{ "episodeId": "SLP213", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "michael_saylor": { "name": "Michael Saylor", "role": "guest", "tag": "MICHAEL" }, "guest_2": { "name": "Guest 2", "role": "guest", "tag": "GUEST" } }, "segments": [ { "speaker": "stephan", "time": "00:10", "start": 9.57, "text": "Hi, you're listening to Stephan Livera podcast, a show about Bitcoin and Austrian economics. Today for episode two hundred and thirteen, my guest is Michael Saylor, CEO of MicroStrategy, and we're talking about why MicroStrategy bought four hundred and twenty-five million dollars of Bitcoin and is adopting it as primary treasury reserve asset. But first" }, { "speaker": "michael_saylor", "time": "01:39", "start": 98.58, "text": "And safe automatic recurring Bitcoin buys, visit swanbitcoin dot com." }, { "speaker": "stephan", "time": "01:44", "start": 104.47, "text": "This show is also brought to you by Unchained Capital, Bitcoin native financial services. Unchained are doing great work to make multi-signature accessible. If you're thinking about your Bitcoin security, why don't you consider going from zero to multi-sig with Unchained? You can either build it yourself with no setup or storage fees on their website, or if you need assistance, they have a Vault Concierge onboarding package. You can have the hardware wallet Devices mailed to you and have guided setup calls to build your vault together. The prices range from fifteen hundred dollars, which includes two hardware wallets, down to twelve hundred dollars if you've already got the hardware wallets, and that includes a thousand dollars to go in the vault. Use the code levera for a discount. Go to unchained dash capital dot com to find out more. Lastly, look into Knox, a Bitcoin custodian dedicated to ensuring their insurance protection covers the full value of their customers' assets. For example, suppose a fiduciary wants to hold two hundred and fifty million dollars of Bitcoin with Knox. Knox will seek to obtain two hundred and fifty million dollars of insurance, dedicated exclusively to that account and adjustable to volatility, no fractional coverage or narrow scope, insurance for what it's worth, a tool to transfer risk. If you are a Bitcoin company, investment fund, trust or family office, check out Knox for your insured custody. Go to knoxcustody dot com. Here's the interview. Michael, welcome to the show." }, { "speaker": "guest_2", "time": "03:06", "start": 185.82, "text": "Thanks for having me." }, { "speaker": "stephan", "time": "03:07", "start": 186.88, "text": "Michael, you've been Really setting the Bitcoin world alight with, the things you've been recently doing, and, certainly I found it fascinating reading some of your commentary. I'd love to hear a little bit about yourself and, how, how you got into the position you're in now." }, { "speaker": "guest_2", "time": "03:24", "start": 204.01, "text": "well, I started the company when I was twenty-four. We came public in nineteen ninety-eight. The company had been founded in eighty-nine, so in about our eighth year. I've been the CEO of the company since nineteen nin-- well, since eighty-nine, but public company CEO since ninety-eight. over the course of, The last decade, we've run the company fairly conservatively, so we accumulated a bunch of cash at one point up to seven hundred million in, in, cash. Normally, we kept it in a treasury, and, nearly all of my focus corporately was, was on the P&L and on developing software, and I, I developed a lot of technology businesses, under the banner of MicroStrategy. I, I created a business called Angel Dot Com, which was like Siri-like. Interactive voice response or like Alexa about twenty years ago, in like nineteen ninety nine, I created a business called, Alarm Dot Com, and that, that I spun off, and that's a multi-billion dollar, company. It's like home automation systems plugged into the internet, kind of like, well, like everybody does now, Google Home, Apple Home, et cetera, but I started that in, in two thousand. I launched a, a variety of versions of our core software, which is business intelligence. Software. And by probably two thousand and ten, we were really focused upon business intelligence, mobile intelligence, cloud intelligence, the like. And I didn't pay much attention to macroeconomics until twenty twenty. And in twenty twenty, once the pandemic crisis took place, we, we transitioned into what I call the virtual wave, where there, there's a massive dematerialization of products and services and, and the way that we operated as a business That kind of happened, in a matter of twelve weeks, and that occupied our time. And then as we were working through that, we just saw a massive change in the nature of assets and asset values, and I saw an explosion in asset values that decoupled with the, with the mainstream economy, and I found that to be so jarring. that, that gave me, gave me anxiety about the five hundred plus million dollars we had in our treasury, and it jolted me to action. And so that, that is the setup for how I became interested in Bitcoin." }, { "speaker": "stephan", "time": "05:54", "start": 354.05, "text": "So you really had this very successful technology entrepreneur background, and then I take it you became more interested in the economic aspect of it, and that was also part of your learning journey here. Correct?" }, { "speaker": "guest_2", "time": "06:08", "start": 367.76, "text": "Yeah, I mean, I, you know, as a, as a private investor, I ha- for a decade, I had been a technology investor. So in, the year twenty twelve, I published a book called The Mobile Wave, and The Mobile Wave was all about what happens when software leaps from your computer to your mobile phone, and when all of the things we've lived with as products and services dematerialize the software. So I wrote about the impact of mobile money on a mobile phone. Mobile, mobile photography, mobile music, soft- software is, music is software, or what happens if identity becomes software? What happens if medicine merges the software and so, or education becomes software? So I was always very interested in technology, but my, my view toward it was Well, you go buy Apple, you go buy Amazon, you go buy Facebook, you go, you go buy Google, you buy, a hundred billion dollar plus digital network that's dematerializing some product or service or some essence of society. Buy it when it's ten times bigger than the next biggest competitor. Wait, wait for it to become ten times bigger than that, while all the conventional thinkers tell you why it won't work. And of course, that's been a winning formula. As an investor for the past decade, it's kind of like shooting fish in the barrel. You know, everybody tells you Amazon won't work, they don't make any money, then they, you know, they don't understand Google, they don't understand Apple, they tell you Apple won't work, they tell you, you know, HP, IBM, other big enterprise software com- enterprise hardware companies are safer bets. And so I, I kinda understood the idea of a, of a dominant digital network in that context. Of