The Prof G Pod with Scott Galloway - State of Play: Bitcoin and Cryptocurrencies

Episode Date: December 17, 2020

Michael Saylor, the co-founder and CEO of MicroStrategy, joins Scott to give us the 411 on Bitcoin and the cryptocurrency space. Michael explains why he’s been making big bets on Bitcoin and investing his company’s treasury into the cryptocurrency. He also shares his advice on navigating our world of superabundance. Follow Michael on Twitter, @michael_saylor. (14:47) Scott opens with his thoughts on Tesla joining the S&P 500 on December 21st and Disney’s mammoth content announcements.  This Week’s Office Hours: why WhatsApp is Facebook’s most valuable asset, investing in the cannabis industry, and the second-order effects of remote work. Have a question for Scott? Email a voice recording to [e-mail]. (45:35) Algebra of Happiness: a call to arms. (57:26) Subscribe to The Prof G Show on YouTube here. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Episode 40, the atomic number of zirconium. I don't understand rare gems. They find diamonds in my luggage and TSA thinks they're theirs. They find my edibles and all of a sudden they're mine. The 40-yard dash is an important metric in American football scouting. True story, I tried out for football in college.

My notes back were small, but slow. Let's make this podcast big yet fast and near diamond-like. Go, go, go! Welcome to the 40th episode of The Prop G Show. In today's episode, we speak with Michael Saylor, the co-founder and CEO of MicroStrategy. He's made a big bet, as in a monstrous bet on Bitcoin and the crypto space since the start of the pandemic. And we're going to discuss the state

of play and why his company continues to invest millions of dollars into Bitcoin. He's been somewhat of an evangelist for the asset, the currency, whatever you want to call it. And I asked Michael to come on and give us sort of the 411, give us the dealio, if you will, on the cryptocurrency that is Bitcoin. He's also just this big systems thinker that seems to have insight into the future. Okay. What's happening? Let's be honest. This is the vaccine and the seven doors, meaning that there's really only one thing happening or one thing that is probably we're talking about or discussing. And we should take a moment of pause to praise this historic moment for humanity as the U.S. became the sixth country to roll out the Pfizer and BioNTech vaccine. I

don't know if it's BioNTech, BioNTech vaccine. Anyways, this is exciting. And all 50 states have begun to administer the vaccine. The first dose was given to an ICU nurse in Queens. So we need to keep in mind here the logistical challenges as UPS and FedEx have to safely deliver or attempt to deliver the first 3 million doses of the vaccine to 636 distribution locations nationwide. Aside from that, this is an opportunity for us to demonstrate our citizenship as we need at least 70% of the population to get not one, but two doses of this vaccine to put an end to COVID-19. And other news.

There really isn't any other news, but we'll talk about it. The end of big tech as we know it is coming. The FTC and 48 states attorneys general have sued Facebook for its abuse of power and anti-competitive behavior. Okay, better late than never. We have more on that during office hours, so stay tuned. We also have a full overview, more color,

more details, more texture coming up on the Prop G YouTube show, our Prop G YouTube show on, guessed it, you guessed it, YouTube. We've linked to where you can subscribe in the episode description. You're welcome. What a thrill. So with that, let's move on to stocks and other exciting business developments. We're taking a temperature check on Tesla. The company is expected to begin trading on the S&P 500 on the 21st of December, less than a week away, and recently announced a $5 billion capital raise for the second time in three months. Why wouldn't they when the stock is up sevenfold year to date? And its market capitalization sits at, get this, $600 billion. It bears repeating that this firm is now worth more than, I don't know, let's call it General Motors, Chrysler, Daimler, Toyota, Volkswagen, Airbus, and Boeing. and it produces about 400,000 vehicles a year versus 24 million vehicles for those automobile firms. Actually, it's probably more like 30 to 40 million for those other automobile

firms and I don't know, a couple thousand or a couple hundred. Big boy jets, much like we've been talking about how Airbnb is the ultimate brand. Tesla is also one of the greatest brands ever built with no advertising. Because of Elon Musk's ability to drive the narrative, we see that they don't need advertising. And by the way, I was on a call last night with a bunch of political consultants that were talking about starting a media firm. I don't know why I'm avoiding it. The Lincoln Project. These are incredibly impressive people. And their tendency is to start something around media or an ad agency or a communications firm. And I'm like, come on, guys. You don't need to be the tallest midget. That shit is over. The sun has passed

midday on the era of brand. Amazon, Tesla, Apple, they all shed the value or gain the value of IPG, WPP, Omnicom, and publicity in a trading day. That is, anyone who starts talking a lot about brand, look at them and say, okay, I see a dead man or woman walking. You are going to be out of a job in about 24 months. Yeah, brand is a construct for which we use it as a guiding light for our strategy. Which core associations are we going to reinforce? And it seems like the only core association recently in the investment world is, are we a disruptor? Yes or no? That's kind of the only question that seems to matter. Anyway, Tesla is joining the S&P 500. And why is that a big deal? For one thing, fund managers who run S&P 500 funds will need to add Tesla to their portfolios.

According to Barron's, there is $5.4 trillion in index funds that track the S&P 500, and these funds will need to purchase an estimated 81 billion of Tesla shares. My guess is they've already done that. This also means one company will be leaving the index, so their shares will need to be sold. How should Wall Street value the stock? Who the fuck knows? Don't listen to me. I thought this thing was going to get cut in half, I don't know, about 80%, 90% ago or about 700% gains ago. I could not be, there are a lot of places I am very wrong. This is one of them. Let's not forget that Elon Musk tweeted back in May that in his opinion, the stock price was too high.

