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Speaker 1: The information provided in this program is of a general

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Speaker 1: nature and is not intended to be personalized financial advice.

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Speaker 1: We encourage you to seek appropriate advice from a qualified

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Speaker 1: professional to suit your individual circumstances. Micro Strategy is the

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Speaker 1: world's largest corporate holder of bitcoin. We're in Washington, DC

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Speaker 1: to interview its executive chairman, Michael Sailor about how his

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Speaker 1: company has catapulted to be one of the most highly

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Speaker 1: valued in America.

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Speaker 2: Really, micro Strategies pioneering a new market. We're issuing securities

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Speaker 2: backed by digital capital, backed by bitcoin.

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Speaker 1: This whole conversion financial engineering type strategy is often referred

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Speaker 1: to online as the infinite money glitch.

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Speaker 2: See the misnomer there is. It's not a money glitch.

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Speaker 2: It is a digital transformation of the capital markets.

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Speaker 1: Meet Michael Sailor, the technology entrepreneur who started micro Strategy

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Speaker 1: in nineteen eighty nine and took it public on the

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Speaker 1: Nasdaq in ninety eight. What is an enterprise software company

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Speaker 1: is now better known as the world's first and largest

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Speaker 1: corporate holder of bitcoin. In August twenty twenty, Sailor converted

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Speaker 1: two hundred and fifty million US dollars of the company's

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Speaker 1: cash to bitcoin. Since then, he's spent almost ten billion

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Speaker 1: US dollars acquiring more. Its total worth is now more

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Speaker 1: than fifteen billion dollars, making micro Strategy officially a whale.

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Speaker 1: It owns more than one percent of all bitcoin available.

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Speaker 3: The strategy has transformed.

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Speaker 1: Its once languishing share price to a market capitalization of

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Speaker 1: more than forty billion US dollars at the time this

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Speaker 1: video was made. Its valuation represents a premium to its

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Speaker 1: bitcoin holdings of about two and a half times.

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Speaker 3: While believers think it could shoot higher.

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Speaker 1: Some short sellers believe it's only worth however much bitcoin

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Speaker 1: it actually holds. Michael Saylor is obviously more bullish. He

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Speaker 1: sees his company is at the center of the modern

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Speaker 1: capital flow to digital assets. To understand how he thinks

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Speaker 1: about the company's future, we flew seventeen hours from New

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Speaker 1: Zealand to the United States to interview him at.

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Speaker 3: His apartment in Washington, DC.

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Speaker 1: A reminder that this show never offers financial advice, but

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Speaker 1: what this interview does offer is an insight into the

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Speaker 1: mind of Michael Saylor. mIRC Sailer, thank you so much

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Speaker 1: for having us in your incredible apartment.

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Speaker 3: It's so good to be here.

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Speaker 2: Yeah, thanks Rah, thanks for coming.

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Speaker 3: I guess you are most welcome.

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Speaker 1: I heard in another interview that you did that you

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Speaker 1: resented people who worked from home. So I felt like

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Speaker 1: we had to come and.

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Speaker 3: I was ready to do this ran in person.

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Speaker 1: Now you were just telling me before, but I'd love

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Speaker 1: my audience to hear this. You spent some time in

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Speaker 1: New Zealand growing up.

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Speaker 2: Tell me about that. I did. My father was in

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Speaker 2: the United States Air Force and there was a station

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Speaker 2: down on the South Island in Blenham And so when

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Speaker 2: I was a child. I guess I arrived around age

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Speaker 2: three and I stayed there till age six. I remember

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Speaker 2: walking to school through a wheat field, and every day

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Speaker 2: at school, the highlight of the day was when they

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Speaker 2: delivered our lunch, and it was it was either fish

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Speaker 2: and chips wrapped in a newspaper or it was a

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Speaker 2: meat pie and you could alternate between one or the other.

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Speaker 3: Sounds about right.

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Speaker 2: It was like the culinary highlight of my childhood. When

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Speaker 2: it came back to the US, the food went downhill

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Speaker 2: from there.

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Speaker 3: That's amazing.

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Speaker 1: So you actually started school in New Zealand. So I'm

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Speaker 1: going to claim you as a Kiwi for the rest

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Speaker 1: of this conversation.

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Speaker 3: If you're right with that?

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Speaker 1: Okay, Now, like I want to get the figures right,

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Speaker 1: micro Strategies bitcoin holdings. Two hundred and fifty two, two

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Speaker 1: hundred and twenty is the number of bitcoin you hold?

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Speaker 1: Is that still correct? And if we put that at

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Speaker 1: the current price around sixty six thousand US dollars, that

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Speaker 1: is the total value of about sixteen billion dollars.

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Speaker 2: Maybe closer to seventeen billion right now, but yeah, sixteen

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Speaker 2: after seventeen billion dollars.

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Speaker 1: Now, do you mind if I personally ask how much

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Speaker 1: how many bitcoin you hold? Personally in its total value?

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Speaker 2: I have more than seventeen thousand, seven hundred and thirty two.

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Speaker 2: That was the amount I announced about four years ago.

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Speaker 2: Haven't sold any That's amazing. Okay.

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Speaker 1: We're going to come back to that and talk more

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Speaker 1: about the bitcoin revolution in the latest stage of this interview,

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Speaker 1: But first I want to talk about micro Strategy, the

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Speaker 1: company that you yourself started decades ago. Now, how should investors

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Speaker 1: think about the underlying software company because you still operate it. Right,

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Speaker 1: You often talk about micro Strategy as a bitcoin development company,

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Speaker 1: but I can imagine the actual software company is quite

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Speaker 1: critical because its success provides the means to accumulate one bitcoin.

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Speaker 2: Well, the way to think about micro strategy is three components.

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Speaker 2: We've got a balance sheet, which is the bitcoin balance sheet.

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Speaker 2: We've got a software business, a technology business, and that

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Speaker 2: was the springboard for us to get into bitcoin. And

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Speaker 2: now we've got an emerging bitcoin securitization business where we're

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Speaker 2: a bitcoin development company and we leverage our bitcoin balance

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Speaker 2: sheet to issue security to the public market that no

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Speaker 2: one else could so easily create as us. So if

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Speaker 2: we look at the software business, well, that's a five

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Speaker 2: hundred million dollar a year revenue business and it generates

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Speaker 2: consistent cash flows, and that got us to twenty twenty

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Speaker 2: and that's still a very healthy business. It's a multinational

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Speaker 2: and we do business with thousands of companies all around

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Speaker 2: the world, including customers in Australia and New Zealand and

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Speaker 2: Korea and Japan and you know, you name it. But

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Speaker 2: the best way to think about micro strategy of your

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Speaker 2: investor is we have we're the largest operating company that

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Speaker 2: holds bitcoin. So if you have seventeen billion dollars of

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Speaker 2: capital a bitcoin that's permanent, so there's no redemption rights

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Speaker 2: to that there's ETFs like black Rock or Fidelity that

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Speaker 2: are comparable to us in size, but those are over

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Speaker 2: night deposits. So if you said, hey, I've got seventeen

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Speaker 2: billion dollars in deposits, people can take the money out

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Speaker 2: of the bank tomorrow, Well, they just basically a trustee

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Speaker 2: holding the money. They and they return it when they're

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Speaker 2: asked to return it. You can't leverage it, and you

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Speaker 2: can't build businesses on top of it. Micro Strategy has

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Speaker 2: permanent capital, so for example, we can do things like

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Speaker 2: we can issue convertible bonds on top of that capital.

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Speaker 2: So if you have you know, we have sixteen to

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Speaker 2: seventeen billion in bitcoin exposure, we have four point two

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Speaker 2: billion and convertible bonds. The bonds we can issue fairly

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Speaker 2: cheaply because we have a stock. The stock reflects the

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Speaker 2: permanent capital the bitcoin, but that's not redeemable either. That

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Speaker 2: means that it can generate a premium to the bitcoin.

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Speaker 2: So as people trade the stock and they trade the

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Speaker 2: options on the stock, the stock trades that are premium

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Speaker 2: to the acid value, and when the stock trades at

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Speaker 2: a premium to the asset value, the company issues either

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Speaker 2: equity or convertible bonds at a premium to the underlying assets.

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Speaker 2: When we do that, we don't just put the money

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Speaker 2: in the bank or in t bills. We actually invest

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Speaker 2: the money in bitcoin. So you can imagine when the

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Speaker 2: company issues, if we were to sell a billion dollars

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Speaker 2: of equity in the market and it's back by five

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Speaker 2: hundred million a bitcoin at one hundred percent premium, then

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Speaker 2: we buy the bitcoin in three days later, we've generated

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Speaker 2: a five hundred million dollar gain for our shareholders in bitcoin.

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Speaker 2: So that's very interesting. That generates what we call a

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Speaker 2: BTC yield. Now, if we do the same thing with

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Speaker 2: a bond, a billion dollar convertible bond, we don't do

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Speaker 2: it a one hundred percent premium. It might be a

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Speaker 2: two hundred percent premium because the bond comes at a

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Speaker 2: premium to the stock. So when you go up forty

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Speaker 2: percent over a stock which is one hundred percent, now

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Speaker 2: you're looking at something looks like more than one hundred

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Speaker 2: and eighty percent. So now a billion dollar bond sold

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Speaker 2: into the markets backed by three hundred and fifty million

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Speaker 2: dollars a bitcoin we buy backed the billion of bitcoin,

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Speaker 2: we capture the six hundred fifty million dollar gain another

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Speaker 2: BTC yield. So the real operating business of the company

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Speaker 2: isn't the software business anymore. I mean that's that's still there.

