Unchained - Why Bitcoin Now: Michael Saylor on the Best Way for Companies to Buy Bitcoin - Ep.209

Episode Date: January 26, 2021

Michael Saylor, CEO and founder of Microstrategy, explains how he decided the publicly traded business data firm needed to put its excess cash in bitcoin and what happened afterward. In this episode, we discuss:  why Microstrategy decided to buy Bitcoin, and how the pandemic spurred that whether his previous experience with Microstrategy stock imploding after accounting irregularities were revealed had any bearing on the company's decision to buy bitcoin the reactions of the officers and board members to his suggestion to invest in bitcoin why they put all the excess cash into bitcoin as opposed to some percentage what parts of the bitcoin industry could be improved to better serve corporate interests whether Microstrategy intends to take any money off the table at the top of any future bubbles and reinvest when the price hits a new low whether it hurts Microstrategy that GAAP rules require the company to mark Bitcoin down to the lowest price it traded at during the quarter how his life has changed since Microstrategy bought bitcoin what he thought of Citi downgrading Microstrategy stock what he thinks of Renaissance Technology being the third-largest buyer of Microstrategy stock since the summer what will happen to Microstrategy stock in a bitcoin bear market whether or not there was any further conversation after his tweets with Elon Musk what types of companies, and how many, have been talking with him, expressing interest in buying bitcoin what will happen at the Bitcoin for Companies conference what type of bitcoin data products they are contemplating offering what he thinks will happen to the USD’s global reserve currency status what it would take for him to sell any bitcoin   Thank you to our sponsors!  Crypto.com: http://crypto.com 1inch: http://1inch.exchange   Episode links:  Michael Saylor: https://twitter.com/michael_saylor Microstrategy: https://www.microstrategy.com/en Bitcoin for Corporations: https://www.microstrategy.com/en/resources/events/world-2021/bitcoin-summit   Microstrategy purchases an additional $10 million in bitcoin: https://www.microstrategy.com/content/dam/website-assets/collateral/financial- documents/financial-document-archive/Form-8-K_jan-22-2021.pdf   Unchained interview with Saifedean Ammous:   August 11, 2020: Microstrategy adopts Bitcoin as its primary reserve asset:   August 11, 2020: Microstrategy makes tender offer to purchase up to $250 million of its common stock:   September 11, 2020: Microstrategy to purchase $60.5 million of common stock:   Plan to offer $550 million in convertible notes: https://www.theblockcrypto.com/linked/87120/microstrategy-550m-convertible-notes-bitcoin   Microstrategy announces over $1 billion in Bitcoin purchases in 2020:   Michael Saylor’s 2013 tweet on Bitcoin: https://twitter.com/michael_saylor/status/413478389329428480?s=20   Forbes expose on unusual accounting practices by Microstrategy back in 2000: https://www.forbes.com/global/2000/0306/0305024a.html?sh=46312df01674 April 2000 profile of Michael in The New Yorker: https://archives.newyorker.com/newyorker/2000-04-03/flipbook/034/ SEC enforcement action against Microstrategy: https://www.sec.gov/litigation/admin/34-43724.htm Forbes profile after the SEC enforcement action: https://www.forbes.com/2000/12/18/1218faces.html?sh=523061e03bf9 Forbes announcing Microstrategy would restate earnings after its expose: https://www.forbes.com/2000/03/20/mu3.html?sh=21efe89d1ee6 Summary of SEC action:   Citi downgrading MSTR:   Renaissance Technologies has been third-largest buyer of Microstrategy’s stock since the summer: https://www.theblockcrypto.com/linked/87194/renaissance-technologies-microstrategy-bitcoin  Microstrategy contemplating bitcoin data products: https://www.theblockcrypto.com/post/85310/microstrategy-bitcoin-data-products Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto five years ago, and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. Subscribe to Unchained on YouTube, where you can watch the videos of me and my guests. Go to YouTube.com slash C-unshamed podcast and subscribe today. One-inch exchange is Defi's leading decks aggregator that discovers the best trade practices across all dexes. One-inch was launched in May 2019 by two White Hat hackers at ETH Global's ETH New York Hackathon. One-inch has reached almost $7 billion in overall volume in just over a year. Crypto.com, the crypto super app that lets you buy, earn, and spend crypto, all in one place. Earn up to 8.5% per year on your BTC. and more than 20 other coins.

Download the crypto.com app now to find out how much you could be earning. Today's guest is Michael Saylor, founder and CEO of Microstrategie. Welcome, Michael. Thanks for having me. Since events and Bitcoin move so quickly, I want to let the audience know

that we're recording on the afternoon of Friday, January 22nd. This morning, Micro Strategy, announced it, had purchased another $10 million worth of Bitcoin, in accordance with its Treasury Reserve policy, micro-strategy already has one-point-one, or had already purchased $1.1.1 billion for the Bitcoin in 2020, that is now worth about $2.3 billion. Is the Treasury Reserve policy simply to allocate any excess cash to Bitcoin?

Yes. We keep a certain amount of working capital in U.S. dollars or in the local countries in yen and Juan and euros where we need it. And generally, we target about $50 million. And then anything we generate from the business in excess of that, we work to sweep into our treasury. And then as soon as practicable, we converted into Bitcoin. And why did you decide to do that? That's, you know, obviously quite a different switch from how pretty much any other company out there works. So why did we adopt Bitcoin as a Treasury Reserve asset? You know, I think that if, if the U.S.

dollar was debasing at the rate of 5% or less a year at 2%. My perception, Laura, by the way, was the U.S. dollar was debasing at 2% a year. You know, the inflation rate is 2%. People preach. We will not allow inflation to be more than 2%. So if you just listen to that, you think, well, I guess cash is maybe losing 2% of its value or 1% of its value or, you know, Jerome Powell says we can't get inflation. We don't have any inflation yet.

So the average person would maybe think that the U.S. dollar didn't lose 2% of its value this year. And that was my perception for a decade. And I think the jarring K-shaped recovery that started in March caused me to question all of my premises and all of my beliefs about macroeconomics. I mean, let's be honest, right? You're on a software company. You're not really a macroeconomist, right? you're not really thinking about macroeconomics, asset classes, currency trading, currency devaluation, monetary inflation.

I didn't know what, I couldn't have told the difference between M1 and M2 money supplies or the rate of monetary expansion in February of this year. It just, I could have preached to you all day long about Apple Watch. I could have told you what I thought about the transformation of mobile devices and wearables and phones and now it's going to change politics and sociology. I cared about tech. I didn't really pay attention to money. So I think that March was a jarring wake-up call. And somewhere along the line, I started reading macroeconomics and I discovered Seifedine's book, the Bitcoin standard. And then I started looking at the rate of monetary expansion.

Then I realized it was about five and a half percent for the last decade. And then I realized the asset inflation rate was five and a half percent. The cost of capital was five and a half percent. And everything clicked. And then I realized that the cost of capital jumped to 25% this year. And everything double clicked. And then I realized the cost of capital was going to stay at 15% or more. And then I realized that if we didn't do something, we were screwed. So, you know, then despair sets in or despondency.

And, you know, if everybody had confidence in the currency and they have confidence in their asset strategy, there's no need to do anything different. When you have a crisis of confidence, you have a crisis of confidence in a country, you leave the country, right? I mean, if you had all your money in Argentine pesos, at some point you lose confidence. If you lost confidence in Venezuela and Bolivar,

at some point you realize you've got to leave. I think this was a crisis of confidence when we saw the K-shaped recovery. And at that point, I realized I either needed to invest the money wisely or I needed to give it back to the shareholders. And the giving it back to the shareholders is like it's a nice flippant thing to do. But, you know, then you decapitalize the company and then you have no assets.

And if you run into, if you run into a business crisis, you become insolvent and you're bankrupt. And then things get really bad. So we decided we had to come up with a treasury strategy. we were forced to by monetary circumstances. And Bitcoin looked to me and to the company to be the most rational, highest quality, technically most perfected asset if your goal is to hedge yourself

against monetary inflation. And is this money then that you don't imagine that you'll need a tap at any time soon? Because so I know Bitcoin can be volatile in both directions, but let's say it was a bare market, then it's like that kind of like long-term investment money that you just don't feel like you're going to need to touch. Yeah, the decision was made easier for us because we're about a $500 million company

and we were generating $25 to $30 million in free cash flow per year in February. But when we went through the lockdowns and the transformation to what I'll call the virtual wave, all of our marketing sales and services dematerial. virtually, and we started doing things via Zoom online. Our micro-strategy world cost $3.5 million last year, and this year I couldn't spend the money even if I wanted to spend the money. That's your annual conference. Yeah.

Yeah, it costs $3.5 million to collect 2,500 people in a room. Now, think about how much you spend to collect 2,500 people in a room. Well, here's a good factoid for you. Are business travel and entertainment expenses year over year? It decreased. By what percentage do you think? 99. 98.

