“Bitcoin Is Going to Millions & You’re Still Early” - Greatest Wealth Transfer in Human History

Michael sailor welcome back to the

show happy to be

here it is very good to have you now at

the time of recording Bitcoin is over

100k and has been for quite a while at

this point so I think the question of is

Bitcoin real is dead uh but now the

question becomes how does Bitcoin go

from where we're at at a little over

100k to the 13 million a coin that you

consider the base

case yeah I think I've always said

it's either something or it's nothing if

it's if it's embraced as an

Institutional asset if it's legitimized

as an asset then it's not going to zero

and if it's not going to zero it's going

to a million and I think the the short

answer to your question is

education and with education comes

adoption and at this point you just have

95% of the world that still doesn't

quite understand what it

is and that means I mean the way Bitcoin

marches from 100,000 to 13 million and

and by that's for your listeners you're

referring to my long-term forecast I

gave that forecast in Nashville in July

of this year and is based upon the

Bitcoin 24 model so the Bitcoin 24 model

is an open- Source macro model of

Bitcoin adoption and macroeconomic

development over the next 21 years

anybody can go to uh Google and they can

Google Bitcoin 24 they'll find it on

GitHub you can download that model you

can plug in all your own assumptions and

you can check uh what we uh what we

thought but my forecast is Bitcoin in

essence it it's growing 60% a

year uh for quite a while now and I'm

forecasting it will decelerate to 20% a

year over 21 years but that means on

average it grows about 29% a year ARR

and that 29% a year for 21 years gets

you to 13 million of coin and so what do

I expect to

happen well I expect um lots of high nut

worth individuals uh that previously

thought it's too risky or it's too

scary they see it legit IED by Black

Rock now black rock is giving guidance

that you could have 2% of your portfolio

in Bitcoin and they're seeing the ETFs

like ibit and they're noticing that this

these are the most successful ETFs in

the history of the world and black rock

has got the most successful e ETF ever

launched and now they're seeing the

world's largest money manager Black Rock

with more than 11 trillion dollars of

money managed they're seeing them

publish uh scholarly thoughtful

responsible white papers on portfolio

allocation and instead of the 6040 model

uh with 60% equity and 40% bonds now

you've got 2% that they're saying you

might want to put into a crypto asset

like Bitcoin so I think that you've got

uh that group of people that are finding

it I also think you've got institutional

investors that are moving into Bitcoin

more frequently now a lot of them are

big investors in micro strategy a lot of

them trade micro strategy options um and

uh they have Micro strategy been the

most successful stock in the S&P index

we're not in the S&P but we're more

successful than all 500 S&P companies

for the past five four years I think

this year too so we're getting the

attention of mainstream

investors and and that's bringing a set

of new investors to the asset class

because when they buy our stock we buy

Bitcoin with it I think the third uh

driver is a bunch of Bitcoin standard

companies a lot of companies are

recapitalizing their balance sheets on

bitcoin micro strategy was the

first but mea has done it m and Riot

just announced they doing it R

IO and uh the most successful company in

the Japanese stock market this year is

metap planet and they just did did it

and similar scientific just did it and

they tripled their stock in very short

order so you've got like a half dozen

companies that are recapitalizing to the

Bitcoin standard um but you've got 60

companies that have Bitcoin and there's

a lot of companies that are getting more

heavily involved I think recent oh

recently Hut 8 announced hut

hut and then um Rumble rum and so a

bunch of public companies that are kind

of uh they're innovators and they're

they've got fairly open- mind and

they're flexible and the really

important thing about that Tom is when a

public company adopts Bitcoin they start

sweeping their cash flows into it but

then after that they may start issuing

equity and then after that they can

borrow money so um uh Riot just this

week issued uh a $500 million conver

able Bond and then they bought Bitcoin

with it and Mara is this Riot games no

Riot uh Riot Bitcoin mining are r i o t

Riot um and so mea did the same thing

they did a billion doll convertible Bond

deal and they bought Bitcoin and then

they did another $850 million Bond deal

two weeks

later and micro strategy when we