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Speaker 2: It generates seventy five million in cash flow, but one

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Speaker 2: of those bonds would generate ten years worth of earnings

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Speaker 2: in five days. And so really micro strategies pioneering a

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Speaker 2: new market. We're issuing securities backed by digital capital, got

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Speaker 2: backed by bitcoin, and then we're buying the bitcoin back.

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Speaker 2: So what that means is I could issue the bond

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Speaker 2: in one week, buy the bitcoin, capture the three four

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Speaker 2: five hundred million dollar gain, announce it to the market.

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Speaker 2: The stock would trade up. I could do another bond

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Speaker 2: the next week. So instead of a tradition model where

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Speaker 2: I raise a billion dollars, I go find real estate

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Speaker 2: in Auckland. I invest in the real estate, I leverage

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Speaker 2: it up, and in five years you determine whether I

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Speaker 2: was smart or stupid.

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Speaker 1: History of our property market, you'd be pretty smart.

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Speaker 2: It's a five year investment cycle. And if I was smart,

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Speaker 2: after five years, I come back to the capital market

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Speaker 2: and I say I'd like to raise another billion. Now

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Speaker 2: I have to find another set of real estate in Auckland,

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Speaker 2: or Blenham or Sydney or Melbourne, and it takes another

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Speaker 2: five years to figure out whether it worked. So what

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Speaker 2: you have there is heterogeneous credit, and you have a

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Speaker 2: slow investment cycle. Micro strategy has homogeneous credit. We're going

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Speaker 2: to raise a billion by bitcoin. Show you that we

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Speaker 2: bought bitcoin to ac created bitcoin per share. The investors

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Speaker 2: look at it. It's an immediate gain. We just lived

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Speaker 2: through five years in five days. And then once we've

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Speaker 2: done that fast rapid investment cycle, what's your next idea.

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Speaker 2: I'm going to do the same thing again. I'm going

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Speaker 2: to buy another billion of bitcoin. And so if you

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Speaker 2: look at that against the backdrop of this year. In

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Speaker 2: the first quarter, we did an eight hundred million dollar

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Speaker 2: convertible bond, We bought bitcoin. The market liked it. The

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Speaker 2: very next week, we went back to the market, did

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Speaker 2: a six hundred million dollar convertible bond, bought more bitcoin.

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Speaker 2: It was a creative the market liked it. So what

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Speaker 2: we do. We went back to the next quarter. We

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Speaker 2: did another eight hundred million dollar bond, We bought bitcoin,

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Speaker 2: the market liked it. In the middle we sold hundreds

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Speaker 2: of millions of dollars of equity and the next quarter,

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Speaker 2: we sold more equity. We sold one point one billion

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Speaker 2: of equity in Q three. We basically did that at

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Speaker 2: a massive premium, so we captured a large BTC yield.

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Speaker 2: We announced that the market liked it, and then very

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Speaker 2: next week we did a convertible bond and that became

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Speaker 2: a billion dollar convertible bond. And so what you see

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Speaker 2: is we're running a very rapid investment cycle. We're developing

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Speaker 2: a city in cyber we call that city Bitcoin. It's

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Speaker 2: like if we were the first public company to show

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Speaker 2: up in Manhattan and we started selling debt or public

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Speaker 2: equity instruments in order to raise money to develop Manhattan,

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Speaker 2: and everybody else was using cash or going at a

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Speaker 2: slow rate. And if we found that the two innovations

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Speaker 2: are one, we issue public securities to develop Manhattan, and

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Speaker 2: the second is we can build a building in five days. Right.

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Speaker 2: So you can't do that in real space. It takes

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Speaker 2: five years to build a building, right, and you can't

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Speaker 2: hit the public markets for capital. But in cyberspace, I

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Speaker 2: can raise the capital every month. I can build the

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Speaker 2: building in five days. Our investors are bitcoiners, right, So

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Speaker 2: if you're a bitcoiner, what do you think you think

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Speaker 2: bitcoin's going to go up forever with some volatility. So

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Speaker 2: what do you want? You want more bitcoin per share.

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Speaker 2: So how do you know whether the company is succeeding

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Speaker 2: that's giving you bitcoin per share. Well, we do the deal,

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Speaker 2: we announce BTCLD. This is how your bitcoin per share

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Speaker 2: are creeded. How long does it take? Takes a few days.

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Speaker 2: So the real micro strategy business is to be the

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Speaker 2: leading public issuer of securities in order to acquire bitcoin.

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Speaker 2: And as we acquire the bitcoin, we're driving up the

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Speaker 2: scarcity of the bitcoin. We've now bought more than one

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Speaker 2: percent of the bitcoin. Now there's only four hund and

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Speaker 2: fifty bitcoin available for sale from every day by natural sellers,

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Speaker 2: the miners, you know. So four hundred and fifty times

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Speaker 2: sixty seven thousand a bitcoin, it works out the twenty

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Speaker 2: twenty million in change. So you can see what happens

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Speaker 2: is if we're raising capital via tapping into the public

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Speaker 2: equity markets and the public fixed income markets, and we're

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Speaker 2: bringing that capital back and we're structuring our balance sheet

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Speaker 2: and we're buying the bitcoin, then that's good for bitcoin,

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Speaker 2: and of course that lefsverage that we get via issuing

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Speaker 2: the debt that's four point two billion dollars of debt

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Speaker 2: at eighty basis points. So we pay, you know, we

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Speaker 2: pay less than one percent interest for the four point

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Speaker 2: two billion, which creates the leverage on the equity. And

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Speaker 2: because there's leverage on the equity, that creates more performance.

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Speaker 2: It also creates more volatility. Now, who wants volatility? The

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Speaker 2: option traders want volatility. So in the options market, we've

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Speaker 2: gone from a three million dollar open interest in micro

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Speaker 2: strategy options to some day's forty billion, right, So the

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Speaker 2: options traders are trading high volatility. You can think of

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Speaker 2: them as the options traders want ten x leverage on Bitcoin,

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Speaker 2: ten to twenty x leverage, and maybe they want it long,

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Speaker 2: they want calls, or maybe they want to short it

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Speaker 2: ten x. They just you know, the haters want to

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Speaker 2: short it. The numbers what a log it, right, But

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Speaker 2: then micro strategy is like one point five x bitcoin.

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Speaker 2: And then if you build a derivative on micro strategy

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Speaker 2: like MSTU or mst X, they're like two x micro strategy.

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Speaker 2: So that's like three x bitcoin. And so how well

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Speaker 2: have they done in like two weeks? They raise like

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Speaker 2: seven hundred million dollars in two weeks no marketing. So

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Speaker 2: on top of this stack, if you're looking at spot

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Speaker 2: bitcoin et spot bitcoin, you either buy bitcoin or you

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Speaker 2: buy ibit or FBTC. They're offering you standard bitcoin returns

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Speaker 2: fifty ar R with fifty fifty volatility and fifty R

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Speaker 2: and one hundred percent upside one hundred percent downside. That

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Speaker 2: is the digital commodity micro strategy. The stock is one

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Speaker 2: point five x, and the way we get to one

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Speaker 2: point five x is we issue these bonds which give

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Speaker 2: you half the upside of bitcoin little downside. What if

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Speaker 2: I want half the upside five percent of the downside, right, Well,

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Speaker 2: that's you buy a convertible bond, a senior in the

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Speaker 2: capital structure of a company that's four x over collateralized. Right.

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Speaker 2: So people that are risk averse they can actually buy

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Speaker 2: the bond. They get half the benefit. People that are

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Speaker 2: bitcoin maximalists can buy the equity and get one point

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Speaker 2: five percent benefit. The degenerates, the traders, they can get

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Speaker 2: three to ten x, and then the haters can short

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Speaker 2: the common stock or short or short with puts. And

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Speaker 2: we have sometimes fifteen billion dollars or twenty billion dollars

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Speaker 2: of open put interest. You know, when I was a

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Speaker 2: younger man, when we first came public, you know, I

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Speaker 2: was in my early thirties, and if people shortened my stock,

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Speaker 2: I'd be like, they're short of my stock. I don't

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Speaker 2: like them.

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Speaker 3: But you still called them to generates today.

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Speaker 2: You know, that's that's a term where am I I

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Speaker 2: would reserve to people that are traded with so much leverage.

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Speaker 2: They might get wiped out on the weekend, but they

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Speaker 2: do it for the thrills in lieu of going to Vegas. No,

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Speaker 2: but when I was a younger man, you know, I

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Speaker 2: would have been concerned about people short in my stock.

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Speaker 2: But now I'm not because micro strategy is really just

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Speaker 2: providing a set of institutional instruments. Then institutional investors can

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Speaker 2: use to tailor a portfolio that's long short hedged. They

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Speaker 2: can sell the volatility, they can arbitrage the volatility, they

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Speaker 2: can arbitrage any instrument against any other instrument. They can

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Speaker 2: generate yield, they can buy insurance. Some of those people

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Speaker 2: that are short, they'll short a billion dollars of micro

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Speaker 2: strategy and they'll buy a billion dollars a bitcoin. And

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Speaker 2: so if we didn't exist, then billions and billions of

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Speaker 2: dollars of capital from the traditional finance markets wouldn't be

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Speaker 2: invested in bitcoin because they can't buy or hold the

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Speaker 2: underlying crypto asset. They can only buy securities or bonds

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Speaker 2: or options or other instruments. So we become an institutional

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Speaker 2: gateway for crypto exposure by all types of investors. And

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Speaker 2: you know, my real aspiration now is if you really

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Speaker 2: hate bitcoin, I want you to love us like we're

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Speaker 2: the perfect instrument to short right of you, because I

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Speaker 2: promise you I won't sell it right. We're going to

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Speaker 2: be levered long bitcoin. And if you're if you don't

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Speaker 2: like it, or if you just want to hedge it,

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Speaker 2: you get to sell our stock or sell or sell

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Speaker 2: puts or byputs right and uh. And the worst thing

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Speaker 2: I could do is to take your side of the

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Speaker 2: trade or to interfere with what you're doing. So so

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Speaker 2: I think part of micro strategies rise to prominence in

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Speaker 2: the space is we have been laser focused. We're very consistent,

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Speaker 2: we're very transparent. We're going to buy bitcoin, never sell bitcoin.

