. Grayscale was doing good business at that time. So it struck me as being a rational thing to do, but no other public companies had done it. And it wasn't totally clear to me why, although at this point now it becomes clear, right, in hindsight. And so we went through that.

We did the $425 million. The stock traded up. Bitcoin started trading up. At that point, I started speaking in public. And, you know, you were the first person I spoke to. I remember. Right? And, you know, I learned most of what I knew about Bitcoin by scouring the internet and looking at your podcast and looking at reading all of the stuff that was posted, right?

And I tripped through all these different things. And one thing I knew from your podcast was you always ask a question, right? You know, at the end, right? You're like, you can ask me a question, remember? Now you get to ask me the one question. So what I remembered about Pomp was he wants to know a book and he wants a question

or he gives me a question. So I'm like, gosh, what question am I going to ask Pomp? And, you know, how do you learn Bitcoin? you study Twitter and you study YouTube and you surf the web. So here's what I know. I know I get to ask you a question and I know Jack Dorsey has Bitcoin in his bio. So the question is, how do we get Jack Dorsey to buy Bitcoin next? Correct. Correct. And at that point, we're all alone as a publicly traded company and people aren't quite sure if we're crazy, but what happens next is some bullish things, right? I mean, I thought that when Square bought Bitcoin, that was a seminal event,

right? Because one data point is a question mark, but when you had the second data point, you can draw a line. And so that was a big day. When PayPal announced support for Bitcoin, and they started moving it, that was a big day. That was a data point, right? Those were the data points that moved us from 10,000 to 12,000 a coin. And at some point, you know, somebody, some Citron research studied, you know, discovered my stock. And Andrew left, I guess, said something positive. And the stock started trading up. And then it traded into the high 100s. And then it traded into the 200s. And Bitcoin started trading up. And when we got into the teens, people thought, well, there's something interesting here.

So the next step in our journey was like, in addition to me starting to communicate why we had done what we'd done, the next step in the journey was to go out and buy more Bitcoin. So we started buying more Bitcoin as part of the treasury reserve strategy and that got people's attention.

Then when the stock got to the 300 range, that was the highest it'd been in a decade, 300. So we started thinking, well, maybe we can raise more money. And so we went back to the convert market, and we were trying to raise $400 million in a convertible debt offering, but it was extremely popular, and we were oversubscribed. So we upsized the deal to $650 million. So that was a screaming home run. We had proposed a 32% to 37% premium.

We priced it at the 37.5% premium, the high end of the spread. We'd proposed like 1.25% to 0.75% interest. We priced at the low end of the interest rate. So we raised $650 million at 75 basis points with a strike price of $3.98. The stock had not traded at $3.98 in a decade. So it seemed like a reasonable – if you could sell $650 million of stock at $398 a share, seemed like a reasonable thing to do at the time. So then we took that and we bought Bitcoin with that.

So that was, we started out with, we're going to raise the money for general corporate purposes. And along the way, the discussion was, what are you going to do with it? And I said, well, you know, I want to be able to buy Bitcoin with it. And they said, well, we should put that, you know, into the disclosure.

I said, yeah, we should disclose that. And then they said, well, are you sure you're going to buy it? I said, yeah. So eventually it flipped and it became, we're doing it to buy the Bitcoin. So that became in the history of first, right? We're the first public company to buy Bitcoin on the balance sheet. We're the first public company to declare it a treasury reserve asset. We became the first public company to do a Dutch auction, which is in essence like an equity issuance to buy Bitcoin, right? It's like I'm either buying my equity back

or issuing the equity. So the first Dutch auction, you know, where the proceeds eventually became Bitcoin, then the first convertible bond to buy Bitcoin. And I think that all of those things rotated the shareholder base, right? I think the most important thing was to be long Bitcoin, right?

So in essence, the first publicly traded company where the shareholder basis is long Bitcoin. And it started out, my aspiration was, it'd be great if half of our enterprise value is based upon enterprise software and half is based upon the assets. Because before we did this, we got substantially no credit for the assets. Like people were basically taking the 500 million and they're like, okay, well, that's going to be worth zero, right? Or negative. Because you were one times revenue plus just the cash on the balance sheet. Yeah. Yeah. So if you've got a low growth cash cow, right, that's like being a dentist where you're going to make a lot of money every year for a decade and maybe you'll make 5% more each year for a decade. If you've got a low growth cash cow, but the money supply is debasing at 25% a year.

Kills you. right? It's like the road to serfdom is working exponentially harder for a currency getting exponentially weaker. What I saw was 2,000 people doing 100,000 things right every year to make $50 million and then watching the enterprise lose $100 million a year due to a political decision. So in essence, we're running as hard as we can. We're falling backwards and the situation was literally hopeless right like people wonder where the bitcoin is hope come from well it just was hopeless right i mean the operating business is hopeless and and you know okay you know you're going to work yourself to death for a decade and do a million things right

with 2 000 people and you're going to be worse off in a decade than you are today okay that's operationally hopeless right that's and then on the balance sheet if somebody says we're not even thinking about thinking about raising interest rates, it means for the next four years, you're going to get 0% on your money and is going to be worth half as much in 36 months as it is worth today. The balance sheet is hopeless. And this is all before we even see the persistently high inflation that we're seeing now, right? This was just from a market structure standpoint of this had been going on pre-COVID, got accelerated during COVID. You started to recognize this again last year, if you go back and you look at the inflation numbers in Q3, Q4, I mean, it was

obvious that we were increasing or accelerating, but we weren't at 5% CPI for three, four, five months, right? Now's a much, much different situation. So at what point do you switch from this as purely a defensive like treasury strategy of we want to take the cash on our balance sheet and put it in an asset that we can protect ourselves, protect our purchasing power to then it feels like you've made the switch to go offensive. That first bond offering was an offensive move. I think you called it right there. I think that it's a defensive strategy through the Dutch auction. We had to do the Dutch auction to provide a graceful transition for our shareholders to get long Bitcoin, right? You're either long Bitcoin or you're selling out to us

at a premium, one or the other. And then from that point, Bitcoin started moving up and our stocks started moving up. And then we realized that we, like the conservative thing to do is just stop there. And if we'd stopped there, I mean, we would be all equity, $475 million invested at $11,000 a coin or something. And that's not a bad result, right? We would have made 6X our money. but what we realized is we could borrow money at 75 basis points and we and you know

Bitcoin's up 171% a year every year for a decade right if you can borrow money at 1% and invest it at 171% your arbitrage is 170% on how much well how

how much do you want right like where are you going to stop that when you borrowed at the 75 basis points I was impressed but then you followed it up and you borrowed even more at a 0% interest rate, if I remember correctly?

What was the second offering? Because the first offering came out, the strike was 398. Bitcoin kept moving up. Our stock kept moving up. Eventually that bond was the best performing bond of the entire year, right, Anthony? What I'm saying is of every single corporate bond sold

in the year 2020, every convert, every junk bond, everything sold, every municipal bond, whatever you could imagine, the single best performing bond was MicroStrategy convertible bond, which where you would have, you could have doubled your money, you know, at some point it's trading insane amounts, like triple, you know, your money on a bond. Okay. So we had good success there. And of course, Bitcoin kept moving up and our stock kept moving up. And we realized by February that we could do another offering the next offering uh was we came in the market offering 600 million dollars the first one we started with 400 million this time we started with 600 million but again it was

oversubscribed we upsized it exercised the green shoe it became a 1 billion 50 million dollar offering and the range was 50 basis points to zero so we struck it at zero and uh you know up 50 37, I forget the number, but we ended up having a 50% premium or 47%. I forget exactly. It was a high premium. It was a low coupon. The strike price was $1,432 a share. So now put this in perspective. This is 10 times the price of the Dutch auction, you know, some number of months earlier. Now, so why'd we do that? Well, because if you could borrow a billion dollars at 0% interest and invested in something going up 170% a year. Pretty good trade. Why wouldn't you do it, right? Like every single business on earth that's debt financed presumably is borrowing money to

invest in something which is going to return a higher yield than the cost of the debt. Now, I want to pause here and make one point. The reason that I was sensitive to inflation was I immediately saw the inflation in March and April in the stock market, right? Because my inflation bogey wasn't, if I were to go to all my investors and say, I got $500 million, I'm investing at a 2% interest and inflation rates 1%,

they wouldn't have given me a pat on the back. they would have said the S&P index is moving up 10% a year. Your hurdle rate, your cost of capital is not 1% or 2%. It's 10%. And maybe you're getting 5% yield on a piece of debt. Then I don't know, hold my nose, but you're losing 5% a year. Half-life of the money is 12 years. Okay, fine.

But like you shouldn't be holding it. You should be buying your stock back or buying another company with that. sitting on that cash is, it doesn't make any sense. Safedine says the dollar weighted monetary inflation rate across, you know, all currencies for the last 30 years is 14%. Interesting number he comes up with, 14% is the inflation rate of the currencies. Now that would be the inflation rate on scarce desirable assets or any portfolio of assets. And if I look at my screen right now, over the last 10 years, the S&P 500 is showing 14.15% interest, or 14.15% compounded annual growth rate.

NASDAQ's up, you know, whatever, 19%, you know, gold is up 20 basis points, nothing. Bitcoin is up 170%, right? And long bonds give you like 2.5%. So the monetary inflation rate equals the S&P index. well yeah the traditional way you'd value um a stock is you would put a risk premium on it and you would say well your cost of capital is the return plus the risk premium so it used to be we think well there's a three percent risk premium and the inflation rate then would be 11 but i think that if you buy the s&p index you're kind of in theory stripping out the risk

because you're buying 500 companies. So the S&P index can be viewed as a proxy for monetary inflation. And the question of inflation is, what's your inflation rate? Well, what do you need to buy? If you're a consumer, then your inflation rate might be CPI

if you agree to buy what the Federal Reserve tells you you should want, right? And the market basket of things in the CPI is what the government says you should want in your life. But they never included a Picasso or a jet or a yacht or a house in Miami Beach in that market basket. A step even further than that is the number 14% is very interesting because my understanding is

if you go back, obviously CPI used to represent a cost of goods index. So what is literally the change of price of individual goods year over year over year? and that's how inflation was measured. Now, obviously we have a cost of living index, which is what you're talking about in terms of, well, here's the things that we think you should want. Here's the general weightings of these specific assets or consumables inside of this basket. And then that's kind of our moving target for this measurement of inflation.

