Home Trends Michael Saylor: Bitcoin is Fire or Electricity

Michael Saylor: Bitcoin is Fire or Electricity

by smart

hi and thanks for checking out the coin stories podcast i’m natalie brunell and i’m honored to share my guest this week is the one and only michael saylor michael is an entrepreneur an executive an inventor author and philanthropist and there’s arguably no one in the business world with a stronger conviction in bitcoin as chairman and ceo of his company microstrategy he is the first ceo of a publicly listed company to make a long-term investment in bitcoin microstrategy currently owns more than a hundred thousand coins make sure to check out his website hope.com for all the bitcoin resources you could want and without further ado i’m so grateful to share michael’s story all right michael thank you so much for joining me super excited to talk to you and i want to take it all the way back and start at the very beginning i read that you’re born you were born in nebraska moved to ohio at some point you lived on air force bases you were basically an air force brat right yeah my father was a non-commissioned officer in the air force and he uh you know he worked on aircraft and we lived all over the world in new zealand and japan and uh colorado nebraska florida virginia and you know i graduated from high school in ohio so wright-patterson air force base dayton just outside of dayton ohio and i was always on military bases and you had sort of your own top gun fantasy right you wanted to be like a fighter pilot astronaut well i mean if you grew up on air force bases watching airplanes fly all over you and you know and uh if you’re a science fiction fan and i i read lots and lots of science fiction it was my genre of choice growing up then you can’t help but fantasize about being a astronaut fighter pilot spaceship designer so you went after the footsteps of your dad right you got an air force scholarship you went to mit yeah i got a scholarship from the air force uh i went to mit and i studied aerospace engineering with a specialty in spaceship design and while i was in the air force i went to lachlan air force base as and then i uh i went and learned to fly at hondo airfield in west texas just outside of lachlan air force base it was a very hot july and august and it would be about a hundred and degrees on the runway and we were getting into these t-41s and they were they’re like military military versions of cessna 172s but they have no air conditioning and so we get an airplane and then the one thing you definitely want to do is get the plane going because there’s no air conditioning you open up this little part of the window and if you get going fast it would the temperature would drop from 110 degrees to just 90 degrees and then you want to get up high so the temperature will fall into the mid 80s if you’re lucky you sweat a lot yeah i know i bet um but something changed your your track right two things happened and you didn’t end up going down the fighter pilot route um i saw that first the reagan ended the cold war and then you were diagnosed with a benign heart murmur so what happened there yeah it was a it was a successive one-two punch i think um my final flight physical in my senior year and it would have been like january late late 1986 or early 1987 january i was uh i was worried my entire undergraduate career that all my studying would cause my eyes to deteriorate from 2020. so that was my never-ending nightmare but my eyes were fine when they gave me the uh the test but then uh a doctor thought he heard some kind of heart murmur and they diagnosed me with a with a benign heart murmur and um i mean ten years later they undiagnosed it but at the time they made a misdiagnosis and uh that that disqualified me from flying aircraft in the air force so i was a little bit uh distraught since i spent my entire career thinking i was gonna be a pilot you know a very simple plan pilot you know test pilot astronaut you know it turns out that my um that one of my friends from high school this guy greg johnson and greg johnson was a bit ahead of me from my same high school and he actually ended up going to air force academy becoming a fighter pilot a test pilot and an astronaut and he flew he flew around the earth flew twice on the space shuttle so that was my idea and i watched a role model do it but i got knocked out because of that uh misdiagnosis and uh i would have gone as an engineer in the air force for about five years but reagan won the cold war um and by 1987 congress said i think they’d recognize that they didn’t need the same degree of military budget so they cut the military funding in half they’re doing a force drawdown and they had too many officers probably just too many people coming into the military and so they wanted to discourage people and then one way they discouraged them is they went to all the people in the rotc programs and they told us that if we wanted to go active duty we’d have to wait about two years or more before we got called up or we could uh go to the air force reserve or the national guard so i guess about half of my class just went into the air force reserve or the guard i was kind of like the lost generation every every graduating class before went into the military and every graduating class after went on an active duty but the class of 87 was like uh like the cracking of the whip it was that one odd year and so a lot of us got catapulted out into the civilian world and so i i found myself a civilian with a few weeks to go to graduation and that’s that that kind of drove my career in an odd unexpected direction so what were you thinking at that point that you wanted to do and backing up even further when you were young i mean wanting to be like a fighter pilot or an astronaut did you grow up wanting to be rich like did you think about money when you were young uh you know i think there’s four things i wanted to be in succession uh and i think that the four things every every american male wanted to be in the 80s i wanted to be a rock star or i wanted to be a fighter pilot or i wanted to be a professor or i wanted to be a ceo not rich rich was like unfathomable these were just job aspirations i never met anybody rich or with money before in my life i think the richest person in my hometown was the dentist so that was our idea of wealthy the dentist and i think the dentist had a house on a on a half acre lot which looked like a large house in the town of faribault ohio population 28 000 and uh yeah so in high school i wanted to be the rock star i played the rock band and then at some point i realized that uh most musicians don’t make a lot of money and the odds were against me and so once you know i was a little bit of a statistician so once i concluded that the odds of me being a successful rock and roll musician were one in a thousand or one in ten thousand i decided i should probably try getting the engineering degree so i went and i got the engineering degree because i figured if i failed uh at music i could at least afford to pay for my own amplifiers and musical equipment and guitars so it was kind of a hedge bet and uh then i you know got more enthusiastic about going and flying and when i couldn’t fly anymore i really wanted to be a professor so i wanted to get a phd but i was only i was only becoming i was only able to do that around february march of my senior year and that was enough time for me to get into a phd program but all of the financial aid and all the fellowships have been dispensed by that semester so i couldn’t afford it it was very expensive you know the air force had paid for my undergraduate degree i think my family’s life savings were enough to maybe afford three weeks of college but no money you know uh and so i couldn’t really afford to pay for it so i thought i’ll just go and work for a year or two years and then i’ll reapply for the fellowship and then i’ll go back and get a phd and then i will be a teacher or a professor or something because that seemed like an honorable thing to do and uh so then i i went and i got my first job and uh that that didn’t work the way i expected uh my boss kind