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Speaker 2: We're going to borrow money intelligently. If you like Manhattan

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Speaker 2: and if a company said I'm going to borrow five

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Speaker 2: billion dollars at one percent interest, and I'm going to

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Speaker 2: develop real estate in Manhattan. You might think that that's

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Speaker 2: kind of company you would like to invest in. But

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Speaker 2: if you hate Manhattan and we're one hundred and fifty

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Speaker 2: percent exposed in Manhattan, you get this investment teach you're like,

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Speaker 2: that's the company I want to short. And the most

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Speaker 2: important point in the marketplace is you just have to

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Speaker 2: be very pure, true to your focus, have integrity and

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Speaker 2: consistency and transparency because it's it's not my job to

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Speaker 2: trade hedge arbitrage or construct that portfolio. There are guys

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Speaker 2: with hundreds of millions or billions of dollars in a

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Speaker 2: Bloomberg and that's what they do every day. So my

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Speaker 2: contract with them is we're going to do what you

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Speaker 2: can't do. We're going to buy bitcoin, whole bitcoin, and

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Speaker 2: we're going to issue equity and we're going to issue

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Speaker 2: debt instruments and you can't do that. We're a public

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Speaker 2: company and on the you know the Nasdaq Stock Exchange

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Speaker 2: in America with the nearly thirty year track record, and

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Speaker 2: we have sixteen billion of permanent capital that's bitcoin, right,

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Speaker 2: So I can create an equity with eighty or ninety vol.

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Speaker 2: I can have permanent capital. We can stand massive swings

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Speaker 2: because of our capital structure. That's what we can do.

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Speaker 2: What you can do is decide if you want to

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Speaker 2: buy it, sell it, hedge it, or short it. Short it.

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Speaker 3: So let's talk about micro strategies.

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Speaker 1: Rise there. In the past few days, it hit forty

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Speaker 1: three billion dollars, a fifty two week high. All of

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Speaker 1: those functions that you've spoken about, the reasons why you

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Speaker 1: think that your stock can currently command a dreemium to

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Speaker 1: its net asset value forty three billion at it's high

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Speaker 1: versus that sixteen billion, and it's near asset value being

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Speaker 1: the bitcoin holdings. Give me the rationale beyond what you've

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Speaker 1: mentioned about those functions for you think that you think

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Speaker 1: it may be able to continue to expand to perhaps

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Speaker 1: one trillion.

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Speaker 2: Yes, because I mean, if you wanted to make it.

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Speaker 2: Put it simply, we're the only company that can issue

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Speaker 2: bitcoin back bonds. So anybody can buy bitcoin and have

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Speaker 2: all the downside and all the upside and all the volatility.

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Speaker 2: But what if I want half the upside but no downside. Well,

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Speaker 2: there's a lot of people if you look at the

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Speaker 2: at the fixed income market, Look at the corporate debt market,

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Speaker 2: look at the preferred stock market, look at the convertible

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Speaker 2: bond market. People in the convertible bond market, they have

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Speaker 2: to buy a convertible bond I can buy. I can

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Speaker 2: sell a billion dollars of bonds in one day to

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Speaker 2: people that have to buy the bar. They can't buy bitcoin,

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Speaker 2: they can't buy the equity. So who in the market

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Speaker 2: is the leading issue of convertible bonds. Well, we are

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Speaker 2: micro Strategy. We've issued like five billion dollars worth of

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Speaker 2: convertible bonds, and so we've got that credibility. And what's

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Speaker 2: going to back the bonds Bitcoin? Well, what if I

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Speaker 2: had fifty billion dollars of cash and treasuries and I

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Speaker 2: wanted to issue bitcoin bonds. It wouldn't work. Why because

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Speaker 2: the volatility of a T bill is five, the volatility

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Speaker 2: of bitcoin is fifty. The volatility of micro Strategy equity

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Speaker 2: is eighty. If you want to buy a convertible bond,

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Speaker 2: you want to buy a bond from an issuer that

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Speaker 2: has volatility more than forty five. You want high volatility,

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Speaker 2: you want high liquidity, and of course you also would

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Speaker 2: like the bitcoin upside. If bitcoin if it doubles, the

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Speaker 2: convertible bond will provide you a bitcoin return only if

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Speaker 2: it's sold to you by a company that's all all bitcoin.

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Speaker 2: So micro Strategies this bitcoin securities company. And if if

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Speaker 2: I want highvoll high performance bitcoin equity, well you have

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Speaker 2: to have a company is one hundred and fifty percent bitcoin.

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Speaker 2: If you want high volatility, high performing bitcoin converts, you

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Speaker 2: need a company that's backed by bitcoin. If you want

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Speaker 2: to buy, you know, a bond that pays one hundred

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Speaker 2: two hundred basis points more than conventional things, you need

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Speaker 2: a company that can sell you that bond that has

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Speaker 2: a way to generate better than that. So there's an

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Speaker 2: entire swap market out there where a lot of people

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Speaker 2: would love to get paid seven percent interest. Fixed income

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Speaker 2: retirees let people literally have one hundred billion dollar funds

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Speaker 2: and they have to buy bonds that generate fixed income.

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Speaker 2: That's the name of the fund, fixed income. They can't

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Speaker 2: buy bitcoin, they can't buy the equity, They might not

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Speaker 2: even buy the convertible bond. So MicroStrategy can we can

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Speaker 2: generate that bond. And of course bitcoin's been going up

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Speaker 2: fifty percent a year, so we have crude capital digital capital.

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Speaker 2: On one side, this is fifty percent with massive volatility.

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Speaker 2: There's a lot of people that would love ten percent

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Speaker 2: fixed income with ten volatility. So how do you turn

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Speaker 2: you know, high voltage capital into low voltage fixed income.

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Speaker 2: You need a transformer, Okay, So what's the perfect transformer?

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Speaker 2: A company with ten twenty thirty billion dollars of bitcoin

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Speaker 2: and then I sell a billion dollar bond here that

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Speaker 2: gives you this percentage and this low volatility, and I

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Speaker 2: invest the money into this which is high performance, high volatility.

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Speaker 2: And so what Microstate does is we're scraping or stepping

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Speaker 2: down the volatility, and we're stepping down the performance. Now

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Speaker 2: you would think, why would you want ten percent instead

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Speaker 2: of fifty percent? I mean, like, why would you want that? Well,

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Speaker 2: micro Strategy has gotten fifty percent every year for the

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Speaker 2: past four years, but we took fifty percent vole. Right.

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Speaker 2: The world's full of people that would rather have five

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Speaker 2: percent and five vol or ten percent and ten vol

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Speaker 2: or fifteen percent and fifteen vol. So, in essence, micro

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Speaker 2: strategies opportunity is to be that leading public company in

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Speaker 2: securitizing this asset class and then providing the derivatives, you know,

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Speaker 2: fixed income, high yield, convertible, high performance equity, And you

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Speaker 2: can't really do that if you don't have a public

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Speaker 2: company with permanent capital. You can't do it with that

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Speaker 2: sec forty and ETA for a trust. See they've got

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Speaker 2: overnight deposits. They can't generate five years duration leverage on

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Speaker 2: some kind of preferred or bond like instrument. So I

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Speaker 2: guess the last metaphor I give you is, you know,

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Speaker 2: standard oil created the oil business. So I give you

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Speaker 2: a petrochemical refinery and think about what goes in one side.

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Speaker 2: It's crude oil. What comes out the other side? Gasoline?

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Speaker 2: Why do you put gasoline in the car, because that's

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Speaker 2: the only thing that works. Kerosene? What do you put

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Speaker 2: that in jets? That's jet fuel? Right? Propylene?

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Speaker 1: You know, the two men goes in paint.

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Speaker 2: All of those petrochemical products come out this side. The

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Speaker 2: refinery does a lot of work and incomes crude oil.

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Speaker 2: So think of micro strategy as we take in crude capital.

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Speaker 2: There's no doubt it's the best performing acid fifty years.

435
00:26:00,400 --> 00:26:04,679
Speaker 2: It's theoretically the best digital. Best form of capital is

436
00:26:04,720 --> 00:26:09,200
Speaker 2: digital capital. It's just scary to a lot of people.

437
00:26:09,280 --> 00:26:12,320
Speaker 2: It's too volatile, it's too difficult to manage. So they

438
00:26:12,320 --> 00:26:17,320
Speaker 2: want someone that can, you know, domesticate it, step it down,

439
00:26:17,760 --> 00:26:23,240
Speaker 2: package it in safe components, and then connect it into

440
00:26:23,560 --> 00:26:27,760
Speaker 2: the fixed income market, the high yield market, the you know,

441
00:26:27,800 --> 00:26:31,560
Speaker 2: the convert market, and the public equity markets and micro strategy.

442
00:26:32,200 --> 00:26:36,480
Speaker 2: You know, we inadvertently, we just inadvertently backed into that

443
00:26:37,080 --> 00:26:39,520
Speaker 2: because to do what you do what we did, you

444
00:26:39,560 --> 00:26:42,240
Speaker 2: have to start with a very small company, a billion

445
00:26:42,280 --> 00:26:45,440
Speaker 2: dollar company, and then we become a forty billion dollar

446
00:26:45,480 --> 00:26:47,920
Speaker 2: company and now we're one hundred and fifty percent bitcoin.

