Michael J. Saylor - Why Bitcoin Is The Apex Property Of The Human Race & How To Profit From Taking A Long Time Horizon On Cryptocurrency

Full transcript: Michael J. Saylor on London Real

2:44 I am Brian Rose. My guest today is Michael J. Saylor, the American entrepreneur, technologist, author, business executive and Bitcoin evangelist. You are the CEO and chairman of the business intelligence company MicroStrategy, which you co-founded in 1989, a few years after graduating with a double major from MIT. You’re the author of the New York Times bestselling book The Mobile Wave: How Mobile Intelligence Will Change Everything, which correctly predicted the sharp rise of technology giants Amazon, Apple, Facebook and Google, while highlighting the impact of mobile and social networks on global economic development.

3:17 You have described Bitcoin as the apex property of the human race, and last year you began a massive investment drive that has seen MicroStrategy purchase over 100 000 Bitcoin, with over 3 billion today. Michael, welcome to London Real. Thanks for having me, Brian. Great to have you here. You know, before we get started I’ve got to ask you a couple questions about MIT.

3:36 You know, I got there in ’89, so I missed you by a couple years, but you know, it’s a very special place, and I still remember walking through that front door of Lobby Seven and looking up at the dome, and even though I was this punk kid, I still somehow felt honored to be there, and I think it changed me in so many ways. Some I don’t think I’ll ever really understand. I also had a fraternity experience there, which was a really important of my evolution, as well as, as kind of like a man.

4:02 Just curious what the experience was like for you, and what was it like as an 18 year old kid from Ohio going to Boston, Cambridge, and going to a place like MIT? Well, I, it was definitely a very, very, maybe the most important formative experience of my life. If I think about the impact it had on me. You know, when I graduated from high school I was the valedictorian. When I got to MIT, I was one of 400 valedictorians.

4:32 You know, every single person at MIT was the biggest overachiever in their various community, and so it was interesting to be surrounded by so many overachievers. Also, I came from a middle class family in a public school, and I came in contact with a lot of children from upper class families and private schools, and they had had two years of calculus, or they had two years, one to two years of college education before they showed up, and we were just going to college, you know, so I saw people from every class. I think out of my nine fraternity brothers there were like six or seven Eagle Scouts.

5:20 It got to be kind of silly. And then I saw people from everywhere in the world. Right. So MIT brought together global elite overachievers. That was interesting.

5:32 I think the other thing that was interesting was MIT had this ethos of do-it-yourself, think-for-yourself and be fearless. So, you know, they would give you a very difficult problem and they expect you to solve the problem from first principles, and they gave me the tools to do it. I think the third thing I saw was I had some of the most brilliant fraternity brothers. You know, they’re the kind of guys that, I mean, 18 year old, 19 year olds, and they’re the kind of guys that get bored in the summer.

6:05 They take the car apart, put it back together again. One of them took cars apart for a living and put it back together again. The other one had launched a computer software gaming company, you know, while he was in high school, and launched a Pac-Man knockoff successful enough to get a cease-and-desist letter from, you know, from Atari. And so you just saw all these examples of excellence, and it gave me a lot of confidence. I think that’s what I took from MIT: confidence, and that fraternity experience.

6:41 I mean, how can you describe that to someone? Because I think it’s so often misunderstood. I bet it doesn’t even necessarily exist anymore the way we knew it, but for me it was, it was so important. I spent four years living in my fraternity. I never lived in any other public housing.

6:56 I grew up, like you said, with people from all over the world, different classes. There were the guys that couldn’t afford pizza and the guys that could afford pizza. That was like the divide. But you know, what was that? Because I know you co-founded MicroStrategy with one of your fraternity brothers, so what was that like?

7:14 It was, if you dumped a bunch of brilliant Eagle Scouts together into a house for the age of 18 and 22, and they all spontaneously organized the government, then that’s what a government, an ecosystem and a culture. That’s what I saw at MIT. It’s, it’s in retrospect, quite amazing. We ran our own finances. We ran our own work week where we would maintain the house.

7:47 We had very sever, we had sophisticated everything. I mean, we had elections. We had a CFO. We had a head of maintenance. We had a social chairman, and we orchestrated the most elaborate social events, the most elaborate construction development events, fundraising events.

8:09 You know about rush week and all those events, trips, and you kind of took for granted that a 20 year old could run an elaborate enterprise, you know, with due process. We had parliamentary procedure. We had house feedings. We had votes. We had all manner of intricacies.

8:32 So it was a microcosm of the world, run by a bunch of people that were 12 to 36 months out of high school. And, you know, looking at it today, so many people expect, you know, big institutions to do everything for them, but we were completely self-reliant at the time. Yeah, I’m having flashbacks. I mean, there were 50 of us at 233 Mass Ave, average age 20, maximum age 22 or 23. Like, we had to feed ourselves, clean ourselves, social chair, everything, and then have a pledge class.

9:04 So you had to go through that whole thing and put them through the process of becoming brothers, and we figured it out somehow. I mean, if my wife could see some of the meals we served, she would be shocked, or some of this, the look of the kitchen on some days, or the sticky carpets after a party. But there was something beautiful about it as well, because we just got on with it, and it did function somehow. So, yeah, some good memories flashing back here.

9:30 And again, those lessons you say about MIT is funny because they don’t tell you those things, but it’s just this ethos of the place: here’s the fire hose, stick it in your mouth, figure it out, you will figure it out, we’re not going to tell you how, but we’re going to kind of imply that you can do it. And so go, and, yeah, I remember that too. So, yeah, really, really brilliant memories. Look, I want to talk to you about Bitcoin today. I want to briefly tell you when I first heard about Bitcoin, because it involves a friend of yours.

10:00 In 2013 I was doing my show London Real after I quit my job in banking. I was, I couldn’t take it anymore, and I had heard about this thing called Bitcoin, and I put out on Twitter, who’s the one that can tell me about this instrument? And this one name came up in London, and it was Max Keiser. And so after a couple tweets back and forth, as we called each other out and sized each other up, Max showed up in my kitchen, here in Shoreditch, and I didn’t know if we were gonna have a fight or what, and we had a broadcast, and for 90 minutes Max schooled me on Bitcoin, and I think I just bought two for 85 pounds.

10:35 I was complaining there was no market makers, the order book system, and Max really laid it out, and that was my first, that was my first really experience with it, and that episode’s still up. It’s fascinating to watch now. And then I, I didn’t know what to do with it, and so in 2015, ’17 and ’19, Andreas Antonopoulos came back and would always tell us about what was happening, what it could be in the future of money. But again, I, it didn’t hook me, and it wasn’t until this year, when I started looking at what was going on in DeFi, that I got reminded about what I was doing on Wall Street in the ’90s, and I thought, wow, this is crazy, because I used to do this 30 years ago and now other people are.

11:13 And we can talk about that stuff later. Tell me about your experience with Bitcoin, because I know you knew of it back in 2013, but I think it was until last year where you really saw it. You know, in my professional life, I’ve run MicroStrategy, which is an enterprise software company for 30 years, and I’m a public company CEO, and most of my mental energy was consumed by competing against Oracle and IBM and Microsoft and SAP and selling enterprise software to everybody on earth.

11:56 Part of what I did was run a treasury, and our treasury, MicroStrategy primarily, consisted of a very conservative, conventional corporate strategy: hold cash and sovereign debt. That’s what I did for a long time, and occasionally we would take that treasury cash and buy our own softback, but we didn’t pursue any other investment agenda with it, and my private life, as I was a private investor, and there I was a tech investor. I bought Apple. I bought Amazon.

12:30 I bought Facebook. I bought Google. I wrote about why I bought those things in The Mobile Wave, but the summary is the best investment ideas of the century, I believe, are you buy into a digital network that is dematerializing a product or a service, you know, or some kind of idea in the civilization, and you wait. Right? Facebook dematerialized friendship, and Apple dematerialized everything you can hold in your hand.

13:07 De-materialize wallets and cameras and photos, and Google dematerialized information and books and video, and Amazon de-materialized storefronts. So those digital networks that dematerialize things grew through the web era, and we know that story. And then when the mobile era came along, all that software mobilized, and pretty soon you had a store in your hand called Amazon, and you had a library in your hand called iBooks, and you had friendship and relationships in your hand called Facebook.

13:46 And you had a camera in your hand, you know, and probably every other mobile device, a tape recorder, the like, and Apple and I kind of rode that way for a decade. And in 2020, I knew Bitcoin was around. I knew some people used Bitcoin for something or other. I also, you know, thought it was kind of cool that you could go on markets and bet on who was going to win an election, if you remember that, and I thought online poker was cool, and I thought that a lot of things are cool, but I classified them as novelties.

14:27 I classified Apple, Amazon, Facebook, Google as good investments based on a digital network. My professional approach was I invest in short-dated treasuries. Then March 2020 hit. The money supply started expanding at three times the normal rate. We had lockdowns, which shut down Main Street, and we had a V-shaped recovery in Wall Street, and so between March and June, as I watched Wall Street recover, and if you look at the S&P index, and this, the stock market for the past 12 months, it’s just straight up and to the right.

15:05 It’s like there is no crisis. Yeah, and if you’re living on Main Street and you know Main Street hasn’t recovered. I mean, the cruise lines aren’t up and running, the airlines have been impaired, the hotels are impaired, lots of manufacturing businesses are struggling. There’s rampant problems in getting labor. There’s rampant supply chain issues and shortages, and so that dichotomy between the recovery of Wall Street and the impairment of Main Street caused me to question my premises about money.

15:41 I started by questioning my premises about treasury policy. Brian, I had 550 million dollars in cash, and it was yielding zero percent interest, and when the Fed said we’re not even thinking about raising interest rates, the message was for the next four years you’ll get zero percent interest on 500 million dollars, and you’ll like it. Then I started thinking. Then I watched Wall Street recover, and if the S&P, if we actually look at S&P performance over the last 12 months, it’s up 37 percent, Brian.

16:20 And so if you had a billion dollars, and you held it in cash, you’re up zero percent, and if you hold it in an S&P index, you’re up 37. If you took the same billion dollars of cash and you bought gold, you’re up minus 72 basis points. That is Europe, zero percent. If you invested in Bitcoin, you’re up 269 percent. So what is the message?

16:52 Right? That the world’s trying to tell you it’s that we expanded the money supply. If you’re holding, if your long-term savings strategy is put your money in a bank account as dollars or euros, then your money lost, call it 37 of its purchasing power. Right? If, if you put your money into an ETF or S&P index, your money held its purchasing power.

17:24 If you put your money into Bitcoin, it gained the purchasing power. And so, as a corporate fiduciary, I got half a billion dollars. What am I going to do? Well, I don’t want to hold it in cash when I know that the currency is being devalued and the interest rate is zero. That’s a negative real yield.

