Michael Saylor: Why Bitcoin standard is what 8 billion people need for decent life (Pt. 2/2)

you're watching kidco news welcome back

and we are back

with the michael saylor ceo of

microstrategy

so michael we were discussing inflation

and it does seem

that you and warren buffett are actually

on the same page on that one

he's recently sounded the alarm on

growing inflation saying he is

definitely seeing and i quote very

substantial inflation

across his companies but you clearly

don't agree on the best way to hedge

against inflation buffered was cited by

comedian bill maher who's now become a

big bitcoin basher

and mar dedicated a big chunk of his

recent show to criticizing kryptos

it was a 10 minute long tirade so we

spliced a few of the highlights

and i want to get your thoughts on them

let's watch

maybe this is why warren buffett says

cryptocurrencies basically have no value

and they don't produce anything

what you hope is that somebody else

comes along and pays you more money for

them later on

but then that that's person's got the

problem

in terms of value zero

or as another analyst put it it's an

open ponzi scheme

it's like having an imaginary best

friend who's also a banker

there is something inherently not

credible about creating hundreds of

billions in virtual wealth with nothing

ever actually being accomplished

and no actual product made or service

rendered

it's like tinkerbell's light its

power source is based solely on enough

children believing in it

yamaha certainly not missing his words

so why is he wrong michael what is the

intrinsic value of bitcoin

beyond the fact that people have

ascribed value to it

and believe in it again this is it's the

most disruptive technology of our

lifetime and so

it's the butt of jokes comedians will

make fun of it i imagine that uh

comedians probably made jokes about

planes trains and automobiles in their

time

he's wrong because um let's just

you could knock them off one at a time

the greater full

observation why is he wrong about that

he's wrong because when the romans

pumped water

into a reservoir

they didn't put it in the reservoir

because they thought a greater fool

would pay them more money for the water

in the future

they put it in the reservoir because

they thought they might need water in

the future

um when you actually store food in a

refrigerator

you don't put it in the refrigerator

because you're going to sell it to a

greater full in the future

you put in the refrigerator because you

think you might be hungry in the future

and when you charge your battery you

don't put electricity in a battery

because you want to sell it to a greater

full in the future

you put electricity in your battery

because you need the power in the future

so he he doesn't understand that this is

really

in essence storing energy for future

use and uh and the idea

that you shouldn't store energy for

future use

is a silly notion right and

i think there's biblical biblical

stories about

you know the the comedian making fun of

people that stored up

you know during times of plenty against

the famine

and then seven years of famine come and

the people that actually stored the food

live and the people didn't store the

food starve the death

so bill is like making light of

storing energy in order to live

a better life in the future people that

don't understand

energy systems right they don't

understand reservoirs they don't

understand batteries they don't

understand

aqueducts they don't understand

refrigerators

right they just you know they just don't

understand but if he understood it then

he wouldn't make that joke

well maybe he'll watch this interview

and some of your other

uh interviews and i get a better grasp

of it but i get your point obviously

store value a way to store energy but on

the whole

topic of energy he did also go off

on how environmentally unfriendly uh

bitcoin is was raging on about the

massive carbon footprint i mean the

stats differ

some say bitcoin has a carbon footprint

comparable to that of new zealand

that it consumes more electricity than

the entire annual

energy consumption of the netherlands i

mean various different sets from various

different sources

according to the cambridge bitcoin

electricity consumption index bitcoin

mining operations worldwide

now use energy at the rate of the same

annual domestic

electric consumption of the entire

nation of sweden

michael different stats but they

emphasize the fact that

there's huge energy consumption here in

this era

of sustainability and esg

and green you deals do you see that as a

potential issue

well first of all i think there's

something cruel and tasteless about an

entitled rich white male that wants to

deprive billions of poorer women

and children and men in africa asia and

south america

of the basic human right of economic

self-preservation

so he can generate some laughs um and so