447
00:26:48,720 --> 00:26:51,040
Speaker 2: So if you take another billion dollar company and do

448
00:26:51,080 --> 00:26:54,199
Speaker 2: what we're doing, you can't catch us, because at this

449
00:26:54,359 --> 00:26:57,760
Speaker 2: point we can we can grow five ten billion dollars

450
00:26:57,800 --> 00:27:00,959
Speaker 2: a year in capital or faster. Can't catch us if

451
00:27:01,000 --> 00:27:03,200
Speaker 2: you start with the same thing. But if you take

452
00:27:03,200 --> 00:27:06,800
Speaker 2: a big company like Google or Meta or Microsoft or Apple,

453
00:27:07,119 --> 00:27:10,480
Speaker 2: and they took fifty billion and they bought fifty billion

454
00:27:10,480 --> 00:27:12,919
Speaker 2: a bitcoin, well that would be good for Bitcoin, and

455
00:27:12,920 --> 00:27:15,040
Speaker 2: that would be good for their shareholders. And if Apple

456
00:27:15,080 --> 00:27:16,960
Speaker 2: did it a lot, they might add a trillion dollar

457
00:27:16,960 --> 00:27:20,440
Speaker 2: to their market cap, but it would be a trillion

458
00:27:20,480 --> 00:27:23,320
Speaker 2: on top of three trillion, So at the end of

459
00:27:23,320 --> 00:27:26,960
Speaker 2: the day, Apple would be an enterprise twenty five percent bitcoin,

460
00:27:27,080 --> 00:27:31,359
Speaker 2: seventy five percent Apple micro strategy is an enterprise one

461
00:27:31,480 --> 00:27:36,080
Speaker 2: hundred and fifty percent Bitcoin. So how do you create

462
00:27:36,280 --> 00:27:39,240
Speaker 2: a company which is one hundred and fifty percent bitcoin

463
00:27:39,760 --> 00:27:43,720
Speaker 2: that can sell billions of dollars of fixed income instruments

464
00:27:43,920 --> 00:27:47,880
Speaker 2: or billions of equity into the market with a permanent

465
00:27:47,960 --> 00:27:52,000
Speaker 2: capital base that's going to oscillate, It's going to vibrate

466
00:27:52,040 --> 00:27:56,440
Speaker 2: with the frequency of bitcoin, right that that is I'd

467
00:27:56,440 --> 00:27:58,560
Speaker 2: love to say we had the idea four years ago

468
00:27:58,600 --> 00:28:01,040
Speaker 2: and that's what we were trying to do. No, we

469
00:28:01,240 --> 00:28:05,400
Speaker 2: just kind of stumbled onto just a really great business.

470
00:28:05,840 --> 00:28:07,439
Speaker 1: I do want to get to Apple and how you

471
00:28:07,480 --> 00:28:10,639
Speaker 1: perhaps plan to convince companies like that to follow your

472
00:28:10,680 --> 00:28:12,640
Speaker 1: Bitcoin adoption strategy playbook.

473
00:28:13,080 --> 00:28:15,280
Speaker 3: But this whole conversion.

474
00:28:14,800 --> 00:28:18,320
Speaker 1: Financial engineering type strategy is often referred to online as

475
00:28:18,359 --> 00:28:21,600
Speaker 1: the infinite money glitch. But I wonder if it is

476
00:28:22,320 --> 00:28:26,320
Speaker 1: infinite or not. And if it's not, do you perhaps

477
00:28:26,359 --> 00:28:29,119
Speaker 1: see it running into more of a supply issue first

478
00:28:29,240 --> 00:28:32,040
Speaker 1: or a demand issue first, demand being perhaps there might

479
00:28:32,040 --> 00:28:34,200
Speaker 1: not be potential buyers of all of those other options

480
00:28:34,280 --> 00:28:37,560
Speaker 1: like bonds or supply that if you create too many

481
00:28:37,600 --> 00:28:40,080
Speaker 1: shoes and can make too many conversions from your stock,

482
00:28:40,480 --> 00:28:43,600
Speaker 1: that investors existing investors will be diluted too much that

483
00:28:43,640 --> 00:28:45,959
Speaker 1: you'd then run into a sort of cap with that.

484
00:28:46,120 --> 00:28:47,400
Speaker 3: Or can this just keep going forever?

485
00:28:47,480 --> 00:28:51,040
Speaker 2: Michael, see the misnomer there is. It's not a money glitch.

486
00:28:52,000 --> 00:28:58,200
Speaker 2: It is a digital transformation of the capital markets. When

487
00:28:58,720 --> 00:29:03,080
Speaker 2: you have a system that moves from a higher energy state,

488
00:29:03,160 --> 00:29:07,000
Speaker 2: a more disordered state, to a lower energy state, lots

489
00:29:07,000 --> 00:29:11,960
Speaker 2: of energy gets given off. Think of steam becoming water, like,

490
00:29:12,080 --> 00:29:15,360
Speaker 2: is it a money glitch? It's just steam becoming water

491
00:29:15,480 --> 00:29:19,400
Speaker 2: and it condenses what heps when water becomes ice, it's

492
00:29:19,440 --> 00:29:22,320
Speaker 2: not a heat glitch. But heat what you and what

493
00:29:22,360 --> 00:29:25,120
Speaker 2: happens when you add heat, the ice becomes water, the

494
00:29:25,160 --> 00:29:28,720
Speaker 2: water becomes steam. So if you look at the capital markets,

495
00:29:28,760 --> 00:29:33,360
Speaker 2: you've got eight hundred nine hundred trillion dollars of wealth

496
00:29:33,440 --> 00:29:37,240
Speaker 2: in the capital market, and you've got this wealth, You've

497
00:29:37,280 --> 00:29:42,840
Speaker 2: got people invested in all these heterogeneous assets. Why to

498
00:29:43,000 --> 00:29:44,760
Speaker 2: ninety eight percent of the companies in the S and

499
00:29:44,800 --> 00:29:48,600
Speaker 2: P five hundred not perform? Right? How come one percent

500
00:29:48,640 --> 00:29:52,000
Speaker 2: of all the returns come from like seven companies. Right,

501
00:29:52,240 --> 00:29:56,160
Speaker 2: what I talked about with if you study the convertible

502
00:29:56,200 --> 00:29:59,600
Speaker 2: bond market, someone issues a convertible bond, it takes them

503
00:29:59,600 --> 00:30:02,480
Speaker 2: five years for the investors to figure out whether it worked,

504
00:30:02,920 --> 00:30:05,000
Speaker 2: and then when they come up with a new convertible bond.

505
00:30:05,080 --> 00:30:09,040
Speaker 2: Is a different credit proposition. It's very inefficient, right, if

506
00:30:09,040 --> 00:30:12,840
Speaker 2: you think about preferred stocks very inefficient, junk bonds very inefficient,

507
00:30:12,920 --> 00:30:17,960
Speaker 2: private credit very inefficient. You know, fixed income people get

508
00:30:18,040 --> 00:30:21,000
Speaker 2: very low yields. What if I you know, I'm getting

509
00:30:21,040 --> 00:30:23,760
Speaker 2: this yield and I'm taking all this credit risk and

510
00:30:23,800 --> 00:30:28,600
Speaker 2: counterparty risk. So of the nine hundred trillion in capital

511
00:30:28,600 --> 00:30:30,720
Speaker 2: in the global capital markets, half of it is just

512
00:30:30,800 --> 00:30:34,520
Speaker 2: long term, well store of value, long term capital. You know,

513
00:30:34,960 --> 00:30:38,440
Speaker 2: that is pure capital. People with money just want to

514
00:30:38,480 --> 00:30:41,600
Speaker 2: keep their money rich, just want to stay rich. I

515
00:30:41,640 --> 00:30:44,200
Speaker 2: give you an organization of billion dollars in the endowment,

516
00:30:44,240 --> 00:30:46,600
Speaker 2: you just want to not lose the billion dollars. Precisely right,

517
00:30:47,240 --> 00:30:50,920
Speaker 2: So that four hundred and fifty trillion is invested in

518
00:30:51,000 --> 00:30:56,280
Speaker 2: buildings that are rusting, it's invested in cars, it's invested

519
00:30:56,280 --> 00:30:59,880
Speaker 2: in fleets, it's invested in things that suffer from twentieth

520
00:31:00,120 --> 00:31:07,120
Speaker 2: century risk factors, credit, default, war, tariff, tornado, text tech.

521
00:31:07,360 --> 00:31:09,360
Speaker 2: You know, like you had a good business at Kodak

522
00:31:09,400 --> 00:31:11,320
Speaker 2: and your family had all their money in Kodak, and

523
00:31:11,320 --> 00:31:13,800
Speaker 2: then what happened. Or you owned Xerox and what happened.