Okay, that's a new strategy. That's a new IR strategy. Bloomberg reported that Goldman Sachs has a price target of $780 a share, while JP Morgan is at $90. Okay, what the fuck does that mean? Goldman's at $780, JP Morgan is at $90? Well, all right. Okay. Enough about Tesla and its over or under valuation. The mouse, let's talk about the mouse. Who wrote Unleash the Mouse a few months ago? Who is basically dictating Disney and AT&T's strategy

from his little guest house and his mic. Two turntables and a microphone are moving the corporate world. We're changing the world of telco and content here at the Prop G Show. And I'm only half kidding. By the way, BTW, that's right, Bob Iger. That's right, Jan Stanky. I know you're listening to the dog. I know you're like one of those penguins that can hear the dog. The unique, raspy, gladdest night of strategy and shareholder value meets technology, meets innovation. Voice of the dog. I know you're listening. I know you're out there and it's okay. We can keep it to ourselves. We're intellectual lovers on the side. I'm your side piece and that's okay.

That's okay. All right, 87 million subscribers is nearly half of what Netflix has. That's what Disney Plus has. And the fact that an estimated one third of the streaming services initial subscriber base came from the partnership with Verizon suggests Low Churn and customers are committed

to Baby Yoda and more. This is Disney Plus. Who predicted Disney Plus would be the baller streaming video service before it came back? Who predicted that? I'm not even going to tell you. I'm not even going to tell you. It's not Michael Saylor, who's a fucking genius around everything else, but I got the call here. Anyways, enough desperation for your affirmation. If there's one thing you've recently learned on this podcast, it's dispersion. This is my word of 2020 and 2021. Disney is taking its content and dispersing it into series on Disney Plus, moving content from the big screens to your homes and mobile devices. 10 new Star Wars series. Oh my God, not eight, not nine, 10, including The Mandalorian will be new

to Disney Plus over the next few years. And on top of that, the company is also spinning kid favorite movies, including Moana and Cars into series in 2023. In 2024, the company plans to spend up to 9 billion on Disney Plus content alone. And that same year, 2024, Disney expects to reach 350 million subscribers worldwide across all of its streaming services. Who predicted Disney stock would be up 30% on its move to Rundle? I was wrong. It's up 80%. It's up goddamn 80%. And guess what? It goes north of here because it is going to bust a blue line path of 350 million subscribers worldwide across all of its streaming services, what can be learned?

What can be learned? A move to the rundle, a move to the recurring revenue bundle requires vision, it requires the assets to make it an IQ test, not a consumer value proposition. But more than anything,

the baller move it requires is to cross the valley of death, to say, we're going to pull this shit out of theaters. We're going to say, we're going to give up that billion dollars in revenues of the box office or those billions of dollars. They have made a huge bet here. What does this mean for the streaming wars? Let's assume there's

going to be a consolidation. It's kind of Disney Plus, Netflix, and maybe a kind of a distant, close third, HBO Max, which is finally getting its shit together and taking the dragons or taking Game of Thrones and extending doing its own spinoff with a show about dragons. By the way, all strategy comes down to one question. What can we do that's really fucking hard?

What can we do that is really difficult, so difficult that few other firms can follow us? And guess what? Guess what? Well, let's come up with great original scripted television. Well, I don't know. Netflix has a ton of talent and $20 billion to come up with 100 ideas so they can get to one, the Queen's Gambit. Hello, genius. Hola. Hola, Spanish word for genius, which I don't know. That thing is incredible. Oh, my gosh, incredible. Biggest missed product placement or brand collaboration opportunity was for Netflix not to start selling chess't compete with Netflix, but what can they do? Disney can look at the $100 billion in acquisitions it's made over the last decade, specifically Pixar, specifically Marvel, specifically Star Wars, Lucasfilm. They can look at those franchises and say, we're going to start spinning a bunch of interesting stories. And by

the way, The Mandalorian isn't in any way diluting the franchise. It's absolutely supplementing it. But what do we think about strategy? Why is this so baller? Strategy is all about what you can do that others can. That's really hard. And Disney Plus recognizes this and is leaning into the $100 billion they've spent on these incredible franchises. What does this mean for the streaming wars?

Only time will tell. But you can predict. You can see how the ultimate flywheel here, whether it's Baby Yoda toys experiences at Star Wars Galaxy Edge or the reprisal of the Car Series franchise. What's creative thinking here? What's sort of a gangster move that if it happens would be so baller that it might be like predicting, I don't know, Amazon buys Whole Foods. If Disney were to buy Roblox, Roblox, think about this, the company that 50% of kids under the age

of 16 have touched in the last 30 days, this could be the virtual theme park. One thing that Michael Saylor said in our upcoming interview that really kind of blew my mind was investing in the virtual. And I wonder if the next version of theme parks, and I hate to think this because you hate to think about your kids being in front of screens more, but anyways, Roblox could be an incredible acquisition for Disney. But the streaming wars are going to go through a consolidation. We're about to get to the final four, if you will, of the tournament. Sure, Gonzaga went the distance, but Hulu is probably going to roll up into Disney. And most of these things just probably aren't going to be able to carve out

the space that they need to occupy. So we're going to see consolidation, some re-bundling in 2021. I don't know, though. I just think Disney+, oh my gosh, what incredible momentum. And the other move here is we're going to see not just original scripted TV and movies go behind a wall and be part of the streaming wars. The next kind of salvo or the next really interesting entrant from a content arena into the streaming wars is going to be news and politics. Fareed Zakaria is the queen's gambit

and Anderson Cooper is the Mandalorian. Anyways, that's coming next in 2021 as is consolidation. We shall see. We'll be right back. Stay with us for a conversation about Bitcoin and cryptocurrencies with MicroStrategy CEO and unique thinker, Michael Saylor. While you're so focused on the day-to-day, the personnel, and the finances, marketing is the last thing on your mind. But if customers don't know about you, the rest of it doesn't really matter.

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Constantcontact.ca. Hey, it's Scott Galloway, and on our podcast, Pivot, we are bringing you a special series about the basics of artificial intelligence. We're answering all your questions. What should you use it for? What tools are right for you? And what privacy issues should you ultimately watch out for? And to help us out, we are joined by Kylie Robeson, Thank you. AWS, wherever you get your podcasts. Welcome back.

