The Wolf Of All Streets - Buy More Bitcoin | Michael Saylor, CEO Of MicroStrategy

Episode Date: July 13, 2021

Last year, MicroStrategy publicly announced their decision to buy $425M worth of Bitcoin with their cash reserve. Since then, the trailblazer behind that company has continued to do what he believes in most - buy more Bitcoin. Michael Saylor believes that our inflationary macro environment can be arbitraged by taking on low interest debt to acquire more Bitcoin and outpace interest payments. Ultimately, it is Michael Saylor’s die hard belief that has thrust him into the spotlight as one of the most important figures in the crypto community. Michael Saylor: https://twitter.com/michael_saylor --- Matcha: Matcha is the easiest way to trade in DeFi. Matcha enables you to trade across all the major DEXs so you can be sure you’re getting better prices than going to a centralized exchange or Uniswap. Connect your wallet and start today at https://thewolfofallstreets.link/matcha --- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

This episode is brought to you by Matcha. Stay tuned for more information about them later in the episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast, where twice a week, I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, and politics, anyone with a good story to tell. Now, one of the biggest news stories in crypto last year was MicroStrategy, a business intelligent company publicly announcing their decision to buy $425 million worth of Bitcoin with their cash reserves. Since then,

the trailblazer behind this company, who is today's guest, has continued to do what he believes in most, which is buy more Bitcoin. Rather than just leave it as a one-time purchase, Michael Saylor has put it all on the line to effectively go all in on what he believes is the future of money and a catalyst for a better world. Beyond just buying Bitcoin, Michael Saylor has become an important figure in the space, advocating for improved mining conditions, open source information, and honest education. He's prepared to fight and die on this hill, clearly. It's an absolute pleasure to have him back on the show today to discuss all the developments that have taken place since he first bought Bitcoin, what his plans are for the rest of the year, and his current thoughts on the market. Michael Saylor, welcome back. Thank you so much

for being here again. Thank you. So I just interviewed Vijay Boyapati about his book, The Bullish Case for Bitcoin, for which you wrote the foreword. On the cover is a very intense drawing of a bull in armor with a hammer. So I'm curious if that is a portrait of you. No comment. It's pretty awesome cover. I'm your kinder, gentler Bitcoin evangelist. I believe we should be cheerfully evangelizing Bitcoin in a non-intimidating fashion to bring hope and good cheer to the general public. Well, let's hope. So listen, the more Bitcoin you buy, seemingly the more detractors you accumulate. We keep hearing the argument that microstrategy could fail if Bitcoin drops too far, that you're overcommitted to the asset. I'm curious what you say in response to those comments? Well, the company's stock was 120 when we started this journey. And we had $60 a

share in cash. And we were under a lot of pressure to return that cash to the shareholders, because, you know, the S&P is up 40% over the year. And so if you actually sat on 500 million in cash for a year, instead of investing in the S&P, that's a $200 million loss. So I could see that clearly. I mean, some people don't see that clearly, but it couldn't be clearer. Now, if you look back, a 40% gain in the S&P over 12 months is the message that the currency devalued 40%. So we had to do something. So we could have just returned the $500 million in cash. We would have had $60 a share.

We would have a company growing 0% to 10% a year with $60 a share, and no one would know about us. And the shareholders, I don't think would be better in that regard. I mean, I'm looking right now at the stock and it's showing $675 a share. Okay. So 11X, I could have been $60 a share trying to get to a hundred, but we're now at $675 a share. So what did we do next? Well, the stock doubled, and then we sold a convertible note that converts at $398 a share. That was unsecured. So that convert is $650 million of debt, but it yields 25, you know, 75 basis points. So, you know, take less than 1% of $650 million, $5 million a year in interest. Okay, so I agreed to borrow $650 million at five, you know, $5 million a year in interest, we're generating, we generated $115 million in cash flow in the last 12 months.

It's a $500 million company generating 80, 100, $110 million in cash flow a year. So I basically take 5 million of it, I borrow a bunch of money, and I got to invest in something. Now people think like the entire world, Scott, revolves around people doing debt and equity financing to invest in businesses. Every building in the world was debt financed. Vegas is debt financed, right? Every company is either equity or debt financed. The entire cable industry, the telco industry, the airline industry, the railroad industry, right? They're all debt finance. So using debt to grow a business is business. That's why Wall Street exists. That's why there is hundreds of trillions of dollars of equity and debt floating around. So we did the first financing, the convert, then we did the second convert.

And the second convert was we borrowed a billion, $50 million at 0% interest. Okay. So if I walked up to you right now and I said, Scott, I will give you a billion dollars at 0% interest for the next six years and you can invest it in a business of your choice you either have a business that you are bullish on or you don't right first question would you take the money of course of course of course you take the money okay mcdonald, you know, has debt every, I mean, how many, find me an S and P 500 company that doesn't have some debt, like maybe a few, but it seems like, like, uh, if someone wants to, wants to loan you a billion dollars at 0% interest, you would, uh, you would invest it. So the question is what's the least risky thing you can invest it in? I happen to think that Bitcoin is big tech without all the risks of big tech. So if I offered you a billion dollars at 0% interest, would you buy the S&P 500 index with it?

Not now. Yeah. Now it's looking risky, but if you'd done it a year ago, it's probably a good idea. Right? Sure. And if you had actually done it six months ago, you still would be up. Would you buy big tech, Apple, Amazon, Facebook, Google? Well, I mean, you know, they're all all time highs right now, I think. So I, I, I think that it's, if you asked any investor in the world, would you think they would say yes as a general rule. So what we did there was kind of obvious. And then the last financing we did was

the stock was down $400 a share. And we could have sold $400 million worth of equity, but it would have been 10% dilutive and bought Bitcoin with it. But instead of that, issuing $400 million in debt at 6.8% interest doesn't dilute the common stock shareholders, and it doesn't dilute the convert holders either. And so would you borrow money at 6% interest for seven years? Well, if you thought that the thing you were investing in was going to go up at more than 6% and 8%, you would. I did a survey on Twitter, and I got 120,000 responses. And it was 90%. I asked, do you think Bitcoin's going to go up more than 6% and 1.8% interest over the next seven years? It was very, very precise. Happens to be aligned with that bond. The answer is 90% of the people on Twitter that are, if you don't think Bitcoin is going up

7% a year, then I guess you're short Bitcoin. It turns out that MicroStrategy is a publicly traded company. We have gone through a lot of work, a lot of shareholder relations work to rotate our entire shareholder base to be long Bitcoin. There's no one that owns an MSTR stock that hates Bitcoin, right? By the way, when I started on this journey in August, in July, I put out a press release. And the press release was, we've got $500 million in cash. We think we need to buy some asset as an inflation hedge. And so we're going to buy $250

million worth of an asset. And we're going to return $250 million worth of cash to the shareholders over the next year. And then a week went by. The stock was $120. It traded 20,000 shares a day. No one noticed. No one cared. We're going to buy 250 million of your stock back. Nobody cares. Seven days later, we accelerated it. Okay, we have a Dutch auction. We're going to buy 250 million worth of your stock back at up to $140 a share at a premium. And we just bought Bitcoin. Now, 20 days goes by. Everybody that hates Bitcoin, that's short Bitcoin, either got to sell above 140. They sold between 140 and 155. Or they got to sell into that tender offer.

And you get to get off the train. You don't have to be invested in the company. And at that point, we had substantially rotated our shareholder base. The way I know we rotated our shareholder base is we only had $60 million of shares tendered. If we had had $250 million of shares tendered, you couldn't be sure that you bought out everyone that disagreed with the strategy. But if you only have $60 million out of the $250 million tendered at a premium where the stock was trading $120 million the previous week, then you kind of know that everyone

that disagreed with you is already sold. And you've only got 60 million people that are skeptical. They tender. And at that point, we've gone net long Bitcoin. So my answer to everybody is, my shareholder base is long Bitcoin. If you're a Bitcoin hater, you got 5,000 other companies you can invest in, in NASDAQ and Nice. You don't have to buy MicroStrategy. I'm not trying to convince everybody they should own Bitcoin.