524
00:31:13,920 --> 00:31:16,360
Speaker 2: Then you own the best business in Ukraine, and then

525
00:31:16,400 --> 00:31:18,600
Speaker 2: as a war that happened. Right, I could give you

526
00:31:18,680 --> 00:31:24,160
Speaker 2: ten thousand examples of risk factors that destroy wealth. So

527
00:31:24,280 --> 00:31:26,880
Speaker 2: you've got that four hundred and fifty trillion on one side,

528
00:31:26,920 --> 00:31:31,400
Speaker 2: and then you've got one trillion digital capital. It's like,

529
00:31:31,520 --> 00:31:33,360
Speaker 2: well I had a building. I get rid of all

530
00:31:33,360 --> 00:31:35,360
Speaker 2: the things that make the building a problem, and I

531
00:31:35,440 --> 00:31:39,880
Speaker 2: make it an invisible, immortal, indestructible, teleportable, digital building. That'd

532
00:31:39,880 --> 00:31:43,320
Speaker 2: it be cool? Okay? Well that's what bitcoin is. So

533
00:31:43,800 --> 00:31:46,800
Speaker 2: this thing that people think of as a gwitch, it's

534
00:31:46,840 --> 00:31:50,840
Speaker 2: not that. It's it's energy flowing from a from a

535
00:31:51,000 --> 00:31:56,160
Speaker 2: steam state, from highly disordered, inefficient bouncing into each other

536
00:31:56,800 --> 00:32:02,240
Speaker 2: into a more ordered state. Right, it's moving from a

537
00:32:02,320 --> 00:32:05,120
Speaker 2: year in Africa, I give you a billion dollars, I

538
00:32:05,160 --> 00:32:07,880
Speaker 2: say go invest in any real estate in Africa and

539
00:32:07,920 --> 00:32:10,720
Speaker 2: anything you want, any country, hold it for thirty years.

540
00:32:12,280 --> 00:32:15,080
Speaker 2: There's not a single thing you know that you would

541
00:32:15,080 --> 00:32:17,680
Speaker 2: want to invest in. And I say, well, you know,

542
00:32:17,720 --> 00:32:19,880
Speaker 2: would you rather own a billion dollars of real estate

543
00:32:19,880 --> 00:32:22,120
Speaker 2: in Africa or a billion dollars of real estate in

544
00:32:22,160 --> 00:32:25,240
Speaker 2: New York City. Well, you can see you'd rather swap

545
00:32:25,280 --> 00:32:28,120
Speaker 2: the New York City risk for the for the Nigerian risk.

546
00:32:28,880 --> 00:32:30,480
Speaker 2: And then I say, well, would you rather own a

547
00:32:30,480 --> 00:32:32,480
Speaker 2: billion dollars of real estate in New York City or

548
00:32:32,480 --> 00:32:36,720
Speaker 2: a billion dollars of bitcoin? Or billion dollars in cyber Manhattan.

549
00:32:37,560 --> 00:32:40,680
Speaker 2: There's no mayor in cyber Manhattan. There's no property tax

550
00:32:40,680 --> 00:32:43,440
Speaker 2: in cyber Manhattan. There's no storms, there's no weather in

551
00:32:43,480 --> 00:32:47,720
Speaker 2: cyber Manhattan. Everybody lives forever in cyber Manhattan. You can

552
00:32:47,880 --> 00:32:50,800
Speaker 2: you know, you can teleport cyber Manhattan sixty times a second.

553
00:32:51,400 --> 00:32:54,280
Speaker 2: You can program it as an AI. It's like, so

554
00:32:54,360 --> 00:32:58,240
Speaker 2: what you see is it's not it's not a glitch.

555
00:32:59,120 --> 00:33:05,040
Speaker 2: It's simply capital flowing from a disordered economy. In Argentina

556
00:33:05,080 --> 00:33:08,520
Speaker 2: and Nigeria, they have hyperinflation. Okay, So if I happen

557
00:33:08,600 --> 00:33:12,000
Speaker 2: to be there and I'm selling pesos and buying dollars,

558
00:33:12,760 --> 00:33:14,800
Speaker 2: and you know, the peso used to be one peso

559
00:33:14,880 --> 00:33:17,960
Speaker 2: to the dollar, and today it's like fourteen hundred or

560
00:33:17,960 --> 00:33:21,040
Speaker 2: twelve hundred pasos to the dollar. Was that a glitch?

561
00:33:21,760 --> 00:33:22,480
Speaker 2: Like was?

562
00:33:22,920 --> 00:33:24,760
Speaker 3: Or was that?

563
00:33:24,760 --> 00:33:28,280
Speaker 2: That's basically the free market. It's it's capital flows to

564
00:33:28,320 --> 00:33:31,240
Speaker 2: where it's treated the best. And so if I have capital,

565
00:33:31,640 --> 00:33:34,840
Speaker 2: you know in Argentina, I would put it in the US.

566
00:33:34,880 --> 00:33:37,560
Speaker 2: And if I have capital and the dollar, let's take

567
00:33:38,200 --> 00:33:41,160
Speaker 2: the dollar. One hundred years ago in Miami Beach, an

568
00:33:41,200 --> 00:33:43,800
Speaker 2: acre of land in the waterfront cost ten thousand dollars,

569
00:33:44,480 --> 00:33:50,000
Speaker 2: today ten million dollars. The dollar lost ninety nine point

570
00:33:50,320 --> 00:33:55,680
Speaker 2: nine percent of its value against real estate waterfront property

571
00:33:55,920 --> 00:33:59,680
Speaker 2: in Florida. Okay? Is that a glitch? Right in? The

572
00:34:00,800 --> 00:34:03,800
Speaker 2: peso lost ninety nine point nine percent of its value

573
00:34:03,800 --> 00:34:05,920
Speaker 2: against the dollar in twenty years. Is that a glitch?

574
00:34:06,520 --> 00:34:11,040
Speaker 2: That's really just capital flowing from a weak asset to

575
00:34:11,160 --> 00:34:16,400
Speaker 2: a middling asset to a stronger asset. And Bitcoin's advance

576
00:34:16,640 --> 00:34:22,520
Speaker 2: is capital flowing from twentieth century analog assets, financial and

577
00:34:22,560 --> 00:34:28,239
Speaker 2: physical assets to the twenty first century digital economy. And

578
00:34:29,400 --> 00:34:32,120
Speaker 2: it's going to go fast. Early on, it went really fast.

579
00:34:32,120 --> 00:34:34,560
Speaker 2: The first decade has been going fifty percent a year

580
00:34:34,880 --> 00:34:37,479
Speaker 2: ar for the past four years. But as the one

581
00:34:37,560 --> 00:34:42,200
Speaker 2: trillion equalizes with the four hundred trillion, and this becomes

582
00:34:42,320 --> 00:34:45,720
Speaker 2: two hundred. When this becomes four, probably this four hundred

583
00:34:45,719 --> 00:34:48,480
Speaker 2: and fifty trillion will become seven hundred trillion, But this

584
00:34:48,560 --> 00:34:52,040
Speaker 2: one trillion will become one hundred trillion, And so as

585
00:34:52,160 --> 00:34:57,200
Speaker 2: this becomes a fraction of the twentieth century economy. The

586
00:34:57,320 --> 00:35:01,200
Speaker 2: difference between the cost of capital on the bitcoin universe,

587
00:35:01,640 --> 00:35:04,440
Speaker 2: which is fifty percent right now, and the cost of

588
00:35:04,480 --> 00:35:07,840
Speaker 2: capital in the dollar universe, which is about twelve to

589
00:35:07,960 --> 00:35:11,440
Speaker 2: fourteen percent. Look at basically, that's the return of the

590
00:35:11,520 --> 00:35:14,239
Speaker 2: S and P. So the S and P sets the

591
00:35:14,239 --> 00:35:19,560
Speaker 2: cost of capital for traditional conventional assets, and bitcoin is

592
00:35:19,600 --> 00:35:22,160
Speaker 2: the opposite. And so bitcoin is like three and a

593
00:35:22,239 --> 00:35:26,319
Speaker 2: half times the S and P. And it's also three

594
00:35:26,360 --> 00:35:29,880
Speaker 2: and a half times of volatility. Look at dvol Bitcoin

595
00:35:29,960 --> 00:35:33,640
Speaker 2: volatility fifty five versus the VIX. And so if you

596
00:35:33,640 --> 00:35:36,040
Speaker 2: look at the two it's not a complicated thing. It's

597
00:35:36,040 --> 00:35:40,040
Speaker 2: a thermodynamic idea that any physicists will tell you. This

598
00:35:40,200 --> 00:35:44,160
Speaker 2: is a hot fluid, this is a cold fluid. I

599
00:35:44,320 --> 00:35:46,640
Speaker 2: pull up the gate and I mix the fluids. And

600
00:35:46,719 --> 00:35:50,080
Speaker 2: how hot is the bathtub it's somewhere in between, right,

601
00:35:50,120 --> 00:35:53,759
Speaker 2: the temperature is it's going to be in between scalding

602
00:35:53,800 --> 00:35:57,359
Speaker 2: hot and freezing cold and in the middle. If there

603
00:35:57,360 --> 00:35:59,839
Speaker 2: are some ice cubes in this one and I have

604
00:36:00,000 --> 00:36:02,239
Speaker 2: at least scalding hot water, ear some of the ice

605
00:36:02,280 --> 00:36:03,920
Speaker 2: cubes are gonna melt, but you're gonna end up with

606
00:36:03,960 --> 00:36:08,319
Speaker 2: a warm bath. With the exception that there's always going

607
00:36:08,400 --> 00:36:10,600
Speaker 2: to be you know, if you look out, if you

608
00:36:10,640 --> 00:36:13,839
Speaker 2: look out ten years instead of fifty versus fifty voll

609
00:36:14,080 --> 00:36:18,320
Speaker 2: versus fifteen ball, maybe it'll be forty five to forty

610
00:36:18,440 --> 00:36:21,120
Speaker 2: to thirty eight to thirty six to thirty two to

611
00:36:21,200 --> 00:36:25,839
Speaker 2: twenty eight. This volatile is coming in. This arr is

612
00:36:25,880 --> 00:36:30,680
Speaker 2: coming in. Now. This comes up because what happens when