But if you were to go back and look at the cost of goods index based on how it used to be calculated for CPI and apply it to today's numbers, you get about 14%. And so not only is the S&P, not only is that monetary inflation, but also that cost of goods index based on the original calculation of inflation is around 14% as well, which is, you know, there's coincidences in life, but it seems to keep coming back to somewhere in that kind of mid-teen number when we're trying to understand what is that inflation. Isn't it interesting? You know, the hedonic adjustments kill you. But on the other hand, you know, and I say this oftentimes, inflation is a vector. And what I mean is you've got to use multidimensional arrays and linear algebra to even start,

multidimensional linear algebra to even start to deal with the issue. Another way to say it is you can calculate a different inflation rate for any person in any jurisdiction based upon their mix of product, services, and assets they want to acquire. and so common sense says a person that wants to acquire a set of manufactured goods and wants to watch streaming youtube has a lower inflation rate than someone that wants to buy picasso's now what if you want to be rich if you want to be rich your inflation rate is very high because you have to acquire assets if you want to be middle class your inflation rate is different so back to why I did what I did

if you're the CEO of a publicly traded company your inflation rate is the cost of capital because your shareholders hold you to that cost of capital if I go to a public investor and I tell them my goal is 2% and they're saying well the S&P is up 14% then I'm

undershooting their goal. Their index is the S&P index, right? So the inflation rate for an investor is the index. Now, of course, different investors have different indexes. If you go back to the strategy, if you're a fixed income investor, you've got like a sovereign or corporate fixed income rate. You've got the junk bond index. You've got the corporate investment grade index. you've got the sovereign debt index. You have capital structures in the world that have different indexes. Someone that wants to send their kids to an Ivy League school and wants to have a house in the Hamptons, right? They have a different index. Someone and someone that wants to be obscenely wealthy has a different index, right? So that's why you could have everybody

talking past each other. And of course, if you keep changing the indexes, the S&P 500 index changes, right? They rebalance it. The PCI, the PC indexes, they get rebalanced. So the indexes are changing. And if you allow someone else to feed you the index they want you to focus on, you can see it right now, right? The official inflation rate in Canada is 4%, but the housing price is up 15%. The official inflation rate in the U.S. is 5%, but the Case-Shiller Index is up 27%. Something big.

Okay, and of course, it all comes down to deciding what you want in life. Now, in the last 12 months, the S&P is up 34%. If you're sitting on $100 billion worth of cash and you put it in the S&P Index, you got $34 billion back. You have $134 billion right now. If you held it in conventional treasuries, you're short $34 billion.

If you convince yourself that the inflation rate was 5% or if you convince yourself that you're – you could say, look, my treasury index is just a short-dated sovereign debt index. And so as long as I'm beating the 20 basis points, I'm good. you know and and and uh by the way like if i have a bunch of money sitting in a bank my bankers come to me i've literally had bankers from the big wire houses they came to me when i'm sitting on 100 million or 200 million in cash and they go you know uh we can get you into one of our money market funds that'll yield 22 basis points and that's much better than the nine basis points And they're selling this to me. There are people in suits that make a lot of money

and they're selling it to me. And you read the prospectus and the prospectus is they're going to do something and they're going to charge you a 27 basis point fee to generate 22 basis point yield to you. You're literally- They're making more money than you are. You're giving 60% of the yield to someone in a suit

that's giving you a service to get you five basis points more. But there are people that convince themselves that it's a good idea, right? And we come back to that in a second. It's an important truism in the market. Why is it that everybody hasn't bought Bitcoin? People ask that, right? All the Bitcoiners wonder, why don't all these investors buy Bitcoin?

And the answer is because there's trillions of dollars of capital locked up in capital structures that are chasing a different index, right? There's trillions of dollars of money sitting with people that think that inflation is CPI. There's trillions of dollars sitting in real estate funds, and they're trying to beat CPI. If I got rents and I'm raising them at the CPI rate and I'm happy with it, there's trillions of dollars invested in fixed income funds where they have to beat the junk bond index or beat the corporate index or beat the sovereign index. And if they beat the sovereign index, if I have $20 billion and all I got to do is beat the junk bond index or I get paid, then I'm getting paid to invest $20 billion to get 50 basis points more. What happens to those people? Let's say that inflation isn't 5.1% or 5.4%, wherever it comes in on a monthly basis now. And we all agree it's something that is higher, but there's disagreement on how much higher.

Is it 6% or is it 14%? in terms of the actual inflation number, what happens to all the people who are using CPI as the benchmark? Do they just succumb to the inflation over time and continue to lose money until they wake up or something else? I think a lot of people have a hybrid situation. Like, for example, let's say I run a real estate trust or I run a real estate company and I have a hundred million dollars a year worth of rental income. It's capped at CPI. The leases are assigned 10 years, 20 years, 30 years duration, five years duration. And then you've got all the trade relationships. Like I can't go to, I can't go to the people that rent

my building and tell them that the inflation rate's 14%. Right. I mean, would you pay a 14% an increase in your rent here? No, no, no. So there's a certain inertia in, in parts of the economy where they're going to move up at CPI, or they're going to be flat, or maybe they can do double CPI. But at the same time, maybe you're the person running that real estate company, you're thinking, well, I'm going to take my cash flows, and I'm going to invest them in, would you invest them in a stock that you thought would go up at CPI? Or would you invest them in the S&P index if you thought you would get CPI? Not really. So what you have is you have people that are sweeping their cash flows from an operating business that's low growth, and they're

putting in the S&P index. They're looking for the growth to come from the investment. The S&P is up 34%. How many companies in the world generated 34% more cash flow or raised their prices by 34% or grew their revenues 34% in the last 12 months. Not many, right? 98%, 99%, they're in a fiat operating system where they're going to raise their prices or generate cash flows at a rate slower than the rate of monetary inflation. But those same people will turn around and they'll buy Bitcoin or they'll buy property or that you may buy property that is going up faster, right? There's not a single commercial rent. There's not a single commercial lease, I think, in the world where they raised the price of the rent 27% in the last 12 months,

right? At least I can't imagine if you had a lease, no one's got it capped at the Case-Shiller index. So on one hand, residential property or other types of property could actually be accreting at a much higher rate while your rents don't accrete at a higher rate. So you're taking duration risk. So I guess the more important point is there's a lot of capital. When we think about capital structure, it's like $500 trillion to $900 trillion of capital floating around there. It's locked up in structures. Some of it is in currencies and it can move rapidly. Some of it is invested in companies that can't move rapidly. Some of it is tied up in equity. Some of it is tied up in debt. Some of it's tied up in a trust. I have a trust. My trust gave $10 million to a

financial advisor or to a company whose strategy is investing in mid-duration corporate debt. And every year I review their performance versus their index. And over the course of a decade, I might start to shift small amounts out. But I think that the capital is structured in such a way, there's enough inertia in the system that it could take 30 years for the capital to get reallocated. We're waging a war on the 60-40 portfolio. Is it dead? How long will it take before people allocate that as 65-35 or 70-30? It takes a long time. There are people still invested in gold. You and I joke about that. Gold's been failing for 12 years or something like that. Gold's the same price as it was when Bitcoin was invented. And yet, an aggressive move

would be a macro investor allocating from 50% gold to 45% gold and 5% Bitcoin. And that's a bit, that's a year's work. Yeah. Let me ask this question. Retail investors or individuals, I think over the last 12 years or so, took Bitcoin and as a generalized group, it went from a contrarian idea or contrarian trade to a consensus trade. There's now, you know, 100 plus million people around the world that have decided, hey, this is good enough for me to go ahead and store some of my value or economic wealth here. And so you can argue that that contrarianism became more of a consensus. We now, over the last maybe 18 months, have seen in the financial or institutional finance world more people jumping into the game. And so definitely some shift from pure contrarianism

to now a little bit more of a consensus. Everyone has to have some sort of Bitcoin strategy. You can't simply just say, oh, it's just for drug dealers. It's just for criminals. You at least have to have had a conversation now because Fidelity, Paul Tudor Jones, Stanley Druckenmiller, many others have all now started to participate. What does it take for public companies where I basically break down, there's two groups, right? There's yourself, Tesla, and Square as the three major publicly traded businesses that are multi-billion dollar companies that have pursued a treasury strategy that includes Bitcoin. And then there are all of the publicly traded crypto native companies, whether they're miners, whether places like Coinbase, et cetera.

it's still contrarian in the public markets to have bitcoin on your balance sheet what does it take to get the shift that we've seen in those other two cohorts to now get it to a consensus type uh you know movement or idea i mean i think there's some you could check off catalyst uh that are impediments that will become accelerators um first of all uh regulatory clarity right if you're hearing if you're seeing support for and let's start with the most basic issue is bitcoin an asset or a currency okay the word cryptocurrency has is a very politically charged word because if bitcoin was a currency it's an opposition to the u.s dollar okay and if it's an asset it's an opposition to gold okay so um just resolving the fact it's a digital asset not a

digital currency most people's how many public uh speakers how many how many well-regarded investors have made negative comments about bitcoin over the past 12 months because they're mistaken they mistakenly think it's a currency and they think they're sticking up for the dollar right? Many. Like, I prefer the dollar. So if you understand it's a digital asset, a scarce store of value, speculative digital asset, that's how politically correct people would refer to it, right? And anybody else would say it's just a digital asset or a store of value asset. The first impediment is just understanding that and educating the market that it's a digital asset. I think the second impediment is getting over the issue of, is it a threat to the powers

that be and will it be banned? So first, what is it? It's an asset. Second, will it be banned? Okay, well, no, we're not going to ban cryptocurrency. We're not going to ban Bitcoin. It's going to be around here. So those two checkboxes are huge. I think the third checkbox is, can I actually buy it via my existing bank? Every publicly traded company has been doing business with probably the same bank for 30 years, Pomp. Some have been doing business with the same bank for 50 years, some for a hundred years. Okay. If you trace it to, to have adopted a new banking relationship is not a one in a decade thing, but public companies don't change in a decade right so if i could if i could buy this directly through bank of america or jp morgan

or citigroup etc i think that makes a big difference if i have to go and to a you know an institutional grade bitcoin exchange that's a one-year exercise in due diligence there's friction to doing it there's two issues right one is is before you give a billion dollars to a counterparty you know you have to you have to inspect their accountants their legal teams their licensing their executive team would you give a billion dollars to a private company that's new right it's like that's a huge hurdle um and the second is they're not fdic insured right they're not the the imprimatur being backed by the u.s government means that you know in a liquidity crisis, the Federal Reserve gives you $10 billion or $100 billion. How much money did

you need, right? And that's what the big licensed banks have. And, you know, the last holdout that wasn't doing that was Goldman Sachs. And the great financial crisis, they broke down and they became a bank, right? And it matters. So if you want to move huge sums of capital, right at the point that uh some of the the major banks handle the asset that makes a big difference because uh it checks a lot of boxes and people are pretty conservative about that i think the the next hurdle is uh accounting um explain what this problem is because this i don't think a lot of people understand how big of a problem this is. Yeah. It's a source of massive inertia because every publicly traded company is running on gap accounting. And so we're publishing

our gap balance sheet and our P&L every quarter. And investors are reading the P&L. And the whole point of gap accounting is, in theory, I ought to be able to, at a glance, in 30 seconds, look at your balance sheet and know how much capital you have. And in 15 seconds, look at your P&L and know whether or not the business is well run. And when the gap accounting aligns with the underlying business, then you can do that. But when it gets out of alignment, then you have to adjust it with pro forma accounting, non-gap accounting or adjusted accounting. And when you get to adjusted accounting, it goes from being a 30-second inspection to a 30-minute thing. And you know how difficult it is to communicate a 30-minute concept to the world? Very, very

challenging. So the issue right now and the issue when we got into Bitcoin is no publicly traded company held any material Bitcoin. So the accounting treatment was probably appropriately conservative. The most conservative accounting treatment you could imagine is indefinite and tangible. And what indefinite and tangible accounting means is you buy something, you test it against the market continually, you take the lowest bid, and you mark the value of the asset down to the lowest bid at any point in the history of your ownership. And you treat that not as an investment but you treat that as a loss in the core business the operating business so if you have a business that makes 100 million a year and it's run perfectly you know with a

perfect pegged 20 operating margin right uh if you buy bitcoin and bitcoin trades down for one hour and trades back up again you might have a hundred million dollar operating loss And then you would be showing the business made no money this year on a gap basis. So now you're an outside investor and you're staring and saying, what happened to the software business? It looks like the operation got wrecked. If I made a million decisions poorly, you know, I probably couldn't go from $100 million in cash flow to zero, right? Or if I did, it'd be challenging. But or on a Saturday night, someone could flash crash something and you would have $100 million loss showing on the operating statement.