course, I, I was kind of oblivious to the thought that maybe, a cryptocurrency like Bitcoin would become a dominant digital network Dematerializing money, and that is because I didn't really need to solve the problem. I, I, you know, I was kind of, I was, what was the word? Kind of complacent because I kind of, I kind of bought the, the, the public party line, which is inflation is maybe running two percent or less than two percent, and I thought it would be okay to get a two percent or three percent yield or a five percent yield on the money. Back before the great financial crisis, we were getting about five and a half percent Overnight money, you know, so five hundred and fifty basis points on cash reserves, no risk. And then of course, the interest rates just started getting bent, and they got driven down, but I was, you know, hope springs eternal, I always thought, well, they got driven down, they've gotta go back up, they've gotta go back up, and eventually we'll get, get interest on our money. And I didn't really, I didn't really think much about the expansion of the monetary supply, if I'd been more macroeconomically sensitive, I would've realized You know, as Safedine would say, it's seven percent a year in a good year, in normal years, but it, it didn't click 'cause I was a technology investor, not a macro investor. So, along comes March of 2020, and then we just, we see this jolt, and then as I watch bond prices go up when they should be going down, and when I watch equity prices going up when they should be going down, and I saw, a-and then I realized just how powerful the Fed and the, and the liquidity of the Fed was on determining asset prices, many of my conventional beliefs were shattered. And, and- That jolted me to an action where I realized, no, I didn't have five hundred million dollars that was gonna yield five percent interest one day. I had five hundred million dollars that was gonna have a nominal yield of zero for ever, for a long time, three, four, five years. And, and I discovered real yield, and I realized real yield isn't nominal yield minus two percent. Real yield is nominal yield times twenty percent. Right? And this is the, the big epiphany, right? The thing that's just as horrifying for me is you start thinking about this idea that I could have bought a bond in the year two thousand and ten that would have paid me five percent interest, and I could get fifty thousand dollars a year off of a one million dollar bond. And in the year twenty twenty, a bond that pays fifty thousand dollars a year interest would cost you ten million dollars. And so you had a thousand percent inflation over ten years, and if you do the discounting back, it like works out to like twenty-two percent per year inflation every year for ten years on A government asset on, on, on a simple, plain vanilla bond. Like, you start thinking about it and you think, \"What an idiot I am. I could have actually gotten a twenty-two percent yield every year for ten years, you know, buying a long bond.\" Which struck me, you know, as the, as a tech investor, is the most awful investment decision ever, right? Like, so I end, I end up in this bizarre situation, and I, and I developed a, a, a more nuanced appreciation of inflation. That, that, you know, there's an old saying in propaganda, you know, all of our focus groups, all of our studies, they, they've shown us that we, we can't tell people what to think, but we can tell them what to think about. And so when, when the media talks about inflation, they talk about CPI, and everybody nods, and they all worry about CPI coming. But in fact, CPI is an arbitrary measure where you cherry pick a market basket of things that aren't gonna go up in, in cost, if you like, and then you call that CPI. And so if you actually, if you actually create an array of all the products, services, and assets in the world that you might purchase with the cash flow That you generate from working. Then I, I think that there's also-- there's almost like, there's four standard buckets and one special bucket. Well, the, the first bucket is deflating products like, video and music and maps and information and generic drugs and commodities, anything manufactured, news and books and anything that could be dematerialized, during the mobile wave that's on your iPhone, you know, is, is deflating. Or, or anything dematerialized to an iPad or a computer, and anything manufactured by a robot in a big factory or anything with a, with a low variable cost and a high fixed cost, computer chips, what have you, they get stamped out in massive amounts, and they're all deflating, there's no inflation there. And then the next category is, flat to two percent, and that's like secondary property, property in the secondary markets or manual labor, unskilled, branded Consu-consumables, they kinda hold their value, tick up a little bit, one, two percent a year. Government services, regulated services, and I might not be perfect here, but it's just, it's a rough bucket of ideas." }, { "speaker": "stephan", "time": "13:19", "start": 798.7, "text": "And" }, { "speaker": "guest_2", "time": "13:20", "start": 799.52, "text": "then, you know, then the third bucket is what nobody talks about, a, a bucket where prices are going up like six to eight percent a year, and that's like luxury products, scarce products, elite education, elite medicine, elite services, like an I- Ivy League education or good medical care. And, I, I know this 'cause I went to MIT, you know, and it, it was costing ninety-six hundred dollars a year when I went there thirty years ago, and it costs sixty thousand dollars a year now, and so you kinda do the math, thirty years going up by a factor of five or six, and it's not two percent. And, So that, that's your seven percent moni-monetary supply expansion, I suppose. And then I get to this last horrifically painful category where inflation is going up between eight and twenty-four percent a year. And that's equities, debt, prime luxury property, and scarce art. So, I mean, like the S&P 500, I mean, if we look at the S&P index from one, one thousand to thirty-five hundred over ten years, that's, that gets you a decent clip And then if you look at that ten year Treasury bill that I talked about, it's a twenty-two percent rate for ten years. And if you look at penthouse apartment in New York or a house in the Hamptons or an acre of beachfront property in South Florida, anything water-- I joke, L.A., New York, Miami, San Francisco, London, you know, if, if you wanted to get a house in the middle of the country that nobody wants to live in, that isn't going up eight percent a year. But But if you're in the magic mile of London or downtown and Central Park or wherever it is, then that stuff's going through the roof and, and so those are the scarce assets And of course, I've got one last category which is, which is inflating faster than twenty-five percent. You wanna guess what that is?" }, { "speaker": "stephan", "time": "15:18", "start": 917.78, "text": "Bitcoin." }, { "speaker": "guest_2", "time": "15:19", "start": 