A conversation with Michael Saylor

michael i'm really happy to see you

really happy to see you and i always

loved uh in your background but what is

that exactly this is a boat it's like a

wizard

you know it's a 19th century handmade

model of a 17th century sailing ship

that uh used to play

the the far east indies trade for the

dutch east india company

so you can imagine they made a very

complicated ship you know in the

1600s and

and then in the 19 or in the 1800s

a bunch of model makers decided to make

a model of the ship and so it's an

antique model of a pretty extraordinary

sailing vessel

reminder of what human beings are

capable of doing you know when you

consider

all of the systems that they put into

that ship in order to

affect commerce

love it love it and i mean is your

in all of your interviews i always saw

it and i thought what is really cool and

for a second i thought maybe it's a is a

green screen but no is is real and is

really cool by the way michael uh

you did some incredible things and of

course i want to go into bitcoin and

everything else but i was uh just

curious and i went to check your

biography and uh i was first i thought i

would love to have a biography like that

is incredible and apart from mit i knew

about it

something got my attention because i

read that um

sailor became fascinated by the

application of computer simulation

technology to public policy and business

strategy okay

eventually writing his thesis a

mathematical model of a renaissance

italian city state

while studying this system dynamics

etc etc what was this italian city-state

well you know

you're probably familiar with

machiavelli machiavelli's famous book

that most people read is the prince

which is

kind of a book on you know political

dirty tricks and doesn't have the best

reputation but machiavelli wrote another

book uh the discourses and the

discourses was a study of stable

government and virtuous government based

upon successful renaissance italian

city-state models

and the discourses uh describes uh the

establishment of a governance

structure that includes an executive

branch

a legislative branch and a judicial

which happens to be uh the three

branches of government in the united

states right now and most modern

governments have a judiciary a

legislature and executive branch

so the founding fathers of the united

states copied that model from the

discourses

and um

when i was at mit uh i i discovered the

book

and i it occurred to me that he was

actually describing

higher order feedback systems he's

describing the checks and the balances

and the dynamics between all the

different aspects of government and

describing how it helps the the city

state uh make it through supply shocks

famine wars and other other uh

dislocations so i i created a computer

simulation uh

n-dimensional computer simulation you

know not with non-linear math

and then i i basically attempted to

reproduce all of the various scenarios

described by machiavelli in that book

and show that they were all ex you know

easily explained by

by mathematics and conservation of

energy

and uh and non-linear uh dynamics and

and so uh it was a it was a thesis on uh

human behavior based upon political

science but

but

the idea is to apply computer science

and mathematics to

to human systems

in order to design better

political economic systems for the good

of the people

interesting and also very very actual i

would say i was wondering michael if you

when i hear you talking you always have

this huge knowledge about everything you

you can talk about physics

economy um

business marketing

quantum physics i don't know is this

something that you built in your own

young age or you have like a media diet

where you i don't know you study you

know 300 books a year and you always go

deep into these topics or your brain

just always work like that

um

you know they say experience is what you

get when you didn't get what you wanted

so i have exp i have experience because

you know i've been running a publicly

traded company a long time for 22 23

years and i've i've run microstrategy

since 1989 so i have i have a lot of

experience as an entrepreneur and i have

experience running a large enterprise

and i've experienced you know launching

new businesses and and some succeeded

and some failed and some

have succeeded

and

i was fortunate enough to have a lot of

experience with employees and you know

and experience with customers and i've

been around long enough to see various

cycles economic and political cycles

but uh i think also i had a very

fortuitous education

when i was at mit i studied two

disciplines i got a degree in aerospace

engineering and another degree in the

history of science

and it turns out that that both of those

subjects are in themselves

multi-disciplinary

aerospace engineering is really an

amalgam of

civil engineering electrical engineering

systems engineering computer science

mechanical engineering ocean engineering

if if even chemical engineering if you

took all of those engineering

disciplines you need them all to make an

airplane fly

right if you if you think about what an

airplane is right compared to

a car right an airplane is a vehicle but

you know cars can be much heavier and

they just roll on the ground whereas an

airplane you know you have to calculate

what happens when the airplane gets

turned upside down

yeah under nine g's and you never really

have to design a car to be turned upside

down in nine g's

and a building another structure but

buildings don't have to move

right so you take a building and move it

it becomes a car you take a car and you

fly it it becomes an airplane and when

you think about a ship

uh you know a ship is designed to move

through a fluid and shape matters so

whereas an airplane also has to move

through a fluid but the difference is

you know

the the density of the fluid

is changing for the airplane you know in

a relative uh a relevant sense depending

upon the temperature

you know and it's not quite so relevant

for

other disciplines

so i if you're an aeronautical engineer

you're you're studying the design of

mechanisms under constraint

and and you have to think