announced uh we were going to pursue a

Bitcoin treasury company model we we

announced that October 30th of just this

year and we've raised uh you know

something in the range of 15 billion

dollars in the last six weeks and so

you're talking about large sums of money

that are flowing I mean much larger sums

it it took us 30 years to accumulate

$500 million in order to buy Bitcoin in

2020 it took us four years to accumulate

10 billion and we bought Bitcoin over

the next four years but then it took us

like four weeks or five weeks to

accumulate the next 15 billion so you

would check off that box which is

company adoption then after that um

you've got you've got like uh

institutional adoption you know the

endowments and the Pension funds you

know there's now there's now Pension

funds that are starting to allocate to

bitcoin and there'll be big university

endowments and and 50501 c3s and

insurance companies and so that's

another

driver and um and then you've got nation

states and of course the news of uh the

week is the United States strategic

Bitcoin reserve and the US already has

about 1% of the

Bitcoin if they don't if they don't sell

it that's a big deal and Donald Trump

said never never sell your Bitcoin and

then he was elected

president but now you have Senator

Cynthia lumus advocating for a US

strategic Bitcoin Reserve you have a

very supportive

cabinet lots of cabinet members that

have been Pro Bitcoin and then Senator

lumus just posted a tweet just a few

hours ago having met with the incoming

Secretary of the Treasury Scott bessent

saying that uh she looks forward to

working with him on this and presume

that means that he is also supportive

and uh we know that the Trump White

House and Trump is supportive he was

asked on the New York Stock Exchange

floor I think Yesterday by Jim Kramer

about it will you do something like this

and he said I think so I think we need

to lead so I think that that's also

positive so let's just say there's a lot

of different entities in the world with

capital I mean who doesn't want to keep

their money who doesn't want more money

right everybody wants to either keep

their money or they could use more money

and so Bitcoin is digital money it's the

greatest digital monetary Network in the

world but maybe it's the first example

of what I call digital Capital it's

money just so I can help people not be

confused money is a generic term but it

decomposes in the modern world into two

elements currency and capital currency

is the dollar and the peso and the

Euro that is the medium of exchange

asset it is designated legal tender that

means you can swap it without paying a

tax bill on it and it means it's liquid

INF fungible and probably it's good for

paying taxes and everybody prices things

in it that's not going to change the

world Reserve currency is the dollar the

dollar has been the world Reserve

currency since just after World War I

and uh in different forms the dollar is

getting stronger not weaker but there's

another aspect of money it's store of

value if I had a liquid fungible asset

that was a store of value that I could

give to my children's children well

nobody thinks that's the dollar and

nobody think well nobody in the US

thinks it's the dollar rich people in

the US don't have 50% of their of their

assets invested in dollar bills and uh

what they do think it is in the modern

world is they think it's the S&P index

like the Vanguard 500 or P or some Index

Fund or maybe they think it's uh real

estate and real estate's a store of

value but it's not liquid in fungible so

it's a little bit different to it's

difficult to swap it out in units of a

million dollars every day and so it's

it's not quite money but it is capital

in that

regard and um and gold for 5,000 years

was kind of capital it was go a bar of

gold bullon was that long-term store of

value asset that people

use Bitcoin is emerging as digital

capital and people they're not going to

use it as a medium exchange to buy a cup

of coffee but if you want to buy

something to give to your

granddaughter that she can't mess up

even though she's three years old and

you just want and you don't want to

worry about it every day and you don't

want to trade it and you don't want to

worry about anti trust and whether or

not there'll be rent control on the

building or or renting it out you just

buy her one Bitcoin and you put it in

coold storage and then 60 years from now

she'll be rich because the one Bitcoin

will probably be worth 50 million or

hundred million right and so that what's

going on right now is the emergence of

Bitcoin as a digital Capital Network for

the world and the thing driving it from

100,000 to 13 million over the next 21