Here's our conversation with Michael Saylor, the co-founder and CEO of MicroStrategy. So, Michael, I think a lot of us look at Bitcoin and pretend that we know more than we do. Can you give us sort of the Bitcoin for dummies cliff notes on the origins of Bitcoin and why it has been, for lack of a better term, so disruptive and there's so much excitement around it? Well, I mean, first of all, the problem is that there's $300 trillion worth of money invested in stocks, bonds, real estate, and cash. They're all fiat instruments. And the central bankers are devaluing the currency. So that's the problem faced by 7.8 billion people. It's the problem faced by every investor on the planet. Every investor on the planet in the next three to five years is

going to lose half their wealth unless they come up with a solution to the currency devaluation. So let's put that in one corner. Now, what is the solution? Well, the solution in theory is a synthetic safe haven investment grade asset, call it pharmaceutical grade gold. If I had an asset, which was totally provably scarce, immutable, no one could create any more of, and everybody on the planet agreed that they were going to store their money in that asset, then you would have something better than gold, better than any other treasury reserve asset that you could use to protect yourself against asset inflation. And now what is Bitcoin? It's a crypto asset network. It's decentralized. No company controls it. No government regulates it. It runs on thousands and thousands of decentralized nodes. And

the obvious thing it is, is it's an investment grade safe haven treasury reserve asset. That's the obvious thing. That's what the security BTC is. What is Bitcoin the network? Well, you wrote the four. We both know about Google and Apple and Amazon and Facebook. They're all big tech networks that dominate their particular sphere of influence. Bitcoin is the world's first monetary network. It's a crypto monetary network, which means like Facebook gathered all the social energy and channeled it, stored it, and Google gathered all the information energy and all, and YouTube gathered all the video energy and Apple gathered all the mobile energy and Amazon gathered all the retail energy on a network. Bitcoin is gathering all the monetary energy. As it gathers the energy, it stores it across time.

It can store it for a hundred years with no power loss. It's a big monetary battery and you can channel it across space as a settlement network. If I wanted to put $100 million on a network and give it to my grandchildren in 30 years, and I didn't want a CEO to screw it up, a government to steal it, I didn't want to have it seized by anybody. I didn't want to have it inflated away, debased, impaired in any way. Bitcoin is pure monetary energy. It's your best bet. So what is Bitcoin? It is a solution to everybody's problem. How do I store value in the face of currency inflation? And it's also a monetary network that you can plug Square and Apple Pay and PayPal and Amazon and any tech into. And so that's what

makes it so exciting right now. It's a big tech play and it's an investment safe haven asset at the same time in a year when everybody in the world understands they have a problem that they were kind of oblivious to last year, but now it's like in your face with the K-shaped recovery and you can't not address it. Are you really saying, and this is my first observation and you're connecting dots for me, that Bitcoin is the first currency? Because a currency is just two parties agree that something is a store of value, but it's a currency that is actually because of its limited supply that we can trust will be limited has become an asset that it's actually it's not subject to the same fluctuations or political manipulation that most currencies are. Hasn't it hasn't jumped jumped the Rubicon here and become an asset, not a currency?

Yeah, I think it's I think there's a lot of confusion and it's called crypto currencies. And and people talk about it becoming a reserve currency, but I think that's more of a red herring because what it really is, Scott, is a crypto asset. And what people want is they want to take their money, their savings, and put it in a bank and cyberspace where they're going to get interest and where no politician's going to debase it or devalue it. It used to be, right? If we didn't keep printing money, you would put your money in a savings

account, get 5% interest, and you would feel like in a few years you had more money than you started with. But now nobody believes that if they save their money in the bank in five years, they'll have more purchasing power than they started with. And so there's a mad stampede for a store of value that leads people to buy Tesla stock and Amazon. And they're looking to big tech because they want, because everybody knows they can't hold cash. And not only is the bank going to pay you no interest, but the government is going to double the amount of US dollars in supply in four years. And that means that the same, that double the number of dollars are chasing after the same number of assets and goods and services. Ergo, the purchasing power of your money is collapsing. You need to find something that is immutable. Bitcoin is the first thing in human history where we figured out how to

create a crypto asset that nobody can screw with and they can't debase and inflate and make more of. And so it's a good idea. The only question is, would it be hacked? Would it be banned or would it be copied? The reason that people didn't adopt it immediately is they're afraid of hacking, banning and copying. And it took about 10 years to conclude, it's not going to be hacked. No one's hacked it yet. It's not going to be banned. The IRS has normalized it. The SEC, by the way, Scott says it's property. It's not a security. And that's a very important distinction because it's property like land in Texas, not a security because no ceo no company can control it and and manage the supply it can't be corrupted and that means it's much more uh broad base to the average person it means it crosses borders the issue with cloning is people try to clone it 10 000 times and so bitcoin cash

bitcoin satoshi vision bitcoin, all those were clones. They all failed. The other 7,000 cryptocurrencies, they didn't establish themselves as the monster asset. Bitcoin is $350 billion in monetary energy today. So it's crossed the event horizon. It's got a senator, Cynthia Loomis, who believes in it. It's got a Senator Cynthia Loomis who believes in it. It's got a congressional caucus, Warren Davidson that supports it. It's got Brian Brooks at the OCC saying banks can custody it. It's got the IRS saying you can check the box. It's property.