So indefinite intangible means you take the volatility as an operating loss on your P&L and you take the theoretical worst case. The theoretical worst case would be I buy Bitcoin and I wait for the lowest price ever and I sell it all. okay that you take the theoretical worst case and you represent that as the as the uh status so when you print your quarterly results you print your annual results you want a simple example you buy a billion of bitcoin it trades down to 500 million then it increases to a billion then increases by a factor of 10 to 10 billion if that's the fact pattern when you close your books under indefinite and tangible, your books say you have $500 million of assets and it says that you lost $500 million in the operating business and the money's gone. That's what GAAP accounting says.

In actuality, you might have a statement that says you have $10 billion of assets and it looks to the casual observer like you generated a $9 billion investment gain. so you can now how do you fix it pro forma adjusted accounting you have to create a schedule a reconciliation but but um now what have you done you've just made uh the uh first of all you've made the uh the investor's job 100 times harder and investors got to read all the pro formas think about it and figure and then they've got to reverse it out and figure out what really happened in the rest of the business, right? And then they've got to figure out what's your balance sheet really look like. And then the second problem you have is your statements become non-comparable

over time. Like for example, I can't, if I look at my balance sheet on a gap basis today versus a year ago, right? Bitcoin could go up by a factor of a hundred, the balance sheet doesn't change. So when you're comparing quarter versus quarter, there's no information there because you're suppressing it, right? And then if two companies have Bitcoin, one company has 100,000 coin and one company has 10,000 coin and Bitcoin goes up by a factor of 10, neither company shows an investment gain, neither company shows a balance sheet adjustment. And so how do you compare one company to the other company if you're trying to make a rational investment decision.

So things become non-comparable across securities and they become non-comparable across time. And you're invited as an investor to create your own set of pro forma systems to compare it yourself, which is like a thousand times harder. So that's an impediment for a public company or for a company that relies upon gap accounting.

But here's where it's really an impediment. Like why can MicroStrategy do it? Well, because we rotated our shareholder base to be long Bitcoin, and because fortunately enough, we were able to build a substantial Bitcoin position. So now if you know that MicroStrategy has 114,000... 114,000 Bitcoin? Yeah, if I have 114,000 Bitcoin and I, you know, 114,042 Bitcoin, all you have to know about MicroStrategy is take 114,000 and you multiply by the price and you know that we've got that much.

But let's say that you were Google or you were Apple or you were Facebook. Well, you've got all these other businesses or Amazon, and now you're trying to decompose the businesses. And if they buy a big Bitcoin position, then what looks like a pristine P&L, everybody debates, you know, is Apple's gross margin going to be 38% or 38.5% this quarter? And that's a big deal, right? I mean, there are people who take victory laps on getting within 1% of the gross margin. Well, your gross margins would totally get, all your margins get blown out of the water from the volatility, the accounting volatility of the Bitcoin. So how do we solve it? What is the change that needs to be made where you would say, okay, the system we have right now is an issue and it's an impediment.

If we move to X, that's the solution in your opinion. yeah well um so there i joke with people right like you'll be better off buying baseball cards or or art or just about anything than buying bitcoin from accounting point of view because if you were to buy if i went and bought sculpture or you know some random anything normally the test would be like once a year you check to see if the asset's been impaired but checking to see if an asset's impaired occasionally is much better than checking to see if the asset's impaired every minute of the day, right?

So there are different types of accounting treatments but if you were to buy a billion dollars worth of a security like an ETF, like one immediate fix is you buy a billion dollars worth of a Bitcoin ETF it's not property anymore, it's a security. If you're owning a security, generally accounting says you value securities based on fair market value or fair value accounting. So that means that if it doubles, you would show an investment gain. This is the Warren Buffett's accounting for Coca-Cola stock or for Apple, right?

So fair value accounting is applied to securities. Fair value accounting is applied to certain other things. if the accounting goes from indefinite intangible to fair value in that case then you would be showing the 10 billion dollars of bitcoin as an asset on your balance sheet and then you would show the gain or loss as an investment what they call below the line adjustment like on a quarter where it's up two billion you would have a two billion dollar investment gain and a quarter where it's down 500 million you'd have a 500 million dollar investment loss and that's that provides more clarity it's kind of a benefit to investors because an investor can they can separate

the gain and the loss from investment activity from the gain and the loss from operating activity right and that helps you to figure out is the core business healthy and you if warren buffett prints like three dollars a share or some large amount of eps i want to decompose it into how much of it was from the stock portfolio versus how much of it was from the operating businesses right and and and then i can extrapolate out rationally so ultimately i think fair value accounting is the solution to allow public companies to hold the hold this in large quantity this is why i say even a tesla or square would buy not a hundred percent of their balance sheet or 50%, but 5%. If it's 5% or 1% or 2%, it's not going to be material to the rest of the P&L and

the rest of the balance sheet treatment. When it becomes 50%, the volatility from the accounting treatment will optically impair transparency against the P&L and the rest. So when I look at the public companies right now, let's put aside the kind of Bitcoin or crypto native companies, the miners and Coinbase, et cetera. There's basically three publicly traded CEOs that are orange pilled, right? Yourself, Jack Dorsey, Elon Musk. Those seem to be the ones who have purchased Bitcoin, who have talked about it publicly, who appear to understand the ethos of it and kind of why it's important for their businesses. Is this something where we are literally going to see one by one by one, each individual CEO is going to have to get orange

pilled and eventually make this decision? Or is there some milestone or like inflection point where you say when X occurs, we will then see, you know, on a quarter by quarter basis, tens of publicly traded companies or hundreds of publicly traded companies all going ahead and doing this? Okay, well, first, I would say it's not just the three, there's, there's probably three dozen, but every Bitcoin miner is holding Bitcoin on his balance sheet. And one of the major things, one of the catalysts that's taken place in the last 12 months is all the Bitcoin miners coming public

and all of the miners that were public on international stock exchanges shifting over to the NASDAQ and the New York Stock Exchange, right? Correct. So Marathon and Riot. Actually, if you look at it right now, Marathon has got a Bitcoin exposure. I wonder when Silvergate Bank will, right, or how that'll work. but Silvergate's obviously a Bitcoin company.

Coinbase has got Bitcoin on its balance sheet, right? You've got Bitfarms, Hut8. You've got Sphere. You've got BitDigital. You've got Galaxy. You know, you've got... Well, there's a bunch of businesses that come out of the industry,

and I think we're going to see more and more go public. So let's say that that number doubles or triples of like the publicly traded companies that come out of the Bitcoin and crypto industry because you're just going to get a bunch of startups that continue to grow and eventually go public, whether it's direct listings, IPOs, or SPACs. that number will just grow.

And I think there's a dozen other companies that are public that are holding it in their treasury at a smaller amount. So what are the catalysts? I mean, clearly, one thing that's already happening, right, is the regulatory clarity that's coming. The more clarity, if the regulators move forward and they clarify the treatment of stable coins and security tokens and DeFi exchanges,

I feel like the connection of Bitcoin to crypto has been holding it back, right? Because stablecoin regulation is unclear. Many cryptos are security tokens. That's holding us back. The exchanges that are trading Bitcoin while they're trading security tokens, right? The connection of Bitcoin to SHIB or Dogecoin, right? This holds back a public entity from wanting to get into that space. I mean, in fact, it's really the express concern that the SEC has about approving a Bitcoin spot ETF, right?

Which is they're concerned about the markets where Bitcoin is trading, right? And they're concerned probably about what's Bitcoin volatility coming from? It's coming from the cross-collateralization of crypto markets with high leverage trading at off hours, right, against thin liquidity pools of other security tokens, right? And so as that clarity comes with regard to the entire crypto ecosystem, it's going to decrease volatility and it's going to increase confidence of large public investors and large public companies. That'll be part. I think if we get clarity from FASB or any kind of improvement in the accounting situation, that's a plus. And there's, I mean, there's a groundswell of interest, right? There are 515 letters sent to FASB on this subject.

And there was a lot of commentary from regulators, from, you know, we've got congressmen, we've got senators, we've got auditors, we've got big institutional investors, we've got big publicly traded companies, and they're all opining on the issue. And I have yet to see anybody – I haven't seen any articulation by anyone suggesting that the current accounting treatment is beneficial. Yeah, not the answer. So it's broad-based consensus that it's time to take a look at this again. So I think that accounting is important. I think that we just see the barriers with the banks getting knocked down, right? Like at the point that you saw the commentary by the chair of the FDIC, where she said, we're looking for ways to allow banks to hold Bitcoin on their balance sheets, right? If FDIC, it used to be we dreamed, our dream was one day big banks may actually own Bitcoin, you know, what if all the big banks own Bitcoin?

But now I think we've flipped to another observation, and this is an interesting one. In that stablecoin working group paper that was released last week, not only did they say it's okay for FDIC-approved banks to hold stablecoins, they actually said it's required to be an FDIC-insured bank to hold a stablecoin. OK, so we're we're actually growing up as a crypto industry. We're going from unlicensed, non-institutional grade corporations that are primarily entrepreneurial and fast moving to licensed, institutional, regulated entities. and uh if you look at that isn't the conclusion that the next step i see as a green light jp morgan citigroup bank of america are going to issue a trillion dollars worth of stable coins i mean it's an invitation like it's a green light to to every single bank in the world right if you're if you're silver gate or you know anybody that's in the crypto industry now

right this is this is kind of um a message i don't think it's that much longer right if you can hold a stable coin as a digital asset it's not that much longer behold before you hold bitcoin as a digital asset and if if the fdic is saying we need to find a way for banks to be able to hold this and if the president's working group is saying you need to be a bank in order to hold the stable coin, then I think that sometime in the next 12 months, we actually start to see large banks getting in the business. Is this good or bad? The financialization of Bitcoin, let's talk about, and then there's obviously all of these other technologies and assets. But I think that there's a group that would argue the more that the asset becomes financialized, the more that it gets

not just accepted by the licensed organizations, but you see legislation or directives that say you have to be FDIC insured in order to interface with this stuff. They look at that as negative. There's other people who look at it as a positive. So how do you think about the pros and cons of what I'll just call like the financialization

of what were assets that, you know, many people were attracted to in the beginning because they weren't part of the existing system? Bitcoin is decentralized, and it's an asset, and it's already gone to 200 million places. And you might not like the people that own it, right? Don't they call it the money of enemies? Yeah. Right?