of quit the company about four months after i got there and i ended up i ended up switching jobs about nine months after i got there and i started working for the dupont corporation and i was building computer simulations for them and i guess when i got to be about 24 i was two years out of school i got that fellowship i needed to go back and get my phd and i tendered my resignation to dupont and they asked me to stay they wanted me to finish this computer model and i didn’t i didn’t really think much about it but the computer simulation was going to be used to acquire about one and a half billion dollars of capital in a capital budget so i was this kid making 50 grand a year and i was on the critical path to someone getting one and a half billion dollars and so i guess they decided well we should just give the kid a raise or give the kid whatever he wants because the billion dollars is more important than the kid going back to college but i could not be bought you know i couldn’t you know they could they’re like do you want to race no i don’t want to raise what do you want well i don’t i know i’m not going to be the ceo of the dupont corporation i’m not a chemical engineer and i don’t have 30 years so i want to be professor and they said well what do you want to do if i can’t be a rock star i can’t be an astronaut and i can’t be a professor i went back and there’s only one thing left on my list which is to be ceo so if you let me start my own company then i’ll stick around and starting my own company meant well i had no money so i got a 5 000 furniture loan that was that’s the only source of unsecured financing that a 20 something can get at least at that time but i knew 5000 wasn’t gonna make it so i needed more money than that so i got the dupont corporation to give me a couple of million dollars of contracts and uh 250 000 initial initial contract and a hundred thousand our cash advance and that was back when a hundred thousand was worth more than it is today oh yeah i’ve i actually figured natalie that i could go seven years on the hundred grand yeah 100 grand and uh and then they also gave me free office space and computer equipment they kind of let me be a little bureau inside dupont so i set up in the middle of dupont headquarters on my own floor but i had my own company and i was able to hire over a bunch of people that worked for me that that would work for dupont so dupont incubated the business and it was just kind of a lucky fluke i mean it’s it only would happen if you just happen to be in the right place at the right time with the you know i had the right relationships and people liked me and and at the end of the day okay so we give the kid a half a million dollar contract or a quarter million dollar contract we’re trying to get the billion dollars so i guess it made sense to them i thought it was a good deal for me and in my mind i figured well when the business doesn’t work anymore if we fail i’m just going back to college to get that phd and uh the first year we did about 750 000 in revenue and the next year about a million in the next year 2 million the next year 4 million and then we had a slow year we did 5 million and then we did 10 million and then we did 20 million then everybody started lobbying me to take the company public and then we thought well that might be fun we’ll try that and then we went public and i’m just kind of stuck and i realized i wasn’t gonna i was gonna be the least educated person in my company all the people who work for me have these master’s degrees and phd’s and i’m just the entrepreneur i’m not i don’t quite have college dropout status of steve jobs or zuckerberg or larry ellison or bill gates or michael dell so i didn’t quite achieve that but i kind of styled myself as kind of a drop out because i dropped out of a graduate degree program in order to start a company so that’s my sacrifice to practicality do you ever think back on that time like early in your career and what vision did you have for your company because it sounds like you were almost just you felt like you got lucky a lot and you were almost living day to day you know facing the challenges that might come and it sounds like you were surprised that you kept surviving i just didn’t want to work for anybody else natalie makes sense i figured use technology to do something good right so we were always using technology to help people make better decisions and there was always a new technology if it was the new apple computer or the new windows or the new database or the new internet or the new thing there’s always a new thing that you could do something useful with and so i figured i would help people make better decisions make the world more intelligent and i wouldn’t have to work for somebody else was there a point where you said wow i’ve i’ve made it like i’m successful i’m still working on that and uh i read that you i mean before bitcoin you owned other scores scarce assets within cyberspace right domains you had all these domains and you made some good money from that can you talk a little bit about that it all started in the mid 90s when um we got email and we got email and all of a sudden your company’s micro strategy so you gotta own microstrategy.com so then there is that big vanity you know vanity license plates whenever you select their vanity license plate so we had our vanity emails so of course i’m gonna have sailor at microstrategy.com and then uh and then i thought you know microstrategy.com is cool but what if i just had strategy.com i mean because that’s even cooler because people used to always misspell micro strategy they would all be like is that micro strategies you’re from micro strategies right or that the mic and it just kind of irked me like people could never figure out whether a micro strategy like strategy is like its own plural guys there’s no strategies and i just realized you could talk yourself to your blue in the face but you if you just change the word to strategy then they wouldn’t screw it up so i thought can we buy strategy.com and i and lo and behold we could buy strategy.com so then i started thinking what other words can i buy i thought well i could be mike michael at strategy.com but what wouldn’t it be cool if i was me at michael.com so i went and i found that i could buy michael and i thought well what about mike so you know you know you know about nike nike that’s kind of a cool brand i you know i i thought to myself if you have a very short word that blocks well on a sign like nike coke mike and so i got this idea that you know what if you just own the word you know and michael is the arch angel in heaven like when god is out michael’s in charge of heaven i thought that was kind of cool and i thought maybe michael jackson or michael jordan might want to buy it one day and if not michael so uh so we started looking for cool domains and we bought every word we could buy so we bought wisdom wow and hope hope right bought hope we bought courage speaker we bought voice we bought angel i mean angel.com i figured that would be neat and we bought alarm and we bought alert and then i even bought some other words you know i remember uh jane austen’s book emma i bought emma and uh i bought usher and then i bought frank and how much are these costing you how much were domains back then they arranged you know we started paying like 25 grand you know it’s back in the days when people thought i got to pay 19 for a domain and i i had more than 19 so i think we might have might have paid 10 or 20 grand for some and then we started paying 100 grand and the most we ever paid was maybe a couple hundred thousand dollars wow and a couple hundred thousand dollars would have been daunting to me in that first year in business but once we got to be a 30 40 million dollar business then we could afford to pay it and i thought you know what’s a hundred or two hundred thousand dollars to own a word and my thinking was the english language has been around nearly a thousand years i think it’ll be good around for another thousand years so we eventually created some businesses on these so we created a business called alarm.com yeah and you can