They've given it, you know, normal tax treatment. It's got fidelity. It's got banks in Wyoming that are chartered. And this year, since March, an avalanche of shoes dropping. You've got Paul Tudor Jones, Stanley Drucken Miller, Bill Miller coming on board. My company was the first publicly traded company to buy it on our balance sheet. And we did that. We bought $425 million worth of it. It traded up. Square was the next publicly traded company. Then you had Square build it into Square Cash and Square Cash sold $1.7 billion of Bitcoin in the last 12 weeks. And you want a growth number up a hundred percent quarter over quarter, up 1,100% year over year. If you what, why would you do that? Well, because if I have a bank account in my hand, I've got free checking, when I plug it

into Bitcoin, Bitcoin has been appreciating against the dollar 100% or more every year for the past decade, on average, it's like having a savings account that pays you 100% tax-free interest. Why wouldn't you want that? And so when Square did that, that juiced their business and now PayPal copied them. And so you're probably going to see 10 to $15 billion of Bitcoin sold off of mobile phone apps between Square and PayPal. And eventually, you're going to see the other players follow them. So it's big tech. It's being driven by technology. It's being driven by the inflationary economy of central banks. And by the way, it's disturbing in the US when the Fed triples the monetary expansion rate. But if you're in Argentina, Lebanon,

or Venezuela, you're going to starve to death. I mean, it's not disturbing. It's a matter of life or death if the currency collapses by 90%. What is the catalyst here for Bitcoin as an asset other than just supply and demand? Is it because it'll be a default currency more? Or let me put it another way. Why is MicroStrategy, your shareholders don't need you to buy Bitcoin. They can do it on their own. So you obviously think that Bitcoin must add value to your enterprise. There's two questions there. Why MicroStrategy bought it? And let's hold that for a second. I'll explain that. But let's talk about asset valuation. Commercial real estate, cash, bonds, and stocks are all fiat instruments. So the value of them is based upon the underlying discounted value of the cash flows with maybe a

terminal value. But ultimately, you value the bond based upon the discounted value of the cash flows and the cash flows and the currency that the bond pays the coupon in. Hence, if the bond's paying me 3% interest and the currency has been inflated at 15% a year, it's not going to hold value unless you get a capital gain in the bond. And the only way you get a capital gain in the bond is the Federal Reserve has to crank down the interest rate. So bonds will hold value if the interest rates keep cranking down from 5% to 4% to 3% to 2% to 1%. If they don't go negative, Scott, then that's the end of the road for bonds because they're obviously not going to yield north of 10% coupons. So that takes you to real estate. But real estate's kind

of like a bond, except the rents are the coupon. And now the issue is, is the real estate yield north of 10%? Generally not. And so the only way to make real estate work is the interest rates keep coming down, you refinance the real estate leverage up. And when the interest rates hit the end of the run, this is why so many people are screaming, please take interest rates negative. If interest rates go negative, it's a big win for people that own bonds or real estate. Now let's go to stocks. Well, if I got a company that's yielding 5% cashflow per share or 5% yield, and the money supply is expanding at 5%, I'm kind of holding value. The CFO is probably going to go leverage up, borrow some money, short the dollar, buy their stock back,

get the cash flow yield to 8% or 9% or 10%, the stock will go up. That's how you get the stock to hold its value when it's low growth. If it's a high growth stock like Google, Facebook, Amazon, they're going 20% a year top line and 20% cashflow. They can stay ahead of a 5% or 6% hurdle rate without leverage. But when the hurdle rate goes to 15%, 16%, it gets hard for everybody. It got three times as hard. Now, that's the problem with fiat assets. So what about a scarce asset? If I knew there was inflation coming, I might go buy a massive ranch in Napa Valley or in Argentina, or I might buy a big beach house, or I might buy a Picasso. Those are all scarce. The Federal Reserve can't cut that in half, and it's not based on cash flows. But the problem is

California can tax your ranch in Napa Valley, and they can tax it away from you. In Florida, cut that in half. And it's not based on cash flows. But the problem is California, you can tax your ranch in Napa Valley, and they can tax it away from you. In Florida, I pay 2% tax property tax. So if they keep raising the valuation of your property in 30 years, you lose your property. If the government puts in place a wealth tax, and you know, in California, United States, you can't move your building. And maybe you can't get the gold out of the country. You can't, how do you move $100 million of gold from New York to Tokyo when someone doesn't want you to move it? You put $10 million of Bitcoin in the network, and you could move it to Switzerland in 30 minutes for three bucks. It's the ultimate empowerment for

the individual that wants to take custody of their own life energy. And by the way, I can audit the entire supply from my own node everywhere in the world. That's totally transparent. B, I don't have to trust a bank. Or if I lose trust in my custodian, I can move it to another custodian in 15 minutes, or I can take self-custody. That's a big advantage. It keeps everybody honest. And then C, this is the most tech friendly asset in the world because over Thanksgiving, Scott, over Thanksgiving, if you had Apple stock or Amazon stock, it stopped trading at 4 p.m. on Wednesday, and then it traded from 9.30 a.m. on Friday until 1 p.m. on Friday, three and a half hours. If you had Bitcoin, it traded 113.5 hours instead of three and a half hours in every country, in every language,

in just about every currency on earth, every second of the day. So it's a great global asset, and that's what makes it the global monetary network. It's suitable for any country, any person, any currency, any language, any time, any place. And that gives people great comfort. MicroStrategy, I just don't want to lose half my shareholder value in my treasury over 36 months. So let's get to that question. Like,

why did we buy Bitcoin? Well, I just, let me interrupt you there because you not only bought, you not only bought Bitcoin. So I'm on the board of a public company that has a half a billion dollars in cash. And on a regular basis, we talk about the best way to deploy that cash for shareholders. And we ultimately always end up going as safe as can be because if you want to be invisible until you screw up, be a board that takes your cash and invests it in a risky asset. You not only took cash off the balance sheet, you did a bond offering. You levered up and purchased $650 million in Bitcoin, if I understand that correctly. Tell me how that started, what your board asked you, and how you got them over the hump

to do this. Because that's either an exceptionally visionary or dangerous decision. It's unique. I think it's utterly rational. And once you understand our reasoning, I think you'll agree. But everybody's entitled to their thoughts on it. So let's, let's start here. I have a company that's basically low growth, generating a lot of cash, stable enterprise software company. When we came into the year, you know, we were generating 20, 30 million in cash flow a year. And we had $550 million of excess cash.