17:47 If you calculate negative real yield based on CPI, you might say yourself, oh, it’s only minus two percent negative real yield, or minus the CPI. Now it’s like five percent, minus 5, negative real yield. But if you calculate inflation based upon asset inflation, the asset inflation rate for a portfolio of companies is 37, so your negative real yield is minus 37 percent, and the rule of 72 tells you that you lose half your money in two years at that rate.

18:24 Wow, you lose 90 percent of your money in 10 years. So, so when the negative real yield got to minus 37, Brian, it’s kind of like he cranked the temperature up in my, you know, in my hot tub to 250 degrees, and I jumped out. So, so how did I discover Bitcoin? The answer is, it wasn’t the problem for me until March of 2020. It was an opportunity, but I had other opportunities, and it wasn’t the clear enough opportunity that I would change my life in order to go do this thing.

19:00 But in March of 2020, the big tech trade came to a came to its end. You know, Amazon was, you know, hundred dollars a share. Well, I wrote it from three hundred dollars a share of thirty two hundred dollars a share. It wasn’t gonna go up by a factor of ten or twenty from there. You know, Apple, Amazon, Facebook and Google were acknowledged digital monopolies and dominant networks, and every 22 year old taxicab driver could have told you that those were the winners by, uh, March to June of 2020.

19:36 So where are you going to put your money? You can’t, I mean, big tech is not like the compelling new thing, it’s the understood thing. My, my strategy as a tech investor, Brian, is you buy something that, um, everybody in the world needs, nobody can stop, and 99 of the world doesn’t understand. And that would be the definition of Facebook in 2011 or 2012, or Google or Amazon. You could, if you go back to 2010, you could see Apple, Amazon, Facebook, Google are unstoppable.

20:16 Everybody needs them, and yet 98 of the people on Wall Street would have told you, when Apple doubles, you should sell some, take off the top, and you should diversify into HP and IBM and other, and when technology is more than 20 of your portfolio, you should sell technology and you should diversify into non-technology. So the diversification in that case is selling the winner to buy the losers, and of course, the, the idiocy is Apple became 150 of the profit of every mobile phone company in the world. Everybody else in the world lost money to compete with Apple, which made all the money.

20:57 Okay, that’s why you don’t diversify from the category killer Amazon. Walmart stayed, that, you know, was like the number two, and every other retailer in the world lost in that decade time frame. So selling the winner to buy the losers within the sector doesn’t make any sense, and there’s a certain arrogance and foolishness from a Wall Street investor that says you have too much tech exposure. You went to MIT. I went to MIT.

21:29 What I observed is every growth company in the history of the world, going back to the Carthaginians versus the Romans, they were all tech companies. When they, when, uh, when the Romans beat Carthaginians, they did it with technology. You know, when Kraft and Heinz and, uh, Standard Oil and Carnegie Steel and, you know, and Andrew Mellon, and Aluminum Company of America, when they won, they were technology companies. AT&T, General Electric were technology companies.

22:04 General Motors was a technology company. There was never such thing as an entrepreneur that took a small thing and made it into a huge thing without technology. So it’s only the third generation of investors that have forgotten how the company was built, that think it’s a non-technology company. So bottom line, you know, when something is no longer, when it’s no longer disrupting the world, its growth slows down. It becomes a monopoly.

22:39 When I got to March, April of 2020, what I said was the big tech trade is a crowded trade, and, um, and, uh, holding cash is a foolish idea. Sovereign debt is no longer a store of value. Bonds are broken. We’re at the end of a credit cycle. My stock was ninety dollars a share.

23:05 I had sixty dollars a share of cash, Brian, so I thought the entire company was worth thirty dollars a share, and the investors, when I asked them, said cash is trash. Right? Give it back to us, and so I hit this existential crisis. I had to go study. I had a problem.

23:26 I needed a solution. and we were going to take one to pass. We either had to give back all the capital, and we would have had 60 30 to 60 dollars a share worth of the stock in a company with no capital base that was growing, zero percent a year, competing against Amazon, Facebook, Apple, Google. Good luck with that. Or we had to invest the money in something which was going to hold value or create value in a monetary inflation environment.

23:56 And so we did a search. We considered gold. We considered tech stocks. I already described where I thought tech stock was a crowded trade. It was already done.

24:07 Buying gold was a good idea in the 19th century, in the 20th century it’s too slow, and the 21st century is looking antiquated. Well, I said, I want something like gold, but I want gold. I want digital gold on a big tech network. What if I could take a billion dollars of gold that weighs 30 000 pounds? What if I could take that, dematerialize that gold so it moves at the speed of light?

24:32 It weighs nothing. What if I wrapped it with an open protocol so I could program it? And what if I could program my iPhone or my web server to do a million transactions a second on the go, on the block of digital gold? Move it at the speed of light and make it brilliant, smart, and then I plugged Moore’s law into it, and it just kept getting smarter and faster and stronger. Well, that, I mean, the secret to everything that worked in the last 20 years.

25:03 Google: smarter, faster, stronger. Google Maps. It knows which way the traffic goes. It knows it’s a traffic jam. It routes you around the traffic jam.

25:12 It’ll talk to you. It’ll nearly drive your car for you. It’s a better idea than Rand McNally maps. That’s why Rand McNally is worth 50 million or 500 million, and Google’s worth 50 billion with Google Maps. Right?

25:24 That one thing, you know, your iPhone smarter, faster, stronger. iBooks smarter, faster, stronger. Apple Music smarter, faster, stronger. So I thought, give me a block of dematerialized gold on a big tech network that’s smarter, faster, stronger. Where do I find that? Crypto.

25:44 Crypto created digital gold, and Bitcoin is in essence digital gold on a big tech network. But now it checked all my criteria. It’s something everybody in the world needs. Nobody can stop it, and nobody understands. In March of 2020, you could say, you know, you got there early.

26:06 Max Keiser will tell you, yeah, you should have figured it out back in 2013. But the point is, by 2020 it was a 200 billion dollar thing. 99 of the world doesn’t really understand it. How do you understand, how do you understand, digital property on an open monetary protocol that’s decentralized? When there is no metaphor, there is no analogy to it.

26:32 In the last 5 000 years, a new thing nobody understood. It’s everybody needs it, right? It’s decentralized, nobody’s going to stop it, right? They might slow it down, they might FUD it, but that was the beautiful triple check criteria, and I said, I have the 500 million dollar problem. I think I’m gonna buy me some.

26:58 So that’s how I discovered Bitcoin. That’s, and that’s why it became the most important thing in my world in the second quarter of 2020. Would did that process take you days or weeks? Until you, I mean, was your brain like, was it a three-day thing where you were like you’re getting excited about it and all of a sudden you’re like, I know this is the right way? Or was it weeks before you knew this was working?

27:23 Now, the first five or six times people mentioned it to me, I just dismissed it as, like, a risky, complicated cool. I knew it was cool. I knew it was a cool thing. The decentralized network, I knew other people were passionate about it. I didn’t have the problem.

27:39 You kept tugging on my coat, but I didn’t have the problem. Like, go away, I’m making a lot of money on my Amazon stock. I’m making a lot of money on Apple. I have a problem in my business, you know, like you know, before, um, if you had asked me, uh, do you want to meet via Zoom in February 2020, I was like, what is Zoom? If you said, can I work from home?

28:07 No, you’re fired. You know, what about remote work? No, you come into the office, we meet face-to-face. You know, if you’d ask me the same question in April, I would have said, well, of course we use Zoom. We’re standardized on it.

28:20 We all do all work remote. You know, it’s, we went from 10 million people on Zoom to 400 million people on Zoom in four weeks or something. The world accelerated its digital transformation of sales, of marketing, etc. If I, if I had gone into my board of directors in February and said I think we should buy 500 million worth of Bitcoin, they would have said, what is Bitcoin? You’re out of your mind, you’re crazy.

28:48 It took, you know, this is the, the history of science is the history of paradigm shift, and the one thing you learn when you study the history of science is paradigm shifts come too rare. Two reasons, two ways. Either the old guard dies, everybody dies, and the new generation picks up the thing, or there’s a war and you’re gonna die if you don’t actually learn a new thing. And so in the, in the midst of a life or death war situation, then people have their minds open up and they embrace a new idea.

29:20 Right, that’s the history. You know, that I could go through 5 000 years of history. I could tell you people that had paradigm shifts driven by war or, different, driven by the death of the old guard. We had a war in COVID, and we had a war on currency. The war on COVID had locked down the entire world, and the currency war, the response of the policy makers, was literally to declare war on the currency.

29:46 The U.S. currency has been devalued by depending upon your metric, 20 to 35 percent in the last 12 months, but currency in other places, Argentina’s got 85 inflation. The currency in Venezuela, they’re collapsing, 60, 70, 80 percent. Right? There’s, and so what you have is a devaluation of currency. The war on currency means we’re squeezing all the economic energy out of the currency.

30:18 Right? And where does it go? Well, it goes into bonds, and then everybody that held bonds as a store of value sells their bonds and they move their money into equities and into real estate, and so you’re seeing monetary energy surging from the currency to the bonds to the equity, to the real estate, to collectibles, to cryptocurrencies, to meme stocks. Right? That, that was the war.

30:46 So how long did it take me to figure it out? Well, after March, I mean, the first thing we do is we deal with the lockdowns, and you’ve got an immediate issue at hand. You’ve got thousands and thousands of employees and customers you’ve got to take care of, and how do you rewire the business in a world where the office is closed and you’re operating remotely? That took us half, you know, a lot of Q2, and in the same time as I’m studying my operational problem, and I’m basically doing a digital transformation of a 2000 person software company.

31:19 I actually start thinking about the transformation, in this case, the digital transformation of my balance sheet. And I would say, you know, it takes 10 hours of study to start to get an inkling of what’s going on. It takes a hundred hours to start to be reasonably versed in what’s happening here, and it takes a thousand hours for a reasonable person to have a fair grasp of everything. If you want to be the ultimate master, you need 10 000 hours, you know, before you’re comfortable laying on a billion dollar position.

31:59 You probably ought to have a thousand hours before I convince you to risk huge amounts of money. You probably need a hundred hours, and before you can ask me an intelligent question, you need 10 hours. So that’s the path that we went down. Was it hard to sell to your board? Were you concerned, because you were a public company?

32:19 And then did you expect more CEOs to follow I know you talked Elon into it, and we can get into that, but was that what those other two issues and did you have some trepidation when you went in? You know, um, yeah, we had a lot of trepidation. I mean, there was a lot of trepidation in the year 2020 for a lot of people, right? In every single business across every dimension and every aspect of life, and we’re still working through those issues today. We won’t be for probably, you know, a number of years to come.

32:53 Um, the process was first, uh, me educating myself. So I went through those Andreas Antonopoulos videos. I read The Internet of Money, then I read The Bitcoin Standard, then I started, you know, uh, binge watching every other Bitcoin podcast, cryptocurrency analysis, starting, you know, reading the bullish case for Bitcoin, reading, you know, every essay I could find on the internet. You can learn a lot on the internet. You can, you can learn a lot on YouTube.