i think the entire bitcoin community

they just find it to be tasteless uh

what what he's done and elitist uh with

regard to energy

again he's a comedian he hasn't spent

100 hours studying it the world

generates a hundred and sixty thousand

terawatt hours of energy a year

of that fifty thousand terawatt hours

of energy is wasted like thirty percent

of that 120

terawatt hours is used to run the entire

bitcoin network

to put that in perspective that's seven

and a half basis points

of all the energy in the world the truth

of the matter is everything on earth

uses more power

than a small country uh bill maher

uses 10 times or electricity that

that costs 10 times as much as the

electricity used in the bitcoin network

to enrich himself and he's not he's

not really thinking about it if you take

all the energy using the bitcoin network

it amounts to 25 basis points of all the

wasted energy

so one quarter of one percent of the

wasted energy in the world

offers the hope of a decent life

to eight billion people and solves an

economic problem

and uh and but that the 25 basis points

is is of the wasted energy because the

bitcoin network

is the bidder of last resort for all

energy

so if you eliminated bitcoin from the

world and you robbed the billions of

people of a decent chance at a decent

life

then you wouldn't stop any waste you're

still going to waste 50

000 terawatt hours of energy so he's

he's focused upon and nothing if you

actually study the bitcoin network

you'll find that there's about a

trillion dollars of assets under

management

it's secured by about two billion

dollars worth of energy a year

i'll call it 20 basis points 20 basis

points of the

of the energy and the network uh is the

cost to secure it

now that that energy probably cost about

two cents a kilowatt hour

uh that's what's being paid for it maybe

and in many

cases it is literally discarded energy

and

there is zero value for it no one would

pay anything

for it so its marginal value the human

race is literally zero

whereas the marginal cost of consumer

energy and industrial energy is nine to

11 or

11 to 13 cents a kilowatt hour

when people are watching bill maher on

their ipads

and their iphones they're paying at

least 13 cents a kilowatt hour plus they

pumped it into their lithium ion

batteries

on their devices which probably jacked

up the cost by a factor of 10

he's got no problem with them watching

getting laughs

right wealthy people getting laughs on

expensive energy

meanwhile people that are destitute and

the rest of the world have a chance at a

decent life

using marginal cast off energy and

anybody would deny them that

right i can only say giving him the

benefit of a doubt

he's comedian and he's playing this for

laughs and his job is to

is to act like a fool and uh

if you take uh economic political or

technical advice from a fool

what does that make you all right well

let's uh

point taken but let's separate like the

bill maher aspect even though i did use

him to get into the conversation and the

conversation is this idea

that there is this narrative that it's

an environmental threat

is that something that you see derailing

the rise of bitcoin in any way shape or

form

i don't think so because i mean as i

pointed out

right there are 50 000 terawatt hours of

wasted

energy and this is is literally 25 basis

points of that

it's it's a it's a nothing if you're

concerned about the environment

you're going to focus in on on the dirty

energy sources

and there's a hundred x or a thousand x

bigger target

in a lot of other areas if you look at

the energy

uh consumption of the bitcoin network

one of the characteristics of the proof

of work network is that you only mine

bitcoin

in a jurisdiction where the energy is is

cast off stranded or recycled

therefore marginally not value valuable

and you also only mine it in a place

where you're politically welcome

so no one's going to set up a coal power

plant in the middle of central park

manhattan and mine bitcoin

because it wouldn't be politically

welcome in fact in any country

where they would decide that the bitcoin

miners are not

welcome because they use energy the

miners are just going to move to a

different country

and and one of the one of the powerful

characteristics of the bitcoin

network is is the fact that it is

constantly decentralizing to

the most uh politically supportive

jurisdiction it's also decentralizing to

the place where energy

is the least expensive probably the

cleanest renewable energy but certainly

the least uh the least expensive energy

anywhere in the world and

the other thing that happens is uh you

know the miners are constantly securing

the network because they're upgrading

the technology

all the time and the miners are because

they're capital intensive they're

they're raising capital from financiers