98%. It's a lot of money. So to make a long story short, the company's cost structure compressed. Our cash flows expanded. all of a sudden we realized we're going to generate not $25 million a year, probably more like $75 million a year. And so we're cash positive. What's the second observation?

You can't throw people at the problem anymore. Hiring 10,000 people to knock on doors doesn't work. If there's nobody behind the door, they're not going to answer the door. Right? You can't throw money at the problem. You don't throw money at the problem. You throw intellect and acumen the world. the world wants to see the most entertaining musician, the most intelligent analyst,

the most charismatic, articulate communicator. And that's what moves. So we realized that we weren't going to spend that much money. We couldn't spend that much money. If the company is going to be successful, it's because the software works and people want to buy it. And you better do everything you can to make it less friction-free, right? more friction-free. So brute-force strategies that involve money and manual labor stop working.

We have a lot of money. We have $500 million in cash. We have the expectation of generating another $500 million in cash. So there's a billion dollars in cash flow. And, you know, I guess the good news, bad news is I give you a billion dollars. And the bad news is it's not going to be worth anything in five years or 10 years. It won't buy anything. Houses went up 12% year over a year. So you have to make 12% more to buy the same thing you could have bought last year. So why do we adopt this strategy? Well, we have cash. We're going to have cash. You can't use cash to grow the company anymore. What can you do with the cash? You can either buy the stock back. You can dividend it back to the shareholders. Or you can, you can,

can invest it, what are you going to invest it in? Well, how about an asset inflation hedge that you can't make any more of pure monetary energy? Now, did we actually consider buying the stock back? Sure, we did. We actually tendered to buy back $250 million worth of stock. At the same time as we bought the Bitcoin, it was a $250 million acquisition of Bitcoin and a $250 million tender offer. And the idea was give every shareholder that disagreed with the strategy of investing in Bitcoin the opportunity to exit their equity position out of profit. It was a Dutch auction with a premium. So some people did. Most didn't. We took the excess cash. We invested in Bitcoin. And if Bitcoin was trading at $10,000 right now, we would have $500 million of Bitcoin and be waiting to see how the strategy works out.

but Bitcoin traded up and it's more than that. And so now we're, I mean, our treasury now is up $1,300 million. The stock is up. We now have a balance sheet, which is in excess of like $2.3 billion of Bitcoin. And now the question is what happens with Bitcoin, right? I mean, a business is two pieces. Your right hand, your left hand. The right hand is your P&L.

Your left hand is your balance sheet. Okay, so you can grow the business by growing the P&L 20% a year or 30 or 50 or 100% a year. If you're genius, that's hard. I mean, you can do it that way. You can also accumulate shareholder value by growing the balance sheet by 10, 20, 30% a year. If you told me Bitcoin was going to grow by 20% a year, I would think, by way, if you're going to grow by 20% a year and you have $2 billion on your balance sheet, then you're going to generate $400 million in investment income or shareholder wealth in the 12 months, that's a lot easier than doubling.

Well, if we doubled the revenue of the company, we still couldn't do that, right? Right. Like, we would have to increase the revenue in the company by a factor of five. Yeah. Okay, so, you know, you can compete that way or compete the other way. I mean, some people, you know, some people kind of get irked. like, it's like you're cheating by making money an easy way. Well, everybody on Wall Street's making money that way. Every financial company on earth is like making money by by holding or trading

assets or using their balance sheet. Every bank does. So we simply adopted a strategy that would allow us to create shareholder value, which is good for the employees, good for the shareholders, good for the brand, good for the product. Nobody wants to buy software from a company where the stock is going to zero. Nobody wants to work for that company either, right? Well, one thing that's so curious to me is so you heard about Bitcoin quite a long time ago and famously tweeted back in 2013, quote, Bitcoin's days are numbered. It seems just like a matter of time before it suffers the same fate as online gambling.

So I'm so curious because, you know, I just feel like a lot of people have this story where they start out as critical and then suddenly they kind of have a light bulb moment. And I was wondering, what was it that someone said to you or what was it in how they explain it to you that finally made you a comfort? Was it literally just the pandemic or was there something else? I don't think we'd be here if it wasn't for the pandemic. It's the events of March of 2020. I think there was a catalytic month, the K-shaped recovery. the lockdown of Main Street and the rapid recovery of Wall Street forced everyone to review their assumptions about the way economy works and the way you create shareholder value.

And so that was critical. I think the economic response of the bankers was kind of critical, right? I mean, if the cost of capital goes from 5% to 15%, that's a catalyst. event. It's very difficult to generate shareholder value when the hurdle rate is 5%. The risk premium is 4%. You have to get an 8% yield or an 8% increase in cash flow every year in order to create shareholder value. And if you can't get 8% or more cash flow growth, what can you do? You can leverage up. You can borrow a billion dollars, buy back half your stock, and you can take a 4% cash flow growth company and make it look like 8%. And so you can almost make that work from 2010 to 2020,

right? And so you look at every publicly traded company or every company you can imagine, how do you make stocks hold value you leverage up? How do you make real estate hold value? You refinance, which is leveraging up. How do you make bonds whole value? You refinance them. How do you do that? You keep lowering interest rates. If you can lobby in order to get the bankers to lower the interest rate from 5% to

4 and a half to 4 to 3 and a half to 3 to 2.5, you're leveraging up the bonds as you're leveraging up the real estate and then you're leveraging up the companies. And you can use that to take a 5% grower and make it look like a 10 or 15% grower. arguably Apple did that in the last few years. If you look at Apple's revenues are flat for three years. Its stock is double, right? It's cash flows were fairly flat, but it was buying back its shares. So that's one way to be successful. The other way to be successful is you be Google or Facebook or Amazon. What they did is they grew 20% top line and 20% bottom line.

So if you're growing 20% top line and bottom line in an environment where the cost of capital is 5%, that works, right? You hold that stock. You made money. That was a good trade. Now, what happens to every stock where you can't leverage up and you can't grow more than the cost of capital? They don't hold value. Okay, so it's interesting until 2020, but in March of 2020, it became untenable, right? Because whatever you think you might have done at 5% cost of capital, when it goes to

of 15% or 20% cost to capital and you're fully leveraged up and the interest rate is at near zero. At that point, how many companies are there in the world? How many companies in the SNP 500 can grow their cash flows and their revenues 25%? Like from now, from this point, right? Right. I mean, it's, it just is impossible, right? One percent, five percent? Last year, maybe it was like Zoom. 90% can't. So coming back to my observation, right, when do people discover new ideas when you're forced into a corner, when your back is in a corner, when do people make paradigm shifts in a war, when they die or when there's a war, right? When the old generation dies and, you know, Peter Schiff's son likes gold, right?

Bill Miller's son likes Bitcoin, right? When the new millennials, a new generation, comes along, they might get it. Otherwise, you need a war. And, you know, what was the war, the currency war? When I actually crank up the inflation rate of money by a factor of three or four, then you can't ignore it. So what do I think in 2013? Look, I didn't have a problem. I was, you know, I had a solution. The solution was by Amazon, buy Apple, by Facebook, by Google. That was the investment solution. And in business, I had a business, I was going to sell enterprise software, and I had a conservative treasury, and we invested our money in T-bills and cash. And, you know, Laura, I remember when you could get 5% interest on it on overnight money,

five and a half percent on repos, no duration risk, no credit risk, investment grade. Okay. So, I mean, there was a time when it would be rational and responsible for a public company's CEO to invest their cash in those treasury assets. And then if you have excess cash, you gradually buy the stock back. And we did. We bought back $300 million worth of stock, like large sums. And then you do your best to compete with Microsoft, Oracle, SAP, IBM. And that's what you do.

Well, I think what happened is A, the inflation rate went from 5 to 15%. B, we saw a K-shaped recovery, screaming success. All the financial companies are doing great this year. All of the service companies and Main Street companies, you know, are struggling. If you happen to have a stock on Wall Street, maybe you're getting a pass. But if you're a private cash flow business and you're not financiable, you can't get cheap money, you're not, right? They're struggling. So you have that on one hand.

And on the other hand, Bitcoin matured. I mean, Bitcoin was one, two, three years old. You have to check the box. Will the IRS give it property treatment? Will the SEC deem it property? That's a pretty big deal, being property and not a security, right? You saw what happens with Ripple when you're a security. Right.

It's illegal for Scenti Alumus to promote a security in Congress. whereas promoting property ownership in Congress is the American way. And so that decision, is it property or is it a security, is pretty critical. I think if you look forward, you say Bitcoin's been derrised. Will it be forced? Well, it was, and we know what happened. Will it be hacked? It wasn't.

Will it be banned? It hasn't been banned. Is there any rhetoric to suggest they'll ban it? No, except in China. But you know what else China banned? They ban Google, Twitter. Facebook, okay? How those trades do in the last decade?