33:28 You know, I, I figured out pretty quickly I could speed everything up to 150, and speed listening while I’m, you know, so you’re speed listening while you’re eating dinner, and you’re absorbing a lot. Once you do that, you realize that you don’t want to go back to, like, taking a one or two hour lecture a week over the course of the semester. Just like people binge watch Netflix, you know, television series in a weekend. You start binge watching 30 hours of podcast at 150 speed with a little bit of skipping, and you find that in 10 hours you can put, you know, cover a semester of content.

34:11 So I did a lot of that once I got myself comfortable. Then I put together a summary of materials, like four hours of videos and you know, ten documents or something like that, that I sent to all the officers and directors of my company. Then I started meeting with them individually. Then we started having group meetings, you know, we got educated. Then we split up and then the, you know, the general counsel went off to do the legal review with our outside counsel and to retain other counsel.

34:44 The CFO went off to do the accounting and the finance review with outside auditors and finance experts, and you know, the board did their research, and then we came to a very elaborate process, Brian. If we couldn’t just buy 500 million of Bitcoin and put out a press release, we’re a publicly traded company, so the first thing we do is we have a deliberation, and the conclusion is we’re going to actually buy 250 million dollars worth of something, and we’re going to buy back 250 million dollars worth of our stock. So the first, the first press release and the first announcement is we’ve decided that we’re going to invest 250 million dollars of our capital in a treasury asset or mixture of treasury assets.

35:38 This may include stocks, bonds, real estate, gold, silver, Bitcoin or cryptocurrencies, something like that. We let the market think about that. We also said we’re going to buy back 250 million worth of our own stock over the next 12 months. We announce a share buyback program. Stock is a hundred and twenty dollars a share, sixty dollars a share, and that put that in perspective, it’s a 500 million dollar company with 600 million dollars in value to the enterprise and 600 million dollars in value of cash, about one time, 1.2 times revenue.

36:14 Um, at that point we had concluded, you know, we’re going to generate a lot of cash flows, 70 90 million dollars in cash flow a year. I mean, the digital transformation of the operation meant we weren’t going to need capital to grow the business. We were going to generate a lot of capital, because the things that were expensive, like throwing trade shows and flying around on airplanes and staying in hotels and spending money on all this advertising, that just all went away.

36:43 So, um, so we knew, I’m going to generate cash. We know we didn’t need the cash. We announced this generally to the, to the public. Crickets. Stock trades 20 000 shares a day.

36:56 Nobody really notices. They don’t care. You know, one week later we, uh, we went to stage two, where we said, okay, well, we’ve gone through our analysis. We’ve decided to buy 250 million worth of Bitcoin. We did it.

37:15 Here’s the announcement, and we’re also announcing, um, a Dutch tender offer. We’re gonna buy back 250 million dollars worth of our stock in 20 days, and you can tender your shares for up to 140 a share. So in essence, the message is, if you don’t like the Bitcoin strategy, this is your chance to get off the roller coaster, and you can get off with profit. You can sell your shares back to us at 140 dollars a share. Stocks trading 121, 122.

37:45 When we notice that you’ve got 20 days to think about it, so the idea is, don’t surprise anybody. I don’t want to tell you, figure out what Bitcoin is, and you’ve got five minutes, right? That creates anxiety. You can’t figure out in five minutes. Um, the company has embarked on a novel new balance sheet strategy, and we’re going to give you 20 days to figure out whether you’re going to buy more, sell, or hold your current position.

38:17 And should you decide you want out, the company is going to backstop you. We’re going to buy the first 250 million dollars worth of stock at a premium, so the market trades first. It trades into the 130s. Then they think about it a bit. Then it trades up past 140 and maybe past 150.

38:39 Okay. So you’ve got kind of a put. You know, you can put the stock back to the company at 140. You would think it would trade at least 140. For 20 days, the shareholder base rotates.

38:52 We want them to rotate. If you hate it, we want you to sell. If you love it, we want you to buy. At the end of the tender period, we don’t know what’s going to happen. We could have had 250 million dollars tendered.

39:05 We could have non-tendered. We had about 60 million dollars with the shares tendered. Okay, so we buy back 60 million dollars worth of shares at 140 dollars a share. Then we have 175 million dollars of extra cash. We think about it.

39:21 We have a board meeting. We adopt Bitcoin as our treasury reserve strategy, or a treasury reserve asset. So the next message to the market is MicroStrategy is adopting Bitcoin as a treasury reserve asset. If we have excess capital from time to time, we’re going to convert it into Bitcoin. Let the market think about that.

39:42 Shortly thereafter, we bought 175 million worth of more Bitcoin. Now we bought 425 million worth of Bitcoin. Well, the people that are shareholder bases, you know, you either like, are you long Bitcoin or are you short Bitcoin, or are you a neutral Bitcoin? We don’t have to convince everybody. We just have to be, uh, we have to be transparent with a group of people that happen to like Bitcoin.

40:11 So, and maybe you could say, I just got to convince anybody. Right, it’s like, I’m not trying to convince 100 of the people that they should love Bitcoin. I’m just trying to find the one percent that like Bitcoin, and then act with transparency and integrity and offer them a publicly traded company where they can invest in such a strategy. So at that point we had 425 million worth of Bitcoin. We started to communicate why we did it.

40:41 We thought it’s digital gold. It’s smarter, faster, stronger than traditional gold, and it offers a monetary inflation edge. The world starts to digest that. Our stock trades up. Bitcoin trades up.

40:56 At some point our stock trades up to 200. Then it trades up to 250. Then people discover, maybe this is a good idea to own Bitcoin. Bitcoin, we buy the Bitcoin at the first thing we bought. It was like eleven thousand eight hundred.

41:10 People are like, you’re crazy, you’re taking all this risk. It traded down to ten thousand. We bought some more. They thought you’re double crazy. We took the risk.

41:19 I’m like, I don’t think I’m crazy. I think I’m, you know, well, what are you going to do with trades up, or down? The answer is, I’m not a speculator, I’m not a trader. I don’t care whether it trades up or down. I’m holding it.

41:30 For, they’re like, well, how am I going to hold it forever? Well, like, I, I’m holding it forever. It’s property. I mean, a decade is a, you want a time frame? A decade.

41:41 I can, we can mark it I mean, short time frame is four years to figure out whether it worked out. In the short time frame, well, mid time frame is a decade. Reasonable time frame is 100 years. That’s why we bought it. People thought that was kind of crazy.

41:56 Like, are you speculating? No, I’m not speculating. Okay, it takes a while. People don’t, you know, they don’t quite figure it out. At some point our stock traded up.

42:07 Well, you know, all of a sudden our stock trades up to a 10-year high. We keep making money. Uh, our employees like exercise and stock options. We make more money. We have more cash.

42:20 We go buy 50 million dollars worth more Bitcoin. I think we buy another 75 worth of Bitcoin. Now we bought 500 million worth of Bitcoin. Bitcoin doubles. We’ve made 500 million dollars.

42:30 The stock is doubled. At that point the stock gets the 300 a share. It’s more than we’ve, you know, it’s best in a decade. We go to the market. We offer to sell 400 million dollars of the convert bond.

42:43 The market loves the idea of a converted bond. Okay, here’s the idea. We’re going to basically raise 400 million dollars. We’re going to buy Bitcoin with it. If Bitcoin goes down, you still got the bond.

42:57 If Bitcoin goes up, you’ve got the upside of Bitcoin. Where else can I buy a Bitcoin bond that makes me money? If Bitcoin goes up and doesn’t lose me money, if Bitcoin goes down, I’ve got, I’ve got a software company standing behind it. Okay, people wanted to buy that bond. We were like quadruple oversubscribed, so we raised the bond from 400 million to 650 million.

43:21 We paid 75 basis points in interest. We borrowed 650 million dollars at less than one percent interest. We bought Bitcoin. We bought the Bitcoin around 20 000. Bitcoin kept going up.

43:35 That bond was the best performing bond in the year, in the year in the U.S. No one had a better bond. Okay, at this point people are starting to think that MicroStrategy likes Bitcoin. Bitcoin keeps going up. MicroStrategy stock goes to a thousand.

43:53 When it gets to a thousand, we go back to the market to offer a six hundred million dollar bond between zero and fifty basis points yield, like, uh, 40 to 37 to 50 percent premium. The bonds oversubscribed. We make that bond a 1 billion 50 million dollar bond. We saw it at a 50 premium that yields zero, so we raised 1 billion fifty million dollars in one day at a zero percent interest rate to buy Bitcoin with a strike price of fourteen, hundred thirty two dollars a share.

44:32 Brian, remember when I started the journey? My stock was 120 a share. Our stock went up, and we sold a billion dollars of, of, in essence, equity at 10x. That now there’s a, there’s a bond related to it. Uh, so we were providing downside protection.

44:48 We bought Bitcoin with it. So, so now we’ve got another capital transaction. At this point people get the idea that we like Bitcoin. People, and and and this is crazy. Is this the craziest year of your life?

45:04 Easily. Yeah, I think so. It’s gonna get better. What, because our strategy was we’re an enterprise software company, and people said, well, you know, are you a hedge fund or an enterprise software company? And I said, Well, let me clarify it.

45:19 We have two strategies now. Our first strategy is grow the enterprise software business. Our second strategy is acquire and hold Bitcoin. Okay, that’s our strategy. We put it in our 10-K.

45:30 We published it in February. So people just read it: acquire Bitcoin. What do you mean? Well, what I mean is when Howard Hughes went to Vegas, he looked at Vegas and he said, I think one day there’ll be a great city in the desert that supports tourism, conventions and gambling. So he bought all the land in the desert.

45:51 What was his plan? Just to buy the property. Well, how long to hold it? Forever. People are still building houses on land that Howard Hughes bought, and he’s been dead for 50 years.

46:02 Summerlin is a Howard Hughes project. They’re building entire cities on land at Howard Hughes. Well, it’s just a property development strategy. If you could buy all the land in Manhattan 300 years ago, and what day or what year would it have been, and wise to sell the land in Manhattan? Just hold it.

46:21 Buy it, hold it. So that’s what we did. We adopted it as a strategy, and, um, and eventually we got to May and June, and in June we went back to the market. We got a credit rating from Moody’s and S&P, and we issued a senior secured debt offering, and we raised 500 million dollars at six and one-eighth percent interest. It wasn’t a convert.

46:46 There’s no equity. It’s just straight debt, corporate debt, to buy Bitcoin. And why did, why did people buy that bond? Because they’re getting a very fat coupon. They’re getting six to one eight percent interest, and the junk bond index is three point nine percent interest.

47:04 An Apple computer would be sold, would be paying them one and a half percent interest. And the Federal Reserve would be paying them 1.2 interest, and so they’re actually getting yield, and we took the money we put it into Bitcoin, and Bitcoin’s part of the collateral. So now we have a Bitcoin-collateralized senior secured note. And why did that work for the company? Well, because it’s increasing the upside for equity holders and the convert holders now they’ve got more Bitcoin.