years is the adoption of it as a capital

asset by people that have have the

wealth have the capital all right A lot

of people in my audience are not going

to understand why you can't just store

your money in dollars um I have a whole

tie rate about it but I'd love to hear

why how do you explain to people why you

can't just put your money in a bank

account or under your mattress in

dollars the simple answer is the supply

of dollars expands about 7% a year every

year for the past 100

years and what that means

is that if you want to buy something

that is a very scarce desirable asset

that the government can't make more of

and that manufacturers can't make more

of if technology and capital and

machinery and robots can't make more of

it it's scarce and desirable here's an

example um an acre of beachfront

property in Palm Beach or or a beach

front house in the Hamptons or

waterfront property in Miami Beach

that's a desirable place to live you

can't make more of

it and if you go back a 100 Years you'll

see that the value of that acre was

$110,000 and you go forward a 100 years

and that is about $10

million and for those who are very quick

at math they'll realize that works out

to 7% increase in price every year for

100 years and that's why you know that's

why people buy houses for $100 million

on the beach in Palm Beach and my house

the house that I'm in right now it was

sold in 1930 and I have the deed on my

wall and it was sold for

$100,000 in

1930 if you put that

$100,000 in a vault and you kept it safe

and sound for the 90 years and if you

took it out it would pay

about 8 to 12 weeks of my property tax

on this

house like you literally couldn't keep

the house for eight weeks go ahead you

say it in my way tell me if this

resonates with you the reason that you

can't store your money in cash is that

the government uh steals your buying

power by printing more of it I find it's

very sobering to look at it as theft um

does that resonate with you or do you

think I'm being

hyperbolic no you're correct uh in

essence the inflation of the dollar

supply means that your wealth is cut in

half every 10 years if you hold all your

wealth in

cash and and uh it just it's the rule of

72 right you divide 7% into 72 that's

the half life of the asset so the half

life of your wealth is 10 years if you

store it in cash if someone gives you an

asset you can invest in that goes up 7%

a year you're keeping up with inflation

you're not getting

wealthier but you're not getting poorer

you're just treading water you know and

if you're beating that hurdle rate then

you're getting a bit wealthier so you so

once you understand that you can see

that you can't um you can't preserve

your wealth for long periods of time in

a fiat currency and the best fiat

currency in the world Tom is the dollar

but in most other currencies they

inflate 14% a year and that means the

half life of your wealth is 5 years but

in a weak currency like in Turkey or

Syria or Iraq or Venezuela or Argentina

it used to be for 20

years the inflation rate looks more like

uh 28% a year or 30% a

year and we take example the peso the

peso went from one peso to the dollar to

a thousand pesos to the dollar over 20

years

Jesus okay so I don't you know

in America you got to keep in mind

you're an American you live in the

greatest country of the last hundred

years America won every war right we

were the winner of World War I we got

richer we were the winner of World War

II we never lost the war we were the

winners of the century our currency lost

99.9% of its economic power over the

hundred years but if you went to Nigeria

or like Germany the currency crashed

like three times two or three times

right in Japan the currency crashed you

know in Russia it crashed three last

time the Russian currency crashed in 98

the the Brazilian currency crashed

completely uh 25 years ago the Argentine

currency crashed about four times in a

100 years so if you're an

Argentinian and you're 30 years old you

already know what it's like to have

hyperinflation because you live the

entire cycle it's just Americans don't

and so when you're if you're taking

advice from an American Business person

like Warren Buffett or Charlie

Munger well I mean they didn't live

through the Yar Republic they didn't

live through the collapse of the current

by the way the currency collapsed in

Venezuela it collapsed in Argentina it

collapsed in

Brazil it collapsed in Cuba it collapsed

in Russia it collapsed in every single

country in

Africa you see and so foreigners

actually get it a bit better right it's

like the you the bank's going to take

your money the currency is going to zero

the government's going to promise you