in each of these political jurisdictions

all the time

and the combination of those things

means that wherever mining is not

welcome it's going to move

and wherever it moves to it's going to

be by definition

welcome and it's going to be very

harmonious with the energy grid

so i don't really think that the energy

usage of bitcoin

represents a threat i actually think the

opposite which is

which is the energy usage of a

proof-of-work crypto asset network

creates seven

layers of security to the asset

which are absolutely critical the first

layer of security is

is uh they co-opt all of the energy

producers worldwide

to support the network because you can

sell energy at about 45 to 50 cents a

kilowatt hour

to the network it's the highest value

use of energy

in the world and anybody can plug into

it so that's very powerful

the second is it co-ops the technology

producers

people are producing these sha 256 a6

like the s19 miners

and that means all of the technology

companies are continually

building better equipment that's more

energy efficient

the third is it co-ops politicians like

the governor of texas

there's no way the governor of texas

would be supporting bitcoin except for

the fact that bitcoin mines in texas are

creating jobs and bringing tax revenues

to texas and they're providing massive

revenues to

texas energy producers the fourth is a

co-ops wall street

because wall street's financing all of

these bitcoin miners

in a big way and you're talking about

hundreds and hundreds of multi-billion

dollar entities that are financing them

that the fifth is it makes the security

uh temporal it takes 24 to 48 months to

actually

create a material bitcoin mining

operation

so if you wanted to attack the network

you've got to do it over the course of

36 months without

250 million people figuring out that

you're going to do it

and then it also decentralizes it

spatially

because you can't locate uh

all of the bitcoin mining in the world

in one spot because you can't get enough

energy in the one spot

and so you've got a natural spatial

decentralization

after you finish with those six things

the seventh layer of security

is um the mining network you end up with

hundreds of miners that have invested

billions if not tens of billions of

dollars

in creating these security data centers

or security nodes which we call bitcoin

mines

and um and they've got so much vested

interest in running the network

they've all got the support of their

local politicians their local

governments

they're going to defend the network and

um

this is there are two more dynamics very

important one

if i had a billion dollars of gold in

manhattan you'd be relying upon the

mayor

the mayor of new york city and the

governor of new york

and the country of the united states to

secure your gold

but if you have a billion dollars of

bitcoin in manhattan

the security comes from a decentralized

set of nodes in other jurisdictions not

even in the us

and even if the us the mayor

and the governor attacked your money you

end up with someone in iceland or

finland or china or iran or iraq or

someplace

in the in some cyber space you can't

even find that's defending

your money and so that's that's a very

very powerful idea

the last point i'll make is that 20

basis points of energy used to mine

uh to actually secure the network

that's exponentially decreasing what's

what's going on right now

is is the the revenue and the block

rewards and the bitcoin network are

falling every four years

so by the year 2035 99 percent of

bitcoin's been mined

and that means that the network starts

to run only on

transaction fees the incentive

of the network to burn energy will fall

almost by an order of magnitude and the

efficiency

of the sha-256 a6 will increase

by an order of magnitude so what what

you've got

is a network that's decentralizing

itself

and making itself exponentially more

efficient so you could reasonably expect

if we look 20 years out that probably

the cost to secure 100 trillion dollars

it might be 50 billion but that would be

five basis points

five basis points of the total value on

the network which makes it the least

energy

intensive most efficient technology

that we have perhaps discovered ever in

the history of the human race

all right very compelling argument there

michael so you're not concerned about

this

narrative of it not being clean and

green and the whole energy consumption

aspect you've ruled that out you're

ruling out the idea

that governments and central banks are

going to intervene and regulate it

in some way that severely impacts it

and undermines its uh flourishing

so what is your outlook for bitcoin then

because earlier you told me that you

don't see any existential threats to it

so where do you see it going

i think bitcoin is is um

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again the dominant digital monetary