imagine it’s kind of a home automation alarm system plugged into the internet and today that’s a publicly traded company worth about four billion dollars on nasdaq so these i mean i think it generally worked out we ended up um creating more than a hundred million dollar business from angel alarm is a four billion dollar business today um we sold voice for 30 million dollars just just the word i didn’t really want to sell it natalie i liked voice but i figured that was the highest amount that anybody ever paid for just a naked domain name and i kind of wanted to create that comparable in the market so that you know the next time someone wants something like this they’ll pay me a hundred million or wow hundreds of millions we’ll see what happens i don’t know but yeah it’s scarce you could think about com as like it’s the primary domain for um it’s just the primary blockchain for domains if you will and uh just like bitcoins the strongest crypto currency dot com is the strongest you know domain thread yeah well even recently i mean you weren’t thinking really about bitcoin until uh 2020 and it seems like you’ve really done well on the fiat system so i mean why did you start to think that there’s an issue with it um i yeah i did well creating my own company and i i had other interesting ventures that i launched like angel and alarm and then i i you know i was an early investor and all the mobile wave companies so i did well with facebook and amazon and apple and google and the like and i have no complaints about that i think that when i got to 2020 in march my thought was the big tech trade it’s no longer unique and everybody agrees with me that apple amazon facebook and google are digital dominant monopoly networks that’s not debatable it would have been a debate in the year 2010 and then it was you know so if you’re 10 years before everybody else then it’s good investment i think the best investments are when you buy into a technology trend that everybody needs nobody can stop and nobody understands and that would describe facebook became before they came public or twitter before they came public or or amazon back in 2010 or 2011 they were already 10 years into their run as digital retail there was no competitor but 98 of wall street was hating on them they don’t make any money you know amazon doesn’t make any money you know how can you buy amazon they don’t make any money well one day everybody will want to order things from their smartphone and they’re the only one that’s the only app is going to run on a smartphone so when 5 billion people have a smartphone then maybe you want to own the icon which stands for retail on the phone and then everybody’s money’s going to squeeze through that icon so those are good investments then when if it’s obvious it’s going to happen when there’s so much momentum and inertia you can’t stop it but when people still don’t understand it i would say by 2020 everybody understood amazon like if you did how could you not understand amazon you were locked in your home and you were going to starve to death and so that was the year when all the late adopters downloaded the amazon app and got an account you would have to be really creative to not use amazon and youtube and google’s the same way it’s like if you can’t go to the movies and you can’t leave your home and you can’t go to school then maybe you discover a streaming video so i think amazon apple facebook and google uh their their transition from being fast growing digital innovators to being to being quasi technology utilities that are almost monopolies in their own right that transition was 20 20. so at that point i looked and i said well are those things going to go up by a factor of 10 from here and i don’t really think so i thought that there there are more like cash cow utilities and and yeah you could hold them but but uh they’re not the same companies they were anymore there’s too much politics getting involved right i mean they’re going to be congressional hearings about what can apple do and what can twitter do and what what can facebook do and what can amazon do and should you unionize them and and is it fair that they you know should they have the apple store i don’t know what will happen but uh but it doesn’t feel like a nimble technology business anymore so my my passion for big tech you know uh my passion for big tech kind of died died down we could say amelia rated and then at the same time my uh my confidence in traditional treasury strategies languished it was pretty clear that if you have 500 million dollars in cash and the interest rate goes to zero and it’s going to stay at zero for 36 months then it’s like putting all your money in a savings account earning zero well you know there’s no upside but if there’s hyper inflation in assets or asset inflation and you’re holding all your money in cash not only is there no upside but you realize that there’s there’s downside you know um the the real yield on cash is negative but if you’re tracking asset inflation it becomes negative 20 so if you want to be rich or if you want to if you want to get rich you can’t track cpi you have to track asset inflation and so you know you look at the s p 500 and you say well i mean that’s the hurdle rate so i think in march of 2020 you know i realized that you couldn’t you couldn’t continue to hold cash and the best idea probably wasn’t the big tech trade anymore so what is the best idea and so that drove me on a search and then and i found bitcoin because i had a problem and the traditional solution didn’t look like a solution anymore it looked like the bloom wasn’t off the the big tech rose so what would you like you would like to have a big tech network that has like all the dominance of apple or google or facebook but without the company attached so bitcoin is big tech but without the company what you’re getting is just the pure big tech network no ceo no board of directors no product no iphone there’s there’s no employees so there’s no one to unionize there’s no you don’t need an iphone 12 to be competitive because the product of bitcoin is just a bitcoin and if bitcoin just gives you 121 million to the network now it’s quite reasonable that 121 millionth of the network in a hundred years is just as valuable probably more valuable than one one bitcoin in a hundred years is more valuable than one bitcoin today but you can see that one iphone one iphone 3 today is worth nothing and one iphone 12 in 100 years will be worth nothing so the product that apple is selling isn’t going to last a thousand years the product that bitcoin is selling is 121 millionth of all the money in the world that doesn’t have to change it just kind of has to not break so what i liked about bitcoin was it was it was a digital gold or a digital property that you couldn’t inflate and it was on a big tech network that you could accelerate using computer technology so call it um call it digital gold without all the imperfections of gold but the big tech element meant that you could plug layer 2 and layer three applications into it like square cache lightning apple pay google pay and if i plug if i plug uh applications into the bitcoin network then i can create smarter faster stronger gold smarter faster stronger property and and pretty much the core principle of how you get rich or how you stay rich in the 21st century is you dematerialize something from the physical world to the digital world and you make it smarter faster and stronger if you if you digitize music you create amazon and apple music or pandora it’s smarter faster stronger and you give it to billions of people and if you de-materialize cds and dvds and or de-materialize concerts and broadway shows and you have youtube and if you dematerialize every every library and every book and every university on the planet you have youtube and ibooks and uh and so the digital transformation of information and entertainment is how you provide joy and education to the world ergo the digital transformation of property is how you provide wealth to the world it’s very simple idea it’s not only bitcoin it’s all the applications on top of bitcoin of which you’ve got paypal