The point is, Bitcoin's going to people who have politics that you disagree with, right? It's almost certain. So it's spreading at such a rate. it's like fire and it's like electricity or mathematics and you can have an opinion do you think it's good or bad for banks to have mathematics it's like we're the only ones with math is it good or bad for people to be able to read and write it used to you know there was a concern that we shouldn't let everybody read and write it's just basic technology it's spreading as fast as it can spread. The reason it's superior to gold is because I can snap my fingers and I can

withdraw a billion dollars of Bitcoin from the bank in five minutes. Correct. Okay. And the thing that's going to maintain its integrity is the fact that you can shift counterparties. You can move, if you can move $10 billion of an asset out of a jurisdiction, I can move it out of Miami. I can move it out of a bank. I can move it out of a country. I can move it out of a system. It's always going to have more integrity than the alternative. So coming back to this, it's like, okay, are you comfortable? There are a lot of people that don't think you should have a software wallet on an iPhone. You should have a hardware wallet, right? There are a lot of people that think that it's better if, what if I don't want your family to have it because I don't like

somebody in your family, right? What if I don't want your small company? You have a private company. Do you own some Bitcoin? Well, you know, did you sell out? Now there's a company that's got other corporate interests that has some Bitcoin. A lot of people don't want a public company to have it. Why? Well, public companies have shareholders. Yeah. Well, I don't want a country to have it, right? I mean, there are a lot of people that are concerned that El Salvador uses Bitcoin. Well, it might get hijacked by the politicians. What if Turkey actually starts buying Bitcoin? Do I like it? Do I not like it? But the point is, it doesn't matter what you think, right? It's like you sitting and saying, I'm really angry that someone else is using arithmetic

other than me right it's spreading like wildfire it seems to me that the world's a better place if people have monetary integrity than if they don't have monetary integrity i agree right right um and in this particular case is is this good yeah of course it's good right why is it good It's good because what we want to do is fix everything, not destroy everything, right? If you want to fix the bank, then they replace their bonds with Bitcoin and the capital structure of the bank is better. Do you want to fix every publicly traded company in the world? Do you want to fix the balance sheet of Apple and Google and Facebook and Amazon? If I tell you that they have to do the deal through an FDIC-insured bank, then you either can fix them.

There are a lot of people that don't want to fix them. They don't want Apple or Google or Facebook to fix their balance sheet. They don't want them to fix their product. But on the other hand, I'm an optimist. What do I think? I think 8 billion people should be using Bitcoin as a digital asset. Now, there's two ways to do it, the easy way and the hard way. The hard way is topple every government in the universe, destroy every technology company and create my own hardware wallet and my own decentralized.

Let's rip back to the network, destroy every big tech platform, destroy every big company and somehow let's build something totally new. That's the hard way. Seems pretty stressful to me. What's the easy way? The easy way is all the big banks start issuing stablecoin, a token called the U.S. dollar, right? A U.S. dollar stablecoin. And we go from $130 billion in stablecoins to $1 trillion of stablecoins to $10 trillion of stablecoins to $100 trillion of USD. and then 8 billion people have an iPhone or an Android phone with a wallet and they do 10, 20, 50 transactions a day at the speed of light

on the lightning network, on the lightning network. And that's the best, right? A decentralized non-custodial network moving at the speed of light for free. Next best is they move these things around on the Android or the iMessage or the WhatsApp or the Facebook or Layer 2 or Layer 3 application, right? That's second best. And they do it without toppling every government on earth, right? Like I can't – there's 130 currencies that are floating right now, 130. How many do we need?

Well, we certainly could get by the next step with 12, right? The CNY is not going away, and the USD is, unless you wish to topple the government of China and the government of the US and the governments of the Western world, which I don't think you want to do, right? You've got bigger problems if you did, right? Like security and safety and food and water. Yeah, there'd be mass chaos, and it would be a very, very painful situation for everyone. Yeah, right. So if you look at an optimistic view, let's just actually make the world a better place and a win-win for everybody. So your thought process is this asset, which has that monetary integrity that you're talking about. It's fully transparent. In many cases, you can look at it as an automated central bank. Nobody controls it. It just sits there programmatically executing what the code says for it to do. That will serve as a global store of value.

other people will then choose to take their fiat currencies and upgrade the technology doesn't necessarily change their monetary policy but they can then go ahead and digitize or tokenize the dollar uh the euro the yen won whatever uh currency and then they would basically use the bitcoin network payment rails to have those uh assets fly around the world however people chose but ultimately people would go back to and settle in uh bitcoin as that global store of value partially but it's a it's a more elaborate idea which is my idea is we incrementally upgrade everything everywhere for everybody in the most peaceful least painful least jarring way right so the the incremental upgrade means means uh we deploy to eight billion people

to everybody on the planet, we deploy digital wallets. In the wallet, you have a set of currencies and a set of assets. And in that wallet in Argentina, you've got your peso and you've got your dollar as currencies. If you want to hold something for a day, you hold a peso. If you want to hold it for a month, you hold a dollar. If you want to hold it for a lifetime, you hold Bitcoin, right? You've got digital assets. Bitcoin is as strong as digital asset. Is it the only asset? No, because you've got a company, there are buildings, there's Apple. I still like Google.

I want my YouTube. I like Netflix, right? We need Domino's pizza. We need Bitcoin pizza. Someone's got to manufacture the cameras that are staring us right now. We've got a microphone. We can't just have one asset.

We have multiple assets. We have multiple currencies. Will all currencies survive? No, the weak ones, the ones that are truly defective will go away. 66 countries are dollarized. There's 180 countries in the world. How many currencies do we really need?

Right now, it's China and the USD, right? You might actually collapse down to two, but more likely you'll have the yen and you'll have the euro and you'll have the dollar. Is there any currency in Africa that you really want to hold more than the dollar if you had the freedom of choice? Not really.

What will you do though? You need the local currency for local payments, right? If there's a strong local government, you need the local currency to pay your tax bills because it's mandated by law. You need the global currency, and let's call the U.S. the global reserve digital currency, the global reserve currency. You need that as a medium of exchange. If you want to buy something in Argentina from someone in Brazil or you want to buy something in Africa from someone in Venezuela, you're probably going to swap dollars right why because there's a hundred million companies pump that have invested 30 years to create accounting systems and point of sale systems to process

billions and billions of transactions in those currencies like my company does it i i can actually swap my balance sheet to bitcoin using three people and i can do that in a matter of weeks swapping all of my vendor payments all of my payroll and all of my receivables into bitcoin that would be a billion times harder okay and it's not worth a billion times more stress and effort it's not it's just not worth it right it's in an inflationary environment money decomposes into a currency layer, which is losing value slowly, hopefully slowly. If your currency lost value at 1% a month, but your asset gained value at 15, 20% a year, that's stable. Now, do we need to replace it? Not this decade, right? I'm not going to speculate 30, 40, 50 years out, but I

rather kind of feel like a more nuanced idea. Here's a nuanced idea. I want to build the 21st century economy on a strong foundation of integrity and trust and thermodynamic soundness and energy, pure energy. So that means the balance sheet, the foundation of every institution should be built on Bitcoin, but every institution has its own derivative, its own security from Bitcoin. So when you create your company, if you want to take your company public, you should be able to issue stocks and stock options backed by Bitcoin. I'm not denying that. If Turkey goes and they buys billions of dollars of Bitcoin, they can keep the currency. They would be backing the currency with a hard asset, how many institutions are there in the world that

need some control? Like maybe if I said to you, you can't issue stock in a company, is that good for the economy? Not really. If I said no country can print its own currency, is that good? Probably not really, right? Because the politicians need some power over the currency, right? I mean, unless you come up with a way to generate all the food and all the products that we need without companies and without countries, like when you figure that out, that's like a utopian idea, then maybe you can live with Bitcoin only and the like. But in the meantime, which is like, Let's just focus on the next decade because there's no point in solving this problem

after the year 2030, right? Yeah. Focus on the next decade. The next decade, it works like this. All the big banks issue USD stable coins. What happens? The US dollar replaces all the weak currencies and it grows in strength, right?

The US dollar can become the daily currency of 6 billion people. And it has been doing that for some time. You mentioned the dollarized countries. Right now, analog dollars in the 20th century banking system is the reserve currency of the world, but it's an awful inefficient system, right? How do you send $100 to someone on Saturday afternoon if they live in Africa, if you live in South America? Send someone to a friend of yours in Paris on a Tuesday. I dare you, right?

so the point right now is the u.s dollar is the world's reserve currency but it's running on on 20th century rails so the u.s dollar should evolve to run on crypto rails it should run on you know we can debate right lightning rails what's up rails you know any other crypto right interesting question but what what we can't debate which is 100 certain is everybody wants to be able to move the money at the speed of light and program it on a computer chip on a Saturday afternoon. Sometimes we get in this confrontational state where people think, well, it's Bitcoin versus the Fed

or Bitcoin versus the dollar. It's not, right? We can all win, right? It's a win-win here. It's in the best interest of the dollar to move at the speed of light and be programmable. And there's a hundred million businesses that want to do business in the dollar.

And I am the controlling shareholder of MicroStrategy. I founded the company. I mean, there aren't that many CEOs that have more power than me. If I walked into a room and I ordered everybody in my finance team to convert over all the accounting systems and sell everything in Satoshis,

and pay everybody in Satoshis, you know you understand that uh if everybody didn't quit on the spot it would be a decade and a billion dollars of work and it wouldn't work and by the time i finished the billion dollars of work the company operation would go to zero right it's literally a death sentence for a big institution to attempt to convert over its um its mediums of exchange and its accounting systems for for routine transactions. So right now, really, the value is to get Bitcoin onto the balance sheet as a store of value, protect shareholder value that's sitting there, continue to operate your businesses. And, you know, my understanding of what MicroStrategy is doing is you basically

have articulated and highlighted two separate strategies, we have a software business that we're going to continue to try to grow, drive cash flow and serve our customers from a business intelligence standpoint. And then we have a treasury strategy, which is, we're going to use Bitcoin to protect our purchasing power and our assets that are actually sitting on the balance sheet. And those two strategies combined make up the business. And, you know, obviously, the market has found it incredibly attractive, given what the stock price has done over the last year or so. Well, if you're Apple computer, right, you've got, you've got two strategies you can pursue to get in the digital economy. One strategy is you just buy $50 billion of Bitcoin. And three

people can do it. And if the three people did it, then your stock becomes a Bitcoin derivative. Apple stock becomes a Bitcoin derivative. And if Bitcoin moves up at 100% a year, right, you're generating $50 billion a year of shareholder value. Three people, $50 billion shareholder value, right? It's a very simple strategy. The harder strategy is you start building uh bitcoin protocol or lightning protocol into all your other products you can build it into the iphone you can build it into the iCloud you can you know you can build it into all of your other services you know and and uh they all have merit and that's an operating strategy and at that at some point that starts to um that starts to correlate your revenues to the growth of

of the digital asset economy and the growth of Bitcoin. So, and both of those are rational. What's not rational? What's not rational is to require that all your customers pay you in Bitcoin and stop taking dollars, right? You can control what you do with your balance sheet and you can control what your strategy is,

but implementing it on your customers. Or to rewire all your back-end accounting systems. And it's unnecessary, right? It's not the right way. So like coming back to my view of the world, I mean, I think my view of the world is we want to find the path of least resistance to fix everything. And that means looking at every single part of the economy, every country would be better if they had some Bitcoin. Cities can be improved if they buy Bitcoin. If a city buys Bitcoin and they issue bonds, the bond becomes a Bitcoin-backed bond, right?