multi-dimensionally

and you can't make simplifying

assumptions

that are made in many other disciplines

and uh

and and if you just get if you get one

thing wrong the plane crashes and burns

right right you can you can design

really sloppy mechanisms in cyberspace

like when you're building software

you know you you can design really ugly

mechanisms because it's very forgiving

and uh if you're building a building you

just build it with steel because steel

is infinitely strong and powerful

but it's heavy and so you

when you when you uh have to make it fly

you can't simplify we'll just build it

all with steel now you're talking about

composites and you're talking about

aluminum

so i think that

the first half of my engineering

education was

think

in-dimensionally

across all different systems

you know and understand cybernetics and

control i mean control theory is really

important in aviation for example you

design an airplane and it tilts this way

the lift falls on one side it falls on

one side and increases on the other side

and brings it back to the level so the

plane flies in a stable fashion if you

design an unstable airplane where it

tilts and then the lift uh accelerates

then the thing goes into a tailspin and

you crash and burn

so so this idea of building stable

systems is really really important uh

life or death important with aviation

and a lot of those engineering

principles pop up in in bitcoin and

digital property you see them

in the bitcoin network and it's very

natural and you would you would perceive

perceive them differently if you're an

aviation engineer and if you look at the

history of science

well the history of science is political

economy plus plus

history plus science

plus economic you know various other

dynamics

and it forces you to think in

a broader sense uh

what happens when you introduce

atomic weapons or what happens when you

introduce running water or antibiotics

into a civilization or x-rays

or radio or railroads

and

when you start thinking about the

introduction of technology and network

interactions and how they have an impact

on distribution of power

then uh you have the basis for an

understanding again of what is a

monetary network like bitcoin

what is a rail network right there's no

paris if it isn't the center of a rail

network right what is new york the

center of a maritime network you know et

cetera so

so studying those things

always brings you back to the

preeminence of technology and network

theory and the design of these things

under constraint

and so i kind of got to my stage in life

having

having had a

theoretical background in in technology

and physics and engineering and then

uh social sciences background and the

impact of engineering on civilization

and

and uh human condition

and then i got 35 years to watch that

happen in the real world running a

company

and then along comes bitcoin and so it's

it's kind of like

you know uh the right thing at the right

time and if you're

if you have an understanding of

a little bit of everything

then you appreciate bitcoin because

bitcoin is really engineered to with a

little bit of everything in it

that that that's explained a lot uh

michael because um i remember first time

i saw an interview of yours i thought

wow like oh my god how how can he open

so many different angles and

perspectives and until that moment i was

looking at bitcoin just you know with

one lens that's it you know but the the

way you have to describe the words you

use the analogies

the knowledge that that is

multi-dimensional i think helps

uh to

to it resonates with so many more people

you know because maybe if i listen to a

bitcoin extremist i say all right cool

but i'm 50 years old

uh you know i i don't understand where

you're going but if i listen to the

you know your business point of view or

the property why is the digital property

so that that's a different thing

you you mentioned atomic and of course

now there is this ukraine and russia

situation

what's your take on that and what will

be the impact on on bitcoin from this

this ukraine war do you see a different

perception now about bitcoin when you

talk with companies and institutions

i think that um

wars catalyze the adoption of new

technology

and that's the history what what you

learn in the history of science

is that new technologies are oftentimes

presented and then they're rejected by

the establishment

until there's a war

you know and when there's a war all of a

sudden we

we decide that we want to adopt new

technology because we're more afraid of

losing the war than we are afraid

of the new technology

so uh you know we've got a a pandemic a

war on covid that accelerated all sorts

of

new technologies including bitcoin i

think the ukrainian war has accelerated

it some more and a couple of different

ways

first of all you know you've got

hundreds of millions

of people in eastern europe who have

their currencies collapsing the russian

currencies collapse but the hungarian

currency is weakening the ukrainian

currency is weakening the polish

currency is weakening

the turkish currency is weakening every

currency in that region is weakening and

some are completely collapsing

so people that people that

earn money the working class earns money

in the currency or save money in the

currency are becoming insecure with

their currency the currency doesn't work

anymore the second is the banking

systems are collapsing

if you wake up and you find out that

there's a you know a half mile long line

outside of an atm for you to withdraw 33

dollars in cash

then you realize the banks aren't

serving you

the cash is not serving you

and you need a new form of currency or a

new a new medium of exchange if you're

going to get on with your life and so

people

and

that's happening in the ukraine but that

also happened in russia right where they

shut down the stock market they shut

down and the currency markets etc

when the borders get closed when the

banks fail when the stock markets fail

in the extreme situations like you see

in lebanon

where the banks literally freeze your

assets close and then they devalue your

assets by a factor of 10.