918.62, "text": "Bitcoin. Yeah, I put that in for you. That's Bitcoin. Of course. I felt, you know, okay, I'm not pandering, but, but like, I, you know, I'm wishing I discovered- I, I got beat up for a stupid tweet in 2013 where I thought Bitcoin was going away, and I'm wishing that I'd thought differently in 2013, 'cause it did. And then you gotta ask the question, so why is it that that thing's going up so fast? And maybe one answer is, it is the scariest of all the assets imaginable that I listed. So That's my, all of a sudden, that's my inflation view. Inflation is a vector, inflation isn't a scalar. So what we have is a, is a world where, where, the conventional economists and the politicians refer to inflation based on a, on a CPI basket, and they're simply picking things that are deflating or things that are being manufactured by robots and AIs, and nobody's, you know, nobody's putting a Harvard degree free, a, a scarce asset or Picasso or they're, they're not even-- what does everybody in the world want? They want to like work hard, make enough money to not have to work again so they can do what they want with their life. Call it a comfortable retirement at an early age. So if it, if it used to cost two million dollars to get a bond that yielded a hundred thousand dollars a year risk free forever Now it costs twenty million dollars. So, you know, I, I joke, right? It's kind of like Jedi mind tricking the people, because you're kind of saying, \"Well, this isn't an asset you would wanna buy, don't worry about this. This investment doesn't matter, because this isn't for you. This is for...\" What, rich Wall Street bankers and bond traders?" }, { "speaker": "stephan", "time": "17:08", "start": 1027.93, "text": "Yeah. And it essentially turns people into having to become some form of a professional investor, or they're having to pay a lot of money to somebody who is a professional investor, rather than being able to save, which is the traditional way. So I suppose that was part of your journey as well." }, { "speaker": "guest_2", "time": "17:23", "start": 1043.14, "text": "Yeah, it's, it's very disillusioning because, look, I remember I grew up in an era where life was kind of simple. Like I, I remember Paul Volcker. I grew up- Graduated from high school, Paul Volcker was the head of the Fed, and at some point it seemed reasonable you could actually put your money in a bank savings account and get six percent interest. And we didn't expect any inflation, right? We had a world saying, \"We're gonna stop inflation, you're gonna get six percent risk free interest. You put ninety percent of your money in the savings account, the last ten percent you put in your checking account, you got zero percent interest, you wrote checks.\" And by the way, that's, you know, that's like put your savings in Bitcoin and then move five percent of your money into fiat and write your checks with the fiat on PayPal or Square Cash or Apple Pay or whatever you're gonna use, and leave the rest in your Bitcoin savings account and let, let it accrue. So that, that was the world, and it, it was a reasonable expectation that a person could work very hard, save their money, put it in the bank, and the bank would give you interest. And somewhere along the line, the banks became Broken and defective, and they stopped doing their job of giving you risk-free yield. And, so you, you end up with a situation where like my eighty-two-year-old father is gonna be expected that he studies the stock market and, and picks the stocks that are gonna go up like an investment analyst so that he doesn't lose his life savings? Like that, that's what- That's what our, our, our monetary policy has done to the rank and file, and it's, and, and it's actually, they've been, people have been beaten into submission so much That they don't remember that there was a time when the risk-free interest rate on short-term money was like five percent, and the risk-free interest rate on long-term money was eight percent, and the risk premium were you to invest in an equity was plus four percent more, and you would expect twelve percent on the equity, eight percent on the long bond, you know, and five percent on the short-term savings account, and no inflation. That, that was the social contract. Not, obviously, not for every year in the last hundred years, but maybe I just kind of came of age in that Volcker age or w-where I was conditioned to believe that You could, you could get a decent return without becoming an investment analyst and, or a speculator." }, { "speaker": "stephan", "time": "19:52", "start": 1192.46, "text": "Right, and I think that is also a phenomenon of, partly of the fiat banking world that we've lived in, and, it could also be argued that if we were to go back even to a more hard money time, your purchasing power of your bitcoins or, let's say, of your gold in those days was rising by that, you know, a few percentage points every year, and that was quasi where you're getting at that risk-free return in a sense. But it's really just an increase in your purchasing power. So, Michael, I wanna dive a little bit into how you educated yourself about the economics of Bitcoin. I mean, I presume you were reading Safedine, you were reading Vijay. Tell us a little bit about that journey." }, { "speaker": "guest_2", "time": "20:32", "start": 1231.79, "text": "Okay, don't think this is sucking up, but I was listening to a lot of your podcast. Well," }, { "speaker": "stephan", "time": "20:37", "start": 1236.79, "text": "thank you." }, { "speaker": "guest_2", "time": "20:38", "start": 1237.73, "text": "And, and, so I, and of course, if I look at that, look at them, I come across Safedine, I come across, Race in the crypto industry. So I went through, I went through a bunch of Pumps podcasts and he introduced me to some. You know, I went through yours, I went through, you know, Peter McCormick's And, and of course, if you listen to all those, there are guest speakers, and as they come on, you know, the, the Breedloves of the world, the Dan Hels of the world, you'll just go down that rabbit hole and check them out. I, you know, I, I tend to think you can learn just about anything on YouTube. So if you go to YouTube and you Google Bitcoin, then, you know, you're gonna get the, the seminal speeches by, by Andreas. And so I wa-- I watched a lot of speeches by Andreas. I read his, first book, The Internet of Money. Obviously, I read The Bitcoin Standard. I stumbled across Hard Money, the movie, very interesting. I read Parker Lewis' essays. Then I found, you know, The, The Bullish Case for Bitcoin. A- and a lot of this, by the way, was, I, I should give credit to my friend Eric White, who runs Crypto Hedge Fund. And Eric is good friend of mine, and, and he'd, he'd- Been pitching me on Bitcoin since like 2018, and I was just, you know, I was just oblivious to it, living in my own world. I wasn't thinking about macro and I wasn't thinking about Bitcoin, and, you know All these other things going on, Apple, Computer, and, and, the like, and Amazon were so much more interesting from an investment point of view at that time. And, and, you know, Eric kept at me, and, first I thought, \"Well, you know, I thought what everybody thinks. I mean, can't you just make some more, more crypto coins and someone else, else'll mint a new one?