And we had traditionally invested our treasury in short-term bonds yielding, what was 5% a decade ago, and then 3%, and then 2%, and then 1%. And then pretty soon it was yielding nothing. And then we bought our stock back. And we bought hundreds of millions of dollars of our stock back. And we were saving the treasury for a rainy day. And I thought, of millions of dollars of our stock back. And we were saving the treasury for a rainy day. And I thought it's responsible not to take debt and to have a cash balance so that we can make good on our obligations to our customers, our counterparties, our vendors,

and our employees. Okay. Well, so what happened in March? The economy shut down. You had a K-shaped recovery. And then on one hand, everybody needed our software more than ever, because we're selling business intelligence software to banks, governments, big retailers, organizations, they're all using it. So the value proposition is intact. But we realized that everything we'd done in terms of marketing and sales and services was going to be much less expensive. And our cost structure decreased by $40 million a year or more with no, no diminution in the value proposition. So we went from thinking we're going to generate 20 to 30 million a year,

and we might need cash for a rainy day to thinking we're going to generate 60 to 90 million in cash a year, you know, ad infinitum. We're not going to need the cash for a rainy day. The rainy day came, it's the pandemic, we know what happened. And we couldn't spend the cash that we wanted to because I can't, you know, I can't book a hotel, I can't fly in an airplane, I can't have an event. All of the expensive marketing and sales activities went away. And then finally, the cost of capital, Scott, went from 5% to 15%. Like all my investors started saying to me, we don't value your cash at anything. Nobody can be a professional investor holding their money in cash yielding 20 basis points.

And so their view is, well, give it back to us or do something with it. When the Fed started expanding by a factor of 15%, now I'm losing $75 million a year in purchasing power to generate $50 to $75 million a year in accretion and cash. I could work forever to stand still. And at that point, I realized that holding a bunch of cash that is like holding a melting ice cube. It's a liability. It's not an asset anymore because it's minus 15% times the amount of cash I'm holding. So what do you do? I have to invest it in something. And so this is actually what causes CEOs to go crazy. What are you going to do? You can buy back the stock or dividend it out to the shareholders, but then you

decapitalize the entire company and you go from having 500 million in treasury endowment to having zero. And if you actually stumble with zero, then you're insolvent and you go bankrupt. And so that's not very appealing. You can also go and buy another company. So a lot of companies, they go and they buy other companies because they want to get top line revenue growth, or they want to show operating income growth, and they're desperate. But why is it that you're treated like a loser if you don't grow your company's cashflow or revenue by 20% a year? And Scott, that is a direct result of the Federal Reserve expanding the money supply 5, 10, 15, 20% a year. If the Federal Reserve didn't expand the money supply at all, if we had flat currency, then that would mean that the value of the currency would go up every year

and everything would get cheaper. And if you were holding your revenues constant, then your company would be doing fine and no one would treat you like you're losing and you're a failure in business. So I could basically take every dime I have and bet on a company which is competing against Microsoft, Oracle, SAP, and IBM that's growing a couple of percent a year that has to do 100,000 things perfectly in order to continue to do business and maybe will grow 5%. Or I could take my treasury and put it into a big tech network, which is 30 X more dominant than its nearest competitor. That's growing more than a hundred percent a year. That's been growing more than a hundred percent a year

for the last decade. And I'm just strapping on a hundred percent growing juggernaut to enterprise software company. And, uh, and it seems like that's a less risky thing to do right and to the key point bitcoin's property and because it's property and not a security our decision to invest in bitcoin created massive value for potential investors in the convert market or the public equity market because we're actually uh we're going through the due diligence, the custodial, we're managing the security, the custody problem, the acquisition problem, and we're making the decision for them. The marketplace, the key is the market, the people that are buying the stock understand what they're getting. They're getting an enterprise

software company with a novel treasury strategy. Some people would say it's risky. On the other hand, I fully expect to lose half the purchasing power of my cash over 36 months. So when someone's going to steal half your money in 36 to 48 months, you know, at what point do you decide you'll do something different and take a risk on something new? Because there's a guarantee of losing half if you don't take the risk. So say someone's listening to this podcast and thinks, okay, I want to put 10,000 bucks into a cryptocurrency. Do you think there's any value to taking a portion of that and putting it into the tier two cryptocurrencies, the Ethereums of the world, or you think that if you want to play in

this asset class, it needs to be Bitcoin? I think the right way to think about the market is there's three tiers. Investment grade treasury asset, synthetic gold, that's Bitcoin. That's one tier because it's 25 times more dominant than the next like kind thing. It's, it's the 95% gorilla and you would trade safe Haven assets. If you have bonds, negative yielding debt, gold indexes, and you just want to have safe Haven, that's the asset. The next thing is a theory. It's like a unicorn. It's like Uber, Airbnb. It's big. It's scary. It's coming like gangbusters. There's like $50, $60 billion of monetary energy in it. I don't think you're going to see insurance companies and investment grade corporate treasuries putting hundreds of millions or

billions of dollars into that because there's a lot more moving parts. There's a lot more questions. It's much more complicated. And then the third category is a bunch of cryptos that are, I would call like venture investments. They're all doing different things. Is it privacy? Is it speed? Is it smart contracts? Is it, you know, lots of stuff. There's going to be, you know, some winners, there's going to be a 99% failure rate. You know, lots of stuff. There's going to be, you know, some winners, there's gonna be a 99% failure rate, you know, it's like 8500 cryptos. I mean, you think they're all going to succeed. So if you actually have your money segmented as safe haven, Treasury Reserve, versus aggressive unicorn versus venture capital, then I think you think about it the right way.