It becomes a derivative of Bitcoin. So I'm not against bonds, right? I'm not the guy saying we shouldn't have bonds. We should have bonds, right? If the junk bond index is 4% and you can issue a Bitcoin-backed bond at 6%, it's good for the people that have trillions of dollars locked up in bonds. It's good for Bitcoin. It's good for everybody in the middle, right?

We can take the orthodox draconian view, which is bonds should go away and Bitcoin should replace them overnight, but it's not possible, but it's not even a better view, right? Yeah. A better view is you take your bank and you start handling Bitcoin and you take your mobile app and you build lightning into the mobile app and you take your company and you buy it and you buy Bitcoin. And the reason I don't really think it's a threat to the Bitcoin ethos is because ultimately, none of these people can control Bitcoin. It's like people worry, like, so I have $7 billion or $8 billion of Bitcoin. I don't have any more power than anybody else, right?

And in fact, the only sentiment that's grown in my mind as my Bitcoin position has grown is I don't want anybody to change it. Like, don't mess it up, right? So I think that is, I'm not threatened if a government buys Bitcoin. It wouldn't be bad for Bitcoin, right? I'm not threatened if a company buys it, if a bank buys it. And here, I guess there is one, there's one point worth making. If your portfolio is 100% Bitcoin, you don't have any conflicts of interest. You know, the debate of whether or not people use Square, Cash App, PayPal, Robinhood, Coinbase,

Binance or buy the ETF or buy it through Fidelity or NYDIC doesn't really matter to you, right? Doesn't matter to you. Whether they buy MicroStrategy stock to get Bitcoin exposure doesn't matter to you, right? You're just holding the underlying asset. If you decide that you want to get in the business of selling hardware wallets, or if you run an exchange, or if you provide advice, and now you have a conflict of interest. So now you're a Bitcoin entrepreneur, and And maybe, like, if you're issuing, if you're Tether and you're issuing stable coins, you don't want J.P. Morgan to issue stable coins. It's a conflict of interest, right? It's competition.

Right? I mean, if the feds say you have to get an FDIC license, now you've got to jump through a hurdle. Now you need general counsels. You need to actually pay lawyers. You have to do stuff, right? You have to have nexus. You have to have insurance. It's harder.

so so there are a lot of things that are happening in the economy they're good for bitcoin they're just not good for every entrepreneur in the crypto ecosystem and there is a conflict of interest and and that's why like people ask me well are you going to get into other things are you going to are you going to build software well that's conflict of interest you know yeah are you going to go into bitcoin mining that's a conflict of interest are you going to you know invest with the counterpart of this conflict of interest, right? So you can do that, but those are businesses and they have investment risk and you have competition

and you can fail or succeed. And the truth of the matter is, is it good for Bitcoin if JP Morgan, Goldman Sachs, and Bank of America issue $10 trillion of USD stable coins and start handling Bitcoin and selling it to all their institutional investors? Yeah, it's good for Bitcoin. Bitcoin's going to $1 million a coin, then $10 million a coin.

And all the people that believed in Bitcoins for the last decade are going to have the financial wherewithal to create their own companies to do whatever they want, right, and to express their sentiment. It's just not good for the entrepreneurs that compete against the mega caps. So let me ask this question. We recently have seen a bunch of politicians all start to pay attention in various ways. So we've got on one side in the United States, most politicians started off abrasive. So, you know, without naming any of them, there's a number that we're very concerned

about Bitcoin. If you go back a couple of years, we then saw obviously China go ahead and ban miners and take a pretty abrasive step there. But over the last, let's call it, I don't know, eight months, seven months, we've seen El Salvador go ahead and make Bitcoin legal tender. They seem to not only be supporting it as legal tender, they also are onboarding people via this app that they've built and also this ATM network that they've built. They're mining Bitcoin and kind of really trying to plug their country, if you will, into the Bitcoin network. And then just recently over the last week or two, we've seen multiple politicians all at the local level start to become much more friendly or embracing of Bitcoin. So you've got obviously the mayor in Miami who has been very kind of pro-Bitcoin for a while. you've got Eric Adams who's the new mayor of New York City he now leaning in saying he's going to

take some of his paychecks in Bitcoin and some of the stuff should be taught in schools etc we've also got two kind of smaller mayors one in Tennessee and one in I think it's Tampa Bay in Florida all kind of leaning into this how do you look at the intersection of Bitcoin and politicians and it's just this just a continuation of like Bitcoin is good for business and so if it's good for corporations then it's going to be good for the politicians as well or how do you read that situation i think that um one of the great advantages of bitcoin is is it's money of the people right it's money for the people and um the combination of the fact that it's permissionless and it's open nobody controls it means everyone everyone can adopt it everyone can engage in it

And the proof-of-work network means that you have a large business in Bitcoin mining. And what is Bitcoin mining? Bitcoin mining is like your skin. It's the first line of defense of your immune system, right? It's what makes you healthy. The Bitcoin mining industry is a $22 billion a year industry right now. That means that the protocol is creating a $22 billion subsidy for Bitcoin entrepreneurs to go out into the world and find supportive political jurisdictions, $22 billion per year. So when you think about that, that means that the miners themselves, they have to raise capital.

But you see the Bitcoin miners are ripping today in the market, right? All their stocks are up. Yes. And they've been very successful. You can take a Bitcoin miner public. You're not going to take a proof of stake validator public, right? One of the big differentiators is the miners. The miners have to use energy and technology, but the miners are also recruiting political capital to the network.

And so I think that what you're seeing here is lots of jurisdictions can see the benefit of Bitcoin either as sound money, right? is all the holders are political constituency. And I guess we're going to get close to the point where we're going to flip 50% of the electorate, right? There's going to be a Bitcoiner in Congress. There already are. There's going to be Bitcoiners in the Senate. There already are.

And eventually a Bitcoiner will be president. It's not necessarily because they're going to run on just a Bitcoin-only ticket, but they're going to have grown up. They're going to have held the asset and they're going to become the president of the United States and hold Bitcoin, right? It's the most part.

Bitcoin is the greatest brand in the history of the world. First observation. It's the greatest brand in the history of the world. What's brand value? Brand value is monetary premium, right? The monetary premium of Bitcoin is $1.2 trillion right now. Name another brand that's worth $1.2 trillion, right? So it's the greatest brand in the world.

It's the greatest monetary asset in the world. I mean, I'm not counting the dollar because the dollar is an inflationary asset. It's not an investment. If you pick an asset that you could reasonably expect to protect you against inflation, Bitcoin becomes the most popular one other than just like random real estate, right? Just owning land. I guess land was maybe the most popular one and Bitcoin is that digital property. So how do I buy all these other things in Africa or Asia or anywhere? It's a very egalitarian asset.

And that makes it politically advantageous, right? I mean, how is it not? What politician would say, I don't want you to own your own house and I don't want you to have economic freedom, right? Right? I mean, so I think that the left and the right can both agree on that. It's pretty clear it's high velocity money, the higher velocity than anything, but it's high velocity asset.

It's a bank in cyberspace, but it's a franchise bank. So anybody on earth in any jurisdiction can create their own franchise of the bank. And what that means, right, Paxful or, you know, fill in the blank, every crypto exchange in every country on earth, when they're selling you Bitcoin or exchanging Bitcoin, they're in essence creating, you know, a franchised bank of Bitcoin where they're marketing it. So Bitcoin is spreading through two incredibly powerful franchises, the Bitcoin exchangers, the Bitcoin banks, if you will, and it's open and permissionless, right? So there's no – you don't have to get a license from the FDIC to have a bank in Egypt that deals in Bitcoin. And then it's spreading through the Bitcoin miners. They're the security providers. So the security, the network operators and the bankers are spreading like wildfire everywhere.

And who's an example? Well, Square Cash App, right? I mean, that's an example of a Bitcoin bank. PayPal is a Bitcoin bank. Coinbase is a Bitcoin bank. Binance is a Bitcoin bank, right? And when you look at Marathon and Riot and all these Bitcoin miners, they're the other side of the network. So I think that it's inevitable that more and more politicians begin to support the network.

Not everyone will, but, you know, the game theory of it is such that the more hostile one regime is, the more lucrative it is for another regime, right? It was a benefit to the United States when China banned Bitcoin, right? Cracking down on Bitcoin mining was a gift handed to the West. And I've said it before, I think it's worth a trillion dollars, right? And you can see it in the hash rate statistics. But at some point, it's so – Bitcoin mining is the most lucrative use of energy in the world. Oh, that's hands down. In the world, right?

Very provable and very verifiable. In the world. And it's the best use of intermittent energy and the best use of sustainable. energy. And so when you look at it that way, you're thinking, well, shouldn't we expect an avalanche more of political support? And the answer is yes. And why is it stable? It's stable because the Bitcoin miners and the Bitcoin holders are going to go wherever the politicians support them and they're going to bring their capital and they're going to pay taxes, large sums of taxes. So, the right way to think about Bitcoin is Bitcoin's creating an opportunity.

It's an opportunity for your family to save money for 100 years. It's an opportunity to fix your company. MicroStrategy stock is, you know, hitting 800, right? It's an opportunity for your shareholders. It's an opportunity for your taxpayers. It's an opportunity for your constituents. It's an opportunity in the media business, right? I mean, nobody wants to talk about anything but Bitcoin.

Everyone wants to talk about Bitcoin. It's an opportunity for Twitter. It's an opportunity for every mobile app. What I think people don't recognize, and you and I have talked about this before, is it's the only thing from a strategic standpoint that if you're an individual, you can plug in your personal balance sheet, right?

You can start to run your own node. You can use this technology. If you're a corporation or a financial institution, you can plug your business into the network. And you can do that in a multitude of ways. You can build services that end up facilitating other people to use it, or you can mine to support the network. You can simply just buy the asset and hold it on your balance sheet, but you can plug in. It's also true of nation states and foundations

and endowments and pension funds, et cetera. But when you plug into the network, you're in essence hiring tens of millions, if not hundreds of millions of people around the world that are all now working aligned with you to further your business, right? I talk all the time about whether you're a restaurant, right, where we've literally seen examples of many restaurants who have done this, all the way up to large pension funds or nation states, all of a sudden the cyber hornets online, they begin to rally around you. They begin to push you forward. They begin to say, hey, we will support you because you are like-minded like us.

You are also helping us move this forward. But you also get the support of every single miner in the world. So we will protect your economic wealth for you. And you get the lightning network. We will help people actually route these transactions. It's just a very unique thing where you're essentially hiring so many people and so much economic value but all you do is you just plug in right you don't have to go meet these people you don't even know who they are it's an it's an excellent political strategy it's an

excellent marketing strategy it's an excellent shareholder relations strategy it's an excellent business strategy uh it's i guess there's two thoughts i have here one properly understood i believe bitcoin is digital energy it is pure energy right it's not digital gold that's put a billion dollars of money in a vault and i sit there for a decade and you can't do anything with it it's it's it's not even digital property digital property is a billion dollars of a digital hotel and i can teleport it from new york to paris and back again and it's maintenance free and indestructible it's better than that it's digital energy because i can decompose the hotel to room minutes and i can i can decompose and recompose this pure energy hotel

and rent it out at the speed of light and program it with a million transactions a second you never saw a hotel get programmed with a billion parts a million transactions a second it's literally like a swirling energy mass when you understand that then you see it hasn't eliminated capitalism it's simply the 500 trillion dollar digital energy basis of capitalism it makes sense that you would use it as the foundation to build your family to build your company to build your country to build your city to build your application to build your device you can put it into everything and now once you've done that look you can back up your your family with the balance sheet of bitcoin you'll be rich that doesn't mean you'll be happy there's a lot of rich families that have a lot of

messed up problems right you can watch them on television you know you can put it on the balance of your company you know i have you know seven if i have seven or eight billion dollars on my balance sheet that doesn't mean i don't have to get up and go to work and make the software work and sell the software and listen to the customers. I'm still in a competitive struggle with other like-kind software companies that sell business intelligence software. And the same is true with your city, right?