\" And I didn't really think about it much. And then, Then when we got to like April of this year, and I just watched a V-shaped recovery on Wall Street and a non-recovery on Main Street, if not things getting worse on Main Street while things got better on Wall Street, and then things got best as they'd ever been on Wall Street. And, I looked at that, I looked at interest rates going to zero, and I looked at the prospect that we're not even thinking about thinking about fixing the interest rates, and that caused me to do a deep A deep dive into the world of macroeconomics, and then as I started to do that, and I stumbled across all the Bitcoin, advocates and Ralph Paul, and, and then I, a-and then I realized that I'd been fairly oblivious to, you know, the impact of Fed on interest rates and the impact of the interest rates on asset values and And, that, that got me to my place. I would just, I would say it's some interesting combination of YouTube, YouTube and then all the public documentation that's available on Medium and then just a, a few books that I bought. I would also say, by the way, one thing that was very instrumental, I think, was the Eric Voorhees Peter Schiff debate on, Bitcoin versus fiat. You know, I, I, it's kind of ironic in a way, because now that I know Peter Schiff is like the gold bug, I think it's kind of hilarious that Peter Schiff would have got on stage to, to debate in favor of fiat currency, since ostensibly the number one argument to buy gold is that fiat currency is defective. But I watched the debate, I got introduced to, you know, all of the Austrian economics ideas. I, I think it's like a very good, succinct summary, fairly crisp. You know, and eventually, what is it, Rothbard, what has the government done with your money? I think, that, popped up and I got driven a, a little bit into Austrian economics. And a lot of the stuff I'd read and, you know, when I was in, college, and I, I generally agreed with all of that, right? I mean, it doesn't take Like, it doesn't take, a huge amount of, education to get the idea that capitalism and fairness and market clearing mechanisms make sense. I think, I, I'd mentioned to some of you before that one of my favorite books is The Moon Is a Harsh Mistress. And, and The Moon Is a Harsh Mistress, right, is like the quintessential work by Robert Heinlein, where he coins the phrase, \"There ain't no such thing as a free lunch.\" So I, I, I probably read it when I was nine. So, so I've always been of that belief, I just didn't really pay attention to what was going on with our money until I was, forced to." }, { "speaker": "stephan", "time": "25:40", "start": 1540.24, "text": "Yeah, so it's sort of like it aligned, very much with some of your earlier thinking. I'd love to also talk a little bit about how you did that education process within the company. What was that like?" }, { "speaker": "guest_2", "time": "25:52", "start": 1551.57, "text": "So I had a problem, which is I had this large corporate treasury, and, I, you know, after the macroeconomic analysis, I came to the conclusion that it was, it was debasing. At the rate in, in excess of ten percent a year, which meant that I had a fifty million dollar a year loss, and I couldn't reasonably expect to generate more than fifty million dollars a year in cash flow. So in essence, if I did nothing There was mo-no point in doing anything, right? Like, I literally was running to stand still, and, and it could be much worse than that. You can make an argument that we have a twenty, twenty-five percent or more debasement of the currency this year if you were-- if you wanted to trade your currency for those scarce assets that, you know, that popped after April. So once I knew I had that problem Then, there's a checklist, right? in a publicly traded company, you need to get all the officers and the directors on board. So it's an education process. So I collected, I collected like a summary of the three or probably the three best, videos on YouTube, maybe an Andreas video, the debate with, between Voorhees and Schiff, and then I think, a Pomp. Video on, on an overview of Bitcoin, something like that. And I packaged them together and, I opened up a group chat line to all the officers and the directors, right? We had, we had previously had board meetings once a quarter and it was all fairly stately and, and, conventional, and, we couldn't have a board meeting face-to-face anymore because of, COVID lockdown restrictions and the like. So I just opened up an iMessage chat line with all of them. and I posted the three videos, and then I said, \"Uh, hey guys, I want you to watch all three of these, and then I'm going to call you.\" And then I set up, and then I waited and I set up a one-on-one meeting, like a Zoom meeting with each one of them, you know, a- a-after having made sure that they'd, done their homework. Then we had, one-on-one sessions and, and tense with The CFO, the general counsel, all the outside directors, I answered all their questions, I fielded all their thoughts. They were all fairly well informed, and half of them had experience with crypto before I did, right? So, you know, the thing, the funny thing about Bitcoin is, is whenever you say you're gonna do something with it, like as a, as a public company or whatever, people go, \"Oh, aghast, isn't that scary? And won't the, you know, will the investors be concerned?\" About that, and, they think it's some kind of horrifically strange thing. But in my experience, half the officers I talked to knew more about it than I did, or they'd already been in it. Half the directors had already been involved, and then half my investors already own Bitcoin privately. And, you know, in fact, my number one detractor, that, you know, some, some of, At one point, some of my investment relations people said, \"Well, you know, you're doing this Bitcoin thing, and there's this-- everybody's generally okay with it, but there's one investor that has concerns about you investing in Bitcoin, so be very careful when you, talk to him.\" So I said, \"Okay.\" So I talked to that investor, and his real, his real message is, \"Well, why don't you just like give us all the money back instead of buying some Bitcoin with it?\" And I, I explained, \"Well, you know, we For the longevity of the company so that we can make good on all of our obligations to our counterparties over the next decade. And if I drained the corporate treasury of all liquid assets and we had a downturn, I couldn't make good on my promises to my customers, my employees, or my vendors. So, you know, of course, everybody, if they thought about it, they would probably conclude, \"Yeah, you need a treasury.\" So then after I finish that I started to go off on Bitcoin and explain to him why I thought Bitcoin was, was the most prudent thing we could do with our corporate treasury, and he cuts me off and he goes, \"Yeah, I already know about Bitcoin, I own it.