So China is totally consistent. They ban the information network. They ban the mobile network. They ban the speech network. And they're going to ban the monetary network. And Bitcoin's the monetary network. And that just means in the Western world, in Europe and the U.S., Bitcoin is going to be the predominant digital monetary network.

And then it'll be, it'll have rails on it. it'll be regulated in the same way that stocks and bonds are. And when it is, all the crypto anarchists will be freaked out that there's some regulation. And all the people of Black Rock and Pemco and Fidelity that have more money than God will say, okay, well, it's safe now. We might as well buy a hundred billion of it. Right. You know, what I say to the crypto anarchist is, why don't you just get along with the institutions

and the corporations for now, hold your nose. And when you've made billions of dollars or $10,000, or $10,000, tens of billions. Take all your money, buy an island, start your own country, and do it your way. Just take, but take the money first, right? Because there'll be time to do it your, you could have an island with no taxes and no, and all privacy. You do it exactly how you want it, but wouldn't you be better? I mean, to get the $100 billion first and then start the country, then to have your privacy and then have no regulation and then, and your Bitcoin is worth like $42. Right.

It's like it's, it's not that I don't believe. Look, I believe the ethos. I'm a libertarian. I'm all in favor of all of these, all of these, you know, individual sovereignty and the like. I just, I think there's a certain order to go about these things. And the first order is make the monetary network successful. Yeah.

And then after that, figure out what you're going to do and don't hate on Square and PayPal, because they put some rails on some part of their network. It's like it's still going to benefit you as the hoddler. Yeah. Right. I mean, Grayscale is benefiting every hoddler, even though, you know, that's anathema, you know, it's not your keys. It's not your coin.

But arguably, Grayscale is doing more for the Bitcoin ecosystem than anybody because they're channeling huge amounts of institutional money into it to the benefit of everybody. earlier you were talking about these kind of like pivotal moments where the paradigm changes. And so when I heard the news that micro strategy had first bought Bitcoin, the name was familiar to me. And then I remembered how I knew it. And you may know what I'm going to ask you about. But you know, I knew micro strategy as the high flying stock back in the dot com era was a total tech darling. And then then it had this epic downfall that I was watching, you know, every day in the news, seeing the stock price plummet, you know, after these accounting irregularities were revealed, actually by Forbes, which is my former employer, but at the time I was following this, I was working in the Wall Street Journal. And so I'll just recap for the audience. It appears micro-strategy, and you can feel free to correct, you know, anything, was booking revenue from deals that had just been inked,

but booking that revenue on its quarterly earnings to show a profit, or sometimes at least the SEC said even leaving contracts unsigned until after the quarter ended and then choosing which ones to sign to meet revenue targets. And so after this was revealed and Microsoft Reded the accounting, it showed that the company had actually been losing money for the previous three years. And so this was just in the news. And I mean, You were also quite the character, like there was a profile of you in The New Yorker. And, you know, I remember, yeah, just, you know, you seemed like this larger than life figure. And at the end of that year, Micro Strategy and the SEC reached a settlement after the SEC accused you of fraud.

And so, frankly, when I realized this was the same company in person that I'd followed all the way back then, I was really amazed also that you had stayed CEO. So I wondered, what was your takeaway from that? experience. Well, you know what they say about experience? It's what you get when you didn't get what you wanted. Look, the restatement was a low point in the history of the company. I'm not proud of it. I learned a lot from it and I'm still here, you know, and I think that it's probably not that much more I care to say about it. It was 20 odd years ago. Was there anything about that experience that you think, or do you think there's any link between what happened then and then your decision now to go all in on Bitcoin? No, I don't think so.

I think that at all points in time, for the last 30 years, the company has grown by harnessing technology trends. We wouldn't have become a public company if we hadn't actually harnessed open systems and relationships. databases and that was a new trend and we wouldn't have grown if we hadn't tapped into the power of the internet and that was a trend uh i launched a bunch of companies along the way like alarm dot com and that was like a home automation trend alarm dot com is a multi-billion dollar public traded company today uh like it was it was uh yeah it was like all the home automation uh things that google and amazon are doing but it was 20 years early we launched a company called Angel, which is like Surrey and Alexa. It was another thing. At every single point,

right, if you don't embrace a new technology, when the mobile wave came along, we launched a bunch of new mobile software, and that was how we grew. And so today, there's a monetary network, and if you want to grow, you have to tap into the monetary network. They're all just different waves of technology and paradigm shifts. If anything, you know, what I, what I learned from my experiences back in 2000 was be very careful, right? Be very careful. But, you know, it was difficult times, right? Ninety-nine percent of the companies that we competed with are gone. Ninety-nine percent of the CEOs that I competed with are gone. It's a 99 percent mortality rate. And, you know, I, I learned a lot. I did some, I did a financing at one point. Didn't work out well. The stock

gyrated. I learned to be careful about that. I learned to be careful about many things. But, but, but you can't quit, uh, thinking about the world and you, and you can't, um, you can't allow your past to keep you from charting the right future. And, uh, I'm, I'm, I'm quite sure this is the right thing to do. I think the rest of the world will end time, agree with me, but Laura, at the end of the day, public companies are required to take risks to grow the business, right? So there are thousands and thousands of public companies. There are some companies that don't wish to be software companies. They think that's too risky. There are some companies that won't be real estate companies, I think it's too risky, right? The responsibility

of a company is to chart a strategy communicated transparently and then let people decide whether or not they want to buy from the company or they want to invest in the company. And I think that we're very transparent about what we're doing. And it may not be for everybody. Some people may not like the idea of Bitcoin. They may not believe it's a digital monetary network. They may think that maybe gold's a better investment or maybe the U.S. dollar is a better investment, right?

They all are entitled to their opinion. And they'll invest in companies and assets that, are suitable for their outlook on the world. All right. So in a moment, we're going to talk about kind of what happened after you made the decision that you wanted to allocate your capital to Bitcoin. But first, a quick word from the sponsors who make this show possible. Crypto.com, the crypto super app that lets you buy, earn, and spend crypto, all in one place.

Earn up to 8.5% per year on your BTC. Download the crypto.com app now to see the interest rates you could be earning on BTC, and more than 20 other coins. Once in the app, you can apply for the Crypto.com metal card, which pays you up to 8% cashback instantly. Reserve years now in the Crypto.com app. One inch is the decentralized exchange aggregator that sources liquidity from the top dexes

and liquidity sources to save users' money and time on swaps. One inch is capable of finding the best possible trading paths and splitting them among multiple market depths. Recently, the 1 inch team, availed 1-inch version 2. The main highlights of V2 are Pathfinder, an API that contains a new discovery and routing algorithm and a new intuitive user-friendly UI. The V2 improvements ensure the best rates on swaps while dramatically cutting response time.

Back to my conversation with Michael Saylor. So you have your lightbulb moment with Bitcoin and you decide that this is what you want to do or where you want to put the company's excess cash. When you proposed it to the board members and the company officers, what was the reaction? They were open-minded. They wanted to get educated. So first, we started with an education process. And it takes a while to understand it.

And after the education process, there was a consensus building process, a lot of meetings, a lot of discussions. And then we developed a set of projects and we assigned some work for every, to do when the CFO had his work and the general counsel had a difference at a task and we considered all of the legal regulatory and operational and technical implications. Then we came back and met again. Then we formed a consensus that we were going to pursue, in essence, a dual strategy, right? The first part of the strategy was invest in Bitcoin and the other part of the strategy was do a tender offer and that we executed that. And so we didn't know how that would evolve, right?

I mean, if you have publicly traded company, it's not like you can just meet with the three shareholders. You can't even meet with the 10. You can't meet with shareholders because they're changing every minute of the day from 930 till 4. So what we did was we announced the strategy, telegraphed it, allowed the market to digest it. Then we started to execute the strategy.

We had a 20-day tender period. That was 20 days for the market to digest it again. You're in a dance with the shareholders, right? Because they could have tendered $250 million or they could have tendered none or they could have tendered some at different prices. We don't know what will happen. So after the tender offer was complete, then we had better information. And we knew we had $175 million of extra cash.

We also had rotated the shareholder base. we had a different shareholder base. Everyone that thought this was an awful strategy had either sold during the tender period or sold into the tender. And those that stayed in the stock, and presumably actually a lot of companies bought into the public float based upon the strategy.

Right? So you have a different shareholder base and you have a different capital balance sheet situation. So at that point, we announced that we were going to expand our scope and we are going to make Bitcoin the primary Treasury Reserve asset without a cap, right? And that's another important development. Then we move forward to acquire additional Bitcoin with a new shareholder base.