I'm just pursuing a strategy that where we believe in Bitcoin. And if you believe in Bitcoin and you want to be long Bitcoin and the person running be long Bitcoin, and the person running the company said, guys, I have a chance to borrow a billion dollars at 0% interest and buy more of the thing that you love, should I? Well, of course you should, because you wanted to own the Bitcoin. If you like Bitcoin and you can have a billion dollars of it, and if someone said, I'll give you $2 billion of it for free, how do you not like that? So I'm pursuing, and the company is

pursuing a long leveraged Bitcoin strategy. And now the question is, am I putting the company at risk? Well, Scott, I could go and pledge a billion dollars of Bitcoin and I could take out a margin loan, loan to value 50% mark to market. And we're not pledging the Bitcoin. So our convertible debt is unsecured. So Bitcoin could go to zero. The debt doesn't default. If Bitcoin price goes from $35,000 to $10,000 to $5,000, the debt's not in default. Okay, so if Bitcoin goes to zero and stays there forever, then our business strategy will not have worked. And at some point, we'll have to do a diluted financing. In that case, if Bitcoin went down, if it went to 20,000, then I would end up issuing equity probably in order to refinance the debt.

But if Bitcoin jerks down 80% overnight, the difference between permanent debt and margin loan is if Bitcoin jerks down 80% for one week, you get forced liquidated and you get wiped out as a trader. And that's why that's a bad idea. And is that likely? Yeah, that I mean, that could happen in the next five years, right? You could have some cataclysmic Black Thursday event, right? A meteorite or whatever. But that's not the same as calculating the statistical likelihood that Bitcoin jerks down 80% and stays there forever. Right. Right. And so they're different. And if you look at the senior debt we just did, we basically financed the cash flows of a software company. So I could either wait for a decade, or I could wait for seven years to buy $500 million worth of Bitcoin,

or I can finance it upfront and buy 500 million now and pay 6% and 1.8% interest to do that. We pledged the intellectual property of the company and we pledged the cash flows of a software company. And we probably could have done the deal just based on those two. And I'm taking a company with cash flows growing zero to 10% a year. And I'm putting it into an instrument, which is up 120% a year for 10 years running, that's up 280% or 290% this year, whatever it is.

Okay, so is it risky? Sure, it is. That's why we're the company doing it. And we disclose it in the risk factors and our 10 K and our 10 Q. If you don't want to own Bitcoin, then you don't want to own micro strategy because Bitcoin is a risk, but you know, what else is a risk? Everything running a cruise line is a risk running an airline is a risk. You know, Tesla sells cars, the car, you know, cars blow up, you know, guns, you know, shoot people. You get sued for it. Tobacco gives you cancer. There are plenty of businesses that have risk factors. Our risk factor is laser focused, fully disclosed. And the risk factor is Bitcoin is not the digital property that everybody needs. It's something different. If you believe that it's digital

property, then you buy MSTR, or you might buy a converter, you might buy our debt. You get paid to do that. There's a benefit. If you took the risk on MicroStrategy, the stock went from 120 to 675 in 10 months. If you took that risk, if you actually take the risk of a company owning Bitcoin in its balance sheet to buy our debt, you're getting paid 6% and 1.8% interest. The companies that didn't have Bitcoin were paying 4% interest. The junk bond index is 3.9% interest. You can buy a company losing money, and you can loan them money so they can buy their stock back and get paid 4% interest. You can buy a company losing money and you can loan them money so they can buy their stock back and get paid 4% interest. Is that a bigger risk or a lesser risk? People are loaning money to Apple at 2% or 1% interest. So you're getting paid a fat yield

in order to own a different instrument. And of course, with that piece of debt, we actually also, we bought $500 million of Bitcoin with 500 million in debt. Well, technically we bought 487 million of Bitcoin with 500 million in debt. There are fees to be paid to the banks to issue the debt. And now you've got a collateral package, which consists of, you'll probably get paid with cash flows. If that doesn't work, you'll get paid with the Bitcoin. If that doesn't work, you've got a claim on the intellectual property of the company. Is the company worth more than $500 million? Well, it's been worth more than $500 million for 20 years. So probably you're senior. So I guess I laid out why would someone want to buy the debt

or the equity? Why is it good for the company? Well, because we're financing all these things in a non-mark-to-market fashion over long periods of time. And we're highly confident. Let's take the total debt. We have $2.2 billion in debt, I guess. And we're paying 6%. We're paying $35 million a year in interest. Okay. What's my effective interest rate on $2.2 billion at 35 million, right? Is that like

1%, 1.5%? Okay. So we've got about a five to seven year loan at 1.5% interest. Now let's run the survey. If I asked everybody that follows you on Twitter, is Bitcoin going to go up more than 1.5% a year for the next five years? What's the vote? Yeah, 99%. Okay, so under what circumstances people go, well, you know, what if it trades below 26,000? Okay, so what if it trades at 20,000? Okay. What if it trades at 10,000? Well, if it trades at 10,000 in five years, you'll probably read a headline like MicroStrategy refinanced its debt by issuing some equity. Okay. Guys, I really hope that all of you are not still trading on the old platforms like Uniswap when there are much better options like Matcha. And now Matcha has upgraded to 2.0.

Now, I've told you about Matcha a number of times. They have limit orders, which these other platforms don't, which is absolutely incredible. So you don't have to sit there staring at your screen waiting for that perfect moment to enter or exit a trade. And they also aggregate liquidity from all of the different platforms, finding you the best price and reduced fees. But now they have Matcha 2.0 and have added so many awesome features. Matcha is now the only DEX with an integrated fiat on-ramp. You can put your dollars directly onto the platform. They also now have OTC trading for orders between 1K and 1 million, which is beyond huge. And maybe most importantly, Matcha now supports trading on

Polygon, meaning that those gas fees will almost evaporate completely. Now, if you guys want to check out Matcha, which you absolutely should, you can do that at the wolfofallstreets.link slash Matcha. That's the wolfofallstreets.link slash Matcha. Please check them out. I'm telling you, it will save you so much money and is such a superior experience. Do it now. Doesn't the very fact that people concentrate on those numbers show extreme short-term mentality and that they're completely missing the point? Because it's assuming that there's a trigger for you to sell just because for one moment you're underwater, which clearly is not the case for any long-term investor or any long-term investment. Yeah. I think that Twitter, there's a lot of people on Twitter and on the Reddit groups and

the like, and they want to talk about get rich quick schemes or trading schemes, and they want to tell you how to trade this week. And I've been pretty consistent, I think, in all my interviews, I've said, I don't really know what will happen this week, this month. I'm not even sure about this year. Like there's nothing that I would invest in where I have less than a 10 year time horizon. So I look, I think Amazon was a good investment. When should you have sold it? Never. I thought Facebook was a good investment. I bought it before it came public. When should you have sold it? Never. I thought Facebook was a good investment. I bought it before it came public. When should you have sold it? Never. It just hit a trillion dollars. I thought Apple was a good investment. Amazon traded down 95%, Scott. I remember it traded

down 95%. Should you have sold it? No. The richest man in the world didn't sell it when it traded down 95%. What's the difference with all? How about Microsoft? They got rich by holding Microsoft stock for a long time. So I think that trading is a very difficult business. 1% of the world can do it. If you're a good trader, then you know you're a good trader. Presumably, you have proprietary information flow, proprietary models. If you're lucky, you're a market maker and you get in between, you arbitrage out some inefficiency. And if you do it, you keep it to yourself or the like. I think fundamentally, the big idea with Bitcoin is Bitcoin is technology. It's technology to distribute property rights to 8 billion people.

If I want to give education to 8 billion people for free, you don't do it with books and libraries and bricks and mortar institutions. You do it with digital books and digital lectures on YouTube. And if I want to give joy to 8 billion people, you don't do it with Steinway pianos and orchestras and CDs and records. You do it with digital music for free. You pay nine bucks a month and get 50 million songs and you give it and you pay $15 a month and you give it to your family with a family plan. And for $3 a month, you can give 50 million songs to your daughter or your wife. That's how you give music to the world. Digital music. If you want to give wealth to the world, if you want to make the world rich, you give them digital property.

You cannot do it with gold. You can't distribute an ounce of gold. You can't do it with land. You cannot buy $387 worth of land. You can't take the land with you. The gold gets seized. It gets mined. The property gets taxed. The tax rate in Florida is 2% a year. If you put your money in land anywhere, the property tax, the property gets impaired. You cannot move it. You can't buy a building. You can't give a building to 8 billion people. It's pretty clear you cannot give physical property to 8 billion people.