47:36 If you’re long Bitcoin and Bitcoin doubles, well, we bought 13 000 Bitcoin, and they’re going to double. And then you’re going to get the equity upside. That holder is going to keep getting that coupon. Are you going to keep doing this for the foreseeable future? So I’ll give you the kicker.

47:53 Not only did we go from 500 million dollars of assets yielding zero percent interest that were evaluated nothing, by the shareholders. We also flipped it to 105 000 Bitcoin. And you do the math at 35 000 a coin, it’s it’s 3.7 billion dollars in assets that are now, uh, appreciating asset. Bitcoin’s been appreciating 120 a year for a decade. It’s up 270 percent in the last 12 months.

48:27 It’s, it’s, you can reasonably make the argument it’s a monetary inflation edge. It just goes up at the rate that the, that the central bankers print money. It should go up 15 to 20 percent a year. Any number. And by the way, I have 2.2 billion dollars of debt, and I pay 35 million dollars a year in interest on it.

48:49 That’s like about one percent. One point, figured out, we borrowed one point two percent at less than one and a half percent interest rate, and the arbitrage, if it yields 20 percent, it’s like you’ve got billions of dollars that are yielding an 18 arbitrage in a conservative situation, and you can stomach the volatility. So we flipped the company from being asset poor to asset rich. And here’s the irony, Brian. The brand of the company got 100x stronger.

49:23 All the employees got wealthy. They’re happy. All the shareholders, the stock went from 120 to 630. The stock went up by 500 percent. The shareholders, uh, the shareholders benefited.

49:36 The employees benefit. The customers are happy. The company is now well endowed. The brand was burnished. Our distribution channel increased, and we started our top line grew 10 percent year over year in Q1, and so the growth rate of the company increased because of the awareness, uh, of the world to our value proposition.

49:58 So even the operational part of the business was improved by the balance sheet strategy, kind of in the same way that if I said, you know, guess what, Harvard, Yale and MIT have massive endowments. They’re super rich. If you’re a student or a professor, you would rather go be a student at the well-endowed university, and you’d rather be a professor at the rich university. If I said Harvard gave up their entire endowment, they gave it back to the donors because they couldn’t get a yield on it, now they have about no money in there.

50:33 Within four weeks of bankruptcy, who wants to go be a professor or a student at that university? So what we did is we basically endowed the company in order to revitalize the company, and that’s why I say, often, Bitcoin is hope. And you have also become probably the most famous Bitcoin evangelist in the world in the process and been embraced by the, community. I mean, what’s that been like for you? Because that’s a transformation.

51:04 You know, it’s easy to be depressed in the depths, you know, of March 2020, right? A lot of a lot of people went through a difficult time period, and, uh, you know, what is, uh, Mark Twain says? Two most important days of your life: the day you’re born, the day you figure out why. And so, uh, I, I think it’s been very revitalizing. For me, it’s been revitalizing for MicroStrategy.

51:37 It brought me in touch with a lot of brilliant passionate, progressive, idealistic people. You know, I like being plugged in the mission, and I’ve been plugged into the community. The community is just very motivated and passionate. And just like that MIT story, where I said, just a lot of very intelligent, bright young people doing cool things. When I got to MIT, I see a lot of people in the Bitcoin community, very passionate, doing very cool things.

52:16 You know, when I describe Bitcoin, I’d say it’s an economic imperative. It’s a technology imperative, and it’s a moral imperative. The economic imperative is 400 trillion dollars worth of currency and currency derivatives that are being devalued by the currency devaluation. So everybody in the world has this problem, right? So it’s motivational to have a solution to the problem faced by every investor on the planet.

52:46 If you own bonds, it’s 100 trillion dollars worth of bonds with a negative real yield. If you own commercial real estate, your commercial real estate’s got rents capped at CPI, which means you have a negative real yield on real estate. If you own value stocks, the value stocks are valued based upon the discounted value of the cash flows. If you have a utility company growing cash flows at two percent a year, and if the currency is devaluing at 15 a year, you’ve got a negative real yield on your cash flows.

53:15 So everybody in the world sitting with cash or currency derivatives has a problem. We’ve got a solution that’s pretty motivational. I think from big tech, if you look at the tech imperative, Bitcoin is, this is what Bitcoin is to me. Bitcoin is digital property, which means that if you wanted to give joy to 5 billion people, you would give them digital music on a mobile device. Apple Music, Amazon Music, pen Pandora.

53:48 That’s how you give music to 5 billion people. You can’t give them an orchestra or a Steinway grand piano or a phonograph or a record or a CD. You just can’t do it that way. The 20th century music solution is too expensive and cumbersome to give music in the 21st century to everybody. If you wanted to give education and air addition to 5 billion people, you can’t do it with MIT and Harvard and libraries and books and teachers and professors.

54:20 You need to do it with digital books and digital education. You need YouTube and iBooks, and that’s why Google and that’s why Apple are exploding in value. If you want to give wealth to 5 billion people, Brian, you can’t do it with gold. You can’t do it with land. You can’t do it with buildings, and you can’t do it with 20th century stocks.

54:47 You can’t do with collectibles and art. You can’t do it with diamonds. Those are 20th century property. They work for the elite. You can give 10 of the people wealth that way.

55:00 You can give 10 or 20 of the people wealth with banks and stock exchanges. If you want to give 5 billion people wealth, you need to give them digital property. You need to give them digital gold on an open monetary protocol running on a 50 Android phone, and that’s what Bitcoin is. Once you understand what we’ve got here, you put Bitcoin together with an Android phone with an application. It could be a, it could be a layer 2 decentralized application like Lightning, or it could be Square Cash App, or it could be PayPal, or it could be Apple Pay or Google Pay.

55:40 But when you put together mobile devices with software and you plug it into digital property, you have the means to give everybody on earth property rights, and you can move it at the speed of light, and you can make it as smart as your iPhone or your Android phone can be smart, and there’s no one on the point that hasn’t figured out digital photos, digital video, digital books on a smart device is a better idea, and it’s the way to create a utilitarian entitlement. And so when I say it’s a tech imperative, I mean, hey, it’s a pretty good idea for Google, Apple, Amazon, Facebook, and if they don’t do it, then Jack Dorsey at Square or in PayPal is going to eat their lunch and do it for them. You can’t stop that.

56:35 The genie’s out of the bottle, but I also say it’s a, it’s a tech imperative because they have to do it. Right? It’s like they have to do it because, you know, I, iCloud with your photos and your videos is interesting, but iCloud with 100 trillion dollars of your money is compelling. You know, when Apple doesn’t do it, Facebook’s going to do it, and if Facebook wants to push back against Apple, they need to put digital property in the Facebook app. So, so it’s coming, and it is the, it’s the next chapter of the mobile wave.

57:10 You know, it’s like mobile property in the palm of your hand. When people, people don’t get it, if they’re elitist in the, in the Western world. Yeah, you live in Manhattan. You got a bank, and you have, like, you know, you have your money invested in NASDAQ. Okay, well, good for you.

57:27 What’s your solution to the two billion people in Africa and Asia and South America who don’t live in Manhattan, don’t have a bank account, don’t have a brokerage? You know, the 1.7 billion people on the planet don’t have a bank, and when they actually make some money, they can buy the local currency, and the local currency is devaluing at 80 a year. Okay, that’s, that’s what people don’t get. So the next big tech move is digital property on mobile devices, and that takes me to the moral imperative.

58:02 The moral imperative is you want to give property rights to 8 billion people on the planet. You’re not going to give it to them by preaching. You’re not going to give it to them with politics. You’re not going to give them books. You can’t physically ship one ounce of gold to everybody on the planet, and if you could, there’s a 40 mark up, a 30 mark down, a six-week delay, and you can’t program the gold.

58:25 How am I going to actually build a 21st century economy, on a rock? I can’t do it, and I can’t build, I can’t do it with the 20th century banking system. The 20th century banking system is a couple of central banks wired through thousands of fractional banks that don’t operate on the weekends or the evenings. If I wanted to do business with a company in Nigeria, it took me 25 years. If I took a billion dollars, Brian, and 25 years, I still could not do business with a company in Nigeria or Zimbabwe.

59:00 I cannot do it. You could spin up a mobile app in Nigeria that accesses the Bitcoin protocol, and plug it into another mobile app in Argentina that’s plugged into another bank in Syria, plugged into a retailer in Iran, Iraq, Russia, the U.S., Manhattan, Wyoming and Mexico, and you could thread that together using the open protocols of Bitcoin as a settlement layer and Lightning as a transaction layer, and you could do that without asking anybody’s permission, and you could do it now. And is it happening?

59:37 Yes, it is happening right now. It’s happening in El Salvador right now. So the thing that’s most exciting to me is, there’s a lot of, there’s a lot of academics and a lot of politicians, and they preach, let’s make the world a better place. But when you go to MIT and you look up on those buildings, you know, and you see all the great scientists, and you see Maxwell, right, and you see Edison and you see Einstein, and you see Newton, you’re reminded that if you really want to better the human condition, fire, give them fire.

1:00:18 And when you’re done with that, you don’t give them electricity, and when you’re done with that, you know, give them antibiotics, and then radiation. Right? There you need technology. You’re not, you know, radio. Right?

1:00:38 We went from a life expectancy of 50 to a life expectancy of 70 from 1900 to 1950. We didn’t do that with preaching in politics and elections. We did that through the conquest of infectious disease, and that comes down to two ideas: sterilization and antibiotics. And so what does it mean? Prop, what are property rights?

1:01:01 I mean, life, liberty, and property. John Locke gave us that idea. What does it really mean? I’ll give you a biological metaphor. If you’re a type 1 diabetic, you can’t form insulin, which means you can’t create fat.

1:01:17 What is fat? Fat is an organic battery. It’s a battery to store organic energy. Nature came up with a battery to store organic energy. Insulin is what actually converts the excess energy into fat.

1:01:34 If you have it, you live 90 days without food. If you don’t have it, you eat non-stop and you starve to death. When I, property is a socio-economic battery. And so if I have an excess three months’ worth of salary, and I can store it in property, it means I can lose my job and not starve to death. When I deprive you of property rights, and I deprive you of property, you look hand to mouth, which means in the week when you lose your job, your children go hungry.

1:02:07 So yeah, in America, when you have a bank and you store dollars, and they lose one or two percent of their value a month, it’s just a problem. When you live in Africa, you don’t have a bank, and you can’t store dollars, and you have to keep money in a local currency, and it loses one to two percent of its value a week. At that point you’ve lost your property rights, and if you lost your property rights, it’s hopeless. You know, it is, a type 1 diabetic can eat non-stop, they starve to death.