And from that point forward, things evolved, right? We don't know how that the stock price evolves, the Bitcoin market evolves, new things, new developments present themselves, and then we act accordingly and rationally. Yeah, I mean, in hindsight, we can say your timing was extraordinarily good. But one thing that I was wondering is, so that moment where you decided to not cap the amount, you know, like kind of a traditional way of looking at a portfolio is, oh, you would invest some percent, like, you know, 1%, 2%, 5%, 10% into what they would call a speculative asset like Bitcoin. And so what was that moment where you said, okay, it's not going to be like a percentage.

It's just like everything that we don't really need right at this moment? And I mean, I know you kind of already answered it, but is it literally just what you were saying about how cash is depreciating? Or was there any talk about trying to diversify or? At the end of the tender offer. I mean, when we finished the tender offer and we knew the result of that, we had a board meeting. we made that decision. And I guess I would take issue with your characterization that Bitcoin is a speculative asset. That's a value judgment or that's a particular characterization. It's a speculative asset if you think it is. But if you think that you're going to lose 75% of your purchasing power

by holding the dollar and Bitcoin is the soundest money in the world, and is going up 200% a year every year on average for a decade, a rational person could conclude that in fact it's the least speculative thing you could do. So it just comes down to your point of view. And this is a fundamental issue too. For example, if you were in Argentina and you had all of your treasury in Argentine pesos, and I was on your board and you walked in and said, Mike, the Argentine peso is 10 pesos to the dollar, but I think it's going to slide to 20 pesos to the dollar.

Right. And I think perhaps we should take our pesos and convert them into dollars before that happens or convert them into something else. Is that speculation? I mean, are you risking the company's balance sheet? And then if you came, if I said, no, just do half. And you said, but we're going to lose the rest. Right. I mean, is it prudent? and risk adverse to only do half. What if I told you the peso was going to go from one peso to the dollar to 140 pesos to the dollar, which is what happened, okay? That's what happened. Are you going to sit and debate with, how would you feel if I'm on your board and I say to you,

well, Laura, you know, I really don't think it's safe for you to convert half of your, or 75% of your balance sheet to dollars. I really think that's unsafe. And you say, but you know, we're going to lose 99% of our. wealth of our shareholder value. I don't know. It's a speculative. Well, and now you're going to say, well, the dollar's not speculative.

Well, it kind of is speculative because I've had a company in Argentina. And let me tell you what happened when I did exactly that. I converted the pesos to dollars and the government passed a law converting the dollars back into pesos devalued them 10 to 1. I lost all my money. Right. Okay. So it was speculative to convert pesos to dollars.

Right. So any decision you make with the treasury has some risk. In hindsight, the least risky thing I could have done was convert the money to Bitcoin. If I had actually converted the pesos to Bitcoin and not converted the pesos to dollars, then I actually would have kept the value. And we could go on to other assets, right? Maybe I should have bought gold with it or bought forest land with it or something. But this idea that it's a speculation is based upon, I don't know, it's some premise that people have in their head.

They think that it's therefore risky. But if something's going up 200% a year on average for 12 years in a row, at what point do you conclude that it's no longer riskier to hold it than to not hold it? Yeah, I feel like you're like one of the first people in the hyper-bitcoinization wave where, you know, you think in Bitcoin, it's like Andreas or like other, you know, I've had Olaf Carlson, we, the founder and CEO of Polychain Capital, and he used to just do all his money in Bitcoin as well. So one thing I was curious about, so when you went to buy the Bitcoin, what were the most difficult points in the buying process, you know, what parts of the Bitcoin industry do you think

need to kind of advance further to serve corporate investors as well? The two challenges that any institution or a company has when they're buying Bitcoin or who do I trade with and then where do I store. And that's somewhat related to the other decision you have to make, which is, am I going to buy the underlying asset and take? and take custody of it or hold custody of Bitcoin itself, or am I going to buy into a fund? Like, do I buy the Bitcoin on exchange or do I buy Grayscale or an equivalent as a fund where I have the economic interest,

but in fact the fund manager has responsibility for trading and custody? So there are different pros and cons with regard to those decisions and different companies will make different decisions, based upon their own circumstances. I think you just have to find the institutional grade funds or custodians and exchanges. We're actually hosting a Bitcoin for Corporations conference, and we're going to have 10 of those institutional grade vendors there. And I'll be speaking, you know, either with the CEOs or with their heads of institutional

sales. And the simple question is, what do you offer for institutions? What's the customer journey? what kind of companies do business with you, right? What advice would you have for them? I think, you know, the growth of regulated entities is clearly a big plus, right? When Fidelity came on board, I mean, all of the companies getting licensed by New York State, etc., that's been the financial authority, that's been a good thing.

And as more and more publicly traded companies and large, multi-billion-dollar institutions get involved, they'll be interested in doing business with custodians or funds that pass their accounting criteria where you're going to want to have your Sorbanes-Oxley opinions and your Sarbanes-Oxie controls, SOC2 findings. And they have to incorporate the fund or the custodians. annual report accounting control filings into their own 10Ks or their own annual report. So that development of a regulated, audited, normalized set of institutional vendors, I think is pretty critical to the industry and it's been very helpful.

I don't think it wasn't there in 2013, obviously. It wasn't there in 2015. It's not even clear if it was there in 2018. I think really in 2019 and 2020, most of these things don't. coming online. Yeah. So micro strategy's average purchase price was a little less than 16,000. And right now, you know, the price is about 33,000. So you've more than doubled your investment. And most likely by the end of the year, we're probably going to be in some kind of bubble, I imagine. So the return will be even higher. And you've said that you didn't buy the Bitcoin

to sell it. But would micro strategy ever take some off the table when you sense the market is at a top and then just buy in later when there's another correction? Or do you just plan to huddle through all the cycles, you know, and whether those, you know, whatever 80% downturns when the crypto markets are in a bear market? Yeah, again, I just disagree with your characterization. I don't expect an 80% downturn. I don't think it's a speculative asset.

And I don't think you can, quote, unquote, take money off the table. You know, you're speaking like a crypto trader right now. right yeah i mean maybe you've been maybe you're doing it just to represent their interest but um i don't see the world that way i think that bitcoin is sound money it's the uh technically superior asset class compared to the dollar the euro the peso the bolivar compared to a stock index compared to gold compared to silver, compared to everything you can conceivably buy, it is technically thermodynamics superior as an asset. So when you say things like that to me, and maybe you just do it just to just to see what I'll say back, I just imagine you preaching to me in Argentina while you're asking

me if I'm going to sell the dollars and buy pesos back again as the pesos leads from 20 to the dollar to $40 to the dollar to $80 to the dollar. Or if we're in, you know, Venezuela. I mean, you think Venezuelan company is going to like, quote unquote, take some money off the table by selling their, their U.S. stocks and their U.S. dollars to buy back into local currencies. Or then, you know, in Zimbabwe, you think they would take money off the table, right? Like, the point is, if you have the superior asset, it's going up forever, Laura, forever. Right. I mean, right, but I mean, we can all look, Bitcoin sort of as,

numerous investors have talked about it, kind of like breathes, you know, after having the next like year and a half after it tends to go up and then after it reaches some kind of bubble, it kind of size a little bit. And then after the next having, we see

it go up. But you know, so it's this kind of like up and down cycle, but the overall trajectory is up. So, and it's not, you know, these are like I, on Twitter, people were asking me to ask you this as well. I think it's a perfectly, you know, natural question to ask. I think, I don't think Bitcoin is volatile if you're

an investor. If you're a hoddler, if your time horizon is one year or if it's one year, you're a short-term investor. You can find like two or three times in the last decade when it wasn't great, but it wasn't awful. If your time horizon is four years, you can't find a time when it wasn't working. So I think, I mean, just a normal, ordinary, responsible investor with a four-year timer eyes were looking to say, this is very boring, right? It's exciting if you're a trader or a journalist. And if you're on Twitter, and if you want the news to change every day, like people,

and I feel like on Twitter, we've got a hyper-inflammatory, hyper, like a high-speed, short-time preference. Like, I have to have an opinion every day or every week. or every month. And that means everybody's always generating news. Like if I take anybody on the world and if I take a microscope and I zoom in and I magnifying glass and I zoom in by a factor of a thousand, I'll eventually find a blemish. Like if you look at Bitcoin trading every week, you'll find a blemish.

If you look at it every day, you'll find more. If you look at it every hour, you'll find more. if you look at it every minute, you'll find plenty. But if you zoom out to a decade or five years, then you'll have a different view. I really take issue with everybody that attempts to apply some statistical model. I'm not a trader. By the way, to be clear, trading is speculation, and traders see the world in short-term moves. And they're always, and maybe traders love all volatility and traders love controversy. And traders love this debate because it creates that volatility.

But this is an engineering issue for me. The years 1910, people are wiring their houses with electricity. And you're asking me at what point I'm going to turn my electricity off or you're telling me how eventually people are going to get tired of electricity. And then you're telling me that wouldn't I really want to convert back to horse and buggy? and manual labor to take some off the table because electricity is a scary speculative thing. And I'm like, no, it's running water. It's electricity.