You have to give digital property, digital music, digital books, digital photos, digital communications, digital everything. The reason Facebook's a trillion dollar company is digital, right? Google, Facebook, Apple, Amazon, Bitcoin, digital something. Now, in all of those cases, you have to have a 10-year time horizon. You have to basically buy it and wait 10 years. So when I'm looking at Bitcoin, I'm not a trader. I shake my head. I feel sorry for them. It's like, give me an example of a billionaire that made a billion dollars shorting Apple, Amazon, Facebook, or Google stock with trading algorithms. Name one. You can't even name a millionaire probably. It's like, you're going to short or trade Bitcoin. It's like shorting and trading Amazon stock.

Yeah. It's like you can find and cherry pick a 12-week time period when maybe you got short and you are correct. I mean, I have people on Twitter and they post, yeah, salary told people to mortgage their house, sell their house to buy Bitcoin when it's 60,000. Well, no, I mean, first of all, I told people to buy Bitcoin when it was 9,500. They let, they leave out that part, you know, very famously, you remember what it was like, what was like 18,000 or so when we spoke last year? I mean, it must've been in the teens. So I've been consistently telling people Bitcoin was a good idea since I bought it and I started buying it in the mid nine thousands.

And I've never told someone to sell it. And I never told them to trade it. And my position on mortgaging is no, you shouldn't sell your house, keep your house. I like houses, but if somebody wants to loan you money against your house at two and a half percent interest for 30 years without marking it to market, and you have a business, you ought to take the money and invest it in your business. And if you, and if you have a portfolio that you believe in, truthfully, it's probably a better idea to take the 2.5% money and put it into a

broad equity index today, given money printing than not. I don't think that equity is the best store of value, but I think given a choice between investing a million dollars in the US dollar and watching it be debased at 10 to 20% a year, or taking the million dollar loan from the bank at 2.5% interest and buying a diversified portfolio of stocks, I would probably do the latter. I would probably buy, obviously, I would buy Bitcoin with money that cost me two and a half percent. And I would probably, if I couldn't decide to buy stocks or Bitcoin, I would buy land, like buy your house. I mean, clearly, like buy, someone wants to, there are people getting these five and seven and 10-year arms at 1.5% interest. So for the conventional person, I mean, a consumer that does not have a publicly traded entity that's financeable, your cheapest source of funds that is simultaneously your safest source of funds is mortgage debt. I could borrow money at LIBOR plus 50 basis points against its stock portfolio, but it is mark to market. And if the

stock portfolio trades down 80%, you will get a margin call. They will force liquidate you and they will take your property. And so that's a cheap source of funds, LIBOR plus 50 basis points, but that's not nearly as good as LIBOR plus 150 basis points or LIBOR plus 200 basis points for 10 to 30 years without mark to market. And so if you understand the stochastics of this and the volatility, there's nobody in the world, I think, that has a better source of funding than a 2% or 2.5% mortgage against real estate. Because that's being subsidized by Fannie Mae and Freddie Mac and the US government. They're creating subsidized financing. So when someone says, you shouldn't borrow against your house

or I'm gonna sell Bitcoin, which, okay. So I'm gonna sell Bitcoin that traded up 294% this year so that I can pay off my mortgage. I basically sold a million dollars worth of Bitcoin, lost 294% yield so that I could avoid paying 2% or 2.5% interest. So I could hold a million dollars, which lost somewhere between 20 and 40% of its value in 12 months. Okay, so the haters, they just hate Bitcoin, so they want to generate a line. But you're telling people to give up an asset portfolio. Forget about Bitcoin. What if it was just S&P? Would you sell S&P portfolio a million dollars, lose 40% gain so that you could avoid

a 2% interest rate so you could hold money that was losing 20% of its value against scarce assets? I just don't think it's good. So in an inflationary environment, if you can finance at a rate that's lower than the monetary expansion rate, when the monetary inflation rate is 7% and you can finance at 2%, there's an obvious arbitrage. When the S&P is yielding 10% a year for 100 years, if someone was willing to give you infinite money at 2% interest, the only thing you got to do is ask the question, is it marked the market? If someone said, I'll give you a 100-year loan at 2% interest, and you bought the S&P index, isn't it obvious that you're going to scrape the 8% arbitrage with no liquidation

risk? Yeah. So if it's 30 years, probably. Right? 8% arbitrage with no liquidation risk. Yes. Yeah. So if it's 30 years, probably. Right? So it really just comes down to, am I borrowing money that's mark to market every minute of the day and I go to 10X leverage, then you've got liquidation risk. You will probably be forced liquidated on a crystal ball.

If you're doing some kind of stochastic forecast, you pump into your forecast 100,000 possibilities, you probably get forced liquidated in 98% of them because of some black swan event. But if you get out to five to 10 year financing or more, you probably don't. And of course, if you're financing an asset, a house that is not marked a market, okay. How many people have ever told you the story of my bank showed up, reassessed my property down 50%, called the mortgage and liquidated and wiped me out and I'm bankrupt. Have you ever heard that story? No. No. So it's kind of silly for people to say, it's a bad idea to take on a home equity loan or a mortgage loan. I mean, it's much riskier to take on a mark to market loan, but I mean, you can do theier to take on a mark-to-market loan.

But I mean, you can do the tranche, right? 30-year mortgage against a home is probably the least risky. A 10-year mortgage, a bit more risky. A five-year to 10-year note against a business with no conditions of default, a little bit more risky. When you start a 10-year mortgage or a five-year mortgage against an asset portfolio that gets assessed in five years, more risky. On mark-to-market, up to 50% loan-to-value, that's risky. 10% loan to value, less risky. 20x leverage, super risky. So micro strategy, we actually took an uncorrelated asset, our enterprise software business that generates cash flows.

We pledged that in order to raise debt to invest in Bitcoin. So we're actually very intelligent about the way that we construct the debt and the capital structure. If I wanted to make it riskier, then I would securitize the Bitcoin directly. And if I wanted to make it more risky, I would simply post the Bitcoin and I borrow 10% against it. And if I wanted to make it more risky, I'd run up to 50% loan to value. And so there are ways to construct a tower of risk and a capital structure. But most people on Twitter, I don't see a lot of parsing. I suspect that 99% of the

people that would criticize us for doing this haven't even read the debt instrument or the SEC filings. Or they wouldn't understand it if they read it. And I was just going to say, I think your average person in this country has a fear of debt or a lack of financial education, which is not provided by the system. And so you have this sort of binary debt is bad feeling and don't understand that taking a 2% interest on a mortgage and paying the same $2,500 payment 30 years from now as today is obviously with inflation, a far cheaper payment and is the best bet to make every time. And you can take money right now and park it in USDC and earn 9% with that loan and do absolutely nothing. And theoretically, if you believe in gaining yield,

you can buy Bitcoin and get 6.5% if you trust the platforms and are comfortable at the counterparty risk. I'm curious if you, as a company, have explored any of the yield strategies for your holdings. Yeah, I talk to everybody in the market and I keep track of what's going on. Believe it or not, Scott, I'm still in my rookie year. I haven't gone one year in Bitcoin. So this is our first year.

And our first year, our focus was do the equity financing to buy Bitcoin, do the first convert to do buy Bitcoin, buy Bitcoin with our cash flows, but do the second convert to buy Bitcoin, then do the secured financing to buy Bitcoin. And then make sure that we communicate and we build institutional awareness. And we had to educate our auditors and we have to educate our lawyers. We have to educate our shareholders. We have to educate the general public. So in that environment, during that timeframe, Bitcoin is up 294%. So those yield offerings might have yielded, what would they yield? 4% of Bitcoin on Bitcoin. So I might've got 4% more. I go from 298% to 302%. But I can tell you as a

public company officer, my risk and my regulatory headache and my legal headache and my accounting headache would have been 10X higher. So I would have put my finance team through 10x as much complexity in order to get comfortable with the counterparties. First, we got to figure out who do we trust. Then we got to figure out what is the risk. Then we have to figure out how to disclose that to the public shareholders. Then we have to figure out what the legal issues are. So there's a lot of work to get that last 4%.

And what's a more profitable use of time? How about borrow a billion dollars at 0% interest? The billion dollars at 0% interest was invested in Bitcoin at 20,000. And so, or not at 20,000, but the 650 million was invested at 20,000. So, you know, we made almost, you know, 500 million off of that or 400 million. We made a lot of money off of that, some amount of money. You can do the analysis, right? So what we're doing is we're carefully thinking through what's most accretive and then what's best for us. If I was an individual and I had five years holding Bitcoin and I knew I was much more comfortable in my position and I was a private

individual and then I had a good comfort level with whatever the entity was offering me yield, then maybe I might enter into that. I think ultimately, the first step is you establish Bitcoin position and you find out how you want to custody it. And that's a major debate, right? We could spend hours talking about how you should custody it and then how you should acquire it. I think the second step is banking a Bitcoin. Do I borrow against it? Do I lend it? Do I generate yield on it? And it's second order. It's important in time. But I tend to fall in the camp of the obvious thing to do. If I bought a billion dollars of property in Manhattan 100 years ago, I would have held it for 100 years.