and coinbase and binance and square but you and you have the block fi credit card but microstrategy is an application on bitcoin like our stock is a layer 2 application our debt is a derivative of bitcoin our converts are derivatives of bitcoin so all sorts of things can plug into bitcoin and all of them are in essence they’re building applications and platforms on top of digital property in order to construct the 21st century cyber economy smarter faster and stronger thinking a billion times a second moving at the speed of light so yeah that’s how you do it that’s how people create value you either build on the internet platform or the pc you know uh thomas watson built on the mainframe platform and bill gates built on the pc platform and jeff bezos was built on the internet platform and then apple came back and revitalized on the mobile platform and now you got you know the next platform digital property as a platform it’s it just made sense so i discovered it because i had a problem we adopted first defensively in order to avoid losing all our money like if i told you natalie i’m just going to take all your money next tuesday all of it you would spend between now and next tuesday researching to figure out how not to lose your money but then after we figured out how not to lose all our money we started thinking maybe we can use this offensively in order to grow the business and that was serendipitous you know it wasn’t obvious to me all that that would happen but you know the truth is when i started in business if i if you’d asked me what success was i would have said successes if i could one day afford to hire 10 people and if you’d ask me at 10 people what success i’d say maybe one day we’ll have 100 employees you know it’s like success is iterative and you keep finding the next thing that you might be able to do and so opportunities present themselves organically once you get into the market yeah well i wanted to ask you because we have a mutual friend eric weiss and i know he helped orange pill you but there was some tweet that resurfaced at some point and it was it’s i think it was even back in like 2013 that you said bitcoin would die or something so had you heard about it prior to that and just kind of passed it off and said no this is not going to work yeah i mean i i just read about it i knew it was decentralized money and i got the idea it was kind of a cool thing and there are a lot of like fanatic people that liked it but i it wasn’t the solution to a problem i had it was just one more thing so there’s a thousand things you can invest in you know uber and airbnb and bitcoin and the next instagram thing and the bumble thing and tinder and you know and and buildings and the like there’s always something it just i’m not a venture capital i just kind of focused on my things i did alarm.com and i did angel.com and i did microstrategy and it was just uh that long tail thing i did you know like a lot of people are critics of bitcoin if you study it for an hour and you’ve got a and you’ve got a lot of other priorities and a lot of other passions you can find something to criticize about it it’s it’s not very difficult to study somebody for a few minutes or an hour and come up with something to criticize it takes 40 hours before you start to understand some of the nuances of it and why it’s unique it might take you a thousand hours before you start to have some modicum of facility or expertise and some people would say it takes 10 000 hours before you’ve mastered it but pretty much anybody on earth if you let them study it for 10 minutes to an hour or two hours they’ll just find something to not like or to be or to be afraid of in 2013 it was small i didn’t have a problem i hadn’t spent much time on it i looked at it and i thought well maybe it’ll go the way of online gambling you know by the way i like gambling i liked online gambling i thought it was good i i don’t i i didn’t think it was a good thing that people outlawed online gambling like they outlawed poker online they would arrest people you know going through dulles airport because they were running online poker sites i didn’t think that was a good thing and people want to play poker online why shouldn’t they be able to there was something called trade sports you know where you could go online and you could bet on the outcome of elections or the you know who’s going to win the olympic gold medal i thought that was cool thing too and you know the regulators cut off uh cut off currency flows or like bank accounts to trade sports and shut it down so i looked at bitcoin it was 2013 that was before the irs even gave it property tax treatment that was 2014. so i thought some regulator is going to shut it down maybe and then i tweeted and i forgot about it forever and hey the bitcoin community didn’t really care much about me at the time either so nobody noticed that i and natalie the joker courses i didn’t even remember i said it like years went by and then about six other bitcoiners tried to orange pill me from 2017 to 2018 2019 2020 and i didn’t remember when they did or maybe i did and uh then finally you know when you get hit in the head with a 2×4 you know if you’re in nubbin on and the bank seizes all your money then maybe you would discover bitcoin or if you’re in a country or your family is in a country where there’s hyperinflation that’s a wake-up call you discover bitcoin so the pandemic was a wake-up call the lockdowns were a wake-up call for a lot of people in a lot of areas maybe you figured out zoom or discovered zoom for the first time you know maybe you learned about youtube and you could do stuff on youtube for the first time maybe you discovered twitter for the first time so i i had a problem i discovered bitcoin for the first time and then when i finally put out that tweet saying we bought 250 million dollars worth of bitcoin other bitcoiners they discovered my previous tweet and they threw it right back at me and i was like wow i said that interesting and i could have deleted it but i thought just better just to leave it there just as a reminder that sometimes we think one thing and then we change our mind yeah no i was talking to sephidine last week and he admitted himself too he was once an ignorant no coiner but you have to go down that rabbit hole and like you mentioned it is really nuanced you have to do a lot of research and one of the things i i found interesting that you’ve said before is that we’re living in a time where the asset prices are so inflated so people out of like arrogance and ignorance think that they’re doing great because they have tech stocks or maybe their house is really appreciated in value but in the background the money is collapsing and they don’t realize that we’re headed for this you know brick wall in a fast-moving train so how do you how do we get people to understand that i mean at what point do you make how do you get hundreds of millions of americans to really understand this system and what’s wrong with it persistent cheerful constructive educational efforts through all channels available to us i think your odds are better doing it on youtube than doing it traveling door-to-door knocking on doors you know the 19th century way was knock on doors there’s a while when people would go from town to town set up a tent and you know preach have a carnival whistle stop tours that’s like how politicians used to educate you could write books but books you know books don’t travel the way they used to i think that uh youtube youtube videos podcasts you know there’s some cable cable networks you have to build relationships build alliances you’re educating people when you um when you take your bitcoin miner public that’s educational microstrategy educated a lot of people when we bought bitcoin um when we went we did our bond offering we educated people in the bond market it’s not just educating individuals in the consumer world um you’re educating across all dimensions right so like is it more important to educate a million people with one dollar or one person with a million dollars or how about one person with a billion dollars you know it is after all it’s a battle