It's half the solution. The other half of the solution is you need rational policies at the municipal level, the state level, and the government level. So when you think about it like that, right, You realize that it just makes sense, and it's going to grow. But what was the second part of your question again? In terms of as more and more people plug into this system, do we expect not only, one, the politicians obviously will continue to do this,

but is there a spillover effect where people actually leave jurisdictions that aren't Bitcoin-friendly? Like there's an element of take taxes, right? There's a carrot and a stick. You can drop your tax rates. You can incentivize people to move, but you also could increase your taxes and literally push people away. It's obvious that the incentive

to get people to move to your jurisdiction, but if people continue to be abrasive, is there problems? Yeah, I remember what I was going to say. Now, the energy system is an energy network. Everyone's plugging into it and it makes them more efficient than they would otherwise be,

but they still have their struggle, what's happening is, yeah, you're benefiting from the rest of the network. You can't afford to lose laser-like focus on your family, your company, your country, right? You can't assume that just because you plugged into Bitcoin networks, you can be a crappy retailer or a bad mayor or a bad father, right? So it doesn't solve that problem, I think we boil down to a simple idea, which is everybody's got a balance sheet. Everybody's got a P&L. The P&L is your operating business. You better be the best in the world at that thing. The best in the world. If you get distracted, you know, you want to be a good husband, you can't have six wives. You want to be a good retailer, you better know who your

customer is. You still compete against every retail. So your operating business, you got to be really laser-like and good at it. But by plugging your balance sheet into Bitcoin, you have hundreds of millions of people guarding your back that are energizing the network. And it takes me back to a historic observation. History teaches us that the winning civilizations, the winners in the history of mankind, are the civilizations that channel energy more effectively through time and space, right? And that means practically speaking, right? The Romans, they were good at killing people.

It's not easy to kill people, right? I mean, to raise an army, they didn't show up with bows and arrows and spears. They showed up with industrial grade artillery that tossed 50 pound flaming balls of shrapnel at you from 500 meters or a thousand meters away, right? And a Navy. so so uh you see that over and over again right uh steel trumps iron and iron trumps bronze

and that's because and bronze trumps stone right you pick up a stone if you're if you pick up the sharp rock you beat the other guy if you're smart enough to pick up a rock and the other guy didn't pick up a rock you won the fight if you had the had the iron then you beat the guys with the bronze If you had the steel, you'd be because of the iron. You ever seen steel forged? People don't even think about this. Walk into a steel mill, look around. What do you think is going on, right?

They're channeling immense energy, right? The fire, the heat, you know, or electric rolled steel. Massive energy into metallic form. Air powers energy, potential energy. You get up 50,000 feet. you drop someone on someone's head okay what's the channeling part remember the gulf war they you know norm schwartzkopf used to show the videos of the laser guided bomb and something that's in the clouds dropped the bomb that managed to hit you know a three by three space from 50 000 feet

up you know through the wind right so the channeling of the energy through time and space and being better at channeling it. That explains why every team wins in sports. That's why Tom Brady wins because the quarterback puts, you've seen him put the football in exactly the spot. You have to put that football in that space in a plus or minus 10 millisecond time spot

with the right spin on the ball. And if you happen to be able to do that, you can win. And is it random? No, it's not random. There's one guy that's better at it than everybody else. And if he didn't have the team, they wouldn't win. So every winner is better at channeling energy and time and space. Every civilization, every city, every company, right?

Every investor. So the real power of Bitcoin is Bitcoin is digital energy. and until you figure it out, if I said to you, what is digital energy? Well, digital energy is I'm gonna put $100 billion into this container and then I'm going to do a magic trick and it's not here anymore, but guess what? I can move it at the speed of light a billion times a second

and you can't find it and I can put it into every car and it'll drive every car on the planet for the next two years without fuel. Sounds like a magic spell. It is a magic spell. Any sufficiently advanced technology is indistinguishable from magic. Bitcoin's digital energy, the next best thing is electrical energy. It's not, you know, information.

These are not nearly as good. It's a thousand times better than the thing it's replacing. A lot of people, they can't get their head around it. They don't want to understand it. The conclusion is, if I told you, like, which country is going to win the war? The one that masters air power, right? The first half of World War II was air power, you know, sea power. The British, you know, control the seas, right?

Or how about this? Nuclear power? What could nuclear power do for you, right? You think you weren't channeling energy, right? You're channeling energy. So now we're talking about digital energy, and you would ignore it at your own risk. It doesn't guarantee you win, right? What's a gun?

A gun is channeling with precision, right, chemical energy or explosive energy, right? It's pretty obvious if you think about it. Guns, germs, steel, you're channeling energy. You know, Lord help you if you're on the wrong side of that. But if I do hand you the gun, you'll probably win unless you're stupid enough to shoot your own foot off. And there are examples of people that shoot their own foot off in, you know, in the history of war and the history of civilization. But ultimately, what history is telling us is the team that is most coordinated, that channels energy, always wins. and Bitcoin's a good bet

just because it's digital energy and the advantage you have versus using metallic energy in the form of gold or using political energy in the form of fiat paper is so much greater that the deck is just stacked against everybody else. Now the question is just who's gonna jump on it and how fast, which politician,

which big tech company, right? If Apple gets on Bitcoin, you know, they generate a trillion dollars of additional market cap just on the balance sheet maneuver. That's the first trillion. If they build it into an iPhone, you make another trillion. If you're smart, you have a $10 trillion asset in your cloud and you become a $10 trillion bank. If they do it or they don't do it, right? The world's full of examples of empires topple because they did not embrace a new technology. You know, the Romans needed the Etruscans to whiff, you know, and for the Greeks to take their eye off the ball.

And then, you know, one thing leads to another. And when you get enough power, you start to become more closed-minded. If you have enough money and enough power, you don't need to learn anything new. What we see going on right now is every single powerful person in the world has asked the question, what do you think of Bitcoin? Everybody, the premier of Russia, every world leader, every major investor, every major influencer, everybody's got to have an opinion. Ask yourself the question, how many of them spent 100 hours

studying Bitcoin to form an opinion? I don't think there's a single person with a negative opinion that spent 100 hours studying it. I mean, I don't think you're out on the limb there. I just think the world's full of people that haven't spent 10 hours studying it. And yet, if I walked up to you in 1900 and I said, I got electricity. I want you to put it in your building.

I want you to put it into your carriage. I want you to put it into your ship. I want you to, you know, you manufacture food, you know. I want you to use electricity instead of steam power or mechanical power. How many people would stop and study it, and how many would think they would master it and figure it out with one hour of consideration? Would you know how to wire Hershey's Pennsylvania or a meatpacking plant

or a ship with electricity in 100 hours, 1,000 hours? how many hours does it take to figure it out and what are the consequences of not figuring it out i think the consequences are over 30 years you go out of business right yeah let me ask this um this idea of moving energy between time and space i think you and i uh unsurprising to the audience uh understand how valuable this asset is we understand how much pristine collateral it provides. When you think about Bitcoin, there's a price that is attached to it. And the price goes up and down on a daily basis. It's priced in US dollar terms. There are short term reasons why to pay attention to the price, especially if you're holding on a balance sheet of a publicly traded

company that we talked about. But when you look out over the long term, I've heard you say things like it's going up forever. Do not sell your Bitcoin and other things that I don't want to make an assumption, but insinuate that you are going to hold Bitcoin for your lifetime. How do you think about price in that equation? Do you worry about it? Do you think about what it will be worth in US dollar terms in the future? Like, how do you think about price? I think the only thing you got to do is figure out how much of it you can buy. And the reason to stop buying it would be you're buying it with leverage or with with a mark-to-market loan that could cause you to get forced liquidated so if you had a million

dollars sitting around you just buy bitcoin and hold it wait you know can you borrow 10 billion can you borrow 10 million dollars to buy bitcoin i i wouldn't buy it at 20x leverage or 10x leverage or even 5x leverage or something uh because the significance of price is you look at the volatility. You ask, what's the likelihood that it will trade down 50% and I'll get a margin call and force liquidated. If you have margin debt, you can theoretically get a margin call. If you have long dated debt, you know, if you have a seven year loan, we have a seven year loan and we bought $500 million of Bitcoin at $36,000 a coin. What's the odds it'll be $36,000 a coin in seven years, you know, I'm not so concerned about it. So I, I, I think the way to think of

it is, here's my model for Bitcoin. Bitcoin's price is going up because of inflation. Saifedean says 14%, right? We know that in the absence of everything else, if you had, if you had complete adoption, if 8 billion people had Bitcoin, and they, and we had world currencies, and the US dollar was the world currency, and we inflated at 14% a year, then you would think Bitcoin would go up 14% every year, as the currency kept getting inflated. So the price of the dominant monetary network or dominant monetary asset goes up by inflation. And the second dynamic is adoption. There's a rip, right? That if there's $100 billion of demand for Bitcoin, then it's going to go faster than the 14%

because there's a short squeeze as people are trying to buy the stuff faster than the market wants to sell. And if you went from 1% adoption to 2% adoption, you could imagine that the price could double just because the adoption doubled even in no inflation, right? And then the third driver is utility. This is common sense, right?

you ever send Bitcoin to anybody else on the main chain and you want to send 37 bucks and it takes you an hour and you got a fee. And then when Cash App came out and said, you could just send it via cash tag or, you know, or you get a lightning, that's the proprietary way called layer three. And the layer two lightning way

is like a lightning wallet and I zap it for one Satoshi in a split second. Remember the big smile that brings to your face? It's pretty fun. Okay. And did it not make you think that Bitcoin is more valuable? Like Bitcoin's utility explodes. If I can move the money at the speed of light on the layer two or the layer three, and if I can do a billion transactions a day, or let's take El Salvador, right?