And then I would have mortgaged it. And the Fed would have printed 7% more money every year. And the value of the property in Manhattan would have gone up more than 7% a year. And then I would have taken loans tax free to live off it. And then 100 years later, I would have bought the property for 20 million. It would be worth a billion. I would have 700 million of debt on it after a hundred years, I'd have 300 million in equity and I never would have generated a taxable event. And I probably, you know, maybe I would rent it. Maybe I'd rent, you know, like maybe I'd have a rental business there and I'd be doing financing and I'd be thinking about managing the property.

But, you know, that's the way to think about that. One point I'd make, that's interesting if I could, if you roll the clock back one year, now we have hindsight. If you had a million dollars, or if you were sitting in a position where you could have invested a million dollars a year ago, or a hundred thousand, pick any amount, and maybe you could borrow a hundred thousand against a house a year ago, and you think about what you could have done with it, what are the mistakes? If you borrowed a hundred thousand dollars And you think about what you could have done with it. What are the mistakes? If you borrowed $100,000 and you bought gold, you lost 2% of your money. You would have 98,000

worth of gold. If you borrowed $100,000 a year ago and you bought long duration government debt, 10 and 30 year government debt, you would have lost 12% of your money. That was an awful idea. Pretty stupid, right? Why would you ever buy debt and loan the federal government money for 30 years for 1.2% interest for 30 years, right? I mean, hopefully no one would buy 10 year and 30 year debt. 10 years, we're yielding 70 basis points or 50 basis points and the like. So those are two mistakes. If you borrowed the money and you just held it in cash, you would have the money and you would pay 2%, you know, and so that's that. But what if you'd done everything else, right? If you bought a house with the money, single family houses were up 24%, according to the headline in the Wall Street

Journal last week. Okay, so if you bought a house 12 months ago, that was smart. Not a bad idea. Why you bought a scarce asset. If you bought a portfolio of S&P stocks, you were up 40%. So you would have had a 38% arbitrage. You would have made 38% on the loan. If you bought big tech, you're up 47%. If you bought Bitcoin, you're up 294%. You could probably list a whole set of meme stocks that did even better, and probably some cryptos that did even better they all have more risk but you know it's like take a take a flyer if you did it great myself like i'd like to invest in things that i can hold a decade i wouldn't be holding amc stock or gamestop stock for a decade even you know you could have made money on Carnival Cruise Lines and the airline trade.

But I mean, I just wouldn't do it because I want to buy something and hold it for a decade. But generally, what's the one mistake? I mean, unless you were going to buy gold or long dated sovereign debt with the money that you borrowed, the one mistake would be not to have borrowed the money. That's the biggest mistake because you almost couldn't lose money investing in anything.

Right? I mean, I'm sure people did. How do you lose money? You trade it, right? You basically buy GameStop, you short GameStop on margin or you do some kind of short dated trade. And I've lost money on short trades. Like there is nobody in the world that, here's what I think about that. No one in the world is so smart they can guarantee your short-term trade is gonna work.

And any trade, no matter how intelligent it is, can be made to look scary if I compress the timeframe enough. If I zoom in on your face with a 10,000 to one magnifying glass, I'll find a blemish. And if I track the most stable thing down to the one second gyration, I will find anxiety. You know, one point I made to people is if you took a million dollars and you bought a house and then you went to everybody you could find in the world every minute of the day on Saturday night while you're drinking tequila and you said, will you buy my house for me for more than I paid for it? You would probably find someone at some point that would say, no. You would probably find someone that'll say, I don't want your house. I'm not going to pay you

anything for it. Or someone else would say, I'll give you half. And if you then said to yourself, oh my God, I lost half my money. I found someone that was willing to give me half. You would just give yourself a heart attack. If you keep oversampling, if you sample everybody all the time, you're going to create anxiety. And the problem with Bitcoin and cryptos in general is they're sampling everywhere in the world all the time. And so if you fixate on it, it's going to give you anxiety. And the only thing you can do is buy or sell, right? And so if you buy and hold, that's good. And at any point in the history of technology, if you had sold,

you made a mistake, right? With the one caveat, you have to buy the winner. You have to buy the category killer. You buy Facebook, Google, Amazon, Apple, Microsoft. And so the question is, how long do you got to watch them win before you decide they're the winner? I mean, I think 30 years is a bit late. If you got to wait for 30 years before you pick the winner, right, you probably won't get outsized returns. But you could have watched them win for 10 years and bought them and still made a lot of money. And that would be Bitcoin under $4,000 last year. Yeah, I would say. It's got the Lindy effect. I mean, it's been in existence long enough that you know that it will continue to be in existence. So it is an apt analogy to say it's like buying Amazon 10 years in. I waited 10 years. I mean, like if you

bought it in 2013, you were inspired and you took a more risk. And there's a lot more question mark. But waiting until 2020. Like, what about 2021? I mean, really, like, are you still gonna? Are you still going to classify it? I mean, it's, it's certainly more stable, and more successful than Facebook was in 2012 or Google. If you look at the market caps and the stability of Facebook and Google and Amazon and even Apple, you can find that it was 98% skepticism on those stocks 10 years after they had established their business model. And more volatility than Bitcoin in many cases. It was like, yeah, I mean,

Facebook was the idea that I'm going to collect and channel all the social energy in the world on a digital network, dematerializing friendships and communications and the like. And it was a totally revolutionary idea, but it's worth a trillion dollars this week. Tipped. Well, I want to pivot a bit to China, because I think we both agree that they're making a monumental mistake cracking down on Bitcoin mining. As I mentioned, I talked to Vijay Boyapati, and he posited that it was about bureaucracy

and actually the Communist Party disallowing lower-level members to profit from Bitcoin and not really about energy, which is the narrative, since, you know, Szechuan we know is largely using in excess of hydroelectric power. I mean, can you talk about the situation in China? Why do you think it's happening? I know that you believe it's a trillion- dollar mistake, especially in context of the timing. So what do you think the real story is there? Look, the real story is capital controls in China. The Chinese don't want capital to flow out of their country. They've got a closed economic system. You know, for example, stocks in the

Chinese stock market would trade with a PDE of 30 when they were trading with a PDE of 15 in the US stock market. I remember going to China and I sit with business people. Okay. And they would say, yeah, well, you know, you should take your company public on the Chinese stock market, because you would get a 40, 40 multiple instead of a 10 multiple. Like, okay, but, you know, you should take your company public on the Chinese stock market because you would get a 40 multiple instead of a 10 multiple. I'm like, OK. But they're like, yeah, but the one problem is you can't get the money out of China. OK, it's closed system. You know, and then their problem is they can't get money out of China.

So this has been the case in China forever. The Chinese currency is pegged to the dollar and it's been pe case in China forever. The Chinese currency is pegged to the dollar and it's been pegged to the dollar, but the only way to keep it pegged to the dollar was to prevent the capital from flowing. I think that at some point, the Chinese decided that there was too much potential for capital to flow out. One way to evade the capital control is to buy Bitcoin mining equipment

and then mine Bitcoin, and then you've got hard currency. The other way would be to trade OTC Bitcoin. So I think you had a lot of people in China that had a lot of Bitcoin, a lot of capital. Like what do you want to do? If you're a Chinese billionaire or you're a Russian billionaire, what do you want to do if you're a Chinese billionaire,

or you're a Russian billionaire? What do you want to do? You want to get your money out of the country? Right? Why did the Russians always own yachts in the Med? Because it's floating capital, I put the money in the boat, I float the boat out of the country. You know, so there's this issue there. I really think that the number one thing is they China is coal powered. So I think they use that as an excuse, but I really think the environment is always the excuse, any kind of concern like that against the primary issue, which is just controlling the economy. Now, I think that the rest of the world is different because the Chinese have a hard peg. I mean, CNY is pegged like six and a half to the dollar, and there's all sorts of speculation. The euro is not hard pegged to the dollar. And so if you have free or floating currencies with the pound, the euro, other currencies that don't have that kind of hard peg to the dollar,

they don't have the same kind of requirement. I think as long as the cap, by the way, I don't think they've actually outlawed owning Bitcoin. I think they've, so you could own it. I think generally politicians look at this and they want to, they say they want to protect the tax base. And if they have capital controls, they have to defend the capital controls. So any country that has capital controls you can look at will eventually put tighter restrictions on Bitcoin trading. The problem in China is if they can convert Bitcoin to Tether, and if Tether can cross national boundaries, then they've got porous capital controls. And you can't have a capital control policy and allow people to freely trade past that.