for the hearts and minds but it’s really a battle for the money so i think anything you can do in order to educate investors is good educating politicians it’s good you educate financial analysts there’s no one channel we created a bitcoin for everybody course you can go online learn that we created hope.com so that anybody can go on the web and they can get educated that way i think i think you’ve got a hundred different channels to educate people in a hundred different countries yeah in all languages and all cultures and it’s it’s a very it’s a massively parallel decentralized effort i still i can’t do stuff you know in korean and japanese or spanish but there are other people that will look at what we might do if it’s unique and translate it and take it those local markets and that’s that’s part of what’s really wonderful about bitcoin bitcoin you could think of is um you can think of it as a as a bank in cyberspace or the central bank you know in cyberspace or ross stevens might say that decentral bank in cyberspace but everybody else can become their own fractional reserve bank using bitcoin as the central bank so when you set up your own uh exchange in korea you set up a a branch of bitcoin in korea and if you set up a mobile app that’s a bank in nigeria you set up another branch of bitcoin so bitcoin is creating its own system of thousands and tens of thousands of banks and applications if you will and so there is no one channel hundreds of channels hundreds of places with all sorts of different technologies all at the same time and they’re all you know i just read um i just read about spike lee got hired to do a marketing campaign for a bitcoin company that’s pushing like crypto currency atms something like that okay well that’s education yeah you know so every business every business every investor and every holder of bitcoin is doing their own education and if it’s a business they call it marketing but if it’s an individual talking their family that might be education but if it’s microstrategy so we’re holding billions of bitcoin and every time we talk to our investors or we raise money we’re educating the financial markets and our employees and so they’re all just different ways to educate there’s no one right way so you you think people will just gradually learn and kind of jump on board but i also wanted to ask you um you can’t just keep printing money the way that we are the quantitative easing and the fractional reserve banking and we’re at this point with the reverse repo and just historic highs for the nasdaq and the smp do you do you expect there to be some historic crash because some people are are expecting that i think um i think the way this will go is the bankers in the western world will continue to inflate the money supply until they get to a point where they can’t anymore and when and they’ll they will pay for all the deficits with inflation until they can’t and at the point that they can’t they’ll switch to taxation and the taxation will come it’ll come progressively in the form of income taxes and then the third phase it’ll come in the form of property taxes they won’t be able to raise enough money with income tax so it’ll become a property tax and before you recoil in horror just keep in mind in florida there is no income tax but there is property tax as two percent a year on all of your real estate property maybe that become maybe they’ll assess the property up and it becomes two percent of property that’s worth 50 percent more and they raise their taxes 50 or maybe they’ll extend it from just your commercial your residential real estate to commercial real estate to other forms of property i think it’ll be a political process there’ll be a lot of back and forth negotiation each state will do it differently each city will do it differently each country will do it differently each administration will do it differently but eventually um they’ll start taxing things more maybe they’ll say two percent of all your stocks two percent of all your crypto two percent of all your everything i don’t know um what i do know is that bitcoin is the best property to hold when that time comes if you hold if you hold a building in california you won’t be able to move it to wyoming but you will be able to move the bitcoin from california to wyoming and if you have a building in the middle of manhattan it’ll be hard to hide it everybody will walk past it and they’ll say there’s a rich person with a building let’s go ahead and tax that [Music] more but if you have bitcoin people won’t walk past you saying wow that person’s got a lot of money because they won’t be seeing it if i do pass a law you know maybe if i jack the tax rate to three four percent a year on land or or a building or company stock you can’t move the headquarters of apple computer to monaco you can’t move the rockefeller center to monaco and you can’t move the land underneath the rockefeller center to monaco but you can move a billion dollars of bitcoin to monaco so the apple headquarters doesn’t it’s a beautiful piece of property but it doesn’t count as a fungible piece of property a very rich corporation in beijing is never going to buy the apple headquarters when they have to sell it or they have to move it so as we look forward there’ll be inflation and you want to own property to protect yourself from inflation but you want to own the highest quality property and the definition of highest quality property is hardest to steal hardest attacks easiest to move most desirable by everybody on earth also easiest to upgrade why is um why is an acre in new york city more valuable than an acre in the middle of kansas they’re both an acre the acre in new york city is more valuable because a it’s built on granite it’s very solid you can build a hundred story building on it it’s not sand it’s not soil but the second reason is more valuable is because you can develop it into more things there’s a huge amount of demand for land in uh manhattan or property in manhattan because there’s all this economic density in manhattan so you want to own the property where you can get the density right you could in theory put 10 000 people onto that acre in manhattan but you can’t do that on that acre in kansas so if you’re going to own property in cyberspace what property do you want to own if you own the bitcoin property right bitcoin you can develop because it’s an open protocol so you can build thousands of layer 2 and layer 3 applications on it anywhere in the world that’s why you want to own that that’s why bitcoin is if you have a billion dollars of bitcoin that’s why it’s better than a billion dollars of gold or a billion dollars worth of land or a billion dollars worth of real estate or billion dollars worth of a company all of those are properties but they’re easier to impair harder to develop harder to move so if you’re taking the long view find the highest quality property you can hold it for the long term and i wouldn’t worry so much about the political process right if the politicians pursue rampant inflation the highest quality property will benefit if they start to do income tax if they crank the income tax to 90 percent you want to own the highest quality property because that’s the property that you don’t have to sell the way you avoid income taxes you never sell it low quality property can be impaired and if you think it can be impaired you have to sell it and when you sell it you’ll take a capital gains tax if you want to move from here to monaco you’ll have to sell your property in wherever you live in order to go to monaco and you won’t get hit with a with a capital gains tax or an income tax right so so high quality property protects you from income tax and then finally high quality property protects you from property taxes because ultimately the highest quality property is going to be the hardest tax compared to california taxing of buildings in california if i tax five percent of the real estate property in california i’m going to get it all if i tax five percent of the companies in california i’m gonna get that too if i tax five percent of the bitcoin in california it’s all going to move yeah