Three million people download a wallet and they start doing remittances. Is there demand for Bitcoin? Sure there is, right? So as the technical utility increases, as we go from – and by the way, the technical utility drives and feeds back into the adoption, right? Because there's 3 million people in El Salvador that now have maybe a bit of Bitcoin or the ability to buy Bitcoin in a split second that couldn't buy it six months ago. So if you look at a world going from 100 million people with what's low utility, I buy it and I hold it for 100 years. that's low velocity 100 million adoption 200 million and i move it every year 400 million 800 million 1.6 billion as the user count increases that's going to drive things but

the adoption is not just user count right if you're building the model you would say well how much money people talk about they talk about uh bitcoin and network effects and matt caff's law okay again if you're just looking at it in a cursory way you're saying oh metcalfe's laws apply but if you're thinking a bit deeper about it you're thinking you know newton's laws apply right astrophysics applies if you bring a hundred billion dollars to the network and you're one person that's more important than if you brought a dollar to the network and you're a one person And so you have to you have to do a dollar weighted assessment of adoption. Right. And and you would almost say the value of it is a function of the total amount of capital plus the velocity. Right. What's what's the amount of money that shows up? What's the velocity of the money that shows up? What's the utility of the money that shows up? and when you think about it that way it becomes pretty clear that as we march from one use case

to a thousand use cases like you know holding it is one thing lease lending it out for yield is another thing what if i put a lien on it what if i can lock it up for five years what if i can you know what if i can create a trust what if i gave you a trust that's good for the rest of your life and the life of your firstborn child for the next thousand years. And it's an app and I just fund it with two Bitcoin. And you can't ever sell the Bitcoin, but you can live off of the yield of the Bitcoin

for the next thousand years. It's an application, right? I can create insurance policies. I can create trust funds. I can, what if I gave you a car, a Tesla car, and I put a Bitcoin in the car and the car refueled itself forever and maintained itself.

It's a self-maintaining car, more valuable than a non-maintaining car, right? It's like I hand you something with an endowment, right? Yeah. So as that happens, as you get more money flowing on the network and more people flowing on the network and more utility flowing on the network,

the price goes up. And does it go up forever? Yeah. Because as I said, it's the language of money. What's that mean? it's like english how long it's been around long time it's like it's like it base 10 math right like there here's the thing about it right people don't get this part bitcoin is is is math but it's a type of math it's like base 10 math the bitcoin protocol is a

protocol for money now i hand it to you you can either say great this is the dominant protocol for money this is the winner and i'm going to buy as much of it as i can or you can keep trying to commercialize base 16 math and base 32 math and base 2 math and base 4 math and you know the base 16 math base 10 math is not the only mathematical protocol any more than the metric system is the only system of measures it happens to be one that we adopted there's no reason to think it doesn't last 1,000 years. It could last 10,000 years, right? And that's the part that people don't get. So when I say it's going up forever, I'm saying, well, will the technology get better? Obviously. Will adoption increase? Well, I guess you could say it gets pegged out.

When adoption is 8 billion people, when everybody's adopted it, technology keeps advancing, Inflation continues in whatever other currencies exist. And at some point, theoretically, if all the other weak currencies failed, right? You think we go from 130 currencies to 100 to 30 to 12 to 10 to maybe one day there's the dollar and the CNY and you're down to two. And then maybe we decide to throw away the dollar and the CNY and we get enlightened and we just use Satoshis. And you get the perfect Austrian economics hard money, perfect thing. Maybe, it doesn't matter to me if we do or we don't, but let's say we did. Well, then it goes up with the productivity of the civilization, right?

If the civilization has got 5% productivity growth and everybody's adopted the same money, then you've got 5% growth. And until that, you're going to have faster than the productivity growth because you're going to get these rips, these accelerations from technology and adoption and fiat inflation in the frame of reference, right? It's useful to see the frame of reference, right? Is your frame of reference the peso?

Is it the bolivar? Is it the U.S. dollar? And in that frame of reference, then the price is going to adjust. My brothers are going to join us here in a second to ask a couple of questions. Sure. But my last question for you on this topic is, when you think about micro strategy, we always talk about micro strategy, right?

Because that's the company that you run. But a lot of people will forget, you actually made a very large personal Bitcoin purchase as well. Do you think about a difference in the decision making between a person optimizing for this as like a balance sheet strategy versus a corporation? Or do you see those as the exact same thing? I think for a person, you just say, how much money do I want to store for the next decade or maybe hold for life? How much long-duration property?

If I said, you're going to invest something for the next 30 years and give it to your grandchildren, hold it in the family, the family endowment, I would put that amount of money in Bitcoin, right? The rest of your money is an investment. You're betting on Apple versus Facebook, or it's a speculation. I want to speculate on Doge versus SHIB because it's fun, or I want to gamble on the outcome of the Super Bowl because I think I know and it's fun, okay? And I think that all personal money falls in those three categories. It's either an investment, it's a speculation,

or it's an endowment of a savings account. For a business, that's different because some businesses are traders. If you're a trader, if you think you can out-trade someone else, you're a business. You better be thinking about it 60 hours a week. You better have proprietary computers and proprietary models and know the markets and the arbitrages. Then you could trade maybe.

I mean, Citadel trades, Renaissance trades. I mean, other people trade. Goldman Sachs trades. So I think they can be traders. And then also when you get into business, right, businesses have other options. Like maybe they can raise capital. They can issue equity.

They can issue debt. They're publicly traded. I have an army of lawyers and accountants so that I can do that. You don't as a family. So businesses don't have the same financing capabilities. Sorry, people don't have the same financing capabilities that businesses do. And then your business has strategic assets. If you're Fidelity and you have trillions of dollars of fixed income, you can build it into your bonds.

If you're a bank, you can build it into the bank. If you have a mobile app, you can build it into the mobile app. If you build phones or devices, you can build it into the device. One thing I think with a business is clear is you just should be laser-like focused and you should think that when the dust settles, I need to be the best in the world at what I do, right? Like, for example, it wouldn't be a good idea for me to go into business competing with Fidelity, right? They have $11 trillion in assets. I'm not, you know, like I'm not going to launch a Bitcoin investment fund, right? I'm not.

I mean, it's not for me. I'm not going to go in business against, you know, Square or PayPal either just because I think it's a good idea. so businesses need to be laser-like focused on competing and growing and in a creative fashion for their shareholders and also businesses have shareholders to manage and shareholder relations and so so there's that phrase you know if we want to go far we need to go together and so for a business it's very important to have shareholder alignment would you rather have 10 billion dollars of capital and get a 10% return or no capital and get a 30% return, right? So a business has to keep their capital aligned. And so a lot of times they'll do things that are either optimized

for their shareholders or they're optimized for their other constituencies. And businesses have regulatory nexus, right? Like there's certain things that I can't do if I'm a bank in China, right or if i'm a bank in the u.s i can't so so businesses have compliance issues and individuals don't so that's how i think about that you don't know this but uh my two brothers run the best business share research team which is a a very clever thing that they came up with they also run a union that i've busted like 20 times uh what questions do you guys have well hopefully by the end of this we're going to get uh michael to join the union this will be our recruiting Bitcoin's a monetary union.

See, he's in. It's a monetary union you should join. Eventually, everybody else will. We're convinced of him still. What questions do you guys have? So I listened to the entire interview. Fantastic, awesome stuff. But I have to ask one question around volatility.

So you mentioned earlier you own, MicroStrategy owns or holds over 100,000 Bitcoin. I think you've mentioned in the past how much you personally hold. But there's days where Bitcoin is obviously appreciated drastically over the last year 10 years etc but bitcoin also went from 65 000 call to 30 000 or 32 000 this year what's going on on days where you're looking on paper and and and it's going you know hundreds of millions of dollars at some points down look i'm running the business just

like any ceo is running the business like if you were to ask jeff bezos you know what are you thinking about on days when Amazon stock is down, he would say, I'm not thinking about it. I'm thinking about fix the business, run the business, and the stock will take care of itself. And that's what I think. I'm looking out seven years, right? I'm saying, how do we educate more people on Bitcoin? What's my next deal that I'm going to do? I mean, if my stock is down, I'm going to issue debt if my stock is up maybe i can do a convert right what about the software business how are we going to deliver the best quarterly results we can deliver you focus on the things you can control so if i can control it i'm going to do it and the short-term volatility you know you can't

control and so you just wait you you got to figure that in seven years the market will sort itself out in seven months, it likely will sort itself out in seven. And if you want to drive yourself insane, then you zoom in. And if I zoom in close enough, if I just look at 0.0001% of your face for 18 milliseconds, I bet I can find some protozoa bacteria crawling around somewhere and it'll freak me out, right? If I want to, right? Like it's you're driving yourself to apoplectic fits by inducing this anxiety.

So the way I look at volatility is, actually the truth is I just say this, it's a benefit. Volatility is the price you pay to get 10X the performance of the S&P. If it wasn't volatile, then would I have been able to borrow $2.2 billion at 1% interest

and buy $7.5 billion worth of it, starting with $250 million in capital? Like, I like the fact it's hard. I like the fact it's scary. I like the fact it's volatile. What you really want, this is what you should hope for in life. You should hope that you can see the future

and you have a very strong opinion about the future, but that everybody else disagrees with you and they're getting bounced around. It's a bumpy ride. It's like, I'm taking you on a bumpy ride down the road. I'm going to bounce you this way and that way. And in five years, then there's a pot of gold at the end. And there's only two seats.

And there's 10 people. And only two of you can get on. So the two of you guys, you're like, oh, there's a pot of gold at the end? Sorry, pot of Bitcoin at the end? Pot of Bitcoin at the end. And you're like, okay, well, we'll sign up for the bumpy ride. What else do we got to do?

And everybody else is like fat, dumb, and happy. And they've all got plenty of everything and they're comfortable in their life. And they're like, well, that doesn't look like a very comfortable ride. It's like, you know, a Jeep and it's a desert and it's a bumpy ride. We'll sit this one out.

Can you just bring it to us? And it's, you know, what I said tongue in cheek about the FDIC statement. It's like, when every bank can hold Bitcoin on their balance sheet, Well, then every company is going to borrow hundreds of billions and trillions of dollars against their Bitcoin. Every bank is going to buy trillions of dollars of Bitcoin. The price is going to the moon.

You're not going to be able to afford the Bitcoin. When I make it, you know, a smooth passage, you're going to wait until there's a train or a plane that flies across the country. Or you're going to get in a wagon and you're going to go west, young man. Right? So I'm like, the joke, of course, is it's volatility, but it keeps going up. People are like, well, how else do you want it to go up, right? I mean, like, it's going up with volatility. So I think it's a benefit because it's volatility that pays off everybody that does the research and has any conviction.

and it disproportionately benefits people that want to make the investment in the new world and it transfers wealth away from people that are afraid of volatility. It's not really afraid of volatility. It's, I mean, Amazon was volatile, right? I mean, a lot of people made a lot of money on Amazon. A lot of people made a lot of money,

even venture capitalists, you know, accept extreme amounts of volatility. I think here you have an example of a liquid publicly traded asset, which is volatile, but in fact, it's still misunderstood by 98% of the public investors. So it's an asymmetric opportunity to buy something which is no less risky than investing in a big tech company, but much less understood. And I think probably the sharp ratios would actually bear that out if we looked at volatility-adjusted yield. John, what questions you got? Yeah, nice to see you again, Michael. So you have mentioned, and I tend to agree, that Bitcoin is digital gold and it's a store of value.

I'm curious what your thinking is behind people, companies, and other countries using it as a medium of exchange. We've seen El Salvador adopt it. What are your thoughts around that? I really think that for the next decade, the screaming home-run architecture is digital currency as the U.S. dollar on top of digital asset as BTC. And I think that every country really wants

to move dollars around as the medium of exchange because 100 million companies have their accounting systems wired for dollars. And I think they want to use the store of value. And I think if you had $100 and $99 are invested in Bitcoin and $1 is invested in the USD, you have 99% of the benefit. In fact, it's not even that. It's like you don't have to give up anything. If you have a million dollars, you put a million dollars into Bitcoin and you borrow $100,000 in USD, a stable coin, and then you pay your bill in the USD while the Bitcoin appreciates.