network and

that means that you can expect first

thousands

and then tens of thousands and then

hundreds of thousands of corporations to

plug into it

and we should have 250 million people

that hold bitcoin by the end of the year

so i expect a billion people within five

years and i expect five billion people

uh within a decade or so i think that

there'll be five billion people or more

with mobile wallets with the digital

currency and digital assets

and bitcoin will become the uh the

global settlement

and settlement network and the global

synchronization network

for all of them um what what bitcoin

does is it allows you to establish a

trusted relationship with a counterparty

and that means

you know there's a there's a phrase you

know the secret to a successful

relationship

is shared values and that's the truth

with two people

and it's the truth with two companies or

two countries

so shared values requires a value

network and so bitcoin

is a shared value network and i can say

for example that in 20 years of trying

there's no way that my company could do

business in nigeria there's no company

there's no way that a bank in the u.s

can trade easily with a bank in nigeria

or lebanon or iraq or between nigeria or

zimbabwe and

argentina because of the difficulty of

establishing

trust in in the fiat monetary system

so when you establish a digital monetary

system

you can establish trust of value

in 24 hours and so what i what i think

will happen

is i think we're going to see an

explosion

of billions of people

doing tens of billions of transactions

on

layer two's applications that are all

synchronized with the protocol of

bitcoin as the layer one

and i think bitcoin will just continue

to grow as an

asset class it'll be the underlying

asset that's used to establish trust

across all of these counterparties

everywhere in the world in the 21st

century

so what does that mean for the price of

bitcoin

what is your projection there over time

it will go

up yes so i got that how high

care to give me some kind of number yeah

i

i think that if if you look at the 500

trillion dollar monetary planet and the

one trillion dollar

you know crypto asset fire burning in

the core

you can expect that that will continue

to expand it's been expanding pretty

rapidly

i think it'll continue to expand as it

absorbs the monetary energy of the other

store of a

value assets so it should slurp

all of the energy out of or large

portions of the energy out of the

precious metals and then out of

uh monetary indexes and uh

and broad money equity etfs

and so there's no reason why it

shouldn't go from a trillion to 10

trillion to 100 trillion

over what time frame i'm not a trader so

i don't guess by the week by the month

even by the quarter

i mean for me a decade you know is a

target

and i'm expecting that this thing will

just continue to grow for

ever for my lifetime i don't see any

reason why it won't stop

growing because it's for the first time

in the human

race is history and first time in 5 000

years we figured out

how to create digital scarcity

on an open network that's

that's a one-time invention and the

protocol itself

is like as profound as english or arabic

numerals

it's like once once you've got a way to

do arithmetic with arabic

numerals how long will that go well long

time

400 years so far i guess in the western

world has been going

so i don't know why this won't just

continue to grow for hundreds and

hundreds of years

as a protocol you mentioned

etfs and you mentioned scarcity and

there we could be seeing bitcoins etfs

approved

in the u.s and there is some

argument that with the bitcoin etfs

you'll have more bitcoin derivatives a

bigger bitcoins futures market

and that that could ultimately create

paper bitcoin

which could take away from the scarcity

of the bitcoin market do you see that

happening i mean what is your outlook on

the impact of potential

bitcoin etfs and bitcoin derivatives

being approved

i think it's natural that that you're

going to see

uh bitcoin is the solution to

everybody's problem

uh the big tech companies need an open

monetary network

uh to to build the next generation of

products like square cash

paypal eventually apple google facebook

they have to build bitcoin

into their mobile wallets because they

need this uh

this universal digital asset on on a

protocol

on a global network um all the finance

companies the insurance companies the

fund companies etc they need to build

bitcoin into their finance

products so if you have a savings

account without bitcoin in it right

the bitcoin savings account yields 160 a

year for a decade and

and uh the other conventional bank

savings accounts yield 15 basis points

so

it's pretty clear that if you don't have

a savings account with bitcoin built

into it all the assets are going to flow

out of your bank

if you're fidelity or pemco and you have

mutual funds

you're going to build bitcoin into your

funds the etf

is the plain vanilla so fidelity's filed

for a bitcoin etf as they have like

eight other entities

but you know why wouldn't you build

bitcoin into your bond fund

if you look at the performance of bond

funds they're hideous um

over the last decade and especially over

the past year

the real if you look at all treasury

funds

all treasury applications if you have

a monetary inflation rate of 15 percent

to 20 percent a year and we have that

right now

and if the if the treasury yield on most

of these funds

is one two three percent you have a

negative real yield of 15 percent

so you've got a negative real yield on

all the cash

instruments and all the bond funds that

is minus 10 to minus 15

or more so as a matter of preservation

i think that the solution is you put

bitcoin into the bond fund you put

bitcoin into the mutual fund you put

bitcoin into the bank you put bitcoin

into the mobile app

if you're an insurance company i'm going

to sell your life insurance i'm going to

take your premiums i'm going to invest

them in a swap

a 30-year swap yields let's think about

it right now

220 basis points maybe

yeah two 2.2 interest

that's what i'm going to get now if i

invested

those premiums in something that yielded

20 interest

presumably the cost of your insurance

policy goes down by a factor of 10.