613
00:36:30,880 --> 00:36:34,320
Speaker 2: when like when Apple and Google and Microsoft and Facebook

614
00:36:34,560 --> 00:36:37,799
Speaker 2: or whatever, when they buy bitcoin. What happens when you

615
00:36:37,840 --> 00:36:40,279
Speaker 2: could take the bottom ninety eight percent of the S

616
00:36:40,320 --> 00:36:43,840
Speaker 2: and P five hundred if they bought bitcoin, their performance

617
00:36:43,880 --> 00:36:48,120
Speaker 2: would start to approach the big tech and so the

618
00:36:48,200 --> 00:36:51,080
Speaker 2: performance of the S and P index will move toward

619
00:36:51,160 --> 00:36:55,880
Speaker 2: bitcoin as they put bitcoin on the balance sheet, Bitcoin

620
00:36:55,960 --> 00:36:59,719
Speaker 2: performance will move toward the S and P. As we

621
00:36:59,760 --> 00:37:02,439
Speaker 2: move move from you know, a one hundred to one

622
00:37:02,560 --> 00:37:05,319
Speaker 2: ratio to a ten to one ratio to a five

623
00:37:05,360 --> 00:37:09,160
Speaker 2: to one ratio, and these things equalized. But you know,

624
00:37:09,200 --> 00:37:14,000
Speaker 2: if you understand it is thermodynamics and collapsing into a

625
00:37:14,040 --> 00:37:17,040
Speaker 2: more efficient energy state. Like, how is it not more

626
00:37:17,040 --> 00:37:19,560
Speaker 2: efficient to be able to teleport a building sixty times

627
00:37:19,600 --> 00:37:22,840
Speaker 2: a second between New York and London? Like that's efficient

628
00:37:23,320 --> 00:37:26,480
Speaker 2: versus your family made an investment in London thirty forty

629
00:37:26,560 --> 00:37:28,759
Speaker 2: years ago and they changed the law last month, and

630
00:37:28,760 --> 00:37:32,279
Speaker 2: now you're going to lose all your wealth. That's inefficient, right.

631
00:37:32,360 --> 00:37:39,319
Speaker 2: So bitcoin is the digital transformation to capital. MicroStrategy is

632
00:37:39,600 --> 00:37:45,799
Speaker 2: just a business taking advantage of the digital transformation. But

633
00:37:46,040 --> 00:37:49,040
Speaker 2: if I was talking to Apple, I would say, don't

634
00:37:49,040 --> 00:37:51,279
Speaker 2: buy back one hundred billion of your stock. Buy one

635
00:37:51,360 --> 00:37:54,680
Speaker 2: hundred billion of bitcoin. It will go to five hundred billion.

636
00:37:55,040 --> 00:37:57,480
Speaker 2: You'll have a five hundred million dollar business growing twenty

637
00:37:57,480 --> 00:38:00,480
Speaker 2: percent a year. You'll make one hundred billion investment games

638
00:38:00,480 --> 00:38:03,160
Speaker 2: a year. Your investors will look at it and they'll

639
00:38:03,160 --> 00:38:05,760
Speaker 2: add a trillion or two trillion dollars to your market cap.

640
00:38:06,239 --> 00:38:09,800
Speaker 2: And now the company will be valued sixty percent based

641
00:38:09,840 --> 00:38:14,280
Speaker 2: upon the operating business, forty percent based on the balance

642
00:38:14,280 --> 00:38:20,239
Speaker 2: sheet right, and the risk will shift. Because the risk

643
00:38:20,280 --> 00:38:24,920
Speaker 2: in a conventional company is the balance sheet's worthless and

644
00:38:25,000 --> 00:38:27,880
Speaker 2: the company's value based upon the P and L. And

645
00:38:27,960 --> 00:38:30,600
Speaker 2: so if you make a billion dollars a quarter, I

646
00:38:30,680 --> 00:38:32,759
Speaker 2: basically value it at twenty.

647
00:38:32,480 --> 00:38:32,880
Speaker 3: P to E.

648
00:38:33,120 --> 00:38:35,720
Speaker 2: So I take the quarterly result, I'm multiply by eighty,

649
00:38:36,360 --> 00:38:39,720
Speaker 2: and I say, oh, you're worth eighty billion dollars because

650
00:38:39,719 --> 00:38:42,120
Speaker 2: I took one billion. I'm multiplyed by eighty, and the

651
00:38:42,120 --> 00:38:45,080
Speaker 2: balance sheet's worthless. But the next quarter, I say, well,

652
00:38:45,120 --> 00:38:50,000
Speaker 2: my billion went to zero. Well that's eighty times a

653
00:38:50,080 --> 00:38:54,200
Speaker 2: billion dollar change. You've got a massive whip saw. That's

654
00:38:54,200 --> 00:38:58,160
Speaker 2: why these companies stocks crash. If the company had forty

655
00:38:58,160 --> 00:39:02,040
Speaker 2: billion dollars of tangible assets on the balance sheet and

656
00:39:02,080 --> 00:39:05,160
Speaker 2: it was that puts a floor right on the equity.

657
00:39:05,200 --> 00:39:07,520
Speaker 2: And really what you want is you want a well

658
00:39:07,560 --> 00:39:12,759
Speaker 2: balanced company where it's like Harvard University or Yale. They're

659
00:39:12,800 --> 00:39:16,160
Speaker 2: not valued based upon the earnings of this semester of

660
00:39:16,280 --> 00:39:20,920
Speaker 2: freshmen entering Harvard. They're valued because they have eighteen billion

661
00:39:20,920 --> 00:39:24,160
Speaker 2: in the endowment. You know, and if they close, the

662
00:39:24,280 --> 00:39:27,320
Speaker 2: university is still rich. They have eighteen billion in the endowment.

663
00:39:27,440 --> 00:39:32,520
Speaker 2: So micro strategies just pioneering. It's kind of common sense.

664
00:39:33,080 --> 00:39:35,440
Speaker 2: Your family wouldn't give away all your money and just

665
00:39:35,440 --> 00:39:38,520
Speaker 2: say we're going to work harder, And a university wouldn't

666
00:39:38,520 --> 00:39:40,120
Speaker 2: give away all its money and say we're going to

667
00:39:40,200 --> 00:39:43,799
Speaker 2: raise tuition, cram the classes, cut the teacher's salary, and

668
00:39:43,840 --> 00:39:48,800
Speaker 2: work harder. But conventional wisdom and finance is your company

669
00:39:48,840 --> 00:39:51,120
Speaker 2: ought to diving it out its capital, It ought to

670
00:39:51,120 --> 00:39:55,000
Speaker 2: buy back its stock. It shouldn't actually hold any capital

671
00:39:55,040 --> 00:39:57,520
Speaker 2: in the balance sheet, and it should just raise its

672
00:39:57,560 --> 00:40:00,520
Speaker 2: prices and tell its employees to work harder and cut

673
00:40:00,560 --> 00:40:04,840
Speaker 2: its cost. And that, in a nutshell, is why ninety

674
00:40:04,960 --> 00:40:08,279
Speaker 2: nine percent of the companies in the world underperform the

675
00:40:08,320 --> 00:40:12,800
Speaker 2: Magnificent seven and why they all could benefit by just

676
00:40:12,880 --> 00:40:15,600
Speaker 2: adopting bitcoin. Is there a Treasury reserve standard?

677
00:40:15,719 --> 00:40:18,680
Speaker 1: That was an interesting point you made about analyzing and

678
00:40:18,760 --> 00:40:22,320
Speaker 1: coming to the valuation in terms of analyzing the performance

679
00:40:22,320 --> 00:40:24,680
Speaker 1: of a company. Right, investors historically, as you mentioned, just

680
00:40:24,719 --> 00:40:27,680
Speaker 1: look at a price to earnings forward looking ratio or

681
00:40:27,680 --> 00:40:31,759
Speaker 1: look at the profit and loss. How should investors analyze

682
00:40:31,800 --> 00:40:34,200
Speaker 1: micro strategy Because if you mentioned that, to give you

683
00:40:34,200 --> 00:40:37,240
Speaker 1: a metaphor, micro strategy is the tap to that capital flow.

684
00:40:37,360 --> 00:40:40,120
Speaker 1: As you mentioned, there's nothing else like that, like are

685
00:40:40,160 --> 00:40:42,719
Speaker 1: you a bitcoin bank? Do we value you similar to

686
00:40:43,280 --> 00:40:46,239
Speaker 1: do we analyze you similar to a bank or do

687
00:40:46,600 --> 00:40:50,120
Speaker 1: I've seen a simplification perhaps as analyzing micro strategy like

688
00:40:50,120 --> 00:40:53,040
Speaker 1: a ret like a real estate investment trust, But that

689
00:40:53,080 --> 00:40:55,279
Speaker 1: feels too simple. I mean, is there anything we can

690
00:40:55,320 --> 00:40:56,279
Speaker 1: compare it to micro?

691
00:40:56,480 --> 00:40:58,360
Speaker 2: I think I think you got to look at the

692
00:40:58,400 --> 00:41:01,080
Speaker 2: balance sheet and say, okay, that's one component. They've got

693
00:41:01,080 --> 00:41:03,279
Speaker 2: this much bitcoin, and then you got to look at

694
00:41:03,320 --> 00:41:04,920
Speaker 2: the P and L and say, well, how much investment

695
00:41:04,920 --> 00:41:07,680
Speaker 2: income can they generate? So if the company gets to

696
00:41:07,719 --> 00:41:10,600
Speaker 2: fifty billion dollars a bitcoin, and if bitcoin goes up

697
00:41:10,600 --> 00:41:13,120
Speaker 2: twenty percent a year, the company generates ten billion dollars

698
00:41:13,120 --> 00:41:16,360
Speaker 2: a year of investment income and that compounds twenty percent

699
00:41:16,360 --> 00:41:19,040
Speaker 2: a year. So if I said to you, hey, here's

700
00:41:19,080 --> 00:41:21,480
Speaker 2: a big tech company that makes ten billion a year

701
00:41:21,600 --> 00:41:24,399
Speaker 2: and they're growing that twenty percent a year, how would

702
00:41:24,400 --> 00:41:24,960
Speaker 2: you value that?