\" You know? Hahaha. You know, so sometimes people are afraid of the unknown, and, I-- you see a lot of times that the people that you would be afraid to talk with about Bitcoin actually, they might know more than you think. In any event, coming back to my, my, education process, with the, the board and the directors and the officers. So, i-- it's important to make sure everybody had the same information, and then after that, make sure that I understood all their thoughts, and they, they all had really good thoughts about how, you know, how we ought to think about this, and, and, then after that, you know, we went down the rabbit hole a bit more with more writings. And there's, there's an article by Lynn Alden she wrote, you know, where she was a skeptic on Bitcoin And she became a bull on Bitcoin in twenty twenty, and she laid out exactly why, and she talked about security and after, and being past the hard fork, and, you know, and the, and the changed macroeconomic situation and the, and the hardening of Bitcoin and the stabilizing of the community and the like, and I sent that to the board and, and, so a-after we had that kind of critical mass of information, then we had, we had an exercise to go through Through all the legal issues related to it, and the general counsel led that exercise to work through our outside counsel and crypto experts and think it through. And then we had an exer-exercise to go through the finance and accounting issues and control issues related to it, and the CFO took responsibility for that. And then we had all the issues of how do we communicate and evolve, this process and communicate respectfully? to the outside investors, because, you know, there's, you know, a simple rule in life, if you're a public company, no surprises. Yeah. And, that's the kind of general rule in life to get along with anybody, right? It's like people don't like surprises. So if you're going to do something, and by the way, this is- This would be my message to all the Bitcoiners out there in the world too, if you, if they would ask, \"So what does someone that wants to invest four hundred and twenty-five million dollars in Bitcoin want?\" And the answer is, no surprises. Don't, don't, don't surprise me with something beautiful and elegant and risky and complex that may or may not work, that it was, that was unexpected, right? Move forward in life carefully and responsibly. Because people's livelihoods are in your hands. So just like the livelihood, you know, if I invest in Bitcoin, the miners, the developers, the community has my livelihood in their hands. Well, I, I am a fiduciary responsible for the outside shareholders of MicroStrategy, and they own MSTR stock. And I have to be concerned not just with my officers and directors and my employees and my customers and the regulators, I have to be concerned with the investors, and there of course, there's a lot of different investors, there's, you know, there's, and they all have different timeframes. So, I spent a lot of time with the management team and the board thinking about what's the, what's the process of due diligence we go through? What's the process? You know, what would you expect, right? There's a simple golden rule, right? Do unto others as you would have them do unto you. You know, if, if you were an investor in my company, what would you expect the management team to do when faced with a crisis? And the answer is do something. You know, if, if, if somebody invented a qu-quantum computer and you heard about it, what would I expect the Bitcoin community to do? Do something. Like, i-ideally, like, why don't you get yourself one of those quantum computers and plug it into a mining rig, and why don't you be mining some Bitcoin with it, right? Like, like that's what gets me about all the, all these guys that talk about, \"Well, what if there's a qu-quantum computer?\" Well, the answer is when I'm expecting the community will take advantage of that to make the net, the network more secure and more efficient for everybody involved, and, and, and that's a healthy response, think about it. Consider it, move forward carefully and responsibly with respect to all constituencies. So as a public company officer, we do the same thing, which is we think about it really hard, we do our research, and, You know, I didn't write, I didn't mention it, right? But the first thing you gotta do is say, \"Well, my treasury is debasing at ten to twenty percent a year.\" The next thing you gotta say is, \"What are my treasury assets? And can I invest in equity? Can I invest in real estate? Can I invest in precious metals? Can I invest in crypto?\" And you can, we x'd off most of those and we got down to gold and crypto. And then I did a deep dive on gold, and, we could talk about that" }, { "speaker": "guest_2", "time": "35:26", "start": 2126.14, "text": "point in time, somewhere between ten and a hundred times better than gold, but over time would be a thousand to a million times better than gold. And so it just didn't make any sense to invest in gold because gold is going to be eaten. gold as a store of value should rationally be eaten by Bitcoin, and even if it isn't eaten, it's already defective by twenty-first century standards. As soon, all you have to do is conclude that bit-- Bitcoin is working, and as soon as Bitcoin is concluded to be working, then everything else starts to pale in comparison to it, and then it just became a question of how do we go about, communicating it to the investors? In a respectful way, how do we go about buying it and how do we go about handling it?" }, { "speaker": "stephan", "time": "36:16", "start": 2175.59, "text": "Great, and I'd love to hear your thoughts on why Bitcoin and not any altcoins." }, { "speaker": "guest_2", "time": "36:20", "start": 2180.36, "text": "So first, you, you do a, a quick look at Bitcoin and you conclude, \"Wow, you've got about a two hundred billion dollar market cap,\" and then you see Ethereum's out there about a forty-five billion dollar market cap, and then, and then you see the Tethers and the stable coins that pop up whatever in the four, five, ten billion dollar range Varying, and then you start to see Bitcoin Cash like four billion, and then you see the other ones that fall off, and so I started thinking about it a bit. And I guess what I would say, Stephane, is, you know, it It took me about fifteen hours of research to determine that Bitcoin was the best money ever invented. Fifteen hours from start to finish. It took me about fifteen minutes To figure out that Ethereum was still in its developmental venture capital stage. Like, Ethereum's like the unicorn of the crypto industry. they've done really great so far. I wish them well, full of exciting possibilities. but, you know, I've listened to, Vitalik on your show, right? And even they would admit they have a lot of work to do to arrive at a finished product. product, you know, the entire Ethereum two dot O process or initiative is, is in essence, i-it's an admission that Ethereum one dot O, the