well bitcoin's been running a lot more

than 20

so what if i told you i can give you a

life insurance policy which cost you 1

20th of your current one

or what if i told you i'll give you a

life insurance policy that pays off

25 x more than your current one

presumably i'm going to obliterate

every life insurance policy every

insurance policy in the world

so the insurance companies are going to

are going to want to build

a thermodynamically sound asset a

deflationary appreciating asset into

insurance

just like the banks needed just like if

you're going to lend or securitize

against it you want

you want good liquid collateral

bitcoin's the best collateral you could

imagine

so i don't i'm not concerned that it's a

negative

i think that it's scratching the surface

like the bitcoin etf will come along

it's one derivative

there's going to be hundreds of

derivatives that'll be built on top of

bitcoin bitcoin is like base layer

the layer one of the money and the layer

two

the scalability for the civilization it

won't come from bitcoin because bitcoin

is

gov it's capped at 350 000 transactions

a day

now you could say the critics say 350

000 transactions that's not fast enough

to be a currency correct

it's not fast enough well if i could

move an aircraft carrier every 150

milliseconds

for the rest of your life and i could

teleport it anywhere on earth

it'd be fast enough to win a war if i

could move all of manhattan

seven times a second anywhere in the

universe that'd be pretty powerful

so what bitcoin is is a settlement

network to move blocks of a billion

dollars of energy

seven times a second between paypal and

amazon and google and facebook and jp

morgan and fidelity

and zimbabwe and the government of

turkey right and the government of japan

and the bank of china

that's what that is and it scales

because we go from moving 100 million to

a billion to 10 billion to 100 billion

if i told you i can move all of san

francisco in 130 milliseconds

anywhere in the universe well you would

think that's pretty cool

but if i said to you i've only got seven

transactions a second visa runs fast you

say well that's pretty crappy

it's just a question of what you're

moving so

when you think about it like that what

you see is

the the settlement network is the

granite upon which you build the 21st

century economy

the application layer is paypal and

google and apple pay and amazon pay and

fidelity and

and life your life insurance policy and

the etf

and and um maybe the maybe it's it's

like

the city of new york borrows 10 billion

buys bitcoin and eliminates taxes

forever to the benefit of everybody in

new york

that's a derivative right that's right

they could do that turkey could go and

they could buy five billion dollars of

bitcoin

in their central bank treasury and then

that would be worth 50 billion

over the next five years and they could

strengthen their currency

and 50 million people in turkey would in

essence have a turkish

lira which is a derivative of bitcoin

so you're thinking about how does the

world scale

right how do you how do you scale this

thing most people they get it wrong they

think well it's got a scale on the base

layer

they're just tragically uninformed

we don't need to scale in the base layer

you want to fix your country

like nigeria or zimbabwe the way you fix

your country

is you buy two billion three billion

dollars worth of bitcoin and you issue

currency backed by the bitcoin that is

the bitcoin

standard and every one of your citizens

stops starving to death

and they they they live a decent life so

i

i think that you're going to see that

everywhere right and it's a race

will it you know who's who's the king

maker bitcoin's a king maker

if if facebook adopts bitcoin before

apple

you know it's good for facebook if

facebook doesn't

it's good for paypal if paypal doesn't

it's good for square

if apple does it's bad for google right

so

it there's going to be a battle between

big tech

there's going to be a battle between

fidelity and pemco

who which fund company there's gonna be

a battle between the insurance companies

who do you want the insurance company to

get

that gives you like what if i just

collected a thousand dollars once

and the life policy was free no premiums

for the rest of your life

wouldn't i want that one the free one

right so

so in every single industry

the way that you win is

you adopt a thermodynamically sound

monetary network as the underpinning

you're going to build manhattan build it

on granite

what is bitcoin bitcoin is granite in

cyberspace

right it's it's the most stable property

in cyberspace

so any country any city any company

any individual any product

any service can be enhanced by plugging

it into that network and then relying

upon

that as the source of energy in order to

differentiate

in a competitive world

michael before i let you go you said

that one of the reasons that you

invested in bitcoin

was because 99 of the world disagreed

with you and you've positioned yourself

as a

contrarian investor on a number of

different fronts

so what does it mean for your outlook if

more and more people

do get what you're saying if they do

come around and that does seem to be the

trend and you're no longer

a contrarian to believe in bitcoin

the way that you do does that change the

way you view yourself

as a contrarian investor

i think the bitcoin will grow in

popularity this decade this is the

decade of bitcoin and it will spread to

billions and billions of people

and it'll make the world a better place

it'll bring

you know economic empowerment to

billions of people and brings hope to

billions of people

and i'll be happy to fade into the

woodwork and be forgotten

when that happens it won't bother me at

all

well i highly doubt you'll be fading

into the background but either way

you've laid the groundwork

of positioning bitcoin as a treasury

reserve asset and in getting companies

to view it as such

elon musk may owe you a thanks but

michael thank you

again for sharing your thoughts on kitko

news thanks for having me michelle

and thank you for watching keep it here

on kitco news for more