1:02:40 It’s a death sentence. The lack of property rights is a death sentence. So if you want to give, and what, how do, what you see happens, well, you know, literally some people starve to death, but when when you have hyperinflation, like the Weimar Republic, when you have hyperinflation, Zimbabwe or Venezuela, or you see the kind of inflation that’s coming and is manifesting in Argentina, or is in Syria or Lebanon. Lebanon lost 90 percent of the value of currency in one year.

1:03:13 The government devalued the currency 90, froze everybody’s US dollar balances in the bank. If you had money in U.S. dollars or in Lebanese pounds, you lost 90 to 95 of everything. Okay, so where’s your property? How do you eat? Right?

1:03:31 That’s the problem with losing property rights. So what happens when you have hyperinflation? It’s like you become a diabetic. A type 1 diabetic. Your batteries start to drain.

1:03:44 What you get is a collapse of the currency, a collapse of property, and you get ripped back to the Stone Age, barter. So you know that the entire modern economy collapses if you don’t have the abilities for economic energy, and that causes the collapse of the society, and we can see that. And Bitcoin will potentially solve all that. There it is. You have all that property, and now everyone can access it, and it’s now so clear to you that this is the solution.

1:04:25 And again, it’s tech, so it works. So give the people the fire and let them use it. And this, Bitcoin is electricity, right? Bitcoin is not a speculative, uncorrelated asset, right? So when people get beyond that, what’s going on right now, Brian, is that as the U.S. dollar expands, and let’s say we’re inflating, we’re devaluing the dollar 20 a year, maybe, and we’re going to keep doing it.

1:04:52 All these strong currencies are also devaluing at 20 a year against scarce assets. That’s why you have asset bubbles. That’s why housing is up 25 in the U.S. year over year. That’s why the S&P is up 35 or 38 year over year. That’s why the S&P had seven consecutive days of all-time highs and seven consecutive months of all-time highs, and looks like this.

1:05:15 There is no price discovery in bonds. There is no price discovery in stocks. There is no price discovery in property. As that’s happening, other weaker currencies are falling faster. So there’s a set of currencies that are devaluing 20 against scarce assets.

1:05:32 They’re the good ones. There’s another set, the value of 40 a year against scarce assets. They’re the middling ones. The weak ones are falling 80 percent versus scarce assets. That’s where you’ve got hyperinflation.

1:05:45 You can see that happening. All of those countries are going to lose their currency privileges. Their local currencies are literally collapsing. In El Salvador, their currency collapsed after the civil war 20 years ago. They had the dollar rise.

1:06:00 Okay, well, nice idea. Let’s dollarize. Okay, fine. If I don’t have a bank, how do I get dollars? Uh, yeah, right, you remember the, you know, the history of the Chesapeake Bay is the settlers came here in the 1600s.

1:06:16 They didn’t have pounds. They didn’t have currency. They used bales of tobacco as their currency. Right? When you don’t have dollars and you can’t manufacture dollars, what are you trading?

1:06:28 Seashells, tobacco? What? Okay, so what’s going on here? What’s gonna happen? This is the ending.

1:06:36 Everybody has an Android phone. It costs 50 bucks. If they’re rich, they have an iPhone. The wealthy, of an iPhone, the working class and the poor have an Android phone. You’ve got a digital wallet, and you’ve got digital currency in it.

1:06:52 The digital currency is not going to be the Zimbabwe dollar. It’s not going to be the bolivar. The digital currency is going to be the US dollar everywhere in the world where the, where US is the predominant political influence. The Chinese would like it to be the CNY. They’d like it to be the RMB if they could.

1:07:11 So you’re going to see a little struggle between digital currencies in the China sphere of influence, versus digital currencies in the Western sphere of influence. People are going to use those dollars to buy coffee. They need digital ones, so they’ll either be stablecoins running on a crypto network like Tether, or they’ll be a digital dollar that came through a centralized solution. El Salvador legitimized Bitcoin as tender, so you could swap between Bitcoin and dollars using the El Salvador banking system, and that’s how they do it.

1:07:44 But everybody’s going to have that digital wallet, and you’re going to have digital currency, which is like a dollar or CNY or euro, or maybe the yen. There’s only going to be about a dozen. The world only really needs a dozen strong currencies, and most of them, I could argue, that every Western currency is pretty much pegged to the dollar. Even the CNY, Brian, is pegged to the dollar. Everything is pegged to the dollar, and So the US dollar be the world’s reserve currency.

1:08:16 It’s going to move on these crypto Bitcoin rails, and then the underlying, the other part is going to be digital assets. People want to hold digital currency and digital assets. The assets hold their value. The currencies devalue one or two percent a month. If they’re good, they devalue faster, but, you know, when you divide the currency 85 a year, everybody wants to get rid of it.

1:08:41 In Venezuela they want to trade their bolivars for dollars, and then they’ll want to trade their dollars for Bitcoin. Right? Right? If you need, if you need to spend the money in the next 12 months, you’re going to hold currency. If you need to hold the money for the next 12 years, or for the next 100 years and give it to your children and your children’s children, you need property.

1:09:01 So that’s called an asset property. So what you’re going to see is mobile devices with the currency in one layer, and then property or asset in the other layer. Bitcoin is the king of the assets because it’s the most secure, most likely, it’s got the strongest integrity, the greatest durability over the next century. The US dollar is the king of the currencies. It is the world’s reserve currency.

1:09:33 Most of the world, you’re talking billions of people in South Africa, in Asia, in Africa. They’re going to want to flip to the dollar and the Bitcoin. That’s the 21st century ecosystem, and they’ll augment those wallets with some other assets. Maybe if you can hold an equity token or an Apple stock or whatever you love, if you hold some rights and privileges, you will, and they’ll want to hold maybe some local currencies, if by law I have to pay my taxes in euros or pounds.

1:10:06 So you mentioned, you mentioned Tether there, and I’m glad you brought it up, and you mentioned maybe a token, maybe a synthetic equity asset. Right? Now these things are considered DeFi. Right? Decentralized finance.

1:10:19 Most of them are based on the Ethereum network, which came a little bit later than Bitcoin. We know the whole story. There had the smart contracts, and again, all this brain power went there. And Michael, that’s, that’s what caught my eye a few months ago in this space. Is that I saw the, the rate of growth of some of these, these instruments at a rate that I hadn’t even seen in the 1990s when I worked at Bankers Trust on Wall Street.

1:10:44 We were putting together some exotic risk. We were probably one of 10 or 20 shops in the world that were packaging these products for customers, and, with, and some of these things were high-level concepts to understand in finance, and yet I saw this happening in a decentralized way, and I was like, wow, this feels like next level growth. I’ve never seen anything like it, and that’s what attracted me to this ecosystem. But that’s a very different thing than Bitcoin.

1:11:09 And I, you’ve made an incredible argument for Bitcoin. Where does Ethereum come into play? DeFi, smart contracts, obviously Tether’s on there. Tether’s got quite a big market cap right now, and I agree with your train of thinking. It’s like there’s the currency.

1:11:23 There’s the property. That currency, you mentioned Tether. What will play out when it comes to Ethereum? Let me give you an interesting magic quadrant for you. Okay, if you want to take the entire crypto universe and divide it into the end of, um, four quadrants, you’ve got property, you’ve got currency, you’ve got platform, and you get application.

1:11:49 And, uh, what is property? And that’s the, that’s the decentralized economy. Okay, there’s a centralized economy, a traditional economy. There’s property. There’s, uh, there’s platform.

1:12:03 There’s application. There’s currency. There’s this centralized world, the decentralized world. So once you understand that, uh, decentralized property, the leader is Bitcoin. What is it?

1:12:16 It’s engineered for integrity and trust over the long term. What I wanted to do, I just wanted to be here in a hundred years. I really wanted to be here a thousand years. Do I want to change it? Not really.

1:12:29 Okay, in Manhattan it has low ambitions, right? You like that it has low ambitions because it does what it says on the tin, as they say in the UK. You like it the way it is, because in that sense it’ll be durable, and it’ll store value for a thousand years. That’s why you like it. I want indestructible inertia.

1:12:48 Okay, so if you think about Manhattan as the metaphor, and you’re in Manhattan, I’ve got a city block in Manhattan. I’m hoping Manhattan’s made a grant. That’s why it’s Manhattan. It’s well located too. So a granite city block in Manhattan.

1:13:06 Okay, Bitcoin is 21 million blocks of cyberspace. And what do I like about granite? It’s heavy, it’s inertial, it’s indestructible, and if I build a hundred-story building on it, it won’t sink. You know, there’s other places. There’s a, you know, very, very tragic Surfside accident in Miami Beach, a building sunk, built on sand.

1:13:31 Okay, you want to build something? You want to build it based upon granite, a strong foundation. That’s your property. There are other properties. Ultimately, generally, what you do is you pursue a proof-of-work decentralized mining architecture.

1:13:51 Um, the way that you get that granite indestructibility over time is, is you’re securing a network with a lot of energy. You’re securing the network with a lot of technology, the seventh generation SHA-256 ASIC miners. That’s a lot of technology capital. You’re securing the network with a lot of political capital, like the governor of Texas, you know, the nation state of Iceland, you know, Canada. They have a lot to gain, so they’ll protect it.

1:14:22 You’re securing the network with a lot of human capital, all the mining operations, and you’re securing the network with a lot of external financial capital. I put billions of U.S. dollars into mining facilities, which are then mining Bitcoin. And so everybody that’s got a vested interest in that has now got a vested interest in defending uh Bitcoin and preserving the integrity and not having anybody change it. Right? A lot invested interest, so that’s the pro, that’s the architecture for property.

1:14:56 There are other, there are other crypto asset networks, you know, Bitcoin Cash, Bitcoin Satoshi Vision, Dogecoin. They’re properties. Right? Obviously I have an opinion about which one is the safest bet. Bitcoin feels like the risk-off, right?

1:15:13 Crypto property network, right? It’s the Manhattan and cyberspace. One day I think billions of people want to live there. Now you’ve also got digital currency. You’re in Manhattan.

1:15:25 I give you, let’s say I give your family, Brian, a billion dollars, and I say, invest it for the next hundred years, or you can buy a billion dollars with the land in Manhattan, buy a billion dollars of Bitcoin. Okay. What else can you do? You can buy a billion dollars with the US dollars. Okay, that’s buying a digital currency.

1:15:47 If you buy a billion dollars worth of Tether, you’re just buying the currency. Is it a good idea for the long term? Not really, because it’s going to, it’s going to devalue at one or two percent a month, or seven percent a year, whatever. It’s meant to be value. You’re tying yourself to an asset which is tied to the fiat economy.

1:16:05 Is it a good idea if you need to actually buy a billion dollars worth of stuff tomorrow? Yeah, who needs to buy a billion dollars with the stuff tomorrow? Traders, exchanges, right? Insurance companies, banks. What if you need to buy a billion dollars worth of stuff in six months?

1:16:24 It’s a good idea. Like, you need it for working capital. MicroStrategy has 50 million dollars worth of dollars. That’s working capital. We have billions of dollars with the property.