So I want to switch gears, you started MicroStrategy at the age of 24. What professional advice, we have a very young, very male listenership, what professional advice would you give to your 24-year-old self? Right now, you're 24 years old, you're coming out of college or maybe not, and you're thinking, how do I allocate my most precious capital and that is my human capital, my time? What advice would you give to your 24-year-old self or to some of our listeners? Well, I think you have to invest your time and your energy on the technology platforms that are going to dominate over the next decade. You know, at this point, I think we're going into the virtual wave. And the virtual wave means you can, you can zoom anywhere at the speed of light and bend time

and space. So what are you going to do with that? And so on one side, you got to be thinking about how do I how do I take an existing service and virtualize it to make it 100,000 times better, faster, cheaper? Or you got to think about an existing product that virtualizes, that transforms fundamentally. Or think about what we just did. We virtualized our balance sheet. I'm going to basically switch from dollars to Bitcoin. I'm going to take a disruptive major change. I'm going to rethink the way that I see my world. You're going to have to embrace some kind of massive exploding virtual technology. So you have to specialize, focus, choose your platform, and commit. And I want you to think about this next question, Michael. I've known you for about,

gosh, probably the better part of two decades now. And you've always struck me, I don't know you well, but I know you. And you've always struck me as a pretty self-actualized guy. You were sort of dancing to your own drummer. My sense is you have a clear, fairly clear set of values around the way you want to live your life and don't really care what I'll call the standard or society is telling you around how to operate a company, how to be a CEO. What personal advice would you give to a 25 or 30- old? What has worked for you and what has not worked in terms of your own personal happiness and your own set of values and reward system? Take care of your health, right? I mean, what we're seeing clearly is low sugar, low starch,

low alcohol exercise, right? You start with that platform, right? If you don't exercise, drink a lot of alcohol, consume a lot of sugar, consume a lot of starch, right, then that's a drain on you. So I put that in one bucket, which is take care of your health. And you can learn as much as you want to know on YouTube or anything else on that if you care. But some people don't put that first. I think that's really important. I'm sensitive. And you've talked about this a lot. You're probably the expert on it.

I think that addiction to insane amounts of everything is the scourge of modernity. I think that there's too much. You know, you can, you've got infinite porn, infinite videos, infinite Netflix, infinite alcohol, pharmaceutical grade downers, pharmaceutical grade uppers, you know, pharmaceutical grade steroids, anything you might want in this world, we produce too much of it. I can be 22 years old and get an addiction to, you know, to anti-anxiety medicine. And they'll give it to me for the rest of my life by walking into a doctor. And, you know, having the, you know, having the maturity to know that just because you can do a thing

and you can get a thing doesn't mean you should. On one side, the beauty of the modern age is I can go on YouTube and I can learn anything about anything. And my mind can go anywhere in time and space. And I can educate myself on anything. And it's very beautiful. That's the beauty. And the horror is I can get locked in a loop where all I'm doing is watching the same looping, enraging, brain numbing thing over and over and over again. And it'll feed me that too. So I think that, you know, when you're starting your career,

the key is to have very strong values. We're just too good at creating stuff in the modern era. We create too much of everything. Michael Saylor is a technologist, entrepreneur, business executive, philanthropist, and bestselling author. He currently serves as chairman of the board of directors and CEO of MicroStrategy. Since co-founding the company at the age of 24, Michael has built MicroStrategy into a global leader in business intelligence, mobile software, and cloud-based services. He joins us from his home in Miami. Michael, thanks for your time and stay safe. Thanks for having me, Scott. Always a pleasure.

We'll be right back. powered email, SMS, and more, making every moment count. Over 100,000 brands trust Klaviyo's unified data and marketing platform to build smarter digital relationships with their customers during Black Friday, Cyber Monday, and beyond. Make every moment count with Klaviyo. Learn more at klaviyo. com slash B-F-C-M. Welcome back. Let's bust into Office Hours, the part of the show where we answer your questions about the business world, big tech, higher education, and whatever else is on your mind. If you'd like to submit a question, please email a voice recording to officehours at section4.com. Hello, Scott. My name is Rob, and I'm from Ireland, but living in Dubai for the last 10 years or so, part of your UAE fan club.

My question is about Facebook. So with all this antitrust pressure that they're facing at the moment, do you think that there's any chance that if they're forced to divest one or more of their assets, that Mark Zuckerberg could end up choosing to get rid of Facebook, the big blue app itself, rather than say Instagram? Some estimates say that by next year, Instagram could account for up to 40% of the parent company's advertising revenue. This has been getting bigger and bigger every year since they really started generating revenue back in 2015 and with some other beefed up revenue generating features like shopping also getting attraction on Instagram lately it's maybe not crazy to think that in the next couple

of years Instagram could end up bringing in more cabbage as you say than Facebook itself and with all these controversies around fake news and content moderation on the Facebook platform, it's starting to seem like it's more trouble than it's worth. So what do you think? Could Mark Zuckerberg ever give up his baby for a potentially greater shot at better future revenue? Rob from Ireland, living in Dubai. It's good to be young and international. And by the way, most importantly, let's talk about how big the dog is in the UAE. That's right. If you go to Chartable.com, you'll find out that the Prop G Show is the 134th most listened to podcast in the UAE. Who would have thunk it?

But that's not what you asked about, Rob, from Ireland living in Dubai. So which company would Zuckerberg spin? And to a certain extent, it doesn't matter. It's an interesting kind of existential question. And that is if Jack Dorsey can be the CEO of two distinct public companies, why couldn't Mark Zuckerberg? All it means is a separate capital structure, although I guess they couldn't coordinate any longer. The notion is the principle of a spin is that once you have separate shareholders and separate corporate governance, that they each pursue their own shareholder value and they stop coordinating and cooperating, if you will. But it could be kind of weird if they spun

one or more of them or divested them. And the ruling might be they need to sell it, not just spin it, meaning, sorry, boss, you need to sell two of these. So where would Mark Zuckerberg go if he could only be CEO of one of them? I think Instagram, to your point, is a juggernaut. I think it's probably going to decline a little bit in the short term, just in terms of sheer awareness at the hands of TikTok or even something like Roblox. But I'm fascinated by social commerce, specifically Instagram's ability to merchandise incredible products.

And you think, oh my gosh, it's creepy that they registered that or figured out that I want a new pair of those on cool running shoes. And I actually made my first purchase off of Instagram. I think Instagram is actually arguably worth more than Facebook right now, but the kind of the baller move I think would be to go for him to helm if I were him. I would probably want to run WhatsApp. I think WhatsApp could go after Zoom. I think WhatsApp could go after Teams and Slack. I think WhatsApp is incredible and has basically been used as a DOPA data bag to feed the corpus that is Facebook and Instagram. So I think WhatsApp has tremendous upside.