it'll be okay and tell you to put your

money in the bank then they're going to

inflate the currency freeze your bank

account crash the currency and then tell

you it's worthless that's what happened

in Cypress not too long ago if you want

to go and Google that and so the real

promise of Bitcoin is very simple it's a

bank in cyberspace that won't steal your

money

and it's an asset that you can store

your life savings in that nobody can

debase or corrupt and those are two

powerful promises for the first time in

the history of the human race no one

ever gave you that those two promises

ever before

now yeah the the thing that um and a lot

of this started with me getting to know

you researching

cryptocurrency um realizing the just

absolute devastation that even in

America is happening with with inflation

uh and understanding this difference

that you're now talking about in a

really clear fashion that until I

started researching you for this episode

I'd never heard you delineate it this

way that uh money is bifurcated into

those two elements you've got the money

that you spend cool but then you've got

the money that you're trying to preserve

your wealth over time uh when I tell

people the way you should think about

your house is not something that's going

to go up in value over time you should

think of your house as something that

you pay an insurance policy against the

upkeep the property tax as a way to

match inflation which is unless your

area becomes disproportionately

desirable and that does happen so like

Austin went up in value because people

just flooded into that area but for the

most part uh what you're going to see is

actually just keeping up with inflation

that as the dollar is devalued it looks

like the price and the value of your

house is going up but it's really not

now I think that's fair by the way I

think that's that's definitely a good

way to think of it yeah I think so my

thing my own company when I start

talking about this stuff uh my employees

look at me a little bit like I'm crazy

because I'm so aggressive about getting

people to understand and it'll be very

interesting to have this conversation

with you that ultimately the stock

market is gambling and once you

understand that people have been forced

to become gamblers based on inflation

that you have to find a way to outpace

inflation otherwise you lose your money

and they're really smart among us look

at the capital system look at look at

the equities market and they go oh oh

cool I have a really complex way that I

can find Arbitrage basically in these

moments where if I find an area of risk

that I think I understand better than

the next person I can come in I can buy

that asset it goes up in value compared

to what I can sell it for down the road

and I'm able to sell it for a bigger win

than inflation and and that forces

everyone to play that game or to just

have their buying power stripped away

from them which of course is what

happens to the vast majority of call it

normal to undereducated they're they're

just going to get eaten alive because

they don't have the time energy or

intellect to figure out this relatively

complicated game okay so with all of

that as the structure of why even the

average person should care about this to

a screaming degree um there's an idea

that that you say but you go by quickly

that I think if people understood it's

really going to help them so you you've

said I want to see the entire world

recapitalize in Bitcoin now when you say

recapitalize is what you mean hey that

part of your wealth that you want to

store to maintain purchasing power over

time all of that instead of being in

real estate instead of being in

treasuries instead of being in equities

that should move over to bitcoin is that

what you

mean yeah that's a good way to say it

yeah you've articulated that quite well

yes recap build yeah build your house on

a firm foundation don't build it on

sinking sand don't build it on a swamp

build it on a a granite rock on granite

on shist and I guess if I could give the

math the risk-free rate of the dollar if

you're capitalized on US Dollars and you

were to say buy uh treasury bonds the

risk-free rate is something close to

suur or the standard over night funding

rate and you know that ranges but after

you after you get paid that rate and you

get taxed on it you know you might get

paid 5% you get to keep 3% after tax

maybe if you're taxfree you get 4 and a

half% and if you're taxed you get three

so the risk-free rate of return of your

capital on that dollar standard is like

in the 3% range we'll get back to my

conversation with Michael sailor in a

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Theory and now let's get back to my