703
00:41:25,160 --> 00:41:27,799
Speaker 1: I mean, through the roughot it there you go.

704
00:41:28,200 --> 00:41:30,720
Speaker 2: So it's not very complicated. The thing that's helped people

705
00:41:30,800 --> 00:41:34,759
Speaker 2: back is we've used in definite and tangible accounting for

706
00:41:34,800 --> 00:41:37,840
Speaker 2: the last four years, and it's not until twenty twenty

707
00:41:37,880 --> 00:41:40,440
Speaker 2: five that you actually start to do fair value accounting.

708
00:41:42,360 --> 00:41:44,160
Speaker 2: And when you start to do fair value accounting, you

709
00:41:44,200 --> 00:41:46,759
Speaker 2: can actually see investment income and you can see the

710
00:41:46,840 --> 00:41:51,839
Speaker 2: income potential. And so it's not complicated to figure out

711
00:41:51,880 --> 00:41:54,440
Speaker 2: what the balance sheet is. Everybody knows, you know, two

712
00:41:54,520 --> 00:41:58,440
Speaker 2: hundred and fifty two thousand bitcoin. The complicated thing is

713
00:41:58,520 --> 00:42:02,600
Speaker 2: to grasp the idea of a company that's securitized that

714
00:42:02,680 --> 00:42:07,560
Speaker 2: issues securities back by bitcoin, and the real franchise the

715
00:42:07,600 --> 00:42:12,960
Speaker 2: micro strategy has is we're the leading issuer of bitcoin

716
00:42:13,080 --> 00:42:17,239
Speaker 2: back securities. So the question is how much capital can

717
00:42:17,280 --> 00:42:20,680
Speaker 2: we raise, how much permanent capital we have? And the

718
00:42:20,719 --> 00:42:24,080
Speaker 2: second question is how much leverage will we use and

719
00:42:24,080 --> 00:42:27,400
Speaker 2: how intelligent will it be? And the third question is

720
00:42:28,440 --> 00:42:31,680
Speaker 2: what's your forecast for bitcoin? Right? I mean? And so

721
00:42:31,760 --> 00:42:35,080
Speaker 2: there's three variables there. If we barrow ten billion dollars

722
00:42:35,120 --> 00:42:38,040
Speaker 2: at seven percent, and we invest in bitcoin and bitcoin

723
00:42:38,080 --> 00:42:41,839
Speaker 2: returns twenty one percent, then we scrap fourteen percent arbitrage

724
00:42:41,880 --> 00:42:43,920
Speaker 2: on ten billion, We make one point four billion a

725
00:42:43,960 --> 00:42:46,840
Speaker 2: year in the swap, We roll that into the business,

726
00:42:46,960 --> 00:42:49,800
Speaker 2: and then ten years out you've got fifty billion dollar

727
00:42:49,920 --> 00:42:54,880
Speaker 2: business fifty billion in capital, and you're generating ten billion

728
00:42:54,920 --> 00:42:58,439
Speaker 2: dollars your investment income just off of that one piece. Right,

729
00:42:58,960 --> 00:43:02,400
Speaker 2: But it all comes down to, you know, what's the

730
00:43:02,480 --> 00:43:04,719
Speaker 2: nature of the capital, how much can we get and

731
00:43:04,800 --> 00:43:07,839
Speaker 2: raise and then how will we invest it and will

732
00:43:07,880 --> 00:43:12,440
Speaker 2: be responsible? You know? And you know the haters, right,

733
00:43:12,520 --> 00:43:14,840
Speaker 2: the haters think, well, Bitcoin's just going to go up

734
00:43:14,920 --> 00:43:17,000
Speaker 2: zero percent a year, right, So of course from their

735
00:43:17,040 --> 00:43:20,319
Speaker 2: point of view, the balance sheet's going nowhere. And if

736
00:43:20,360 --> 00:43:23,440
Speaker 2: bitcoin goes zero percent a year, you can't raise any capital, right,

737
00:43:23,480 --> 00:43:27,400
Speaker 2: So if that's your forecast, you're not that interested. You know.

738
00:43:27,640 --> 00:43:30,560
Speaker 2: My view is Bitcoin's going to appreciate twenty nine percent

739
00:43:30,560 --> 00:43:33,560
Speaker 2: a year arr for the next twenty one years, right,

740
00:43:34,040 --> 00:43:35,000
Speaker 2: that's what it takes it too.

741
00:43:35,040 --> 00:43:36,600
Speaker 3: Well, was the dollar cigirl on that.

742
00:43:36,719 --> 00:43:41,920
Speaker 2: Thirteen million pi bitcoin? Yeah? Okay, And so what do

743
00:43:41,920 --> 00:43:45,080
Speaker 2: you think my shareholders think? Well, my shareholders are pretty

744
00:43:45,080 --> 00:43:48,759
Speaker 2: bullish on bitcoin, right. There's no one buying Micro's strategy

745
00:43:48,840 --> 00:43:53,560
Speaker 2: that hates bitcoin. No, they're shooting in Yeah. So at

746
00:43:53,600 --> 00:43:56,160
Speaker 2: the end of the day, I mean, the methodology would

747
00:43:56,160 --> 00:44:00,359
Speaker 2: be figure out what's your forecast for bitcoin? By the way,

748
00:44:00,360 --> 00:44:04,239
Speaker 2: you can go to Google type Bitcoin twenty four and

749
00:44:04,280 --> 00:44:06,960
Speaker 2: you'll find the Bitcoin twenty four open source model. It's

750
00:44:06,960 --> 00:44:09,200
Speaker 2: a twenty one year model. You can download it. It's

751
00:44:09,200 --> 00:44:12,960
Speaker 2: a spreadsheet you can put in your forecast for innovation rate,

752
00:44:13,120 --> 00:44:20,640
Speaker 2: inflation rates, all the asset class, monetizations, demonetizations, bitcoin assumptions, supply. Well, yeah,

753
00:44:21,000 --> 00:44:22,640
Speaker 2: you can put that all in and you can run

754
00:44:22,680 --> 00:44:24,479
Speaker 2: your model and you can get your own answer. Right,

755
00:44:25,080 --> 00:44:28,920
Speaker 2: So do that, and then you just got to consider, well,

756
00:44:29,000 --> 00:44:31,399
Speaker 2: how much capital do you think the micro strategy will

757
00:44:31,480 --> 00:44:36,440
Speaker 2: raise via securities offerings? And after you do that, you

758
00:44:36,520 --> 00:44:40,080
Speaker 2: decide are we responsible custodians? And then you create a

759
00:44:40,120 --> 00:44:43,040
Speaker 2: five or ten year model for our investment income and

760
00:44:43,080 --> 00:44:45,560
Speaker 2: you figure out how much income can we generate and

761
00:44:45,600 --> 00:44:48,560
Speaker 2: how fast can we grow? And of course all those

762
00:44:48,560 --> 00:44:53,080
Speaker 2: things are very integrated. And you know, if the more

763
00:44:53,120 --> 00:44:56,239
Speaker 2: you know about the capital markets, the more enthusiastic you get,

764
00:44:56,280 --> 00:44:59,799
Speaker 2: because we look and we say the convertible markets are

765
00:44:59,800 --> 00:45:04,000
Speaker 2: in a efficient, the preferred stock markets inefficient, the high

766
00:45:04,040 --> 00:45:07,960
Speaker 2: yield markets inefficient, the corporate debt markets inefficient. You know,

767
00:45:08,080 --> 00:45:12,360
Speaker 2: the real estate market is and efficient. So you know,

768
00:45:12,480 --> 00:45:15,520
Speaker 2: we our view is we kind of want to be

769
00:45:15,640 --> 00:45:19,319
Speaker 2: the Amazon of fixed income. We want to we want

770
00:45:19,320 --> 00:45:23,240
Speaker 2: to build a better product direct to a new distribution channel.

771
00:45:24,080 --> 00:45:26,359
Speaker 2: And uh, you know, I don't blame people for not

772
00:45:26,400 --> 00:45:30,000
Speaker 2: necessarily understanding that, because sometimes you have to see it.

773
00:45:30,840 --> 00:45:33,640
Speaker 2: And in the in the absence of you know, fair

774
00:45:33,760 --> 00:45:37,279
Speaker 2: value accounting and the like and three or forecasts and

775
00:45:37,360 --> 00:45:40,440
Speaker 2: those you know don't exist. It's it's a lot for

776
00:45:40,520 --> 00:45:42,680
Speaker 2: people to grasp right now.

777
00:45:42,920 --> 00:45:44,880
Speaker 1: Well, you've even had to come up at micro strategy

778
00:45:44,880 --> 00:45:48,560
Speaker 1: with your own measurement to measure the success of the strategy.

779
00:45:48,600 --> 00:45:50,680
Speaker 1: You already mentioned it earlier on in this chat. The

780
00:45:50,680 --> 00:45:54,000
Speaker 1: BTC yield Currently you're to date, that's around twelve point

781
00:45:54,080 --> 00:45:55,320
Speaker 1: two percent that yield.

782
00:45:55,400 --> 00:45:56,720
Speaker 3: But over the next three.