But these are good problems. The notion that he would spin one or which one is going to be strange. It'll come down to if they're found guilty of any trust violations, what will the remedy be? If he's asked just to spin something, he could technically still be the CEO, which I think would be sort of like, well, what's the point? So I hope they force him to sell it to a distinct entity. But if I were him and got to choose, I would probably want to do WhatsApp first, Instagram second, and Facebook last. But then again, I'm not like him. I'm not like him. And that's probably the nicest thing I've ever said about myself. Thanks for the question, Rob from Ireland, living in Dubai.

Question number two. Hey, Scott, thanks for your good work and your bad dad jokes. I'm a 50-something woman in Boston considering investing in the cannabis industry. I'm thinking more around equipment and cultivation products than cannabis itself, but I'd be interested in hearing your thoughts on that. Thank you. Thanks very much for the call. So while I'm a consumer

of the cannabis industry, I haven't touched it because it seems as if one of those industries, it's just very hard for me to get my head wrapped around it because the valuations looked insane and then they came back down. I think that first off, the way you're thinking about it is the right way. And that is if I were to go or invest in that business, I'd want to invest in the picks and the shovels, not in the mine itself. Investopedia looked at the top marijuana stocks for December 2020 and found that Harvest Health and Recreation to be one of the best valued stocks. That's according to Investopedia. It's a Canadian-based cannabis company specializing in cultivation dispensaries and production facilities for medicinal and recreational marijuana and a reported 86% year-on-year increase in total revenue. I'm not recommending the stock, but Vestipedia actually does look at kind of things like valuation and underlying metrics.

Grow Generation, a distributor of agricultural products, landed a spot as one of the marijuana stocks that had the greatest total return over the last 12 months. The company offers plant nutrition, farming soils, crops, advanced lighting technology, hydroponic, and aquaponic equipment. I don't know the difference between hydroponic and aquaponic. Maybe Aquaman knows and recently acquired the Grow Biz, the third largest chain of hydroponic garden centers in the US. In sum, I think this is something that if you're like me and you are in your 50s, you dabble in it, you go into the infrastructure. I wouldn't go into retail. I just think that shit right now is overvalued. So I like the infrastructure plays or the distribution plays. And I wouldn't put more than call it 10% or 15% of your net worth into this

asset class because it strikes me as an asset class that will be very volatile. And at our age, we want to be able to sleep at night. We typically, yeah, we'd like to get rich, but more importantly, we don't want to get poorer fast. It's just not worth the stress. So as you get older, I think you want to be more diversified. But as a whole, I think you're right. Go after the infrastructure side of it. The space, though, I don't know it well. I have a difficult time wrapping my head around it. Although the wind in your sails, the wind in your sails are probably the most exciting thing about the sector, is that if you were to glean one takeaway from the 2020 election, simply put, was the green wave. The green wave. Well,

the first takeaway we said under repudiation of Trump, but really the bigger takeaway or as big a takeaway is the green wave. Initiatives, ballots all over the nation, propositions around marijuana changed dramatically. Or there's basically, it was overwhelmingly, the nation said that we are going green, if you will. So you have that wind in your sails. Anyways, thanks for the question. Best of luck to you in your marijuana investments. Don't forget to send the care package to your favorite podcaster. Don't forget, he's big in Dubai and he's big on Dubaj.

Next question. Hey, Prof G. My name is Michael. I'm from San Francisco, now working remotely in Lake Tahoe on the Nevada side. My theory about remote work is that proximity is power. I'm 26, career driven, and work as a startup. While I'm enjoying remote work now, I can't help but think that being back in the office provides a competitive advantage over those who would choose to stay remote. I have a hard time believing that my VP is going to promote Chad, who's working remotely from Tulum, over the gal who got back into the office.

If you're a 26-year-old who isn't fearful for your health, are you getting back in the office to accelerate your career? As a business owner and operator, do you think that affects your decision-making on who gets promoted, all things being equal? Be safe, be well, and thanks as always for taking the question. Your instincts are right on. A survey conducted by PwC in June found that executives are more likely to report that employees have become more productive, 44%, while working from home during the pandemic. That's the good news. But the bad news is, is that proximity or relationships are a function of proximity. And guess what? Promotions are a function of

relationships. As a matter of fact, I'm reminded of the research that my colleague at NYU, Pankaj Jemawa, did in the last decade, where he found that the further from headquarters a retail store is, an individual store, the less profitable it was. Proximity to headquarters, no doubt about it, is an accelerant for your career. You're just more likely to think, okay, who should run our Southeast Asian division? Well, there's Bob and there's Susie. I see Susie every day. I get to see how smart she is.

She's in meetings. I like Susie. We've developed a rapport. Yeah, I want Susie to win versus Bob, who, as you said, is in Tulum. So there's just no getting around it. Proximity, if you have the ability, the discipline, the economics, the willingness to live close to work, put on a suit, all the bullshit required around being at HQ every day, you are going to advance your career faster. There's just no getting around it. There's no free lunch. If

you want to hang out in Tulum or you want to hang out at home with your kids, it's going to cost you. One of the unfortunate things here, one of the second order negative effects is that work from home will have, one, it'll increase income inequality because the people who can't afford to live in cities, who get to live in the outskirts of Denver, don't realize that if your job can be moved to Denver, it can be moved to Delhi. And two, it'll probably be a step back for women. Because if you look at most relationships, if one person is going to give up their career so they can live in beautiful name of mountain resort here, typically they decide that it's the woman's career that should be put on hold or that she should work remotely or that she should give up her job to spend more time at home. And I think

you're going to see fewer women at HQ. What does that mean? That means fewer women accelerating their careers as fast or fewer women on the same career trajectory as men. And we've made a lot of progress here. Women under the age of 30 who are college educated have largely closed the wage gap with their male counterparts. The problem is once they have kids, the problem is once a woman decides to actually, and her partner, decide to use the ovaries, the pay plummets to 77 cents on the dollar. And kids, the assholes that they are, the needy jerks that they are, want someone to be at home. And typically those responsibilities, let's call a spade a spade,