So you have to clamp down on the exchanges that would allow that. And that's what's going on. Do you think any of it's related to the development of their central bank digital currency? Not really. Like if I had $10 billion in China and it was invested in the Chinese stock market and I wanted to sell it and I wanted to put it in the United States at JP Morgan and buy the S&P 500, they wouldn't let me. I mean, the first order issue is they want

the money. Like if there's hundreds of billions of dollars in China, they do not want anybody in China to move that capital to New York or London. They want to keep the capital in their system. And so that's the Chinese wall. The Chinese wall is an internet wall and a capital wall. It's not new. For example, the Chinese ban Facebook, the Chinese ban Twitter, the Chinese ban Google. The Chinese won't let you have data outside of their country. So there's a very hard wall. And the Chinese don't want you to move capital. And Bitcoin just happens to have gotten to the point where it was immaterial. I mean, they'd already, you know, they shut down conversion of fiat CNY currency to Bitcoin in 2017, right? You know that,

you followed that story, right? And so they just left this loophole, I guess, where people were trading. I think they shut the retail trade out and they left the institutional trade functioning. And probably what you had was a lot of very wealthy, powerful people in China, probably that had control of provincial governments, and they were mining Bitcoin and trading it, and they had that opportunity, whereas the billion people and the consumer working class did not have that access. And the Chinese closed that loophole. The entire China exodus is really forced, rushed exodus of capital from China. I got a billion dollars of Bitcoin. I have to sell it. And I have to sell it in a hurry before

I get audited by the Chinese government or before someone comes and asks me why I'm holding this and I need to convert it into local CNY. So the Chinese have a history of providing amnesty. So you have three months to clean up your act, just like the US. At one point, they said, well, if you have money in a Swiss bank account, you have three months to declare it and pay tax on it. And after that, we're going to bring charges against you. And lots of people declare it and get clean and the other ones don't and they get prosecuted. So this happened, it happened in 2017. The country gave people some number of months to move their exchanges out. There's OKCoin and there's OKEX, and they split because you couldn't be trading fiat to Bitcoin in China. So they gave them amnesty. I think they gave them another amnesty. I think you saw this kind of rolling exodus of mining and exodus of capital. Who are the big winners? Look, my company buys Bitcoin

at $35,000. I would have paid $70,000, Scott. If this had not happened, then Bitcoin would have gone $60,000 to $70,000 to $90,000 to $100,000. We'd be paying $100,000. So people buying Bitcoin in the 30s got Bitcoin at a discount., you got two types of people. You got the long-term people that said, but for the Chinese exodus, we would have had to overpay. And you got the short-term people that said, you're so stupid. You bought it at 50,000 and now it's 35,000. You should have shorted it. Well, shorting is like shorting electricity. It's like, no, I don't think so. If you think it's a, this is a Rorschach test. If you understand that Bitcoin is digital property rights for 8 billion people are going to change the earth, then you think this is just volatility and it's a buying opportunity and it's a windfall. And if you think Bitcoin is a random speculative gambling asset of no consequence with no underlying value, then you think, it's like decentralized, sound digital property network that can serve as the basis of the 21st century economy.

This is a trillion dollar mistake for China because they had 60% of Bitcoin mining. It was worth $12 billion a year plus all the Bitcoin. And it was doubling every year. And it was going to $100 trillion. And they could have had trillions and trillions of dollars. And instead, they held a gun to you scott 15 years ago if you owned half of google and google was worth 50 billion dollars and i said you have to sell all your stock in google how much would you have lost i mean billions and billions of dollars like a forced liquid. It's like a forced liquidation, right? It's a forced liquidation of the dominant digital property network on earth. They forced themselves out of the business. So that's why it's a geopolitical mistake. It's a tragedy for the people in China that own Bitcoin. I feel awful for them. It's just a tragedy. Now they got to, but for the Bitcoin miners in North America, it's a windfall, right? Their revenues are going to double their costs are the same. Their margins have quadrupled or quintupled, right? It's like in any business, right? If I,

if I went to a, if I went to a Pepsi and I said, guess what? I'm going to outlaw Coca-Cola and obliterate all their factories worldwide. What do you think? Sounds like it's a good thing for Pepsi. That's kind of what happened here, right? North Americans were a bit behind. The big fight in the market was, oh, yeah, Bitcoin is dirty. Well, 75% of the power in China was coal.

So China was the dirtiest miner of Bitcoin. The next FUD is China might take it over. That's not happening. The next FUD was they dominate mining. That's not happening. The next FUD was it's a secret to undermine the dollar by the Chinese. That's obviously not the case. So now that you're through the China FUD and you're through all the Bitcoin is China coin type ridiculous narrative. Now, the next question is, well, is Bitcoin good for the world? Well, it's good for the rest of the world, right? It's good for the rest of the world, right? It's good for the dollar. What you can see here is if you're free floating currency, then you're going to see the US

dollar float to 5 billion people's mobile devices. And Bitcoin is going to be the underlying protocol to synchronize all 5 billion devices. And if you don't synchronize on Bitcoin as a settlement network, you'll synchronize on Lightning as a transaction network, or you'll synchronize on another layer to a proprietary layer to controlled by Binance or Coinbase or Square or PayPal or Apple or Google or Facebook that then in turn settles on the underlying Bitcoin settlement network. And so the architecture of the world is kind of is becoming clear. And Scott, you know, when I, when I wrote the book, The Mobile Wave, what I said was, and I said, buy Apple, Amazon, Facebook, and Google, because they're the dominant digital networks in the Western world. China closed off China to Google and Facebook and Twitter and

Amazon and the like through capital controls and information controls. And then they created their own version, Alibaba, WeChat, Alipay, Weibo. So China created its own little world and what you saw was the western which consists of western europe the united states the rest of the world that became one ecosystem china with their with their billion people became the other ecosystem and then you saw the category champions in both ecosystem but ultimately you know like yeah i would rather own Google than own the equivalent in China, especially because at least Google gives you right to property, which you can take to Sicily or Paris or London, and you can live in a free economy. Whereas if you've got all your wealth and your business trapped in china it's a closed

system you have to stay within china you don't have access to the rest of the world with it you can't take your capital and so ultimately they close themselves off which you know it works in the near term but on the long term are you going to bet against Google? No, I'm not. You know, like, I don't think I want to do that. Right. So, you know, that's what I think about that. That's helpful. It is. It's interesting. I mean, China is obviously an example on one pole of what we could see from governments. But then we have countries like El Salvador, obviously, they're adopting Bitcoin as legal tender, talking about mining volcanoes. Where do you think that most countries in the world will fall between those polls as they start to actually address Bitcoin as a real asset? I think they'll be in the middle. I think you're

going to see digital property, digital currency, and digital applications, Scott. And digital property is Bitcoin. It's like the block of Cyber Manhattan. And it'll be based on a proof of work network. And it'll be mined. And digital currencies, they're going to be stable coins and CBDCs. They're going to be, with digital property, you optimize it for integrity and durability. Well, you want it to last for a thousand years. Like the city block in Manhattan, it's on granite.

Manhattan's built on granite. That's why it's still there 300 years later, because you can build something, it's still there. You don't build on sand, you don't build on clay, you build on granite. Do you want it to move fast? No. You don't need it to move fast. Does it need to be functional? No. It needs to be inertial. If I'm going to lean on something, I need to know it'll be there in a hundred years. What happens if you build on sand? Well, what happened at Surfside in Miami Beach two weeks, a week ago, right? That's what happens, right? It's riskier. You build on granite, you build steel, it's heavy. That's property.

The currencies are gonna be optimized for compliance and compatibility. You got to do transactions and you're going to get KYC AML regulation. And I think you can expect most countries, they're going to wrap any exchange and any functionality around stable coin with AML KYC because it's just natural because they want to make sure the capital doesn't evade their tax or their regs. And then I think you've got digital applications, the smart chains, smart contracts, DeFi, all the functionality. Well, applications are optimized for functionality and performance. I need to do a million transactions a day. I need to do a million a

minute. I need function. I need touring complete. I need to do flash loans. I need to do a million transactions a day. I need to do a million a minute. I need function. I need touring complete. I need to do flash loans. I need to do stuff. What, what, what are they trying to do? Whether if they're a platform, they're wanting to be the building on the city block in cyber Manhattan. It's like, because what can I do with a building?