first version, is an unstable or, or incomplete architecture. And, That being the case," }, { "speaker": "guest_2", "time": "38:05", "start": 2284.61, "text": "it's interesting and fascinating. I think it's, you know, obviously, I think it's the number one crypto applications platform. If their vision is we wanna create, a crypto application platform so people can, you know, create any kind of, of decentralized application or DeFi application, well, that's good, I get it." }, { "speaker": "guest_2", "time": "38:31", "start": 2310.71, "text": "It would be inappropriate to use Ether as a store of value for a corporate or an institutional treasury. You wouldn't put five hundred million or a billion dollars into Ethereum, yeah? And, you know, and, and why? Well- I mean, it's got an identity crisis. You can't have the founder saying that the current product in its current form is defective over the long term, right? Like, like," }, { "speaker": "stephan", "time": "38:59", "start": 2338.9, "text": "yeah." }, { "speaker": "guest_2", "time": "39:00", "start": 2339.5, "text": "I mean, it's, it that, that in of itself, right, stops you. If I walked into a bank And I said, \"I've got business intelligence software, you can run your business on it.\" And they said, \"Great, well, we're gonna roll out this app.\" And I said, \"But, y-you know, this is only gonna work for twelve months before it breaks down because of congestion and transaction fees, and there's some problems with it.\" And I go, \"But, but don't worry, 'cause I've got a plan between month twelve and month thirty-six to fix it.\" You wouldn't make a sale. Like, no sale. Like, no, no one is going On a developing product, not except if it's a capitalist, right? So that, that's a challenge. The other challenge is the value pr- there's no clear value proposition. Like, you know what surprises me, Stefan, which is, which is like- In my Twitter today, I said, \"You know, when I look at market dominance, I think Bitcoin is a crypto asset network. I mean, it purports to be a store of value, and most people that are into Bitcoin know that that's good enough, digital gold. We're gonna store some value. they're fine with it. It doesn't have to be anything more than that. If we store a hundred trillion dollars worth of value in Bitcoin, we're just gonna be fine.\" It's not a problem, right? I mean, it would go up by a factor of ten to two trillion and by ten to twenty trillion, so it's gonna go up by a factor of five hundred if all it does is store the hundred trillion. I don't-- who, who's complaining about that, right? On the other hand, I feel like, when I suggested that, that Ethereum really is better classified as the largest and the Primary crypto applications platform or crypto applications network, you know, a lot of people kinda took offense to it. And I, I wasn't trying to, I wasn't trying to trigger them, I wasn't actually trying to be insulting. I was actually saying, I can see a place for a decentralized app platform. I, I got a, you know, a dozen use cases for it. you oughta own it. Right? If I was, if I was on your board of directors and you were this, and if, if this was a company, I'd say, \"It's not mature enough to go public because they're not willing to say what they stand for. They can't say, \"Well, we're, you know, just working our way through it. We just wanna launch an experiment, see what happens.\" But right now we know we got a problem, so we're gonna try to fix it somehow. And in twenty-four months, we're gonna roll out a new network that's gonna do" }, { "speaker": "guest_2", "time": "41:42", "start": 2501.72, "text": "Is gonna trust anything until it's rock solid and stable, probably for three years. So three years after you lock on to the architecture, you get someone to bet a billion dollars on it. You know, you, you get a lot of people that will do venture capital and speculative investments before then, and we need that. And I'm, look, I'm a free market capitalist, but, but, I think that, The Ethereum, I don't, I'm not gonna speak for all of them 'cause there's, I don't know, there's thousands of them. Some of them wanna have their cake and eat it too. They'd like to be a store of value, like to be a crypto asset, and they'd also like to be a crypto application. And Look, it, it doesn't take a rocket scientist, and I am a rocket scientist, but it doesn't take a rocket scientist to figure out that when you make something, when you make software more complicated, there's more things to break and there's more attack surfaces. And you would think everybody in the Bitcoin community, they know that better than anybody, right? Because the Bitcoin miners use ASICs. That's a very specific thing, you know? They're not using general-purpose CPUs. They're not using GPUs, they're using a very special purpose chip that just does one thing, and if you used any other chip, you'd fail. And then they're using hardware wallets, which are specialized mobile devices that do one thing, you know? And, and, and if anybody said, \"Well, I think I wanna use the Amazon AWS general network and, you know, I wanna use S3 buckets and I wanna use my, you know, iPhone or whatever,\" they would say, \"Too many attack surfaces, too much complexity, it's a Rube Goldberg device.\" Like it's- It's, it's, it's fine for an experimental developmental prototype app. It's good, you're gonna get stuff done fast. But, you know, here, Stefan, here is," }, { "speaker": "guest_2", "time": "43:34", "start": 2613.76, "text": "you know, a basic premise. Number one Number one, when I was at MIT and I was a freshman, you know, the first thing they taught us is simplicity, right? Complexity kills, right? Rube Goldberg device. Don't build a Rube Goldberg device. Too many moving parts, it's going to break. That's, that's just, the law. KISS, keep it simple, stupid. As simple as it can be. That's the first observation. And I think the second observation is You know, crypto is like creating software life and releasing it into the cyberspace. I, it's not the same as creating a centralized application. You have to create a life form, code the DNA, and you have to release it and let it go, right? It's a, and, and you can't keep tinkering with it. You can't call it back in its fifth year and change out the heart, add three more legs, and- And double or change the way the eyes work. You, you can't do that. If you want it to be truly crypto or truly decentralized, you know, when you're the architect at the very beginning, you kinda gotta figure out what the protocol is And the protocol for doing decentralized applications is different than the protocol for doing store of value or the world's best money. And you can, I can posit a protocol for a, a special type of decentralized application, and that would be different too. The nature, right? Mother nature has given us millions and millions of creatures. Their DNA is differentiated, and they're all good at whatever they do. You know, a spider, a fish, an eagle, a person. But you release the thing, and then you let it become the full, you know, the best version of itself, and you don't tinker with it. If you tinker with it, you're kind of starting again. So the, I mean, the real challenge with- Ethereum right now is when they go to two dot o, you cl- you start to clock all over again, and you throw away all the goodwill, or much of the goodwill you generated with, with the first version. And now anybody that's looking to put a billion dollars into it has got to wait for another three to five years to see if anything's gonna break. Right? That's, that's the Lindy effect, right? From Nicholas Taleb." }, { "speaker": "stephan", "time": "46:02", "start": 2762.28, "text": "For sure. Michael, I'd also like to ask about your thoughts around whether you see any kind of- future regulatory risks or if, you know, because it's, it's funny, I think people talk about, \"Oh, see, I think the government's gonna ban Bitcoin and so on.