1:16:34 The 50 million dollars is what we think we need to trade with, to pay our employees, pay our vendors for the next year. Okay, so that’s working capital. That’s the best use of digital currency. Who needs it? Well, how about, like, 1.7 billion people without a bank that would like to use you as you know, from their point of view, the US dollar is an alternative to the bolivar or to stone rocks of the junk, the yacht people, right, or the bales of tobacco.

1:17:00 Pretty good idea to run an economy that otherwise is constrained to the Stone Age. How do you sell your services to someone in Manhattan when you live in El Salvador, over an internet connection, if you don’t have digital currency? Okay, so it’s not a bad idea, right? My friend Eric plays chess with me. He pays somebody in Siberia to give him chess lessons.

1:17:27 It’s a lot cheaper than paying someone in Manhattan to give them chess lessons. The guy in Siberia gets a good deal. Eric gets a good deal. You know, Eric needs all the help he can get. Eric, if you’re listening, right?

1:17:40 Um, so that’s the currency, that’s the currency, and that’s the lubrication to turn on eight billion people in the economy to trade with each other on fifty dollar phones. So yeah, it’s useful. Tether is the leader in the decentralized, you know, in that space. You know, they’re using a proof of authority, some architecture. Yeah, and that’s on the third, and that’s on the Ethereum network right now.

1:18:06 Yeah, and I am not an expert on the intricacies. All I know is there’s a stack of digital currencies. Right? Tether, DAI. Some are more decentralized than others.

1:18:18 They’re sort of private, and over time they will compete in a way with uh CBDCs and state-issued digital currencies, and there’ll be pros and cons, right? Just like, you know, digital property. Bitcoin competes with real properties. Yeah, you can buy gold. You can buy land in Kansas.

1:18:38 You can buy Bitcoin, right? There’s there’s that flow, and there’s flow between digital currencies. Why would I want it? Because it moves at the speed of light on Saturday afternoon to a 50 Android phone, and US dollars don’t. That’s why you would want it, right?

1:18:53 And um, you know, that the third quadrant is digital platform. Ethereum is the leader of digital platform, and the idea is let people build everything you could possibly imagine in a DeFi architecture and make it work at the speed of light on a Saturday, afternoon, and you don’t have to go through the traditional banking and the traditional brokerage and traditional every system, and then the fourth is digital applications, decentralized applications. A Uniswap wants to be in exchange, somebody wants to be an NFT, somebody else wants to be, you know, there’s maybe a license or a providence or whatever.

1:19:34 You know, your imagination is your limit. Now the decentralized apps compete with centralized apps. Decentralized platform competes with central, and, you know, Ethereum versus AWS, Bitcoin versus Kansas, you know, Tether versus the dollar and the Fed wire. Okay, and visa and Western Union, and, you know, there’s a lot of answers. Right?

1:20:06 Like, Western Union costs a lot of money, and Tether doesn’t cost a lot of money to move it, and then there’s, there’s lots of jockeying. There’s, there’s competition. You know, I have a Bitcoin version of my most popular podcast, Bitcoin versus gold, more than a million views. I think the gold is the 19th century property, and Bitcoin is a 21st century property, but the market is deciding where the money is going to flow. Tethers competing with, you know, with, uh, and we’ll compete with CBDCs if they ever show up, but until then it will compete with Western Union and Visa, right, and Ethereum will compete with, you know, centralized stuff, and, and, uh, the market will sort out, you know, who wins, who loses, right?

1:20:57 And, and, uh, maybe there’s lots of winners, and maybe multiple people win at the same time, and certainly they’ll be losers, right? Because that’s the way it works, and then you’ll also, in addition to the market competition, you’ll have regulatory clarity. Right? There’s a certain set of regulations that apply to currencies. There’s a certain set of regulations to buy the property.

1:21:21 Guess what? If you transfer a billion dollars of Bitcoin, you got to pay tax on it, property tax. On the other hand, you know, you transfer a billion dollars of currency, there’s no tax on it, but there’s KYC, AML. There’ll probably be some KYC along property too. And then, uh, and then with platforms, maybe some platform, you know, there are rules that we apply to platforms.

1:21:47 There’s a big political debate about Facebook and Apple and Google and their obligations, and Amazon, their obligations as platforms. Right? You know, what’s going on? There’ll be platform issues, and, uh, and then finally there’ll be applications. You want to be an insurance company, and you want to sell life insurance to like 16 year olds, you know, on the day that a 16 year old buys life insurance on their parents, and then they kill them.

1:22:11 There’s going to be somebody is going to show up, you know, digging around saying, did you sell an insurance policy to a criminal that collected on it? I, I have a colorful imagination, Brian, so please take that as just a random hyperbolic example, but if, to the extent that you want to be a decentralized application and you want to, if you want to sell future derivatives swaps, in London, the regulatory authority that is concerned with future derivatives swaps in London may be interested in you, and then you have to deal with that, right, which is, which isn’t a risk that you necessarily want to mess with, because you’re like, I’m property, and Bitcoin’s the property, and I like that it doesn’t have big ambitions. DeFi, on the other hand, does.

1:23:00 I mean, it really wants to just mow down the banks. I worked in banking for 15 years. I’ll be honest, Michael, I I personally want to mow them down as well, because I saw from the inside the way they, they, they stopped innovation. They stopped people having access, and there’s no need. 30 years ago I was doing some of the things that now the kids are doing on these dapps right now.

1:23:21 Why did it take so long, and why can’t these people, you talk about these two billion people around the world have access to these complex instruments? So I’m on this, maybe I’m a rebel. Anyways, maybe that’s why I, you know, fought against freedom of speech last year and ran for mayor this year in London, but I want to wreck it, but I think your sense of the fact that that comes with it, regulation issues, and they’re going to be real, and DeFi is going to have to go through those hurdles, and meanwhile Bitcoin as a property might not.

1:23:47 And that’s the way you see that. Is that correct? Yeah, I mean, I, I think that, uh, innovation. Like, we’re all in favor of innovation. This question of who can do what, like Uber was illegal in half the jurisdiction so they do business in, but I still like Uber.

1:24:03 Yeah, but, but, you know, they fought, you know, Airbnb in Miami Beach. Airbnb is illegal, but people are doing Airbnb, and like, so if you ask me how do I feel about that, they’re both successful unicorns. They’re making the world a better place, but there’s friction, but I also can see the point of view of the taxi cab drivers. You know, I bought a medallion in New York City, and I paid hundreds of thousands, and you bankrupted me, you know, by coming into my town.

1:24:31 Like, what about me? And maybe the guy that’s got the apartment next to the party house that’s got a hundred thousand parties going on, maybe that guy thinks I had I bought the apartment, and the condo association rules are you’re not supposed to do this, and, you know, Airbnb is making my life difficult. There’s friction with innovation. I, I think that, uh, just like the magic quadrant model is useful with crypto, it’s like, figure out what, what you’re investing in, and then start to work through the competition issues, and work through your ambition, and work through the regulatory issues.

1:25:07 I think there’s another quadrant, or another segmentation, which is, which is the investors, uh, segmentation. Are you a saver, are you an investor, are you a trader, or are you a speculator? And the way I think of it is a saver is someone that simply wants to keep their money for 100 years. You want to preserve your property, right? Uh, Brian, if you, if you would like to give your money to your grandchildren, and you want to put away some bucket of money for your grandchildren and not think about it, the traditional technique is, is I buy some gold and I bury it, or I buy land, or I, or I buy, uh, something which is stable, like, uh, and I buy Bitcoin.

1:25:58 I swap a weak asset for a strong asset. If you live in Argentina and I told you the currency is going to go from one peso to the dollar to 155 pesos to the dollar, well, then so what’s your strategy? Well, I just sell pesos and buy dollars. Okay, but what, but what’s your mix of real estate versus stock versus crypto? Like, now you’re overthinking.

1:26:23 I just sell the peso, I buy the dollar, because that way I’ll have 155 million pesos instead of one million pesos. In players, that’s the idea. Okay, that’s a savings strategy. Buy the strong asset, sell the weak asset. That’s a hundred year time frame, ten year time.

1:26:44 I’m an investor. An investor is I buy Apple, Amazon, Facebook, Google because I think they go up by a factor of 10, and they may be cut in half. If you show me a company that would go up by a factor of 10 where I might lose half my money, I would say if I believe in that company, that’s an investment proposition. I can get behind that. I’m buying a business.

1:27:06 It’s much riskier than saving. See, the thing about Bitcoin is Bitcoin is if I took big tech and I ripped off the PR, if I took away the product and the CEO and the board of directors of the company and all the employees, and I just left the big tech, and it didn’t ship anything and nobody worked for it. Can you see how that is less risky, less moving parts, than when I give it, when you give Apple, Amazon a million employees, you can unionize them, and when you give Apple 10 products, they have to upgrade them, and then when you give Google a headquarters, well, you can regulate them, and, you know, so when you give the company stuff, people, you create more attack surfaces.

1:27:52 So that’s why with Bitcoin, I can imagine, I just, if I buy a hundred thousand Bitcoin, and it is whatever, half a percent of the network, maybe I’m holding it for a thousand years. Well, Mike, what has to happen for that to be valuable in a thousand years? Nothing different than what’s happening now. Right? So savers have a view.

1:28:19 They just want the land. The investors, they’re taking a different risk proposition. Um, the traders, while they’re, they’re betting on risk derivatives. Like to be right on Apple stock, you just have to hold it for a decade, but if you’re a trader and you were trying to guess whether the quarterly results would be, well, so you could buy the call or sell the put. You have to actually, not only do you have to guess whether they print a good quarterly number, but you also have to guess whether the market has already assumed that they’re going to print a good quarterly number, and you have to trade against the sentiment of the market.

1:28:58 So you’re trading the shape of the yield curve, and you’re trading dynamically risk derivatives, the first and the second derivative of risk. If you’re a good trader, you know you are, and then the last thing is speculator. I, you know, I don’t even know what Apple’s going to print, but everybody’s talking about it, so I just bought the stock to see if it would go up. All right, I bought Dogecoin before Elon Musk goes on to Saturday Night Live to see if it goes up, but that’s, that’s a different thing.

1:29:27 I think that, um, if you have a bucket of money that you just want to save, low risk, you do a savings strategy, and if you didn’t like Bitcoin, I would say buy a stack of market basket of scarce assets that are going to hold their value in an inflationary, monetary environment that nobody can screw up. You know, you just want to, I’m just going to buy a trophy asset. I’m gonna buy beachfront property. I’m gonna live in the rest of my life. I’m gonna buy something which you can’t mess up.

1:29:57 Very simple. An investor, you have to, you have to cherry pick from 500 different stocks in the S&P 500 to pick the right one. Okay, and then, but then if you’re a Warren Buffett investor, you buy it, you hold it forever. He’s still holding Coca-Cola 40 years later. Okay, that’s fine.