then what you have is you have 400

million people directly affected where

they can't trust their government they

can't trust their bank they can't trust

their currency 400 million directly

affected

what you have is four billion people

watching

indirectly affected in two ways

first of all everybody else in the world

is suffering from inflation that's

already rampant

we were already inflating the currency

supply by about 15 percent a year or

more before this

and then the uh the response of europe

and the us to the war exacerbated the

inflation right we drove up the price of

energy we're driving up the price of

just about everything we're impairing

the supply chains so

you've got everybody in the western

world probably staring at 20 monetary

inflation right now

they're losing one to two percent of the

value in the euro and the dollar every

month

okay

that's also happening in china

so anybody as in the world right now is

getting a double dose of inflation

because of this war

they're also watching

and at every level people are realizing

that uh currency derivatives and

traditional conventional property is no

longer secure

um

the russians had hundreds of billions of

dollars of gold and uh and sovereign

debt seized

but the chinese have three trillion

dollars worth of that stuff

so if you're chinese and you're thinking

what happens if uh if the united states

just seizes three trillion dollars of my

money

that makes you a bit insecure and of

course that rubs off on the the indians

the pakistanis right everybody in the

world is now insecure about their

sovereign reserves

at the corporate level

every company is insecure about their

treasury and every individual becomes

insecure because

what you have is a precedent where a

politician can

in canada we have a politician that

seizes the the money of of the citizens

of canada without due process

right without a law

and then you have uh the plight of the

russian oligarchs not very sympathetic

but a politician can seize the property

of a citizen of another country without

a war

without a law

and so

who's going to be confident in their

property rights

if your own government doesn't seize

your money

then someone else's government will

seize your money if you don't own the

country

if you don't control the government you

probably don't have

any secure property if you do own the

all your property that's outside of your

country is still insecure

so this is an unprecedented time of of

insecurity

combined with inflation and literally

the collapse

uh the collapse of of currencies and

currency derivatives

you could look at this war as kind of a

wake-up call

for everybody in the world if you're if

you're at all paying attention

what you would realize is

you really want crypto property

right says i can't i can't rely upon

property in any country and i can't rely

on on any currency

and i can't rely on any currency

derivative

and a bond is a currency derivative a

swap is a currency derivative a value

stock is a currency derivative

a piece of real estate commercial real

estate that generates rents is a

currency derivative

so if i can't trust currency derivatives

i can't trust the government and

i'm insecure about my property

what would you do and the obvious answer

is convert your property into crypto

property or digital property put it in

cyberspace

beyond the reach

of any government

or or any other hostile action and then

make sure it if it's crypto property

it's not a currency derivative which

means that it's inflation-proof and the

idea of inflation-proof property that

cannot be confiscated by a hostile

regime

is uh it's a matter of life or death for

hundreds of millions of people right now

but it's probably the most important

thing in your world for the other two

three four billion people

sorry what i don't understand michael is

i totally agree

what i don't understand is why

with this scenario um companies and

institutions are not just running and

adopting

bitcoin

and there is no like a mass adoption

why is not is not happening in your

opinion

i think there's a lot of inertia in

capital structures

if you look at capital structures right

now for example um

there are large pools of capital that

are tied up in institutions that by

mandate can only invest in certain

assets

so for example if i had 10 billion

dollars of capital for investing in uh

stocks

well um i can't buy uh i can't buy

digital property for two reasons one

reason is my mandate for my limited

partners keeps me from owning property i

have done securities

and the second would be

that i don't have a relationship with a

digital property exchange you know a

crypto exchange that can actually buy it

for me

and the third of course would be

you know since my limited partners won't

let me buy it and i don't have the

exchange agreement i also don't have all

the security protocols within my own

institution to be able to custody it

like who should i who should i trust

with that

if you actually calculate how long that

takes

it could take five years to change my

mandates with my limited partners

it could take one year to set up a new

custodial relationship and vet a new

exchange it could take six months to a

year to set up the security protocols

so

uh

if if i had the mandate it'd probably be

a one year process for me to change my

institution if i don't have the mandate

it could be multiple years

so

so um

like if you have 10 billion dollars and

you were given the money to invest in