The Rockefeller center is standing in manhattan it's nearly a hundred years old the city block is a thousand years old you know the rockefeller center probably stand another hundred years but maybe not much longer than that a lot of businesses have come and gone in the Rockefeller Center over the 100 years. Insurance companies, banks, discotheques, restaurants, membership clubs, condos. So digital applications are either a platform or they're an application. And the question is, are you making an investment for a 100-year time frame? Are you wanting to own the building for the next 50 years? Are you wanting to own the business that might be good for five years?

There's some businesses that lasted, you know, 50 years, not many. Right. So, so I would say it's like property is a 500 year timeframe, a building or a platform is a 50-year time frame. A business is a five-year time frame or 10-year time frame. They've all got different risk reward. It takes a lot more capital to own the property. It's capital intensive, right? You can start a business in New York City today, and you can rent the space for a year,

right? It doesn't take a lot of capital to start the business. To build a building is intermediate capital. So how much capital do you need? What's your timeframe? What's your risk tolerance? And Bitcoin will be regulated as property and you'll pay property taxes on it.

And you'll have to disclose. I cannot transfer, you know, a billion dollars of property from here to Africa privately without paying taxes on it. Of course. Right. On the other hand, an application, if you're going to get the insurance business and you're going to sell life insurance on a defined network to a consumer, you're probably going to get your door knocked on by an insurance regulator that's going to say you sold life insurance and you violated the following life insurance restrictions. You're overcharging or undercharging or whatever you're doing. And if you're going to trade stocks, if you want to trade Apple stock as a token on Saturday night in the United States of America with quintuple leverage, the SEC is probably at some point going to say, it looks like you're an exchange.

And since we've already said you can't trade with that kind of leverage on exchanges, we have a problem with you doing it. Or if you're going to trade commodities, the CFTC is going to say, if you're going to let, you know, American citizens trade commodities in competition with the CFTC, you know, there are rules, right? Like everybody's got their regs. So if you want to trade uh eagles music on an nft network on a platform and you're actually going to upload it try uploading an evil an eagles music video to youtube and see how long it lasts before they rip it down right you're like well that's fair use can i just use the you know the music from the eagles in the, in the beginning track of my podcast? And the answer is no, you can't. Okay. So I think that, that as you build application functionality, you're going to invite Apple application level regulation

from the, from the jurisdictions where you do business. And it's going to be slower. It's going to take a while for people to figure out what they think about it. And it's going to be very asymmetric and jagged, right? Like some jurisdictions will move more aggressively faster than other jurisdictions because of their political sensitivities. So that's kind of what I think will happen. And if you're making investments, you kind of have to figure out, you know, what jurisdiction am I in?

Right, El Salvador said, we're not going to charge you tax if you transfer Bitcoin. Okay, well, if you're an El Salvador citizen, that's a great thing for you. But if you're a United States citizen, you're going to have to surrender your passport and be an expat for 10 years before that's going to be a great thing for you. But if you're a United States citizen, you're going to have to surrender your passport and be an expat for 10 years before that's going to be a good thing for you. Right? So everybody's got their different thing. I don't really think

that Bitcoin is going to be currency in the US ever, nor do I think it should be. I really think logically, it should be treated as property. It's like owning a building or owning a bar of gold or owning a share of stock. It's property. And what it's doing is it's demonetizing other forms of property. If you have a million dollars and you have to choose whether you buy collectibles or a house or a second house or an ETF or a share of Apple stock or start a business or buy art or buy a bar of gold or buy Bitcoin, that's the fungible decision you have to make. Where do you want to store your monetary energy? And clearly my message, I even posted today, it's like gold is no longer a store of value for monetary energy. That's why it's up 0% in a year where the S&P 500 is up 400%.

It's pretty clear the marketplace thinks that stocks are a better store of value than gold. And the marketplace thinks Bitcoin is a better store of value than gold. And the marketplace thinks Bitcoin is a better store of value than stocks. So ergo, digital property is demonetizing other traditional assets. And I think that the way the world will revolve is eventually they'll figure the best architecture of a digital property is proof of work, decentralized Bitcoin mining or mining in general. And I think that the architecture the world's going to adopt for applications is proof of stake of some sort. Lightning is a proof of stake network. It's a stake with Bitcoin. These other staking networks, they're staked with something. I happen to think that if you're going to have a staked network, you're better off to stake with a financial asset that is uncorrelated to your network. So for example,

I staked my debt instrument, my $500 million loan with cash flows from enterprise software, right? And then I bought Bitcoin. So I created an uncorrelated asset. Bitcoin miners stake dollars. They use dollars and they use technology, mining rigs, and they use political capital. So technical capital, financial capital, fiat capital, political capital, engineering capital, and human capital. They use people to create a mining operation that stakes the Bitcoin network. And they use energy too, right? So five different flavors of capital to stake Bitcoin. The Lightning Network uses Bitcoin to stake it. You could even argue Ethereum 2.0 will be using Ethereum 1.0, which is a proof of work GPU mine network to stake it, you see. So to the extent, if you were going to spin up your own application, Square Cash and PayPal, they have layer two applications staked with Bitcoin. Binance and Coinbase have applications staked with Bitcoin. And Micro

Strategy issues stock and convertible debt and straight debt, which is a derivative staked with Bitcoin and political capital and other things. right? So the way that you get stability in a network is hopefully you're open to another form of energy so that you're not inbred, self-referential. If you create YoYoCoin and you create YoYoyo network and you give yo-yo coin to yourself and your friends and you stake your yo-yo network with yo-yo coin to create you know virtual security so that you can do virtual functionality you just create a second life but i i'm not even saying it's not valuable like second life and fortnight are valuable right You've created a virtual gaming ecosystem, Farmville. You can have Farmville with Farmville dollars and stake and buy skins and the like.

It's a question of on the continuum from game to casino. I go into a casino. I buy a bunch of chips. Maybe they're not redeemable. They're only good for the casino. I go into a casino, I buy a bunch of chips. Maybe they're not redeemable. They're only good for the casino, but they're valuable. Have I gone from the game to the casino, to the application, to the bank, to property? I think that if you want to create property that's good for 1,000 years, then your best architecture is one that uses political capital, energy capital, external financial capital, semiconductor capital, and engineering capital that are all external to the network that you're attempting to stake

and to securitize. Yeah, I 100% agree that it'll be treated as property as it already is. My only fear with that is that if the world ever does move to a Bitcoin standard, that you're de-incentivized to actually spend it when it's needed, obviously. Buying a cup of coffee with Bitcoin is a bad idea right now because of the tax. I don't think you ever need to. Look, I don't think you should spend property. I think that this is a fundamental misconception people have. They keep thinking they have to spend or it has to be has to have a use utility for it to have value. The reason they think that is because they've never been rich. Like, I mean, it's really non rich people that think that, for example, if my family had bought up

20 blocks of Manhattan 200 years ago, would I have to spend my real estate on coffee? Does Manhattan have to have value? Isn't it obvious that owning all of Manhattan and not giving away any of it for 200 years is probably a better investment, a better idea, right? It's property. Like how about Robert Kraft? He owns, you know, the New England Patriots. Does he spend 1% of the New England Patriots to buy coffee? Does he give it away every year so it'll have value? No, he owns it. What's he going to do with it? Give it to his kids if he can, right? It's a dynastic thing. The United States doesn't give away its land to foreign countries to buy coffee, right? So if you have real wealth, if you have a franchise, if you own Manhattan, if you actually own like Jeff Bezos didn't get rich by spending Amazon stock on coffee. Jeff Bezos got rich by not spending Amazon stock. Larry Ellison still owns Oracle. You know, how did he do it? He borrowed against it, right?