1:30:17 The trader is, you better have proprietary liquidity or proprietary algorithms, or you better be in between two inefficient markets. If you are, you know you are, and if you’re, if you don’t know that you’re the best in the world at this, you probably aren’t, and you should probably stay out of it. And I don’t begrudge anybody being a speculator. That’s, you’re right. I mean, if you want to go to Vegas and bet money, go do it.

1:30:42 If you want to bet on yo-yo coin, go do it, right? But, but you know, only bet where you can afford to lose, and call it, you know, call it that’s your, that’s your gambling entertainment bucket, and maybe you make money. And I mean, people make money in Vegas, that maybe, maybe on the margin your odds might be better you know, in certain places than other places. If I could just say with one, one, uh, geographic metaphor, coming back to this New York analogy: if Bitcoin is a block in New York City, then, then the currency is a bunch of dollars in New York City.

1:31:23 The platform is a hundred-story building, the Rockefeller Center in New York City, right, and the applications are companies in the Rockefeller Center. Roll the clock back 100 years. Do you, would you rather own the land underneath Rockefeller Center, would you rather own the Rockefeller Center, would you rather own the banks, the insurance companies, the restaurants, the discotheques, the retailers, the condos in Rockefeller Center, or whether would you rather own a billion dollars worth of money in a vault in Rockefeller Center?

1:32:01 And then, and that’s your four different things. Figure it out. I would say you can make, you know, you can make money in any of the four if you’re going to own the dollars, you better be a trader, because you can’t hold them that long. You better be trading if you’re going to own the platform, you’re going to be a landlord, and you’re going to have some tenants go bankrupt and other tenants hit it big, and you know, figure it out. I think that the block in Manhattan is good for a thousand years.

1:32:31 I think the building is good for one or two hundred years before you have to rebuild it. That’s okay. I mean, Rockefeller Center still there. They put it up in 1930 something, but you had to, you know, you gotta renovate it if you want to own the company. Man, companies, they could last name a company that’s 100 years old.

1:32:51 They could last 10 years. They could last 20. They could last 30. They could also last 30 months. But on the other hand, Brian, if I had infinite capital, if you have a billion dollars and you just want to put the money to work in a brainless way, you buy the property.

1:33:10 But if you don’t have a billion, and you want to make a billion dollars, if you start with a million dollars and you want to make a billion dollars, maybe you want to start a company. In fact, maybe I’ll say, like, I started with a five thousand dollar furniture loan at age 24. In order to, in order to create a multi-billion dollar company with five thousand dollars of capital, you better start a company. You need to invent something. So if you don’t have any capital but you have, if you have intellect and passion, ambition, you start on the application area, and then you move backwards.

1:33:48 Yeah, if you have a decent amount of capital, maybe you can have a building, a platform, and you’re hedged in the middle, and if you have a lot of capital, you buy property. And, uh, I think they all appeal to different pools of capital, and, and, and they all, you know, there’s a there’s a, the marketplace will sort it all out, but it’s important to keep in mind that, um, there’s a lot of uh, 400 trillion dollars of the money in the ecosystem is CeFi. It’s traditional finance, and so if you want to see this thing really explode, what you want is for the insurance companies, the MassMutuals, the New York Lifes, the AIGs, you want them to rotate a hundred billion dollar portfolio that’s all bonds into 30 or 40 or 50 or 100 billion dollars of Bitcoin.

1:34:44 And then as that, as they rotate their traditional bond assets into digital property, the entire ecosystem will expand, and then you can start to use that digital property as collateral for the next thing, and the next thing. Right? We, there’s a place for, for both. Right? Some people think the only innovation is in the DeFi apps.

1:35:08 Well, I mean, there is. You need to do DeFi apps to bring innovation to certain parts of the economy. Like, if you want to bring, when we wanted to bring stablecoin, uh, uh, to El Salvador, you needed Lightning on Bitcoin, and it was DeFi. You couldn’t do a Visa. But on the other hand, there’s also massive opportunities for Apple Pay and Google Pay.

1:35:33 You can, you know, you can also convert Apple into the world’s biggest bank. Right, right, right. I mean, Bitcoin means that Apple could become a bank with 10 trillion dollars in assets in 36 months, or 16 months. Okay, that’s a different thing, but it’s also possible you could have a DeFi network that spins up with hundreds of billions. I think it’s more likely that you’ll see mega capital flows as the big tech players, like Facebook and Apple and Google, come in, because they have incredible, incredible leverage they can bring to bear if they start to embrace even a piece of the crypto ecosystem.

1:36:15 Yeah, and I think everything you just said, you should teach at a class at the Sloan School of Business at some point, Michael, because it was, it was pretty good. Um, pretty tasty. Those two quadrants. Just a couple final questions before you go. You mentioned potentially those FANG companies maybe doing what you did with MicroStrategy, taking chunks of their treasury or leveraging into these markets.

1:36:35 Are you surprised more companies haven’t? Obviously it seems like you talked Elon into it, um, and I don’t know if he’s if he didn’t necessarily get rid of his Bitcoin, but obviously I guess they’re not taking it. So just thoughts on that, and then finally, just how this all plays out with China. Just would love to get your closing thoughts on that. Okay, so with regard to corporate adoption, um, I mean, corporate adoption of Bitcoin has exploded over the last 12 months.

1:37:01 If you roll the clock back 12 months, I mean, let’s go back to July of 2020. I did a search. I think I found one company that had held like two million dollars worth of Bitcoin for a period. That was it. And so if you look today, there are billions and billions of dollars spread across a couple of dozen companies, two, three dozen public companies.

1:37:27 So, but you and Elon are the big, are the big people that have invested, right? No one else has gone into the billions. Right? We’re the biggest, but Tesla’s got, it’s still got billions on its balance sheet, uh, and then if you go to Galaxy and Marathon and Square, they’ve got hundreds of millions. So, so we’ve made good progress in the first 12 months, but, um, generally the challenge for publicly traded companies is that is the digital assets and accounting for digital assets, right, is not kept up with, uh, the rate of growth of the industry.

1:38:02 So the the traditional GAAP accounting treatment in North America, in the US specifically, is, uh, indefinite intangible, which means that if you buy, uh, if you buy a billion dollars of Bitcoin and it trades down 20 for a minute, and then it increases by a factor of 10, when you report the period, you have 10 billion dollars of real Bitcoin, but you would report that you have 800 million worth of Bitcoin, and it’ll be a 9.2 billion dollar difference between the pro forma fair market value and between the indefinite intangible book value, and that creates opacity and confusion, and then you would have to create pro formas to explain to your outside shareholders where the 9.2 billion dollars went, or, you know, do you have 800 million or do you have 10 billion?

1:38:53 Okay, so if you’re a traditional CFO or treasurer and you have a beautiful P&L, a beautiful balance sheet, then then putting a lot of raw digital assets on the balance sheet in that form, where you get that indefinite intangible accounting treatment, would give you pause. Now, you have the other option. You could, you could actually buy it as a fund, then you hold a security, and then normally most of the time the securities are fair value accounting, and then you’ll be showing 10 billion dollars of security, but you run into all sorts of other issues, like there’s the SEC ’40 Act, where if you have more than 40 percent of your assets in securities, you trip that up, and now you’re a different type of company, or finance company, and so all of a sudden you have conservative CFOs and lawyers saying, well, if we do it this way, then we’ve got this accounting optics issue.

1:39:45 If we do it the other way, then maybe we have this ’40 Act issue, and so let’s think about it a bit longer. And then of course, if I actually bought a billion dollars of Bitcoin and it went up by a factor of 10, I would have a nine billion dollar capital gain, and if I ever, if I ever wanted to transfer the Bitcoin from one custodian to another custodian, like, I’ve got 10 billion dollars in one bank in Singapore, wants to give me 10 yield. It’s like I make a billion a year, but I’ve got it tied up with the first fund, and they’re giving me one percent yield, and so I’m losing 900 million a year, but if I want to transfer it, I can’t, because I don’t have the custodial rights of the Bitcoin, so I have to sell it.

1:40:29 So when I sell it, I get a three billion dollar capital gain tax. So you can see the complexity here, which, which is a complex. You don’t have it if you’re an individual, and if you’re a private office, and if you’re, and if you’re a fund, you don’t really have that complexity, but there are certain classes of investors that have certain complexities on this, and that’s why, that’s why it’s not the simplest thing. I think that over time, what, you know, we will see.

1:41:05 There’s already an awareness that the accounting is not necessarily the most straightforward, and and, uh, you know, a Congressman, Tom Emmer, wrote a letter to the head of FASB, signed by a bunch of other congressmen, saying, hey, can you take a look at this? There’s an awareness of that. What, whether anything changes, who knows, right? And it’s different in different parts of the world, but that’s a long-winded answer to what’s going on. There are asymmetries in the market.

1:41:35 We could sit and we could, uh, whine about it, and we could feel sorry for ourselves about it, or you could flip it around and say, that’s your opportunity, Brian. Yeah, I mean, MicroStrategy went through the process of rotating our shareholder base to actually educate them, and so now that we’ve done that, and people look at our Bitcoin holdings and our performance, it’s actually a benefit. The other thing we did is we issued equity converts and senior secured debt, which are Bitcoin derivatives, and that means that if you’re an investor and you want the Bitcoin exposure, but, but you’d rather own the security, well, maybe you can, you’d rather own the MicroStrategy security than the Bitcoin, and so instead of complaining about the problem, be the solution to the problem.

1:42:20 You know, I could turn it around and say, well, you know, if accounting wasn’t indefinitely intangible, Bitcoin might cost you a lot more to buy right now, so if they ever change that, that might, that might change your, your risk reward scenario. So think about: are you happy that Apple hasn’t deployed Bitcoin as part of Apple Pay, or are you unhappy on the day when they announce that they’re rolling it out? Bitcoin is trading up, and if you didn’t buy everything you wanted to buy, then you’ll be thinking, man, I should have bought more before they did that thing.

1:42:53 So that’s what I think about. Uh, that, the last question is on China. Do you want to go into that? Do you have a, yeah, no, no, let’s, let no, let’s finish on China, because that’s a huge wild card. What happens there in the next 20 years?

1:43:07 There’s a Western Net and there’s a China Net. The Western Net is Western Europe and the United States and the free world, and it revolves around the US dollar, the English language, Western law, you know, and, uh, and Western technology, and it is dominated by Google and Facebook and Twitter and Apple and the US Supreme Court and English, and Amazon, and, and that’s been getting stronger for the past, uh, 20 years. In fact, that’s, I mean, it started to form with the internet and just got stronger and stronger, and then there’s a Great Wall of China, and behind the Great Wall of China they block Twitter.

1:43:56 They block Facebook. They block Google. Apple, they have a love-hate relationship with, but they block most of these other things, and they have their own Weibo and WeChat and Alibaba and Alipay. They don’t want Google Pay, they don’t want Apple Pay, right? And they have the CNY, the RMB, and they have the Chinese language, and they have Chinese law and the Chinese culture, so there’s the China sphere of influence.