So the net balance sheet ratio is 100% Bitcoin, but it doesn't make the currency go away, right? Like MicroStrategy has got more than 100% of its balance sheet in Bitcoin, but we still use the currency. So what I think will happen, if you really want Bitcoin adoption to take off, you don't want to squeeze out the stable coins. And I think that the USD stablecoin is actually going to drive the explosion in Bitcoin. The use case of stablecoins up until now has been crypto exchanges settling offshore, right? They're settling crypto exchanges. We didn't use stablecoins and microstrategy for anything. We don't use stablecoins to buy Bitcoin, right?

So what you want is you want 8 billion people to use a stablecoin to buy coffee. And you also want Amazon and General Electric and Apple to remit cross-border treasuries in stablecoin. And why would you do that? Because you can move money at the speed of light on Saturday afternoon for free. And right now, MicroStrategy can't move money cross-borders at the speed of light for free.

Would we move USD by a stablecoin? Yeah. Would we move Bitcoin? Well, we might flash it into Bitcoin for a second, move it in another second, flash it back into USD. right? A la, you know, Strike and Jack Mallers. We might do that. But I actually think that what the world wants, not just the world, every consumer kind of, every consumer in South America, Africa would love to have dollars in their wallet. They would also love, they know

that now. Everybody knows that now. That's 100%, right? Everybody knows they want dollars in their wallet now. So the US dollar could spread to 6 billion people. It would spread to 8 billion people if the Chinese didn't block it, right? It'll spread to all 8 billion people now. They don't all know they want to hold their life savings in Bitcoin, but that's growing at a massive rate. That's spreading like a virus. Every government knows they want to control their currency, the strong governments will, the US will, the Chinese will, the EU will. The weak governments won't, right? Afghanistan, you know, and, you know, Venezuela and places with hyperinflation, Zimbabwe, they will lose their currency privileges because they're weak. And

who will they lose them to? To the dollar, right? So what I think is happening is you're just going to see an explosion in the dollar, an explosion in Bitcoin, an explosion in demand for money moving over lightning rails. If you can move stable coin over lightning rails, that would accelerate the growth of lightning, right? The killer application I want on my phone is a lightning wallet with USD stable coin, and then Bitcoin, and to be able to move either of them at the speed of light in a programmatic fashion. And I think they both win. Who loses? And this is the key. There's too much the dollar must lose so Bitcoin can win. No. Who loses is weak assets and weak currencies. Can you think of a weaker asset than Bitcoin? Every other investment asset,

right especially gold silver commodities land stock weak value stocks and then and big tech stocks they're all weaker assets so you see money flow for there's 500 trillion of them by the way like we have 500 trillion in weak assets if you got the 10 trillion from gold we'd be up by a factor of 10 so i think that uh weak assets flow to the strong asset and then weak currencies how How many currencies in the world are weaker than dollar? Name one currency, fiat currency, in the world stronger than the dollar. None. They're all weaker.

CNY is weaker. Every African currency, every Asian currency, everything. So 180 nominal currencies, a lot of them are pegged to the dollar. 130 floating currencies. They all can be replaced with the dollar. So who wins? Western banks Western technology companies

Western hardware devices The Western world The United States Western Europe Who wins? Everybody that embraces Bitcoin Right? Who loses?

You know, the nation of gold Right? I mean, you want to declare war on something? Declare war on gold They don't have an army They don't have an air force There's no politicians running for office of president of gold there's there's there's no city state country no one is crying thinking that their way of life

will come to an end if gold got demonetized so i you know if i had one one request from the bitcoin community my request would be focus your guns on gold ultimately gold is being demonetized this is not speculation on the part of michael saylor you have all the stats it's been demonetized for the past decade, right? It doesn't have a country. It doesn't have an army. It doesn't collect taxes. There's not a single person on earth

that is gonna lie down in front of a tank to defend the nation of gold. And yet gold is the enemy because gold is a dumb rock sitting. You can't mortgage your gold. You can't lean up your gold. It's hard to rent your gold or license it or develop it further.

you know gold is not big tech you can't put gold on an iphone so ultimately what you have is there are two things that should succeed and grow the u.s dollar if you live in the united states and you believe in western values and freedom and justice right and western law and the progressive movement you want the u.s dollar to grow and you and instead of saying well the dollar is like a problem to save and forget about that just point out that if you live in africa and asia you would give your left arm to trade in dollars right so the dollar should expand on on uh lightning rails and bitcoin should expand and they go together and we all win there's no i mean we all win right the world's a better place every company everybody wins if you're going to compete by the way if

you're going to compete with square cash app then you might lose if you're going to compete with Twitter, you might lose. If you're going to compete with the United States of America, you might lose. My advice is you don't got to destroy the banks. You don't have to topple a government. You don't have to crush a currency. You don't have to stop a regulator. You don't have to, you know, eliminate PayPal, right? You don't have to compete with all of them. You can buy bitcoin you want to compete with something declare war on a dead rock right declare war on the rock right the rock has been losing for a while now and after you finish declaring war on the rock declare war on on uh dead property right dead money right what a low velocity not

i don't want to hold 500 acres in the middle of nowhere as a store of value i don't want to hold five tons of rock as a store of value. I don't want to monetize these things. So if you start thinking that way and you think, I just want to take my monetary energy, put it into digital energy, and then I want to partner and ally with everything I find admirable, every great company, every great politician, every great country, every great technology, just be positive, be constructive and and we all go and we went together the world will rebuild itself right it's going to rebuild itself i would like i would prefer that it rebuild itself in a peaceful constructive cheerful fashion as opposed to you know someone's got to lose so i could win i don't

think everybody can win right if we if we invent electricity and we invent math and we invent fire isn't it highly likely the entire human race is better off because of math fire and electricity I think we can all win together. And so that's the way I see that. Before we finish up, we've been going for two hours, but I know you and I could talk about this all day. If I just give you the floor to finish, when somebody says to you, why Bitcoin?

What's your two, three, four sentence answer as to why has Michael Saylor, who had every option in the world to buy an asset and put it on your balance sheet or personally invest in, why Bitcoin? Because the most... I'd start by saying the human condition is elevated via the channeling of energy,

and every great advance was a new form of energy via metallic energy in the form of steel or electrical energy or chemical energy. And Bitcoin is the next evolution of that, right? So the first reason is it's compelling and critical to the events of the human race. The second observation is every successful investment idea in the 21st century was a digital transformation,

digital transformation of music, digital transformation of entertainment, digital transformation of books, digital communications. Bitcoin's the digital transformation of everything else. Everything that didn't get transformed in the first chapter of the mobile wave comes next. So now we have digital transformation of gold, digital transformation of property, And digital transformation of energy. And for the first time in the history of the human race, you can literally take energy, transform it into something in cyberspace, store it forever, move it at the speed of light, program it, and eliminate the friction that is applied to that energy when it takes another form. Economically, energy is capital, right?

And we use the phrase capital. If you have digital capital, it's the digital transformation of capital. And capital is half of everything. If you sum up every piece of property, every corporation, the value of everything, it's all capital. You capitalized it. So if I capitalize everything and I stored it in 20th century instruments, I would store them in equity securities and bonds and titles to property. In the 21st century, I have the chance to capitalize the entire world economy and put it in a digital token we call Bitcoin. So why buy it?

Because it's half of everything. it's how it's literally half of everything and it is the platform it's the it's the foundation upon which we build the 21st century economy you could say 21st century cyber economy but if you want to fix everything in the world if i could eliminate the friction move everything at the speed of light make it immortal oscillate it at 60 megahertz or faster you know execute a million transactions a second and make it infinitely intelligent wouldn't you think that uh that would be a good idea right the future of capitalism there's not very many people who believe in this more than i do but uh you may be one of them

because I think you and I see eye to eye on all of this. So I appreciate you taking the time to come in here. I appreciate you two sitting around and watching this entire thing, coming and asking some questions. They'll be taking virtual laps for weeks now because you even hinted at the fact that you may be open to joining their union.

I appreciate everyone watching at home. Please make sure you like the video, subscribe to the channel. Thank you to SoFi for sponsoring the Best Business Show. and we have lots and lots to go over after this conversation but we'll be back tomorrow and I think that's it

go follow Michael on Twitter I don't know if we've got anything else I don't know if you need any more Twitter followers I got one more question go ahead we talk about don't ask me what the price is going to be I'm tired of that question

we talk about Bitcoin being good for business all the time and I think part of that is obviously the price is appreciated So anyone who has been involved has benefited from that. But part of it is also just the community aspect of it, right? And how powerful that is. Is there a specific point in time where you were like, holy crap, like this is wild. These people are really strong.

They're really passionate. You know, I think that every single month that's gone by, I've just been more impressed with the community ethos. If you look at our press release, when we first bought Bitcoin and we said why we bought it, one of the lines we put in the press release is we're persuaded by the community ethos, by the community itself, that this is digital gold and it's harder and it's smarter and it's stronger and it's faster than gold. And I think that came out of all my research before we actually made that announcement. And the way you figure out the community's passionate is you do your research and you study all the influencers and you look at all the podcasts and you read all the books. And you couldn't come to any conclusion other than the asset is differentiated based on the community ethos. I even tweeted this. I made this point, and I guess I'll elaborate right now.

I said, you know, the character of the asset determines the – sorry, the character of the owners determines the destiny of the asset, right? The character of the people that own something, if you own like Joe random yo-yo coin and you're owning it to flip it on Saturday night depending upon which way a football game goes, okay, that's the destiny of the asset, right? it's going to be short term because the people are short term. Whenever you buy anything, you've got to ask yourself the question, what's the character and what's the intent and what's the strategy or the belief system of the people that are buying the thing that I'm buying? If I buy real estate in New York, right, you'll eventually sell it to someone else who swears that New York is the apex city. People that love New York, their opinion is there is no other city on earth where you could go, everything is a step down. They have a view of New York as Mount

Everest and they're living at the top of it. And everything, if you were to say, have you ever considered moving to another city? They recall in horror, you know, kind of like New York is like the Rome of 100 AD and there's Rome and then there's barbarians. Okay. So that's the character of the asset owner. What's the character of people that own Bitcoin? If you have, if everybody bought it because they intend to hold it forever. Isn't that the kind of asset you want? Or if I told you people bought it because they liked the monogram, they own that dog, well, how many dog coins are there? 48 or something? Well, if you bought the 47th dog coin, then the 49th dog coin is eventually going to demonetize you. So I think that's been very clear from the beginning.

Bitcoin had the immaculate conception, right? I mean, you can't recreate this again. How do you have an open sourced, you know, asset that was never pre-mined, that was never ICO'd, that, you know, no one thought would be that until it became that, right? So I think that I think that my conviction grows with time but it's pretty evident in August alright so what's your

do you have a price prediction it's going up forever alright listen I appreciate everyone coming thank you very much Michael you've got a whole bunch of stuff you guys are spending your time on so I appreciate you coming here hanging out with us and anyone who's got any questions

go tweet at Michael He probably will not respond, but he'll at least read it. So see you guys tomorrow.