\" Did, did that come into your mind at all, or do you, or are you not as concerned about that, and you think it's actually going the other way?" }, { "speaker": "guest_2", "time": "46:23", "start": 2783.41, "text": "Well, you know, the reason that Nicholas Taleb's Lindy effect is so brilliant is because, as he says, time is the ultimate, you know, stressor, the ultimate volatility. So if in the year two thousand and ten, In the year twenty thirteen, you know, I, I watched online gambling get banned. You know, I watched, you know, things get shut down, and I actually tweeted, you know, maybe Bitcoin's days or m-number is gonna go the way of online gambling in twenty thirteen, it might have, it might have not, you know, who knows? I- I didn't know. But then, each year that went by, there's always this question, like, \"Will, will the IRS give you a tax treatment? Like, for example, if the IRS said that you have to recognize your, your gains in Bitcoin marked in the market at, at the end of each taxable year, that would have a negative effect on Bitcoin for sure. Instead of ho-- buy the Bitcoin, wait for twenty-two years, and defer the capital gain. So, so that I- The IRS opinion came later, you know, the, the, the OCC opinions come later, you know, adoption by Fidelity, the formation of the crypto custodians, right? The custodians and the exchanges that got licensed by New York State. Each one of those things, right? The, each one of those is another brick in the firmament of regulatory compliance and stability for Bitcoin. The, the, the Kraken, the Kraken crypto bank announced this week, right? Each of these things is building up. So I would say if you'd asked me this question three years ago, I would have thought Who knows, right? It would be difficult for me, right? Take Lynn Alden, right? She writes the paper in 2020. She said, \"In 2017, I was a skeptic. In 2020, I'm not.\" Well, I guess I'm the same way. In 2017, maybe it was a venture capital investment or 2016. I, I, I think, by the way, Stephan, I feel kinda guilty in a way because- I could have bought Bitcoin for ten thousand dollars in twenty seventeen, and I would have taken a huge amount of risk, you know? A lot more risk than I'm taking today. I got to wait 36 months and see the result of the hard fork and see all the regulatory compliance coming into play and, and see all the bricks Falling into place and all the risks disappearing. And then I thought to myself, \"And I get to buy it at the same price. This is-- I, I mean, ironically, and it really is ironic, Stefan, because...\" You know, come May or June, every asset that you can buy as an institutional investor is shot through the roof and it's a crowded trade. Big tech is a crowded trade, overpriced, long bonds or overpriced, real estate is overpriced, all the equity indexes are overpriced, gold arguably is even overpriced. Merrill Lynch is telling all their, you know, all of their investors, you gotta put twenty-five percent of your money into gold. Everything spiked up, it's all overpriced, it's all, you know, gold's up thirty, forty percent or something. Everything's up plus thirty-five percent, except for one thing, Stefan. What's the one thing?" }, { "speaker": "stephan", "time": "49:52", "start": 2992.06, "text": "That's right. Bitcoin. Bitcoin." }, { "speaker": "guest_2", "time": "49:54", "start": 2994.16, "text": "I, I know you got, I mean, you, you, you got like a difficult Black Thursday event and spiked down. But what was Bitcoin on January first of this year?" }, { "speaker": "stephan", "time": "50:03", "start": 3003.28, "text": "Maybe something around ten thousand, I can't remember exactly." }, { "speaker": "guest_2", "time": "50:06", "start": 3006.17, "text": "Yeah, and if I look at the last twenty-four months, right? I mean, Bitcoin looks like it's been trading a bit sideways, and I thought, \"This is kind of a gift from God.\" Like, I finally got-- I got woken up to how good this thing is, and there are people out there selling it. And that's, that's what I joke, you know? Like, I sit there and I buy this stuff, and I, I think I sat for eight days straight. It took me eight days to accumulate four hundred and twenty-five million dollars worth of Bitcoin, and I watched it day and night, and I watched the ticker scroll, and I'm making trade after trade after trade after trade, and I'm obsessing in fear that someone that thinks like me will get into the market, right? And, and I'm feeling very chronically short. Right? Like I, I said to someone, like, once you understand Bitcoin, you're, you just have this horrifying feeling that you're short. Like, like I thought, \"Well, I'm buying it at ten thousand or something,\" but what if, what if someone finally wakes up and it's gonna go to twenty or twenty-five thousand? How do I go to my board and explain to them that I wanna keep buying it when it's fifteen thousand or seventeen thousand or twenty thousand, right? It'd be a much more difficult conversation then So eight days of this torture while I'm buying it bit by bit, you know, and I noted in my tweet, like I, I think we used a hundred and sixty thousand individual trades to get this done, right? It's like it's just obscene. And all the time, all I can think is, \"Who are these people that are selling this to me? Why would you ever sell this?\" And then I thought to myself, \"I hope that they're selling it to get married to the love of their life, or because they wanna buy a jet or a yacht or that Lamborghini, or maybe they're selling it and because it's like this life...\" Changing thing they need to pay for. But if they're selling it to buy another asset, they're trading something that looks like it's got, you know, a positive real yield twenty, twenty percent higher Then the next best thing, and everything else I can figure out to buy looks to have a negative real yield for the next decade. So I thought it was ironic, like, who are these people that would sell this to me? But I, you know, I'm not gonna kiss a gift horse in the mouth." }, { "speaker": "stephan", "time": "52:39", "start": 3158.87, "text": "Right. And, as you stated, I think it was, in one of the press releases, it was stated this is part of a deliberate corporate strategy to adopt a Bitcoin standard." }, { "speaker": "guest_2", "time": "52:49", "start": 3169.46, "text": "Yeah. Like, look, I, I, I look at a lot of people- People in the community, people talk about speculation all the time, or, or, you know, or even they talk about, you know, Paul Tudor Jones says, \"Oh, I put one percent into Bitcoin.