It's automobiles. It's not a fad. It's the future. It's it's not a bubble. It's capital flow. When all the money is leaving the peso going to the dollar, that's not a bubble in the dollar. That's capital flight from a collapsing asset or a collapsing currency that people have lost confidence. in just like the stampede to the internet.

Like would you ask a company, when are you going to stop using the internet? Are you going to stop using it in a quarter because you've used too much electricity and internet? And I say, and you're like, well, you know, I noticed that your Facebook or your Twitter hits were going down or they weren't as high. So you just have to turn off your thing. And my view is, is this is all just short term technicality. And by the way, I don't think there's a single trader with all the data in the world that can predict the future.

Like, for example, you're going to go and pull every line of data of every second. If you know every trade of Bitcoin since 2010 to today, how would that be a better indicator of the future if the future is based upon things that are changing? It's like, this is the thing I said to Keith McCullough. Keith wanted to like talk about quad models and correlating Bitcoin performance to the CPI and inflation and deflation and he's crunching numbers. And just like the Fibonacci retracement is not going to determine the future of Bitcoin any more than the Fibonacci retracement is not determining the future of electricity, right? Okay.

And inflation is not going to determine the future of running water. And if it's stopped, if the economy stops inflating. or if the CPI goes up by three or goes down by two, it is not going to stop a tidal wave from blowing into your beach. If you're standing on the beach and there's a tidal wave coming, the first order issue is that's a tidal wave. And you're going to tell me, well, you know, in the last decade, all of our statistical models didn't predict the tidal wave and there's,

or something. It's like it's irrelevant because it's an engineering phenomenon. So a traitor that wants to preach to me, about what they think should happen based upon 2017, in my opinion is irrelevant, right? And let's come back to the key point. If 10 billionaires choose to buy $5 billion or a billion or $2 billion worth of Bitcoin each, all of your models are irrelevant, all of your history is irrelevant.

It's like everything you, like, you think you know how things are going to work out. And like, how about all the statistics of New York City for the past decade? How relevant are they to predict what happens in New York City this month? Right. Not relevant at all. Right. So traders, I can't predict the future. The only way, trading is not a way to make money, by the way, in my opinion.

The people that make all the money are people that predict the future. Henry Ford, right? John D. Rockefeller, right? Andrew Mellon. What did they do? They invented aluminum. They invented oil. They brought us cars.

They brought us electricity. Andrew Carnegie brought us steel. Mark Zuckerberg, not studying some statistical model. How did he get rich? He kept Facebook stock. He didn't sell it. Jeff Bezos, he kept his stock. So at the end of the day, none of this statistics matters,

None of the trading matters. None of the volatility matters. People that are living in their little world, studying their Fibonacci retracements and preaching with like incredible conviction about the upcoming expected 60% retracement or 80% retracement, they're overlooking this fundamental issue,

which is if Bitcoin is a digital monetary network and if enough people with money and power decide to adopt it, it's going to go up and increase by a factor of a hundred or a thousand. And there's nothing you can do to stop it. And its past is completely irrelevant to its future. Right. So looking back makes no sense. The only question you've got to ask yourself, Laura, is, and here's the question you

ought to ask, how much Bitcoin is Square Cash going to sell in 2021 on the mobile app? That's the question. Right. How much is PayPal going to sell? Because PayPal and Square are going to obliterate everybody else's opinion about what they think should happen, right? Yeah. And so, like, I think that too many people in this industry have been around too long, and they're captured by their past. And they, and everybody wants to draw on their past because they own it.

Well, no, it is true, though, that even when you look at certain of the analytics right now, it's, you know, we're an uncharted territory. One thing I wanted to ask you about was this was just something I didn't understand. So according to the gap accounting rules, your company needs to use the lowest value of Bitcoin in any quarter as the price. And if it falls below the price at which you acquired it, you have to impair the asset and write that value on your balance sheet. So I didn't understand, does that help you or hurt you in terms of your bottom line or like the taxes? I didn't really understand the implications of that. The implications. of accounting are if it's if it's accounted for as an intangible asset you can't write it up on a

gap balance sheet you must impair it to the lowest price that it traded at in the period in question so what that means is that your gap asset balance sheet is not going to be as high as if you were carrying it as an investment asset that's why that's why in some cases it'll be more interesting for some companies to invest in it as a fund instead of buying the underlying asset, right? Because you, and even then, I can't really speak for how every company will account for it because every company has its own accounting treatments and they all have their own facts and circumstances.

And the facts and circumstances get pretty complicated. Okay. So actually, so that element, it sounds like that can at times be negative for micro strategy. I wouldn't characterize one way or the other. Okay. It probably just sort of depends what happens in that quarter. Like, I don't know what you're getting at. Or that, like, it isn't always 100% negative or 100% positive. Define negative. I guess if you didn't, like, if you could just use the actual, the price at the time of, you know, of, at the quarter ends, do you know what I'm saying? Like, if we were to just use that price as opposed to

having to use the lowest price? You know, Laura, I'd rather not engage in a discussion of accounting with you. I can't see what the upside is of that. Yeah, I was just trying to figure it out, but you're right. Okay, let's talk about something maybe more fun, which is, I was just curious, how has your life changed after it became public that micro strategy bought Bitcoin? I engage in a bit more communication now. So I communicate on Twitter and I communicate on YouTube and I communicate on television more often because I think it's important to be an advocate for the industry and to explain what's going on. I think a lot of people don't understand what Bitcoin really is and they don't understand the Bitcoin. network and the emergence of a monetary network.

And I think it's important to communicate and educate the world on that. So I'm more engaged in outbound communication and education than I was before. And I wondered so when City downgraded the micro strategy stock to sell, it also indicated that senior management had been selling micro strategy stock. And they wrote, quote, we are also concerned that the company could be losing focus on execution with CEO, sailors, disproportionate focus on Bitcoin. versus running the business and signs of deteriorating employee sentiment. What do you have to say to that?

Well, I don't agree. I think employee morale is good. I think the company is executing fine. And I think the shareholders would disagree with the opinion as well. But everyone's entitled to their opinion. There are some people that don't choose to own Bitcoin. And there are certain banks and there are certain entities that are more positive on it than others. So I think everybody's entitled to their opinion.

And what did you think when it was revealed that Renaissance Technologies was the third largest buyer of micro-strategy stock since the summer? We have various institutions that take positions in the company from time to time. And that's changing almost every quarter. So we're flattered by the support from any, any reputable investor, and they're all pretty reputable. So I don't play favorites. I mean, we've got a lot of really good investors that have invested in the company. And we appreciate them all. So your stock price has gone from $123, the day before the announcement, to roughly $575 today.

What do you think will happen to your stock in a crypto bear market or Bitcoin bear market? Bet mode activated. The scorebed app here with trusted stats and real-time sports news. Yeah, hey, who should I take in the Boston game? Well, statistically speaking. Nah, no more statistically speaking. I want hot takes. I want knee-jerk reactions. That's not really what I do.

Is that because you don't have any knees? Or... The score bet. Trusted sports content, seamless sports betting. Download today. 19 plus, Ontario only. If you have questions or concerns about your gambling or the gambling of someone close to you, please go to conicsonterio.ca.

With Amex Platinum, almost every purchase made with your card can be covered with points, including new tastes, new fits, and virtually everything in between. That's the powerful backing of Amex. Conditions apply. Local news is in decline across Canada,

and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us, because local news is big news.

Choose news, not noise. CBC News. I don't know. I can't speculate. I mean, I think what happens to the stock is up to the marketplace. The market decides. Again, I think that you have this model that you think, that Bitcoin is a cyclical thing like a sine wave, and it's an implicit assumption in the question

what happens in a crypto-bearer market. But if I had a model that we're going to wire the world for electricity, at what point between the year 1900 and the year 1950 did the world unwire its electricity or roll back its running water or roll back its automobiles? I view Bitcoin as a monitoring network that is spreading, right? It's a bare market in automobiles. And what year was that bear market, you know, from the point that Ford and General Motors started? Right.

So it's like, if you don't believe it's an industrial network, right? When was the bare market in Google and the, you know, since the company was founded, right? Right. It's more like if stocks are reported on a quarterly schedule. I mean, I understand what you're saying because, of course, from along, from, you you know, a long time, if we're looking at a long enough time scale, then of course, what you're saying is true. It's just obviously, you know, the rhythm of stocks and quarterly reporting and

all that is really different. Well, again, speculators and traders managed to, manage to speculate about volatility and focus upon it. But investors and industrialists are more focused upon upon building something for the long term. And the fundamental critical issue to understand is Bitcoin is the most, the technically superior asset in the world right now. And it's running on the dominant digital monetary network. And that digital monitoring network is growing and is spreading. And there's no reason to think it's not going to continue to spread.