fall disproportionately to the woman. So I wonder if remote work will have the second order effects of one, that people who decide not to be at HQ are going to not advance as quickly. And you're right. If you can figure out a way to be at HQ every day, your career will be on a different trajectory than those that aren't. And two, it seems to me that it will likely set women back because you're going to see more women working from home as research shows that a disproportionate amount of the additional work required for things like remote learning or buying a house that's further from HQ, it's usually the woman who sacrifices her career or her proximity to HQ or her old HQ. And as a result, we're going to see, I think, the wage gap widen again. But that is an interesting question. And by all means, if you can be at HQ, then my brother, HQ the shit out of that bitch you call your company. Thanks for the question. Algebra of happiness, citizenship, answering the call.

So many of our mothers, fathers, our grandfathers, our grandmothers, people we will never meet, people we will never know have answered the call who realize that the wonderful society we live in is a function not only of our prosperity, not only a function of shareholder value, not only a function of innovation and people coming up with electric vehicleslated sacrifice with stimulus, that people see patriotism as some sort of fucked up or have lost a sense of patriotism and are more focused on their individual liberties rather than registering or understanding that your liberties are a function of people's sacrifice. And we seem to be very comfortable enjoying those liberties that other people have sacrificed for, but don't seem to want to pay it forward. And the most recent example is all the bullshit I'm hearing around people's reticence to take the vaccine. And if you look at the data, if you look at the science, your chances of an adverse reaction from a vaccine are not less than being eaten by a shark or less than being struck by lightning.

They're less than being eaten by a shark as you are struck by lightning. They're less than being eaten by a shark as you are struck by lightning. Vaccines have saved hundreds of millions of lives. And there have been some terrible, well-publicized instances where they have not worked and there's been negative reactions. There are risks in everything. There are risks when you get in a fucking Uber, for God's sake, look at these risks, look at the actual science here. And you're going to see that the risks are nominal. What is the upside? And this is what really, really is so upsetting. People are thinking, well, okay, I'm injecting a foreign substance into my body. I don't like that. First off, that substance is cleared out of your system in about two weeks. Well, what about the long-term effects? I'm worried about the long-term effects. Well, guess what? The clinical trials, the majority

of adverse effects registered across historic vaccines have manifested themselves or appeared almost right away. And because the clinical trials have now aged, we know that short-term adverse effects are not a problem with these FDA-approved vaccines. So the majority of the hysteria or any sort of bullshit notion around the danger of these vaccines just is not supported by the data. And the narrative that is really upsetting is, well, I'm just going to wait. I'm healthy. If I get it, that's bad, but it's not profoundly bad. I'm just going to wait. Well, you know what? It's not about you. We have a web, a web of death and despair sweeping through the nation over and over, and it is snaring our weak and vulnerable,

and it is killing them. And when you refuse to take the vaccine or you decide, you know, I'm just going to wait, you risk becoming another threat or specifically a carrier, a node of infection in that web. It's not about you. Yeah, 99% likelihood you will be just fine if you get the novel coronavirus, but will the person who gets caught in your web be fine? Let's think about the numbers here. Angela Merkel, who, by the way, by the way, has a PhD in quantum chemistry, said at the outbreak of the novel coronavirus, that she thought without a vaccine, 60% of the population of Western Europe and the US would ultimately contract COVID-19. Let's take 60% of 350 million people. That's 210 million people. Let's call it a mortality rate of 1%. That's 2.1 million people. 300,000 have died already. That means

there's 1.8 million people who are going to die if we don't get the herd immunity. In May of 1940, the Germans drove British, Dutch, French, and I believe Belgian soldiers to the beaches of Dunkirk. They'd overextended themselves. They drove them to the beach. They were out of munitions, out of supplies, and it was basically going to be a turkey shoot. And for a bunch of reasons, some people say that it was a general who was reticent to wake up Hitler. For a bunch of reasons, we were granted or the allies were granted with a couple of days extra time to get off the beach, but they had no way off the beach. But what happened? They sent out a call to Britain and every sailboat, every fishing boat, every trawler, anything that floated that had a motor on it was fired up by British citizens and it headed straight for the beaches

of Dunkirk. They didn't know what was out there. They didn't know if there were U-boats out there. They didn't know if there was going to be Messerschmitts or Stukas raining fire on them. They just answered the call and they got 400,000 young men and boys, and let's be honest, some of them were boys, some 2 million people are most vulnerable on the beach. Get the vaccine. Get our brothers and sisters off the beach. This isn't about you. This is about answering the call. So few of us have had to answer a call around our citizenship in this country. So many of us are actually in a better place than we were pre-pandemic. Are you one of those people right now that's made money, that's had a chance to spend more time with loved ones, that's had a chance to watch more Netflix? Well, guess what?

You need to answer the call first. I'm one of those people. I am first in line. And this bullshit temptation to say, I'm going to wait, I'm going to wait. Well, guess what? This isn't about you. Let's get our brothers and sisters off the beach. Our producers are Caroline Chagrin and Drew Burrows. If you like what you heard, please follow, download, and subscribe. Thanks for listening. We'll catch you next week for another episode of The Prop G Show from Section 4 and the Westwood One Podcast Network.

Gangster. I've got to find the Spanish word for gangster. Anyway, anyway, I have no idea what I was talking about. I've totally lost my train of thought. Oh my God, the dementia is here. The dementia is here. Anyways, stay away. Stay away. We want to be diversified. We want to be diversified. Oh, oh God, bring me back. Where am I? Oh, I was over here. Okay. Support for this podcast comes from Stripe. Stripe is a payments and billing platform supporting millions of businesses around the world, including companies like Uber, BMW, and DoorDash. Stripe has helped countless startups and established companies alike reach their growth targets, make progress on their missions, and reach more customers globally.

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