Rich families, rich countries, they borrow or they generate yield on it, right? If I own Manhattan, I can either borrow against it or I can let you build a building on it, but I keep ownership of the underlying property. A lot of the property in Europe, the noble families like the prince of wales whatever they own the land underneath london and then people that have buildings they don't own their land they have a 100 year lease or ground lease or a 200 year lease or a 50 year lease but they don't actually own the property right sometimes the government owns the property. And UAE, it's illegal for a foreigner to buy land on the beach. I think all of the prime beachfront property, it's impossible for a

foreigner to buy it. It's against the law. So once you understand property, you understand that if I gave you a billion dollars of property, you could pretty much just stay rich forever and you don't have to spend the property. All you got to do, borrow money at 2% interest against the property, invest it in the S&P that yields 10%, scrape the 8% yield, never sell the stock, never sell the land. Just live, you're living off of rent or arbitrage off the energy. And that's, I think, I think Vijay understands that. What Vijay would say is the reason that Bitcoin is good money is because there is no utility

value for it other than his money. Like if gold is not a good thing to monetize because it has value as jewelry and corn is not a good thing to monetize because it has value as food and a house is not a good idea to monetize it because it has value to live in, you want to monetize something which is 100% monetary premium. And to be a 100% monetary premium, you don't have to spend it. I think the big idea that people just don't get is they don't understand that under inflation, money decomposes into a currency and an asset.

So in a non-inflationary environment, this is first principles reasoning. If the US dollar was never printed, if the US dollar was not inflationary, then it would be a store of value, and it would be a medium of exchange, and it would be a unit of account. But when I decide to print 10% more dollars every year, it becomes a medium of exchange, a union of account, but the store of value disappears and it drifts. And the store of value becomes sovereign debt or gold or S&P 500 stocks or equity or Bitcoin, something. So when the dollar inflates 20% a year, it's pretty clear the currency is no longer a store of value. When the currency inflates at 80% a year, it's losing its value within six months. And so it starts to just totally break down.

If you understood that, once you get that idea, you realize that for Bitcoin to have value, you don't have to spend it, you have to hold it. And the way that you execute your life is you fund your checking account or you fund your working capital by borrowing or generating yield off of your asset. So I have a million dollars of Bitcoin. I borrow $10,000 against it. I don't sell the Bitcoin. I pay 3% interest. Bitcoin goes up 10% or 20% a year. I keep funding a USD checking account against my BTC savings account. And then the asset will go up faster than my rate of expenditures. For that to work, all I need is a bank that will either generate yield for me or will give me low interest loans. So you need Bitcoin bank. Every rich person in the world, every wealthy person, they have billions of dollars or hundreds of millions of

assets. They have banks and the banks are going to give them financing at LIBOR plus 50 basis points against their equity portfolios or LIBOR plus 200 basis points against their equity portfolios, or LIBOR plus 200 basis points against their yacht, or LIBOR plus 100 basis points against this, or they're financing their business at the junk bond. Every business can borrow money at 4% interest in the junk bond market, right? And so, or they're going to banks and they're saying, I have a billion dollar building and they're refinancing it with a building construction loan at 3% or 4% interest. So they're all continually financing their assets with a mixture of debt instruments in order to avoid capital gains, in order to avoid income tax, and in order to avoid shrinking their asset portfolio.

Because if I have $10 billion of real estate, and if you can predict that the Fed is going to print 7% more money a year, and if the real estate's in New York and it's scarce, can't you reasonably assume that the real estate's going to go up by 7% a year? Of course. And doesn't that mean that your $10 billion of real estate is going to be worth an extra $700 million next year? And doesn't that mean that you can refinance it and you can take $100 million a year out of that at 2% or 3% or 4% interest tax-free forever? Yes. What about for a poor person who has $100 in Bitcoin and can't find somebody to lend against it? The principle is the same at all scale, which is you want to divide your assets into a savings account that's in an appreciating asset, BTC, and a checking account that's in a

depreciating currency, the same scale. And look, if you're a poor person, the only way you generate wealth is you have to generate assets. So how do you do it? You either create a company, issue yourself to stock, or you have to save money at another job. And then when you save money, you go buy something, you can buy a house with leverage. So if you can make enough for a down payment, then you can buy a house and the house goes up 7% a year. And then you can generate home equity. And lots of people did that, right? Lots of middle class people generated wealth by owning their own home because they were able to buy it with leverage. You can't do it without leverage.

It's hopeless without leverage. Now, once you've done that, right? The classic thing is I get a job. I get a down payment. I buy a house. It appreciates. I flip it, I buy another house, I get more debt, I pull the money out, and then I make an intelligent investment in the stock market or intelligent investment in a business that appreciates. Now you have assets. Now, what don't you ever want to do? You don't ever want

to shrink your balance sheet. Ultimately, what you want to do is construct the balance sheet of the greatest amount of high quality assets. Definition of high quality asset, one that a wealthy person will want to buy in 10 years? That's a good definition. I mean, common sense, a house in the Hamptons is a Picasso. What, you know, how about, you know, you bought 100 acres in the middle of Kansas, and you paid a lot for it? Well, maybe it doesn't seem scarce, it doesn't seem desirable, it's not going to appreciate as fast. So find scarce desirable assets. The other thing is find something which is not going to force liquidate you. You know, you buy Dogecoin, you have to spend something for it to have value. You don't have to spend shares of Apple stock for dev value.

I mean, it's such a freaking stupid thing to say. Mark Zuckerberg never spent a share of Facebook stock to be rich, right? Okay, I got a billion dollars of Facebook stock. I'm in real deep trouble because I can't spend it on coffee. No, I go, I pick up the phone. I call the bank. I say, I have a billion dollars of Facebook stock. And they loan me $100 million at 1% interest.

And I spend $100 million over the next 10 years. I never pay income tax. I have no capital gains tax. And the only question is, is Facebook going to go up or down over time? And if Facebook is a franchise, then when am I going to sell it? The answer is I'm never going to sell it. If you look at John Malone's life, John Malone is one of the great businessmen. He's one of the true genius cable billionaires. And if you read

the story of his life, it was all about, I bought this business. I did a tax-free merger with that business. I leveraged up that business. I sold to AT&T and did a tax-free spinoff. I leveraged that business. He still owns all of these cable companies and these cable networks after 40 to 50 years, never selling. And the number one reason is he never wanted to incur a tax, right? I mean, it's the tax that kills you, especially capital gains tax. And so you just want to buy assets and you want to find a way to build up your asset portfolio. However you can with and generally what what's the best thing?

Long term patient, low cost financing. 10 year debt, 20 year debt. It's like if you don't believe and if you don't believe what you're investing in and you borrow money against it, you're going to get wrecked. Okay, so maybe you don't want to launch a bakery or a restaurant. How about just buy the S and P 500 and just roll that forward for decades, you probably would be fine, right? Sure. Like that would, that would have been a simple thing, a simple thing, leverage up your house, take as much equity as you can out of your house and

buy the S&P index and you probably you know the S&P is up 10% a year for 100 years it's up a lot more right now I think generally you might find one year when it might have been ugly but if you just held that position for your entire life this simple simple idea of borrow money cheap and buy a diversified portfolio of company stocks is not an awful idea. So the average person is going to eventually have to borrow against their Bitcoin. Yeah, I think either that or generate yield.

You'll either have to go to a yield strategy or you have to borrow against it. And again, some people live in fear of that. If you're really hyper conservative, you get a job and you live off of your earnings from your job, and then you let your Bitcoin appreciate unleveraged. But I don't think you can find, I mean, I don't think it would be untrue to say that 95% of the businesses and 95% of wealthy individuals have some debt. I think, I bet you'll find that most of these sports team owners, 80, 90% of the sports team owners that own these franchises, they all have debt on them. Of course. Right? So they're not afraid of it. I mean, their view is find, find an asset that's not getting marked to market, right.

And find a friendly bank that'll loan me money against it. And, you know, so leverage it up 50%, 30%, 20%, 80%. If I bought a house right now and someone offered me two and a half percent interest, yeah, I put debt on it. I mean, why wouldn't I put debt on it? The cost of capital is 40% this year. That's the key. The best surrogate for cost of capital for an investor, in my opinion, is the S&P 500 index. It's just a broad portfolio of desirable assets. And if you look at it, if you can borrow money at less than that, then you can always buy the index, right? Yeah, of course. Yeah. I guess the question is then, when do we have a reliable bank that will

allow us to borrow against our Bitcoin? Well, you see that banking, you see the Bitcoin banking industry evolving, right? BlockFi, Abra, they're all, you know, and Celsius, they're all bringing out offerings. And they're all pretty material, pretty big players for consumer loans. I think Abra announced that they would give you a 0% loan up to 10% of your loan to value or 4% loan. They're all offering two, three, four, anywhere between one and 8% or one and 9%. The catch is really just how much collateral do you want to post? So like I could, if I post a million dollars,

I could borrow a hundred thousand dollars for free. Almost nothing. Yeah. For free. They will take it and they will lend it out. But if you try, if you think that Abra is, is a reliable counterparty, you can have a loan for $100,000 for zero interest. You know, if you want a 4% loan, you can get that. I think the loan-to-value tranche is 20%, 35%, 50%. If you want to borrow half a million against a million in Bitcoin, they charge you 8% or 9%. So, yeah, I'm not a big fan of getting too leveraged, right?