Was there a bare market in the internet? at what point did it make sense for the company to worry about a bear market in the internet? Like if you were given an interview to Jeff Bezos in the year 2000, you said, are you worried about the bare market in the internet? And his answer would be, I'm building a great online retailer and we believe in the future. So I believe in the future of Bitcoin. I believe the future of a digital monetary network. And I think it's just as important to humanity as a electric.

and running water in the automobile and steel and communications and the internet. And it's going to grow over time. And maybe there'll be good days and bad days. But, you know, we don't do things based upon whether or not we'll be up or down by the hour, by the day, or by the week. We do things because they're the right thing to do. So if you believe that the world will benefit from a thermodynamics sound monetary network, then you're going to invest in Bitcoin.

You're going to build Bitcoin into your balance sheet. You're going to build it into your P&L. You're going to evangelize it, educate the world. And you're going to look forward to the journey. And if you don't, then you won't. I think it's a mistake, by the way, for any crypto traders or speculators to fixate upon speculating and trading this thing, it's going to be like trading Apple stock in the year 2010.

It's like you might like buy it for $1.15 and sell it for $1.27 and brag to your friends or short it at $1.42 and cover your short at $1.13. But ultimately you're going to look silly if 10 years later it's trading at $120 a share. And someone's going to say, so you were doing what? You were making nickels when you could have actually made, 100 X or 1,000 X that much money by actually investing in it. Right. You know, you think the people that made the money were...

Plus all the wasted time and energy. Yeah, I mean, people shorting and trading and speculating in the short-term direction of general electric or general motors or, you know, or standard oil. They're not the ones that you remember. You're reading about the people that actually, you know, Henry Flagler, Andrew Mellon, you know, the industrialist, you know, Andrew Carnegie. you're reading about the people that actually invested in the future, believed in the future,

fought through the difficult time periods and held out for the long run. So you could call it hoddling, but I don't, how about just commitment, commitment and conviction over the long term, right? And not being caught up in the near term. I mean, that's the strategy. And I can't imagine that anybody, no employee wants to work for a CEO without conviction. No customer wants to buy from a company that's not committed. Right.

No vendors or counterparties or nobody wants to do business with anybody that that changes their opinions and blows with the wind day by day or week by week. So I think, you know, there are some people that can make money speculating this way and that and trading against bare markets. That's not the business of a technology company. A technology company needs. to identify new technologies and find a way to invest in new paradigm shifting technologies. And if you do it well, you'll grow in the world to be a better place. And if you guess wrong, then you suffer the consequences. And that's the free market. And I also wanted to ask about the convertible debt

offering, which ended up by the end being $650 million. I wondered how that works for the purchasers. So they've received 2.5 shares of micro strategy stock per $1,000 principal in notes. So does that mean that if the price of Bitcoin goes up more than two and a half times, then micro strategy gets a higher return from these notes and the purchasers do? Or I wasn't, you know, I don't really fully understand this world. So I wasn't sure. A convertible bond is structured as partly bond, partly warrants. So if you were to loan me $650 million, and as part of a convertible bond, the first question is, what interest rate am I going to pay you?

In this case, say it's 75 basis points, three quarters of a percent interest. Second question is, what's the term? In this case, it's five years. At the end of five years, I either have to pay you back the $650 million or in cash, or I need to issue $650. $150 million worth of equity at the then current value of the equity, assuming that the equity is lower than the strike price of the warrants. So the first component of the bond is it's a bond and you have downside protection. The second component is warrants. So in this case, the bond converted at $398 a share. So that means that if the stock price is above $398 a share, above that

strike, then you have the right to convert your bond into the share equivalent of 650 million divided by 398. So that's like 1.6 million shares. So you, in essence, have 1.6 million warrants if the price of the stock goes above the strike. And if the price of the stock stays below the strike, you have a bond which pays you back, not that much interest, less than 1% interest, but you get your principal back. So it's a principal protected way to invest in an equity. It's not as, it's not as much upside as buying the stock, right? You'd be better to take 600, if you'd taken $650 million on the day that bond was struck, you could have bought two and a half million shares. You could have bought more than the 1.6 million shares of stock

because it struck at a premium, right? 37% was the premium. So if you wanted all the downside and more upside, you could buy the stock. But if you don't want any downside and you want to accept less upside, then you would buy the bond. And so the bond gives people participation. If Bitcoin were to go up by a factor of 10, then they've got participation in that, not as much as the shareholders have. But, right, it presents an interesting proposition. If I was an institutional investor, I could buy $650 million worth of Bitcoin,

or I could buy $650 million worth of micro strategy stock, or I could buy $650 million worth of a bond. By the way, and that's assuming that you had a charter that was flexible, and by way, investors have limited partners. They're like public companies. I have to consider what my shareholders think. They have to consider what their limited partners think. So if you were high net worth multi-billionaire family office and you could do anything,

you know, by calling the phone, you have those three choices to make. But as a practical matter, what's more likely is you either have a fund that invest in Bitcoin and you raise money to invest in Bitcoin and that's what you can do. Or you have a fund that invest in equity, public company equity. And you can invest in anything with a ticker on the NASDAQ, you know, Amazon, Micro Strategy, Facebook, but you can't buy Bitcoin and you can't buy bonds. Or you have a convertible bond company and sometimes you have convertible arbitrage funds where their specific strategy is they would say, well, Laura, give us your money and we're going

to buy the bond, but we're going to immediately short the equity and the common equity in the market. So we'll never have that much equity risk. We're just going to arbitrage this and we're going to get like 10% yield. Okay, that's a strategy. And if you break that strategy, maybe your limit partners will be irritated at you, right? Maybe you can't. But you could also have another fund, which is a convertible bond fund with the option to go long or to or to hedge it.

And if I bought your bond and I went long, that means I'm not going to, I'm not going to immediately hedge it. I'm going to actually keep the bond and to keep all the upside. That's all of the different situations. everybody's got a pool of capital they can play with subject to a charter, a strategy, and a set of limited partners. And then what happens is people choose to make an investment based upon, you know, their circumstances. Does that answer your question?

Yeah, that makes sense. You kicked off a trend with so far only three companies now buying Bitcoin for, you know, allocating their capital of Bitcoin, which are you and Square and now Mass Mutual. I'm sure we can expect many more. And I, you know, couldn't help. But notice, of course, that you have had tweeted with Elon Musk suggesting that he convert the Tesla balance sheet from USD to Bitcoin. Did the conversation go any further than that?

You know, I couldn't tell you one way or the other. It would be inappropriate. What I can tell you is I think a lot of companies will do this in the coming 12 months and you'll start to see more announcements because it's an. idea whose time has come. I've seen a lot of interest and there's a lot of private company CEOs reach out to me and they're they've already done it. They're just not making announcements. But but this is actually more common at least 100. Oh wow. At least 100 that I know of. And what size typically like small private companies or?

Sometimes billion dollar plus companies. I mean billion, multi billion, 500 million, 100 million. So there's a lot of companies in that sweet spot. And, you know, generally they, they all, they all, everybody talks to everybody, right? And, and so there's a, are the US companies generally or? Well, I'm more familiar with the US ones because I just have more connections here, but and what types of industries do they? I don't think it's limited just to the US. I think that in Europe and the far east and, and the Middle East, I think we're, we're actually seeing people come in to And what types of industries do they tend to be in? Everybody's got money.

It's just money, right? Like it's like the amazing thing about Bitcoin is it's just pure monetary energy. So everybody on earth that has any wealth to speak of or any assets to speak of has the same problem at the same time. And this is the solution to everybody's problem. It doesn't really matter what business you're in. No one's got a monopoly on that. I think that information is traveling a little bit more in the U.S. right now just because of the social networks, et cetera.

But it's not limited to that that I can see. I've had conversations with people in the Far East, Hong Kong, Singapore, London, Europe, Dubai, Abu Dhabi, South America, everywhere in the U.S. So there's a nonstop continual set of inquiries. and I've seen a lot of them have acted. I think that we'll see more public companies. They're the higher hurdle because they have more due diligence, more compliance, more issues to work with or work through than private companies have.

But I definitely feel that's happening. That's going to happen in 2021. We've got we'll have a couple of thousand people. coming to our Bitcoin for Corporation Summit in the first week of February. And there's a massive, enthusiastic response to that. Everybody wants, they just want to, they want to understand how to do it. Like what, it would take you six weeks to 12 weeks to work through the legal, the accounting, the compliance, the due diligence, and the other issues if you're a major company with the

board, with auditors, with lawyers, etc. So what we're really doing is we're bringing together all those experts. And we're going to open source all of our documents into the public domain in order to accelerate everybody's journey by about six weeks and save them half a million or a million dollars each. And then we'll just put, we'll put those top, those 10 companies on the, you know, onto the agenda so that a company can come. They can figure out the methodology. they can see what their options are, work through the due diligence issues, understand how a GC or a CFO thinks,

understand our auditors think, outside counsel think, decide who they want to do business with and how. And we will discuss the accounting issues. So if you want to go deep into accounting, you should come to that event because we'll have our auditors and our CFO

going in detail on accounting and tradeoffs and issues. And we'll have our general counsel with our outside counsel talking about all the legal due diligence compliance and regulatory filing issues. And I think we want to make it as transparent and accessible as we can to the world. And was it all those conversations that you were having with different court companies, you know, officers that led you to hold this?