and so if you’re making a law in california about what tax what’s the point in taxing something that’s going to move away from you when you tax it and so that’s my way of saying if it’s high if it’s the apex property people aren’t going to try to tax it as hard because it’s hard to tax and they won’t be successful and so if you’re not going to be successful then there are fewer people attempting to target you as the victim and let’s say in the worst case now like how you can tax bitcoin in the u.s you can’t tax it at the la level you can’t tax it at the california level you have to tax it at the federal level so i can tax it at the federal level and then people will move out of the country and then you say well that’s okay if you’re a citizen you still got to pay it well then i sell it to a non-citizen see then the question is is someone that’s not a u.s citizen going to want to own this and can i transfer it to them they’re not going to want to own your company in chicago they’re not going to want to own your house on lake shore drive they’re not going to own your ranch in kansas they’re not going to want to own the building in new york but they will want to own the bitcoin and so what you’ve got is this regulatory where there will always be somewhere in the world where they’re going to want this thing and that somewhere will be the highest bidder and so when when calif let’s play this thought experiment out if the governor of california were to levy a 50 a year property tax on a building in california what do you think the price of buildings in california would do decrease everyone would leave let’s make it simple let’s just tax them a hundred percent okay so you have a billion dollars worth of real estate property in california what’s it worth after i tax it a hundred percent nothing right that’s called expropriation does it happen yes it does happen it’s it’s a socialist and communist thing when it happens it happened in venezuela to the oil company it happened in argentina it does happen could it happen in the u.s yeah sure it could you know so when when the politicians expropriate some portion of your property what’s a rich person in monaco going to pay you for that that’s the question you ask yourself and the answer is they’re not going to pay you anything they’re not going to want to when i tax your building in california 10 a year it’s going to be worth like one-fifth of what it was the day before i tax it will you be able to sell that to a rich person in monaco probably not but if you could you sell it at 20 of what it was worth yesterday but when i tax your bitcoin at 20 a year the day before that tax goes into play you’re gonna sell it to someone who’s the high bidder in the world and they’re going to pay you the pre-tax level so if you’re looking to protect your wealth right the way to protect your wealth is with a universally desirable scarce asset which is portable and fungible yeah well i want to talk to you a little bit more about the long view because um let’s talk about the big picture so let’s say we adopt the bitcoin standard uh we convince people that it is the most pristine collateral and maybe we even peg the dollar to bitcoin what does that world look like and realistically not you know rainbows and butterflies but realistically what does that world look like because i’ve seen you say that um you see bitcoin coexisting with the dollar i think bitcoin becomes a reserve asset just like you can make it microstrategy made it our reserve asset and our stock is backed by bitcoin and our stock went from 120 dollars a share to 600 a share so you could you could make it the reserve asset in el salvador and use the dollar the el salvadorians have and or they could issue another currency and then uh and then the currency strengthens so i think what you have is a currency the government controls it’s like every company has a stock right what’s it what’s the currency of a company it’s stock so if a company adopts bitcoin as its reserve asset then the stock starts to be backed by the bitcoin so the best way to think about this transition is companies start to buy bitcoin as their reserve asset and then they have stocks that trade as derivatives of the bitcoin and then small countries buy bitcoin and then they have a currency backed as a derivative of the bitcoin and then larger countries and over time you would just think that bitcoin becomes a larger and larger asset class it goes from a trillion to 10 trillion to 100 trillion to 200 trillion companies going to always have stocks sure just because i bought bitcoin doesn’t mean i gave up the right to issue stock or to buy buy stock back or to do what i want with my stock by the way my company also has debt so microstrategy has convertible debt secured debt and equity we also have stock options we also have restricted stock units so i just counted five different derivatives of bitcoin a company a country a country can or city can buy bitcoin as a reserve asset and then they could a city can’t issue currency but they can issue debt the city of new york could buy a billion dollars a bitcoin and they could issue a billion dollars worth of debt backed by the bitcoin a country you know turkey could buy 10 billion dollars of bitcoin issue the lira they can also issue debt backed by the bitcoin and so or flavors of debt municipal debt sovereign debt short dated debt long-term debt all sorts of debts so in the old days i mean the the gold standard was one to one backing twenty dollars of gold equals twenty dollars of currency the gold reserve standard was maybe twenty percent backing and ten percent backing and five percent backing a bitcoin standard could be any number of things right that microstrategy could have put just 10 of its balance sheet into bitcoin and we would have been had like a bitcoin 10 reserve our stock would have benefited a little bit but not a lot when we went to 500 million we went to 100 of our equity bitcoin backed the stock doubled but then we went and we borrowed money and so today in theory we’re like 300 or 400 percent bitcoin back right and so our stock went up by a factor of five do you feel a pressure i mean i know that you bought many coins when it was at the 50 range and now it fell you bought more um but do you ever feel like you’re gonna fall on the sword if bitcoin were to fail no like i i feel that bitcoin is like fire or electricity i think it’s just a matter of time i think they’ll be it took the human race 100 000 years to figure out fire so like that was a slow thing i think it took the human race 20 years to figure out electricity or 30 years i don’t think bitcoin will take 30 years i think information’s spreading faster but maybe it takes another decade um we pursued a strategy you know to develop to own and to develop bitcoin and um so we’re comfortable with that strategy um and we’ve got a long time frame so i think we’re prepared for all the volatility in the near term and i think time is on our side i think there are there’s more than 100 million people that have bitcoin and there’s tens of thousands of companies that are all doing something to commercialize or evangelize or upgrade and develop bitcoin so i think we’re in good company i enjoy watching all of the developments in the ecosystem and we’ll do our part and everything we can do but we won’t be the only ones working on this there’s a lot of other people everywhere in the world in every industry working equally hard or harder yeah so there isn’t a price at which you would be forced to liquidate any of your bitcoin if it fell too much no okay well i want to talk a little bit about bitcoin mining council because i know that there is is this narrative out there that obviously bitcoin mining bad for the environment and you want to be one of the people that breaks that narrative and uh curious you know for people that aren’t familiar can you kind of speak in general terms what the bitcoin mining council is and what would bitcoin’s impact on the environment be if it was to become a global reserve asset well the bitcoin mining council is a voluntary open forum of bitcoin miners and we just gather together in order to