1:44:25 There’s the Western sphere of influence that has been that way for quite a while. More than a decade, probably 20 years. It’s been getting stronger and stronger. It was always that way, but, uh, but it became visible to us after the internet revolution, because you saw the VPNs and the firewalls and the like. Right?

1:44:48 There is a controlled flow of information. What you just saw with, uh, with, uh, the China crackdown is it drove a China exodus, it drove an exit, as a Bitcoin mining and Bitcoin holdings, from China that has been gradually coming, uh, for the past four years, and this was, um, a pretty aggressive, uh, acceleration of that in about a four-week to six-week time frame. What does that mean? It means that, uh, people holding billions of dollars of digital property on the Bitcoin network in China, they had to sell it.

1:45:24 They, to force liquidate it in a hurry at a discount. The winners were the people that bought the Bitcoin. My company bought 500 million worth of Bitcoin at 37 000. I would have paid double. I would pay triple.

1:45:40 We were gonna buy it. Okay, so we’re the beneficiaries. The people that sold, sold it to me. They were, they had to sell it under, under pressure in a hurry, and then the Bitcoin mining equipment, the Bitcoin miners had half the mining market. It was worth 10 billion dollars a year.

1:45:57 They were growing at 100 a year. It would have been worth a trillion dollars to them. They had to leave China. The equipment, that’s the Bitcoin mining network, is the security network of big point. Now it’s going to Siberia and Iceland and Canada and the US and Texas and El Salvador and Argentina and Africa.

1:46:19 It’s a benefit to the rest of the world. It’s a lost China, but you know, so is Google Maps a loss to China and a benefit to the rest of the world. You know. So when, when the Chinese, the Chinese found out that DiDi was tracking telemetry of the DiDi network, and they shut them down. Okay, well, that’s a negative, but you know, Android tracks telemetry, and if you shut it down and you can’t track telemetry, you don’t get the AI that tells you how to drive, and you have to develop it yourself.

1:46:56 So the view is we’re just going to do all that ourselves. Right, the Chinese have basically, you know, driven digital property in the form of Bitcoin now. They will try to replace it with the Chinese CBDC, but they’re not replacing digital property with digital property. They’re replacing digital property with digital currency. The digital currency is losing 20 to 25 percent of its value a year.

1:47:23 They don’t have any digital property. Control of the digital property network is going to shift to the West. Good for us, good for the West, good for the American way, good for the US dollar and reserve currency of the world, because what that means is, I you know, I gotta believe six, five billion people end up on the Western end. There’s already one and a half billion on the China Net, and I guess if they get another billion, you know, the big question is, is it two and a half billion on China and five and a half billion on the Western, or is it two and six?

1:48:01 It’s something like that, but I bet on the Western, that, Brian, you know, just like, you know, because Google is a national asset, and Apple is a national asset, but all the application companies, they’re all national assets, and if you’ve got a bet between the market economy and decentralized capitalism and creative destruction, a la Schumpeter, or you bet on central planning economy, ultimately you bet on, you bet on the market economy, because it’s Darwinian. There’s not a single, there’s not a single educated person in the world that would have put a bunch of college dropouts in charge of, you know, the tech industry in the US. Bill Gates is a dropout.

1:48:53 Mark Zuckerberg is a dropout. Larry Ellison is a dropout. Steve Jobs is a dropout. Michael Dell is a dropout. Right?

1:49:00 A lot of a lot of college dropouts with a lot of power, you know, in the world, and normally centralized economies put people with PhDs and master’s degrees from good universities in charge of stuff, and sometimes there’s, sometimes there’s intelligent people from good universities, a lot of times, if they do the right thing, it’s because they got beat up by dropouts, or they got beat up by the market economy and they had their head handed to them because they got arrogant, and someone doing something that they disagreed with, you know, blows up their beautiful model of the world, and they react, and and the result is, is a natural selection and evolution towards something better. Yeah, yeah, excellent analysis. Uh, just final thoughts, Michael.

1:49:49 I know you said a few months ago people should mortgage their house and buy Bitcoin. Do you still feel that way? And just final thoughts for people that have, uh, that have joined us for the last couple hours. Look, to be clear, my view here is, is, um, if you’re in a monetary environment where the money supply is expanding at more than fifteen percent a year, and you can borrow money at two percent interest or three percent interest, and you can buy something of tangible value that is not being debased or inflated away, it’s probably a wise idea.

1:50:29 If you bought, if you buy a house and you pay two and a half percent mortgage on the house, and if the house is going up in value 25 a year, the time to buy the house is not next year. It’s last year. Right? So, and the same is true, if you, if you had bought, if you, if you borrowed money at two and a half percent interest a year ago and bought the S&P index, it went up 37. So the generic observation is, when you can borrow money that is not marked to market for long durations for next to nothing, if you have a use of proceeds that you’re confident in, then it’s a good idea, borrowing money at two percent interest to buy something that that is going to go up in value.

1:51:19 Anything north of five percent is arbitrage. So I would say in general, it’s a, it seems wise to me to hold tangible assets and let them appreciate in value as the money printer goes birth and not pay off your mortgage. If you believe in Bitcoin, then yeah, um, if you, if you, if you have a million dollars of Bitcoin and you sell it in order to pay off your mortgage, what you did is you gave up an asset that was going on 280 a year, and let’s just say it’s going up 20 a year.

1:51:52 Let’s be very conservative. Let’s say it’s going to 10. You’re selling the asset going up 10 a year in order to loan a million dollars to the bank, and the bank is paying you two and a half percent interest on it, and the Federal Reserve is going to increase the money supply by 20. So it doesn’t make sense to pay off your mortgage if you have one. You should have, you should be long that.

1:52:19 My general view on debt is you don’t want to have short-term market margin debt. Like, don’t go and buy crypto assets or Bitcoin on 10 to one margin that’s worth the market, because you might get forced liquidated in an afternoon and lose everything. But the, the most subsidized debt in the world is mortgage debt. The US government buys 40 billion dollars worth of mortgage-backed securities every month, and they’re keeping mortgage rates artificially low.

1:52:50 So if you’re paying off your mortgage debt, you’re basically holding cash. You’re basically taking a million dollars of stock, you’re, you’re selling it to buy a million in cash, which the Federal Reserve is debasing and devaluing at 20 a year, 30 a year. So the only way to get ahead of that is flip it. Borrow a million dollars at two percent a year, and then buy something which will hold its value. And as to what you buy, you know, like, obviously I believe Bitcoin is the apex property, but if you don’t agree with me, study for 100 hours.

1:53:27 If you still don’t agree with me, study a thousand hours. If you don’t have time to study for a hundred or a thousand hours, then forget about Bitcoin. The next apex property is a piece of real estate that you’re going to use for the rest of your life, right? And then the next apex property is a trophy asset that you think a wealthy person will want to buy off you in a decade. Ask yourself the question: what is it I can buy that someone with money and education will want to buy from me in a decade?

1:53:57 And that, you know, that gets you to a portfolio of high-quality assets. That’s why people buy high growth. You know, buy a digital monopoly growing 25 a year. If I had to bet on Facebook or Apple or Google versus a value stock, I would bet on Facebook, Apple and Google, because they can ship a product to a billion people over the weekend for a nickel. And you know, I wouldn’t buy a chain of, you know, 20th century restaurants, because they’re not going to get 20x more efficient.

1:54:28 You know, so I think that’s kind of common sense, and that’s what I think about that. I think everybody should figure out what’s their investment strategy or their savings strategy. And, uh, and for your balance sheet, someone, someone wants to give you debt. Not all debt is evil. If I loaned you a billion dollars for a hundred years at zero percent interest, would you take it?

1:54:56 Presumably. Right? Yeah. Would it be irresponsible? Now, is it irresponsible to buy a billion dollars of Bitcoin for 100 years at zero percent interest?

1:55:05 Well, if you think it’s a good asset, no. If you don’t know what it is, I think Warren Buffett said, if you’re not want to hold the thing for a decade, for 10 years, you shouldn’t hold it for 10 minutes. Okay, so that’s my view on that. If you, if you don’t want to hold the thing for a decade, then don’t hold it for 10 minutes. But, but that’s a separate question as to whether or not you take the billion dollars of debt for zero percentage for 100 years.

1:55:30 I think when someone’s ready to give you a 30 million dollar loan, or sorry, a 30-year loan for two and a half percent interest, which is what the U.S. rate is right now, it’s pretty much close to free money for the rest of your life for most people, depending how old you are. And so I, the losers are people that they can’t borrow the money. Count yourself lucky. You can borrow money for 30 years for two and a half percent interest. The losers, people can’t borrow the money because they have to basically hold all their cash.

1:56:03 Like, what are you? You don’t have any assets. So you’re making a hundred grand a year, and this year it’s worth 100 grand, and next year it’s worth 80 grand, and actually it’s worth 60 grand. The next year it’s worth 40 grand. The next year it’s worth, you know, 30 grand, and I can run that, you know, that is a Taylor series, some kind of series, out for about 20 years until, I get it’s worth nothing.

1:56:24 Right? So if you expect to live more than 10 years, if you discounted it 20 a year, you know, simple math will illustrate to you that it’s going to be worth nothing. So, like, well, I’ll end with my, with my pithy quote, which is: the Road to Serfdom is working exponentially harder to earn a currency growing exponentially weaker. And on that note, we’ll let everyone digest everything we went through in the last couple hours. Michael, I really appreciate, um, first of all, you being a pioneer in this space.

1:56:59 I mean, like you said, there’s a reason not everyone’s doing it, because it’s complicated. It takes a lot of thought, and I didn’t realize all those methodical steps that you guys did last year to, you know, educate the market on what you were doing, to get the right people to buy in, literally via shareholders, and then that exponential, you know, takeoff. It’s been a really important piece of the entire story, and, you know, you’ve brought a lot of attention to Bitcoin and this concept of digital property.

1:57:26 So again, I really appreciate you going on a limb and doing that, and also just educating. These quadrants are a great way for people to really think about this stuff. And the truth is, you got a lot of people out there buying crypto who maybe have no business doing it and have no idea what they’re doing. I’ve never seen so many newbie tradies, traders, and volatility and panic and fear and pain on the back of it. So I think it’s important that people think about that quadrant, think about actually what they’re doing, and what are you, what are you doing?

1:57:51 It’s not a video game. It’s not Netflix. You know, it’s, it’s real money involved. So, um, this is great. Uh, your story is going to continue, and it’s like watching a movie as well, so uh, uh, I appreciate what you’re doing.

1:58:04 The next 12 months, I’m sure, is going to be just as exciting. So thank you for the time, and, and thanks for putting your neck out there. Until the next time, Brian. All right, all the best. There he is, Michael J.

1:58:15 Saylor. Follow him everywhere. Uh, you know, the company MicroStrategy. Another way that you can get in on the Bitcoin asset play, and appreciate you. We’ll see you next time