fixed income instruments

you're getting two percent or maybe

you're getting paid one or two percent a

year so you're getting paid 100 million

dollars

a year

just to manage the money

and so you go and you buy bonds that

yield through two and a half percent

interest and then the money loses fifty

percent of its value a year so the real

yield is minus 12 and a half percent and

you're literally destroying a billion

dollars a year but it's not your money

is it

you're destroying a billion dollars of

value of some other investors money and

so your choice is give all the money

back to the investors and you're going

to lose a billion or 2 billion

or keep investing it pursuant to your

mandates that were set in the year 2007

right

and so you've got trillions you know 500

trillion dollars of capital

and they're all tied up in different

kind of structures like that that's one

example of inertia you know if you had

10 billion dollars worth of real estate

in downtown moscow right now

why don't you just sell that and put

that into bitcoin because it's not so

easy right i mean monty that's another

example

right so you see there's a lot of

capital that is already committed in

structures and it'll take a while

probably takes anywhere from 10 to 30

years for the capital flow out

there

if there was a spot etf

where i could just go buy a billion

dollars of bitcoin and a spot etf you

know then maybe i would do that but of

course there isn't the spot etf because

there's regulatory inertia

yeah there's you know and there's also

other forms of inertia like um

like uh fasbi has a certain accounting

treatment the accounting treatment

bitcoin was established when there was

no company in the world that had more

than two million dollars of it on its

balance sheet

okay so a while ago it was irrelevant

and today of course there are tens of

billions of dollars of bitcoin on

balance sheets of publicly traded

vehicles but the accounting is still

indefinite and tangible

and definite intangible accounting means

that if i buy a billion dollars a

bitcoin and it trades down by 50 percent

and then it trades up by a thousand

percent

uh the fair value of it is 10 billion

dollars but i would be showing it on my

gap accounting statement is 500 million

dollars and i would never write it up

again

okay so if you're a publicly traded

company

and uh and you have a successful

business selling streaming video

and you have 10 billion dollars of

capital and you go buy the bitcoin and

you make 100 billion dollars for your

investors it looked like you lost 5

billion for your investors and then you

have to explain that and that's very

hard to explain

and if you're a conservative cfo you

would think do i really want to go

through the headache of explaining this

to my investors and maybe i'll get fired

by some random investor for making money

because they thought i lost money

because i've got an antiquated

accounting role

so

you know if you're wondering why don't

why doesn't everyone just act rationally

well the answer is

some people haven't have organizational

inertia their incentives are to continue

uh to engage in the strategy they've

engaged in for a decade

my grandfather invested in real estate

in kiev and i will continue to do that

right there's inertia other in other

cases

they they have um

they have regulatory um regulatory

inertia that's holding them from doing

what they want to do like these

accounting and these and these other

securities guidelines

and then in a third case sometimes it's

uh it's intellectual inertia or

ignorance

like if i said to you if i if i came to

you and i said oh you you have a house

and you've got no electricity in the

house monty and electricity is a good

thing so why don't you just install

electricity

you go

wait a minute how how long does it take

to figure out how to install electricity

without killing myself

it's like are you stupid i mean are you

just against electricity and the answer

is no it it takes a lot of effort it

might take a hundred hours of study

to figure out the project to install

electricity in my house or my hotel

so bitcoin is like that it's digital

energy

and some people haven't adopted it

because they don't have a thousand hours

or a hundred hours to study it and some

people haven't adopted it because the

regulatory guidelines are hostile to

their business adopting it

and some people haven't adopted it

because they're getting paid billions a

year to do the opposite

and it's it's you know it's like you're

paying me to trade fixed income

sovereign debt so why and i know it's an

awful thing it's losing 10 percent of

its value a year or more but i'm getting

rich doing it i'm making money until

then i keep doing it yeah so go go home

to your wife and tell her that you

decided to give up the job that you know

you're getting paid a lot of money for

to do a different thing

and you'll get by right

so these are all reasons why the world

doesn't just immediately change

but having said all that

the world is changing

right i mean bitcoin was trading at nine

thousand dollars a coin you know in june

of 2020

and we're not two years later

and it's up by a factor of four right so

it is changing billions of dollars of

capital are flowing

and uh you know they

they may flow slower than some people

would like but it seems like it's the

most uh disruptive force in the

financial universe right now and the

world is waking up

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