educate the world on the benefits of bitcoin and bitcoin mining and spread some best practices and and um and information um bitcoin itself right now is it might be using 0.1 percent of the energy in the world it’s negligible the energy usage of bitcoin is negligible it’s measurable because it’s transparent but 99.9 of the energy is going to other things um bitcoin the bitcoin mining network is really the security network of bitcoin it’s a million millions of different machines that are all running the shaw 256 hashing function in order to throw up a wall of encrypted energy to protect your money um in that case it’s it’s uh it’s quite an achievement it’s the it’s the first line of defense for bitcoin it’s protecting the network it means that all of those machines everywhere on earth are preventing any malefactor from stealing your money or screwing with the network the way it works is you’re combining technology capital with with um energy capital so the technology is like seventh generation bitcoin mining rigs there’ll be another generation each generation a bitcoin mining rig is two three four times more efficient in converting energy into hashes i think they measure you know they measure the amount of energy per hash it keeps dropping the s19 is about five times as efficient as the s9 generation the s9 was much more efficient than the previous generation the bitcoin mining network is is probably peaked i suspect it’s peaked in carbon emissions probably last year or early this year and that will that will decrease from this point forward um it might have peaked in energy usage if it hasn’t peaked in energy usage the energy usage is likely to increase with the log of the hash rate and the bitcoin price not linearly certainly not any kind of power function because um what’s happening right now is that each new generation of equipment generates three four five x as much terror hashes per megawatt as the previous generation and that means that all of the aging equipment is the energy intensive equipment and that’s all becoming obsolete and the new equipment is driving up the hash rate driving the old equipment off the network so ultimately what you’re going to have is a very decentralized set of specialized mining rig nodes that are security nodes that use some energy but the energy as far as we can see is already more than 50 sustainable and it keeps creeping up our estimate is 56 sustainable on a worldwide basis right now and growing in sustainability faster than any other industry in the world we can find and it’s more efficient than any other industry in the world so if bitcoin becomes a 100 trillion or 200 trillion dollar network you know that the the amount of energy used is i mean it might be three times as much or two it might be 0.2 percent of the energy in the world is that a 0.1 energy in the world it might be 0.3 of the energy in the world but it will be clean renewable energy distributed through extremely efficient specialized mining nodes using extremely efficient asic mining rigs so you know it’s it’s not really a concern the uh the uh transaction velocity or the transactions in the bitcoin network don’t drive energy usage at all there’s no relationship between putting a transaction through an energy usage all the energy is just it’s just the fixed cost to secure the network and the incentive to burn that energy is falling exponentially because every four years uh bitcoin block rewards get cut in half and so by the time we get to 2035 99 of bitcoin i’ll be mined and so and so the i think if you look right now about two percent of the entire network it becomes revenue to the bitcoin miners but only 20 basis points of the network is transaction fees and so as the block rewards fall in the limit we go toward just that 20 basis points and that 20 basis points is falling that’s going to scale with the log of the price so that means you you can expect as you look out 20 years to 30 years you can expect that you’ll have five to ten percent five to ten basis points maybe five basis points of transaction fees now compare that to the visa network which charges two and a half percent so if you’re looking at inefficiency in the network right that’s 250 basis points in the visa mastercard network and bitcoin will be five or four and it’s a market driven competition it’s it’s the most vicious competition imaginable and people are competing to get zero cost energy and then these mining rigs that are a hundred times more efficient than the last one and you can see where this entire thing ends which is a very efficient distributed mining network running on the edge of the energy grid on sustainable power that generally that’s stranded and intermittent because the miners will find the cheapest waste energy they can find and they’ll monetize that stranded intermittent energy which tends to be like you know the volcano on the island a thousand miles away from anybody right that’s what they’ll be doing and they’re not going to be doing it with energy of intensity so much that’s a secondary thing they’re going to be doing it with the next generation of shaw 256 mining rig which is going to be 5 or 50 times more efficient than the current generation in converting energy into terror hashes well i know you’ve spoken to elon about this so can you offer any insights into why he tweeted what he did and sort of where your conversations went since then like do you expect him to kind of do a turnaround and be more supportive of bitcoin now that more of the information is out there on just how much renewable energy is being used i think he just read some media that suggested that bitcoin had encouraged someone to bring a fossil fuel plant back online and he wants to make sure that there’s information and uh and um and substantial documentation that we’re the good guys and we’re actually driving a clean sustainable energy mix for the planet he wanted to make sure that the bitcoin community communicates that he expressed his concerns so you don’t think there was any agenda or anyone you know over his shoulder i know i i think jeff booth when i was talking to him thought it was maybe blackrock talking to him or some people thought it might be the government because he gets you know so many subsidies for for fiat um but you don’t think any of that i don’t read too much conspiracy theory into these things i think that people just see something and they say something and you should just take it at face value you know he would he would like to he would like to be associated with uh technologies and with movements that are making the planet greener and more sustainable and progressive and his view is if we can drive renewable energy and sustainable energy then that would be a good thing and he’d like i think the bitcoin community to show that that’s what they’re doing so what will it take to get other big corporations like the googles and the apples and the facebooks into bitcoin do you just expect it’s a matter of time or what what’s needed to make it happen i think on the operational p l side i think they’ll build bitcoin into the google pay apple pay and the facebook because they need to do that to compete with paypal and square cash that’ll happen naturally because of the tech imperative and i think they’ll do that because that’s in their best interest to do that i think on the balance sheet side uh the most important thing would be um the accounting treatment right now accounting hasn’t kept up with the the rate of technology advance and most of the rules of surrounding accounting for digital assets were put in place before any public companies owned any a year ago you couldn’t find any public companies that owned 10 million dollars worth of digital assets and now you have billions of dollars held in public companies the current accounting treatment is to treat digital assets as an indefinite intangible and definite and intangible would be you could characterize it as the most conservative accounting treatment you could apply to any property or any asset if you were to apply indefinite intangible accounting treatment uh to your apartment that would mean that you uh start by booking into the