Yeah, I mean, I had a lot of conversations. I know everybody, from the point you decide you want to do it. If you're an individual when I said I want to do it, it took me like eight weeks to get through all the AML KYC, you know, education process. As a company, it's about 12 weeks if you wanted to go as hard as you possibly could. And I have a brilliant team of finance and legal people, and it was a small group. So what we want to do is just take that 12-week process and we want to make it simpler and more accessible and more transparent and cookie cutter because there's 10,000 companies with exactly the same issue. And they all just need to learn. And so if we can

educate the 10,000 companies, then we will speed up the maturation of the market and we will de-risk it, right? And sometimes it's like, do I want to spend a million dollars on accounting and legal opinions before I take this to my board? Or what if I could just take it to the board and spend $10,000 and spend three days, maybe it would, I'm more likely to do it, right? So we're lowering the barrier to entry there by just by making this stuff transparent. And so if you were to put a number on how many Fortune 500 companies you thought would hold Bitcoin by the end of 21, what number would that be? I can't give you a forecast. I don't know. Okay. More will Right. And so I'm enthusiastic about what will happen, but, you know, I can't give you an exact forecast of the future. I don't know.

So this already seems like a new line of revenue for micro strategy. And you've also announced that you're looking into developing commercial Bitcoin data products. What kinds of products are you thinking there? First of all, you know, we're not doing this for revenue. This is a, it's a free summit. and we're open sourcing all of our methodology and giving it away to the world for free because it's the right thing to do. We will benefit and our shareholders will benefit because, you know, as, you know, when Apple buys $25 billion worth of Bitcoin,

it will be good for everyone that owns Bitcoin, right? So institutional adoption is good for the entire network, and that's why we're doing it. With regard to our other thoughts on Bitcoin, I think it's really important when you're considering how to plug into the network that you take your strategic assets that you're committed to that you're really good at and then you plug them in efficiently as opposed to chase after new lines of business that happen to be related to Bitcoin where you're not the the world leader. So, for example, we are, we're a world leader in business intelligence and we have

thousands of engineering years invested in in software to extract insight from large sets of data. So if we can find a way to plug that software into the crypto world or the Bitcoin world and the blockchain in some way that's constructive, then we'll do. that. Something like hyper-intelligence might be, if we come up with hyper-intelligence and we can apply it in such a way that it improves the quality of the exchanges or improves the quality of Bitcoin or is a convenience or intelligence boosting thing for people using this data, then we will. We're evaluating all that right now. We don't have any particular product to announce I think that our first order benefit that we get from the entire Bitcoin strategy is the notoriety of the company as a brand has been increased by a factor of 100.

And that makes it easier for our enterprise salespeople to get meetings with senior executives. Like now we get callbacks from the CIO, from the CTO, from the CFO, the treasurer, the CIO, the CTO, the head. So now they're more likely to know about us and half the challenge is just the brand, you know. And then if they view your company as being on a solid footing and of sound finance, and if your stock is working and if everybody's talking about you, then they go, oh, yeah, Microsoft, I remember them. And that makes it easier for you to sell your existing products and services. It makes it easier to recruit, big recruiting benefits.

to become more famous. It makes it easier to retain employees. People like, you know, if you're a company like Tesla, people like to work for a company changing the world. If you're changing the world, then that's useful. So it's useful for recruiting. It's useful for marketing. It's useful for relationship building. Ultimately, our software is business intelligence and hyperintelligence to people that want to extract any insight. Ninety-nine percent of the world's data is still not on the blockchain. As the blockchain grows, then probably a lot of these things will have an inside leg. But, you know, I'm expecting the great majority of our revenues will be in the business intelligence world. And that's fine. I don't think there's any problem with that.

All right. So at a certain, a few different points in the conversation, you know, obviously we've brought up what's been happening with the U.S. dollar and interest rates. And, So I just wondered, what do you think will happen to the global reserve currency status of the U.S. dollar? I think that we have lost price discovery in stocks and bonds and commercial real estate. And that's because of the excessive monetary inflation we're seeing in the past 12 months. I think that Bitcoin is going to grow to be digital gold, and it's going to grow larger than gold. And at some point, that will bring back price discovery to currencies, to bonds, to stocks, to monetary indexes. So that you can imagine there's $500 trillion worth of assets in the traditional system in Bitcoin is irrelevant.

And gold is not playing the role of enforcer of monetary discovery. It's not working. We're not on a gold standard. Gold is not going to be 20, 30 percent of the monetary energy. It's not replacing safe haven. It's not replacing cash. It's not replacing bonds as a safe haven asset. People are using Tesla as a safe haven asset or is a store of value right now.

So gold doesn't work. The world needs a safe haven store of value that's sound money. as Bitcoin grows, it's not going to replace the currencies. It's going to be the central core. It's like Granite Bedrock. You're going to build New York City on granite. You're going to see Bitcoin become a $10 trillion or $20 or $30 or $50 trillion thing. People that were buying stock indexes as a store of value will say,

I think Bitcoin's a better store of value. Instead of taking 15% in the S&P, why not take 200% in Bitcoin or $100? Bitcoin was 280% right? And the S&P is 15% in the last 12 months. Okay? So why in the world would I ever buy an S&P, a spider index or Vanguard 500 index as a store of value? And the answer is people are afraid, fear, uncertainty, doubt, not, you know, ignorant or fearful or something.

So as we regularize or normalize Bitcoin as an asset class, I think that. that it's going to demonetize those indexes, and it's going to rob capital from bank accounts. I mean, who's going to put money in a savings account that yields 0% interest? Right? It's already, you know, square and PayPal are already siphoning off money from a savings account, right? So what you're going to see there is Bitcoin becomes, people have talked about it. They're like, it's, what is it? It keeps everybody else honest.

It's like the sovereign enforcer of integrity in the world, right? What if there was one country that anybody could move to that was fair and equitable, you know, then if another country were to abuse your rights, you would presumably, you know, blink and move to the fair and equitable country? Well, we can't quite do that, but we've created a cryptocurrency. currency in cyberspace, which is fair and equitable. And if you live in Venezuela or Nigeria or South Africa or Lebanon or Turkey or Argentina, you have the option to move your money. And it's pretty obvious like it would be irresponsible to not. It's not a bubble, right? You would have described

Bitcoin's appreciation against the Venezuelan Boulevard as a bubble. You would describe it as rational capital flight as a currency collapses into another currency that's not collapsing. So I think what will happen is you see that flight, governments have to respond to that. As that starts to happen with the dollar and the euro, I think that people will realize that when price discovery returns, then interest rates will begin to matter again. Let's go back five years, right? What used to be the reason that a country wouldn't drop their interest rates to zero? Because if I dropped my interest rates to zero, everybody attacks my currency and all the capital

flows from the pound to the dollar, or it flows out of the euro, it flows out of the Turkish lira, it flows out of the whatever. And so your currency collapses. And so the check on irrational behavior is capital flow. And I think that what we're going to see here is we're going to see more, and the check on irrational asset pricing is capital flow. Why are stocks overvalued? Because people have no alternative. Why are bonds overvalued? Because people have no alternative. If there is an alternative, the capital is going to rationally flow to the technically superior asset. And it seems pretty clear, right? If I have something which is reliable that's going to appreciate a 200% a year that you can't inflate away, it seems technically superior to something

which is yielding 1% interest that is being inflated. Yeah. So we'll have to see what happens to the U.S. dollar. So on Twitter, people told me to ask you, and I think this is a great question. What would it take for you to sell any of the Bitcoin? I would have to find something superior to buy. Like Bitcoin is the tech.

It's the apex asset. It's the best asset. And the apex monetary asset, the technical. superior monitor asset. If you define money thermodynamics or mathematically or based on any engineering principle, you've got a bath, you've got a swimming pool and it's got a leak in it and 15% of the water drains out of it every year and the other swimming pool has no leak in it. One of the two swimming pools is technically superior as a swimming pool. This is a technically superior asset. So I bought it because I was selling inferior assets.