783
00:45:56,640 --> 00:45:59,480
Speaker 1: Years, according to your most recent quarterly report, you're targeting

784
00:45:59,480 --> 00:46:01,880
Speaker 1: something betwe I think four to eight percent. Does that

785
00:46:01,920 --> 00:46:05,480
Speaker 1: correct that? So that then implies a diminish, a diminishing

786
00:46:05,480 --> 00:46:10,520
Speaker 1: in that yield. So once it decreases or compresses that yield,

787
00:46:10,760 --> 00:46:12,440
Speaker 1: what happens then? Do you need to come up with

788
00:46:12,480 --> 00:46:14,800
Speaker 1: another means to well in the capital.

789
00:46:15,960 --> 00:46:18,720
Speaker 2: Let's just focus on BTCo for a second. What is it?

790
00:46:18,719 --> 00:46:23,520
Speaker 2: It's the rate of increase in bitcoin per share. So

791
00:46:24,360 --> 00:46:28,080
Speaker 2: if I think we're getting close to almost an eighteen percent,

792
00:46:28,280 --> 00:46:31,600
Speaker 2: like seventeen percent BTC yield for the year so far,

793
00:46:31,920 --> 00:46:35,520
Speaker 2: And that means that between January first and today you've

794
00:46:35,680 --> 00:46:39,360
Speaker 2: you've gotten more than seventeen percent more BTC per share.

795
00:46:41,280 --> 00:46:43,040
Speaker 2: If I if I gave you a company and I

796
00:46:43,080 --> 00:46:45,360
Speaker 2: said it's going to dive in and yield to seventeen percent,

797
00:46:45,440 --> 00:46:47,000
Speaker 2: and I give you another company, say it's got to

798
00:46:47,040 --> 00:46:50,640
Speaker 2: be a dividend yield of zero, you know, it's like, well,

799
00:46:50,680 --> 00:46:54,160
Speaker 2: you would value the second one based upon the underlying asset,

800
00:46:55,640 --> 00:46:57,120
Speaker 2: but you're not going to any more. But the first

801
00:46:57,200 --> 00:47:01,040
Speaker 2: one you would actually take the underlying asset it and

802
00:47:01,080 --> 00:47:02,840
Speaker 2: then you would take the yield. And then the question

803
00:47:02,960 --> 00:47:07,680
Speaker 2: is how long will they generate that yield? Right, And

804
00:47:07,719 --> 00:47:10,759
Speaker 2: what's the average yield over the lifetime of my holding period.

805
00:47:11,040 --> 00:47:13,279
Speaker 2: So in that case, I mean you could say, if

806
00:47:13,280 --> 00:47:15,719
Speaker 2: I expect four to eight percent yield, you could put

807
00:47:15,760 --> 00:47:18,800
Speaker 2: a ten, twenty, or thirty pde on that. Sometimes people

808
00:47:18,800 --> 00:47:22,560
Speaker 2: will know it's basically your earnings per share in a way,

809
00:47:22,640 --> 00:47:24,960
Speaker 2: but you know, we can't really call it that because

810
00:47:25,000 --> 00:47:28,680
Speaker 2: it's it's a non gap measure, and it's a it's

811
00:47:28,719 --> 00:47:32,520
Speaker 2: a bitcoin per share type measure for that's valuable to

812
00:47:32,520 --> 00:47:36,400
Speaker 2: people that love bitcoin. But when you think about it

813
00:47:36,440 --> 00:47:41,400
Speaker 2: that way, right, this simple model there is the company

814
00:47:41,440 --> 00:47:45,319
Speaker 2: should have a premium equal to the multiple of the yield. Right.

815
00:47:45,680 --> 00:47:47,960
Speaker 2: If you think the multiple should be twenty, and if

816
00:47:47,960 --> 00:47:49,960
Speaker 2: you think the yield will be eight percent, then you

817
00:47:50,000 --> 00:47:52,120
Speaker 2: could say the companies are traded one hundred and sixty

818
00:47:52,160 --> 00:47:57,239
Speaker 2: percent premium to the underlying asset. Right, So so the

819
00:47:57,320 --> 00:48:01,759
Speaker 2: ability to generate that yield will justify that premium. And

820
00:48:01,800 --> 00:48:05,040
Speaker 2: it's a simple model, but it's not the whole model.

821
00:48:05,200 --> 00:48:07,160
Speaker 2: The real issue is how you generate the yield, and

822
00:48:07,480 --> 00:48:10,879
Speaker 2: the way you're generating the yield is through issuing securities

823
00:48:10,920 --> 00:48:14,880
Speaker 2: to the public market. You know that come to generate

824
00:48:14,920 --> 00:48:16,640
Speaker 2: that yield. And one way to do it is by

825
00:48:16,680 --> 00:48:20,040
Speaker 2: issuing equity at a premium. That's a simple way, the

826
00:48:20,120 --> 00:48:24,120
Speaker 2: most simple way imaginable. Right. Another way to do it

827
00:48:24,160 --> 00:48:27,520
Speaker 2: is to issue convertible bonds at a premium to the equity,

828
00:48:27,880 --> 00:48:29,640
Speaker 2: which may or may not be at a premium to

829
00:48:29,680 --> 00:48:33,000
Speaker 2: the asset. That's a slightly less simple but still kind

830
00:48:33,000 --> 00:48:35,840
Speaker 2: of straightforward way to do it. A third way to

831
00:48:35,880 --> 00:48:38,920
Speaker 2: do it is I just issue a fixed income instrument

832
00:48:39,000 --> 00:48:42,840
Speaker 2: that pays seven percent, and I buy bitcoin with it

833
00:48:42,880 --> 00:48:45,319
Speaker 2: that yields more than seven percent, which is what you're

834
00:48:45,320 --> 00:48:48,719
Speaker 2: done right Well, well, technically that's not exactly what I'm

835
00:48:48,760 --> 00:48:50,600
Speaker 2: doing right now. What we're doing right now is you've

836
00:48:50,600 --> 00:48:53,720
Speaker 2: issued equity at a premium, and we've issued convertible bonds

837
00:48:53,719 --> 00:48:56,560
Speaker 2: at a premium. You know, if the company and the

838
00:48:56,600 --> 00:49:00,480
Speaker 2: future were to issue preferred stock that had to fix thing,

839
00:49:00,719 --> 00:49:05,080
Speaker 2: or issue bonds corporate debt or or something that had

840
00:49:05,120 --> 00:49:09,000
Speaker 2: a fixed coupon, then you would be swapping the fixed

841
00:49:09,160 --> 00:49:12,680
Speaker 2: for the you know, for the bitcoin return. And of

842
00:49:12,680 --> 00:49:15,040
Speaker 2: course in that case, look, if you're if your forecast

843
00:49:15,120 --> 00:49:16,879
Speaker 2: or bitcoin is to go up seven percent a year

844
00:49:16,920 --> 00:49:19,760
Speaker 2: and your and the company's paying seven percent for their capital,

845
00:49:19,880 --> 00:49:23,480
Speaker 2: there's no yield, you see, right. If your forecast is

846
00:49:23,520 --> 00:49:24,960
Speaker 2: to go up twenty one percent a year and the

847
00:49:25,000 --> 00:49:28,920
Speaker 2: company pay seven percent, there's a big yield, right, And

848
00:49:29,000 --> 00:49:33,799
Speaker 2: so so if you use BTC yield, then you just

849
00:49:33,840 --> 00:49:35,799
Speaker 2: think about what's the company going to do to get

850
00:49:35,800 --> 00:49:38,320
Speaker 2: to it. And we've just got lots of different tools

851
00:49:38,320 --> 00:49:41,600
Speaker 2: to get to it. We can there's other things. There's

852
00:49:41,640 --> 00:49:44,080
Speaker 2: a thousand things you could do, right, I just I'll

853
00:49:44,160 --> 00:49:46,160
Speaker 2: keep it for the sake of our interview to just

854
00:49:46,400 --> 00:49:50,840
Speaker 2: those few because they're simple to discuss. And you know

855
00:49:51,440 --> 00:49:54,600
Speaker 2: our guidance. You know, our target is four to eight percent.

856
00:49:54,680 --> 00:49:57,680
Speaker 2: We've done more than double eight percent this year.

857
00:49:57,800 --> 00:49:59,000
Speaker 3: So it feels pretty conservative.

858
00:49:59,000 --> 00:50:01,560
Speaker 2: Then I think we try to be conservative in our

859
00:50:01,600 --> 00:50:06,000
Speaker 2: guidance because we don't want to disappoint our shareholders. But

860
00:50:06,160 --> 00:50:11,080
Speaker 2: clearly you know we will. We will pursue our objective,

861
00:50:11,360 --> 00:50:15,440
Speaker 2: you know, as rapidly as we can in a prudent fashion.

862
00:50:15,960 --> 00:50:21,440
Speaker 1: Should we talk about the bitcoin revolution, Yeah.

863
00:50:20,000 --> 00:50:20,279
Speaker 2: You are.

864
00:50:22,800 --> 00:50:25,239
Speaker 1: It's all bitcoin and part two of this interview with

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Speaker 1: Michael Sailer, he explains what could be Bitcoin's next big moment.

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Speaker 2: Banking is just the next logical step and is.

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Speaker 1: That not exactly what bitcoin is? Don't want to happen.

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Speaker 2: Right, Like, at the end of the day, you have

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Speaker 2: an og crypto community is very hardcore about it. But

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Speaker 2: if you look at where all the money is, ninety

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Speaker 2: nine point nine percent of the money is actually in

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Speaker 2: the traditional economy and in the war for the future

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Speaker 2: of money. The war's going to be won with money.