\" And I, I guess it's good that an investor puts one percent into Bitcoin, but from my point of view, I just can't see how you could say that you understand Bitcoin and then at the same time say you've decided to speculate in it or that, you're putting one percent of your- Wealth in it. Like, I mean, I mean, the joke that I made is, you know, a guy thinks he understands Vegas, he goes to Vegas, and he spends a million dollars gambling in a week. A billionaire that understands Vegas, that really understands Vegas, is Howard Hughes. He goes to Vegas, he buys Vegas, all of it, all of it. He buys all the casinos, all the land, everything around it. Which of the two guys understands Vegas? Which of the two guys is the better business person?" }, { "speaker": "stephan", "time": "53:56", "start": 3235.65, "text": "Yeah, the billionaire." }, { "speaker": "guest_2", "time": "53:57", "start": 3236.63, "text": "Look, what I would say to Paul Tudor Jones is, if you really understand Bitcoin and you understand it's the scariest digital asset, then you know that it's gonna have a positive real yield. Twenty per ten to twenty percent just based on fiat printing. If you, if you actually dug into it to understand the technology characteristics that it's smarter, faster, and stronger than gold, you would realize That it's probably a hundred x to a thousand x better than gold, and its value is gonna create better than just the fiat printing. It's gonna, it's gonna be north of the fiat currency printing. And once you realize that And if you buy into the notion that, that, the Fed's gonna debase the currency ten percent a year for the next decade, or at least for the next five years Then ninety-nine percent of the stuff you're holding is debasing by ten percent a year, and even if Bitcoin works, plus thirty percent You're not making any progress. Yeah, it's a hedge, but, you know, why would you, why would you take ninety-nine percent of your assets and invest it in something that's losing ten percent a year for the next decade if you really understood Bitcoin? What is there you could buy that's gonna be better, right? I mean, Stefan, you, you kinda have to buy a high growth equity that's growing faster than the rate at which the Fed is, Fed is printing money, right?" }, { "speaker": "stephan", "time": "55:25", "start": 3324.92, "text": "And there's not too many of those, right?" }, { "speaker": "guest_2", "time": "55:27", "start": 3327.28, "text": "N- name a co- But at a, at a, at a, if you can buy a company trading at three times revenue that's gonna grow its cash flows at twenty percent a year for the next decade, then have at it, right? Find me one of those. There ain't, you know, Give you with a funny quote, you know, Snowflake comes public, I don't know, it's like five hundred billion in revenue, and it's growing fast, and it's losing a lot of money, like three hundred million a year or some large amount of money, but it's growing, and it comes public at like what, twenty times revenue? And then on the IPO day, it's like we're thirty billion, and then it jumps to seventy billion on like a, what, seven hundred million dollars revenue, like a hundred times revenue. I, I, I haven't even read all the details, I-- but, but I'm like roughly in, in plus or minus thirty percent, in the right order of magnitude. But it's just an obscenely spiked, you know, like hundred x revenue growth company that's not making money. And they write about it in the Wall Street Journal, I guess on the front page, 'cause how do you not write about this? And the journalist writes, and by the way, this is delicious quote, the journalist writes, \"Well, you know, we know it's very, very, it's very over, overvalued. I mean, it's a massive multiple, and the mar-- and the markets would normally never tolerate this. But you have to understand that it's a, a company that's growing its revenues during the pandemic.\" Investors are willing to pay up for a scarce asset. And I'm, and by the way, this is a company that just raised three billion dollars in their IPO and they're being valued plus 35 billion more than a 50x revenue multiple. And the journalists explain it away as, \"Well, it's a, it's a scarce asset. Investors want to pay up for it.\" So now I come back to speculators and hedgers, and I'm, I'm like, \"If you really understand Bitcoin and you've got a lot of money, then you're secretly buying it all up.\" Okay? It's like, how do I buy all this stuff? Right? Maybe there's some of them, and they're not talking at all. Right? They're saying nothing. On the other hand You know, if you've got a ten billion dollar investment fund and you just go and you buy a billion dollars of this stuff, it's gonna be like shooting fish in a barrel, right? Then you just put it out on the wire and announce that you want the next five billion worth of it. There's not any more. It's the short squeeze from hell. So I kinda just wonder, like, why would anybody that really understood Bitcoin and knew that every, you know, all cash is deflating ten percent a year, all sovereign debt is, is debasing ten plus percent a year, it goes for, and all equities are probably in a crowded trade, topped out, and the S&P 500 is probably looking at a lost decade? Why in the world would you take ninety-nine percent of your assets and put it in any of that, and then say, \"I bought one percent of Bitcoin\"?" }, { "speaker": "stephan", "time": "58:40", "start": 3519.72, "text": "Phenomenal. Excellent, articulation there, Michael. I know you've gotta go. so before we let you go, where can listeners find you online?" }, { "speaker": "guest_2", "time": "58:48", "start": 3528.38, "text": "You know, the best thing to do is follow me on Twitter. I'm, michael underscore saylor at, you know, on Twitter. I'm, I'm in a little blue check mark, michael saylor. Find that one. With the cyber hornets quote at the top, and that's me." }, { "speaker": "stephan", "time": "59:07", "start": 3547.48, "text": "Well, Michael, I've really enjoyed chatting with you. It's, it's been a great pleasure. Thank you." }, { "speaker": "guest_2", "time": "59:12", "start": 3551.52, "text": "Thanks, Stefan. Bye." }, { "speaker": "stephan", "time": "59:13", "start": 3553.2, "text": "How incredible is this? I think it's very bullish over the longer term and really how long is it until other companies copycat this? And surely many smaller or private companies are already doing this. So remember, if you appreciate the show, make sure to share it with your family and friends so they can learn. Also, I was actually quite flattered to learn that Michael had been listening to my show as well, so it just goes to show you never know who's listening. and finally, go to stephanelivera.com/213 for the show notes. Thanks, and I'll" } ] }