price you paid for it and then then on saturday night when you’re at a party you go to every single person even the drunk ones and you ask them if they’ll buy your apartment from you and if they say yes you ask them what they’ll pay for it and if they say i’ll give you a hundred bucks then you have to write down a hundred dollars that’s the price for the apartment you go back and you account for your apartment as as a hundred dollars and you write it down to a hundred dollars you take that as an operating loss for the period and you say looks like i lost all that money on my apartment and then later on if the rest of the world thinks it’s really worth 10 million dollars you still carry on your books at 100 because once upon a time the market value of department was a hundred dollars so you see it’s kind of it’s a prejudicial accounting treatment um and uh the fair value would diverge radically from the gap or the book value and that creates an opacity situation where you know if i’m looking at your p l it looks like you have a hundred dollars but you you owe i own a 10 million dollar apartment outright and now i say well it looks like you’re poor natalie i’m not going to invest in you and you’re like well why you know let me explain and so then you start explaining and then i get distracted and i go talk to the next person so it it’s very complicated to explain your balance sheet your p l when you have a definite intangible accounting treatment so if you’re a conservative cfo at google or facebook you’re going to look at this and you’re going to say i just spent 20 years creating a optically beautiful p l and a beautiful balance sheet and if i put this asset on my balance sheet and if there’s volatility and it trades down then i have to take these big write-offs and i’m going to explain it to the shareholders and i don’t want to have to explain anything so i think the short is accounting is probably the single this one of the single biggest drivers that if if that is ever placed at parity with other securities like if they if they give it accounting that’s similar to the way an etf or a stock or or another asset is accounted for in a public company balance sheet that would remove uh a big hurdle for a lot of treasurers and cfos uh there are other things but i think that that’s probably the most interesting thing that i can put my finger on right now well on the retail level we’re in such an interesting time with all the meme stocks and you know crypto speculation with the altcoins and i think peter schiff tweeted uh just last week or so that a lot of people are buying bitcoin to get rich people buy gold to stay rich people are buying bitcoin to get rich which is essentially why he thinks they’ll they’ll be poor so what are your thoughts on that i think you have a much bigger a much better chance of getting rich buying bitcoin than buying gold i think that if you want to get rich then you want to find some big tech dominant digital network that everybody needs nobody understands and nobody can stop so who are the rich people in the world steve jobs got rich on apple bill gates got rich on microsoft right mark zuckerberg got rich on facebook jeff bezos got rich on amazon larry page and sergey brin got rich on google what’s their criteria they all created a digital network that’s dominant that everybody needs that nobody could stop then nobody understood when they bought the stock and then they didn’t sell it if jeff bezos had sold amazon stock when it traded down 80 percent and it did that five times it traded down 95 percent once if he had sold it if he hadn’t had uh you know had the courage to hold the thing when when digital retail traded down 95 if he hadn’t held it he wouldn’t be the richest person in the world right now you know steve ballmer is worth a hundred billion dollars what did he do didn’t sell like how did what was the brilliant thing that steve ballmer did in order to be worth a hundred billion you know he didn’t sell microsoft yeah okay so what what what do they have in common they’re all big tech if you have a big tech network and you can put hundreds of thousands of businesses on it or tens of millions or hundreds of millions of people on it and you can replace something in the physical world in the 20th of the 19th century economy then you’ve you’ve affected a digital transformation of the civilization the problem with gold is you’re not doing a digital transformation of the civilization it’s a 5 000 year old idea it stopped working in 1914 you know so if you want a good digital transformation idea twitter twitter facebook google square bumble tinder uber airbnb it’s an instagram it’s not complicated we’ve got a hundred examples in front of us the digital transformation of blank you know bitcoin is the digital transformation of property gold is not you want to get rich your only hope is to uh to find either to create an asset that is that is going to appreciate by a factor of 100 or to buy an asset that is going to appreciate by a factor of 100 the only the only assets that will appreciate by a factor of a hundred or a thousand are by definition assets that ninety-nine percent of the population doesn’t appreciate or understand if you go down the street and you ask a hundred people do you think apple is a valuable company you’re going to find that 50 of them agree with you if you would ask the question 20 years ago do you think apple will become a trillion dollar company the answer is no i mean at one point in time michael dell said to steve jobs this night back in 1997 or so you should give the money back to the shareholders and shut the company down if you went back to 19 you know to 2007 when they roll out the iphone everybody didn’t agree with them okay well maybe it wasn’t going to work by 2009 you could see it was going to work by 2010 or 11 it was pretty hot by 2012 four-year-old kids wanted an iphone for christmas so in 2012 nine years ago four-year-old kids wanted an iphone and if you gave the girl the you know an obsolete ebayed two generation back iphone for her birthday she throws temper tantrum because nobody wanted the old iphone they wanted the new pink iphone whatever so you had that observation and yet still 98 in the world didn’t quite get it you could have made some money if if you want to get rich you’re going to have to actually buy something that the majority of the uneducated public doesn’t agree with you on and doesn’t understand when you do that you’re going to have to have studied enough so that you have conviction that you’re right and not their right if you’ve studied something for a thousand hours and they’ve studied something for one hour and they think it’s garbage and you think it’s good then you can reasonably assume that’s a chance for you to make a wise investment that’ll make you money if you’ve studied it for one hour and they’ve studied it for one hour you know now you’re just gonna be in a coin flip you don’t know you’re gonna be easily swayed so i i think in general bitcoin meets the criteria it’s something that is a big tech network that is under appreciated that has massive upside potential because of the technology and because it’s a solution to everybody’s problem on the planet gold and silver are not the solution there are plenty of other digital solutions from amazon apple facebook google but they’re already mature and they’re probably not bad investments if you’re looking to get a 10 return or 15 return but i don’t think you’re gonna get the outside returns from those things because two two billion people already understand what they are by now and so you’re not going to be first yeah but along with that idea of you know getting rich on bitcoin i think it breeds a little bit of that toxic maximalism do you see that i mean you know the means of have fun staying poor do you think that that helps or hurts the community i think the best thing for the community for would be for us to cheerfully and constructively engage with everybody with any influence power


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Michael Saylor: Bitcoin is Fire or Electricity
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