Like, if you figure that Bitcoin could draw down 50%, then you don't want to be at a 50% loan to value because you're on the edge. But, you know, 20% loan to value, you know, could you live there? You just want to keep it below that. I mean, again, it's not quite as good as what we've done, because if you get an 80% draw down once you could still get forced liquidated, you know? So on the other hand, 10% loan to value 10% is okay. I think that the market will evolve to the point where there'll be other banks that will

just give you a loan where they don't require custody. You just, like there are banks where if you just represented them, you own the property and they look at your balance sheet. They're like, okay, well, you have $10 million worth of Bitcoin. I'll give you a million dollar loan or a $500,000 loan. That's what I meant. That's what I meant. Like you borrowing against a yacht. The bank doesn't take your yacht until you pay back

your loan. They know that you have the yacht. And you know what? There's one bank that will, that will, if you take the top five banks in the United States, there's one that makes most of the yacht loans. And there's three that won't make a yacht loan. I don't care how much money you got. Right. If you walked in, you're a Bill Gates or Jeff Bezos, they still wouldn't loan you money against the yacht because they just don't trust the collateral. And so you got to keep in mind that these are asset classes that some players are willing to finance and securitize

and lend against and insure, and others just won't. You'll see a wide discrepancy in views. So with Bitcoin, you would expect that there'll be some banks, some people that will get very comfortable with their Bitcoin. Generally, if I post a million dollars of Apple stock as collateral, I've got banks that are getting very comfortable with giving me a margin loan because they are the custodian of the shares. But if I said I'm not going to post the shares, they would be much more skittish. And that's with regard to stock, simple stock. So you can expect the same thing with Bitcoin. And I think we're still early on, right? I mean, I think like the era of institutional acceptance of Bitcoin started

in March of 2020. That was year zero. And then year one was like February of 2021. So we're kind of like in the, you know, the year one or the second year, maybe. If that was the first or the second year, and it'll be 10 years. And each year for 10 years, I think Bitcoin hardens and matures as an asset class. People get more comfortable with it. The terms will get better. And like right now, I'll give you an example. Like if you had half a million dollars, you could buy half a million dollars of Bitcoin and you could buy half a million dollars of Grayscale. Some banks will give you a loan against Grayscale. Some won't. You could buy half a million dollars of MicroStrategy stock. Some, you know, MSTR stock would be marginable

in a JP Morgan account or, you know, a typical conventional banking account. There are some banks that are not likers, right? That wouldn't actually let you hold MSTR in their account, but most would. So you have certain companies, like my company is a Bitcoin derivative, and you could borrow money at Libar plus 100 basis points via a traditional wire house in a margin account. Whereas you couldn't borrow against underlying Bitcoin. So what we're doing is we're gradually spreading exposure to Bitcoin to different classes of investors. MicroStrategy brought Bitcoin to institutional equity investors. Our converts bought Bitcoin to institutional convertible arbitrage funds. And that secured financing we did bought Bitcoin to institutional fixed income funds. And then when the Bitcoin ETFs come out, that will bring another type of Bitcoin. And I think that as

that happens, the banking issues will become more common. And I think the difference in terms and rates will start to narrow. And at some point, Bitcoin is better collateral. A million dollars of Bitcoin is better collateral than a million dollars of Apple stock. Very better. Because on a Sunday afternoon, if there's a catastrophe, there's no liquidity in Apple stock, but there is liquidity in Bitcoin. So if I'm a risk manager and I'm a loan officer evaluating the risk of this portfolio of collateral against the loan I've extended to you, Bitcoin should be a better collateral. It's just going to take a bit of time for it to metastasize or for it to spread. And it is spreading, right? I mean, if you look at the terms and the engagement,

you know, coming out of Abra and BlockFi and Celsius this year versus 12 months ago, I mean, they've come a long way. And I think I've seen, I mean, it's an, you saw Square applied and they got a banking license and they're getting into a small mid-sized financing, trade financing. And you saw PayPal set up their system where they said you could pay in dollars and fund in Bitcoin. Well, the next thing is Square and PayPal get in the business maybe of giving you credit lines

against your Bitcoin. It's kind of inevitable. Lots of these companies are offering a credit card like they're offering block fi's got i think a credit card coming i saw one so if they give you a credit card or a debit card you're not that far from you're just living off of a credit line secured by your assets and you know again if the asset goes up at 20% a year, and if the interest rate is 4% a year, you can actually calculate, if you have a million dollars, and the assets going up at 20% a year, right, then you can calculate that you can reasonably spend $40,000 a year and never run out of money. just keep rolling forward the debt right so so it's got it's it's kind of a simple thing you can you can spend five percent of your assets

forever as long as your assets are going up at ten percent per annum so i don't think people are you know everybody's been in the business for a decade they've you know they remember a different world right okay well the last decade you know people that came to america in the first hundred years they all died on the banks of the potomac river go you know read the history of the jamestown colony and and all of the other colonials and 1500 etc it was that doesn't mean it's like that to live on the potomac river today i mean there's a point at which you go from the wild west to a safer you know regular environment and i'm not uh i'm not saying we've completely turned the corner on volatility, but this is 50% downdraft. We had 80% downdraft. And, you know, I think that

we are seeing a lot more stability as we go forward. And it's indisputable. You could see more institutions entering the space. Absolutely agree. And I know that we've gone 30 or 40 minutes over our time. So I will let you go. Any parting thoughts or it's digital property for 8 billion people, and it's going to demonetize other forms of property in the same way that digital books sucked the information out of libraries and actual books and universities, and the same way that digital music sucked the music out of your CDs and your records and your phonograph and your piano and the orchestra. It's a simple collapsing of the economy from a high energy state where it's very energy intensive and mass intensive and difficult to provide this thing to 8 billion people, to a low energy state.

And when anything crystallizes, lots of energy gets given off, just like the energy when you go from steam to water to ice, the energy that's collapsing because we're demonetizing gold. It's hard to move a billion dollars of gold. It's 30,000 pounds. It's hard. It takes you $5 million to move it from place A to place B. It takes $5 to move Bitcoin from place A to place B. As you demonetize property and dematerialize all of these things in the economy that we live in the 20th century, you're creating extreme value. The value is going to accrue both to the underlying asset and it's going to accrue to all the applications that adopt the asset. MicroStrategy adopted Bitcoin for a treasury,

Square adopted Bitcoin, Binance and Coinbase adopted Bitcoin. Every place that this digital property is plugged into is going to benefit, and then owning the property is the benefit. So once you understand that, you understand it's going to be a process that runs 10, 20, 30 years. I mean, the next decade is going to be big. The last decade was clearly big. You just got to look at it as a technology trend. And then obviously, invest money that you can hold for the long term. I mean, not money that you need to have next Thursday, because you'll get wrecked or wiped out on leverage. And if you don't understand what I said, go to hope.com. There's a free course on Bitcoin for everybody. There's another set of lectures by Gary Gensler at MIT. There's another course. There's 10 hours of discussions that I've got with Robert Breedlove on energy systems and

engineering. There's every book on Bitcoin. There are all the influencers and a ton of leaders on Bitcoin. There's podcasts on Bitcoin. There's tons of video on Bitcoin. Study it until you've concluded that you hate the idea or you like the idea. Because if you're not sure and you're living in fear and anxiety, it's pretty stupid to risk your life savings after two hours of study. It took you a lifetime to get the money. So it's funny that people will work a lifetime and they'll make investments in one hour. How about you worked a lifetime, spend a hundred hours or 200 hours or 500 hours. After you've spent 500 hours thinking about it, maybe then, you know, you make long

term decisions, and you'll feel good about it. You don't know why you did it. So I definitely encourage that. And then the third thing is, you know, follow me on Twitter. And I share on there every day. And thank you for the platform and thank you for the chance to talk, Scott. And I always appreciate seeing you. Thank you. Yeah, I can't wait for round three because I probably could have done this for another three to five hours. So I do appreciate your time

and we will do it again. Thank you so much. Okay. Yeah, all the best. Bye.