I'm selling the dollar to buy the Bitcoin. I'm selling a stock. I'm selling gold, you know, not buying a selling, right? So the issue really is like, why would I sell the superior thing to buy the inferior thing? When you invent something which is better and you show it to me. And by way, it can't be just better technically, right? I mean, otherwise some random Bitcoin fork with a small engineering and monetary better. It has to, when you show me a better monetary network that has more money in it that's more thermodynamically sound,

if you could basically take Bitcoin and if it ran 10 times faster and it had $5 trillion on it and people with more money than the Bitcoiners were using that thing, then I would probably throw in the towel, sell Bitcoin, and buy that thing. I would sell Bitcoin cash to buy Bitcoin. It's pretty obvious why. When 100 people with more money than me pick something which works better than my thing and they anoint that as money, then I will buy that thing. And so that's why you would sell it. I mean, I'm sure I wouldn't sell it to buy a fiat currency that's being debased.

Right? So I wouldn't I wouldn't buy a 20th century thing. It's like let me turn it around to you. If you have a house with electricity and running water, what would convince you to turn off your electricity and you're running water? Nothing. Yeah, you see, it comes down to do you see it as a thermodynamically sound monetary network that's the future of life on Earth and the base layer for $500 trillion of assets? Right. Do you see it as a railroad? What would cause you to stop using the railroad? What would cause you to stop using airplanes? What would cause you to give up on antibiotics?

When will you give up your mobile phone? When will you stop using Google? What would cause you to stop using YouTube? And the answer, by the way, is when something better comes along, right? Yes. So. Yes, I see that. I think it all comes down to a very simple, fundamental question.

Do you view it as technology? Is it a technical network? Is it a digital network like Google? Is it a railroads a network? A power network? Is it a communications network? Is it a technical engineered network? Is it air transit network?

If you believe it is, you expect it to grow for the next 10, 20, 30, 40 years, because it's technically superior to the thing it replaced. It's pretty obvious that if I can move a billion dollars of gold around at the speed of light a million times a second everywhere on Earth, that's better than holding a bunch of gold. Right? It's like, if I, if I, you know, like when will the guys in Star Trek give up the transporter beam that transports you at the speed of light anywhere you was? It's like they're not giving it up until you come up with something better. So if it's technology, it will only be replaced by better technology. And money is technology, right?

If you're a trader. And unfortunately, there's a lot of people in the crypto business that they've been around it forever, but they still don't know what they have. They still think they're trading little coins and tokens and speculating. And they're trying to guess which token will be up tomorrow the next day. They miss the big picture. And it's like we've invented a monetary network, the first in human history. It's probably a million times more efficient way to move money around.

Money is half of everything, right? Half of everything on earth is an asset you need like your car, like your house, like your clothes, like your art. That's half. And the other half is just pure financial energy. It's optionality to buy the stuff that you don't know you need yet. But, you know, maybe you want to give them. money to your granddaughter, your grandson, or save it for a rainy day. So the half of the monetary

energy in the human race is currently moving around in 20th century asset containers called stocks and bonds. Try wiring $100 million of apple stock on a Saturday afternoon, Turkey. It's like, you can't do it. You can't do it, right? I mean, this is why I don't get worked up over crypto regulation It's like, I can't wire $100 million of Apple stock to a private wallet in sub-Saharan African. So why would I be so worried if the Treasury wants to know if I wire a hundred million worth of Bitcoin to sub-Saharan private wallet? It's like, yeah, they might do it. Yeah, you might hate it.

But Google and Apple still hold value. They're still valuable, even though you can't send them to sub-Saharan Africa with privacy. You don't need to actually have that flexibility. So Bitcoin, it solves a problem, and the problem is $200 trillion problem. We need one monetary network that everybody agrees on, right? And what is going to make it successful? I mean, basic technology protocol, an open protocol that supports a deflationary currency. That's one thing.

thermodynamics sound mathematically pure we need it to not be you know corrupted code then we need you know a physical network of a hoddlers to protect it we need minors to operate it needs to be reasonably decentralized once you've got past that it all comes down to can you get institutions corporations you know and individuals to embrace it and if they choose to embrace it then it becomes the network. And if they choose not to embrace it, it isn't. So this is the thing. It's a technology network. It's probably, in my opinion, it's the single biggest technology advance of our lifetime. You could compare it to the internet. I mean, Andreas would. The internet was an information network. What happens if I digitize information and put it on a network, this is digitizing money.

I saw an interesting quote. Somebody said the two greatest inventions of the human race are language and money. Well, the Internet is really all about language, right? If information is language, so the Internet gave us digital language moving at the speed of light a million times more efficiently than, you know, I'm sitting in a library with books, okay? Like, books, right? That's the 19th century. century, quasi-20th century approach to language, very inefficient. You might as well be sitting in a vault of gold. So I think that everything you saw on the internet, that was, that was

digital language. And yeah, it was important, but digital money, digital money seems to be more important, at least as important. We could debate back and forth. One thing is for sure, it's at least 10 to 100 times more important than Google. And the world needs it. You know, when Google came out, you could either buy Google, hold the stock and believe in it, or you could be perennially asking people about the Google bear market and when they're going to actually take money off the table and how are they going to trade it. And that's just so hard and exhausting, Laura, to try to figure out when you're going to, to do that. We're a company. We're trying to make the world a better place. I have some capital.

I have some bandwidth. You've got to decide what you're going to do with it. So I try different things. We invented alarm.com. We spun it off. It's a nice company. You know, we invented business intelligence. We run it. We do good. We have a chance to help commercialize the Bitcoin monetary network. The world needs it. It's probably going to happen with or without us, by the way. I wouldn't have done it if I didn't think it was going to happen with or without me, right? It's going to happen. And probably, if we're wrong, then we're wrong. There's 3,400 and 99 other public traded companies that will do something different. And then the human race will go forward on their shoulders and not ours. If we're right, maybe we help it along a little bit and the world will be

a better place. Either it would be a better place for the people that need a currency that have no other alternative, or maybe it'll be more rational place because price discovery will return to stocks and bonds and real estate. Or maybe it'll be a better place because politicians will treat people better. Or maybe it'll be a better place because big tech companies will find a way to move digital gold around a billion times faster than the current goal moves around. And when they move it that fast, we're going to create something magical that will go on. I think if you have electric power network with a short circuit, right? People forget, there'd be no New York City.

There's no human, there's no civilization if I can't get electricity to flow over power lines without a leak. Right. Right. Like people dismiss this stuff, but New York City wouldn't be here. You can't make a skyscraper work, right? There's some fundamental things about our society, right? There's no antibiotics without refrigeration or no hospitals, right?

So if you want to build a civilization, you're going to have to create networks that are thermodynamics sound. And the railroads, the power networks, the oil networks, you know, and steel and metallurgy and other types of engineering and automotive networks, they're all critical. And I feel just as strongly about the monetary network. It's, it's, you want, you know, you want an example. Go look at what's going on in Venezuela or Argentina right now. Right. You could spend a million hours trying to run a company, but if you're running a company and you're a genius and the currency is collapsing that you're actually doing business in, it's hopeless. Yeah.

It's hope. It doesn't really matter what you do. If the currency collapses, the currency is the blood supply and the oxygen carrier of the body politic and the body economic. So it's, you know, you. You could say, well, you know, leave that to the politicians. But again, name me one successful company in Venezuela right now. Like there won't be any, right? There won't be any.

So when I talk about it as a monetary network, I think it's important because it means that companies and individuals need to plug into this monetary network, the same way they need to plug into oxygen. when the air and then the oxygen gets sucked out of the atmosphere you need an oxygen mask otherwise you're going to die and uh you can you can say well i'm dying slowly and so may you know it's like you could you could say i don't think it'll get any worse but the point is at 15% a year there's a point at which you're not going to be able to make it so i think it's a it's critical for humanity and it's a critical engineer breakthrough. And if you understood that, when you understand that, you're not selling, right? You're not going to sell. The only way, you know, if you have electricity in your hometown

and someone says, let's turn it all off, you're going to say, whoa, before we turn it off, we better have nuclear fusion in the form of a sugar cube that we can give to everybody so they can light up their house because otherwise a lot of people are going to die. So I think when you've got something better, then we talk about it. But until we've got something better, the best thing we can all do is find a way to spread this monetary network to the four corners of the earth. All right. Well, this has been a really amazing conversation. Where can people learn more about you and micro strategy and the upcoming Bitcoin for corporations event? They can go to hope.com. Bitcoin is Hope, H-O-P-E. And we have a...

tons of information about Bitcoin on Hope. They can follow me on Twitter, Michael underscore Sailor. Otherwise, that's probably the best thing to do. Hope, go to Hope. That's where it will be. Okay, perfect. Well, thanks so much for coming on Unchained. Thanks for having me. Thanks so much for joining us today. To learn more about Michael, Micro Strategy, and the Bitcoin for Corporations event, check out of the show notes for this episode. Don't forget, you can now watch video recordings of the shows on the Unchained YouTube channel. Go to YouTube.com slash C slash Unchained podcast and subscribe today. Unchained is produced by me, Laura Shin, without from Anthony Yun, Daniel Ness, Bossie Baker, Shashonk, Josh Durham, and the team at CLK

transcription. Thanks for listening.