conversation with Michael sailor the

risk-free rate for Bitcoin as I just

described it to you 29% over 21 years

about

30% so the way I look at Investments is

when you're pitching me an investment

idea I say well I've got a lot of money

in Bitcoin and I'm expecting about 30%

risk-free for the next 20

years you have to actually pitch me an

idea that generates more than 30% plus

the risk premium plus the tax efficiency

if you told me here's a thing that'll

make me 50% a year but I it was going to

be taxable that might be 40% a year or

35% a year and I'm like well after the

risk it's still not as good as my

risk-free rate of

30% so if you're capitalized on bitcoin

if you understand it and if and if you

understand uh and if you have a long

time Horizon if you're going to hold it

more than four years you don't care

about the volatility all you care about

is the annualized return the annualized

return hold on because there's a lot of

assumptions in there so I know a lot of

people are clutching their pearls right

now about Bitcoin being referred to as

risk-free so can you break down for us

the difference between that volatility

and then how you can have the confidence

to look at this and say no no no the the

risk is merely a timeline question

because I think a lot of people will

will take exception to

that yeah so well the dollar is zero ARR

zero volatility that is to say the

dollar goes up 0% against itself each

year and the dollar is zero volatility

against itself each year so if you're on

the dollar you're living in flat land

and and you're you're a stationary

person in flat land a pedestrian in flat

land Bitcoin is going up 60% a year

against the dollar how long well since

micro strategy made its first investment

4 years ago it's 60% but if you stretch

back 6 8 10 years I think it's also 60%

so like a

decade but you can measure it back a

decade and you see it's going up 60% a

year and it's 60 volatility it's it's a

60 Vol against the dollar so you should

think of of Bitcoin as an asset it it's

like you're on a speeding train going 60

M an hour and you've got a

Flywheel spinning 60

RPM and The Pedestrian on flat land is

standing on the plane watching the train

go by thinking this is scary it's going

to suck the you know the oxygen out of

my lungs and uh they're thinking my

money isn't an asset because it goes up

0% a year so they have a different view

toward money than the view of someone on

the Bitcoin train the person the person

with a million dollars of cash is going

to have a million dollars of cash in a

decade a person with a million dollars

of Bitcoin is going to double their

Capital every 18

months if they just hold on to it right

and so they're going to double it once

twice three four four times at that rate

right um the volatility really does come

down to sorry and I'll let you get back

to that but this uh this does come down

to a belief that when you look into the

future that the the setup that makes it

have the 60% ARR is going to continue

because I look at this and I say the

only reason that it has that kind of

reward is that it is volatile that that

there are question marks because if

there were no question marks everyone

would flood in near instantly it would

hit homeostasis and that would be that

um and so I I do I think Bitcoin is

anything but risk-free uh but I do think

that the volatility is advantageous for

the people who are going to be right uh

about the if people are right about the

upside that's the most Fair way to say

it um why do you think the best way to

conceptualize this is as

risk-free Howard marks would say

volatility is not risk volatility is

volatility right a Margo round you know

or a carnival ride or a roller coaster

is volatile the risk part is if you fly

off the roller coaster right if if you

if the marry go around stops working Etc

um so the fundamental risk of Bitcoin is

the existential risk of an extinction

level event and Bitcoin right if space

aliens come down and say we're taking

your Bitcoin away from you right uh then

I guess there's risk if if some Evil

Genius finds a way to create a cyber

virus that infects and destroys bit the

Bitcoin Network instantly irrevocably

that is the risk so but that's kind of

like the that's the existential risk you

take when you get on the airplane if it

crashes that's the existential risk you

take when you cross the street that's

the existential risk you take when you

put a piece of food in your mouth and I

say and you say well can you imagine

that hurting man I say yeah if I put

poison in the food you're dead Okay so

do you trust me do you trust the waiter

when you put the food in your mouth

right so yes there is some risk in life

and the existential risk is that

extinction level

event you don't think there's another

layer of risk in that not not

existential because you're saying the

risk-free return of Bitcoin is 60% but I

think there is it it seems strange to me

to not allocate some percentage of H

maybe it doesn't grow that fast maybe it

doesn't remain 60% you yourself say over

the next whatever 21 years it's going to

come down it'll average out over about

29% what if that accelerates and uh the

return ends up being substantively less

than that um so I get saying that this

has a better chance of having a higher

uh annual rate of return than say the

S&P 500 which maybe we clock at 15% we

say nah ah we might not hit 60% but

we're probably not going to drop below

15% therefore if 15% is our hurt rate

it's going to be something north of that

but I think where people trip up with

your language is this idea of the

inevitability of the 60% what would you

say to that so we're dealing with three

concepts risk

volatility and

performance okay so I've I've addressed

the risk issue by pointing out that

there is existential risk in your given

Network or frame of reference and I just

want to make that point that once you

understand that risk uh of being in that

frame of reference then you have to

figure out what's the source of the

volatility and the

performance and if you don't understand

why the asset does what it does if you

don't understand the economic physics

involved then you'll think it's random

and you'll and you'll feel like it's RI

the performance is risky but I want to

give you an example of a physical

metaphor I'm a hiker and I come across a

mountain lake and the mountain lake has

500 trillion gallons of water in it and

yeah I don't know how it got there but

it's there the water's chilly it's clear

and I look down and there's a

waterfall coming off the mountain lake

and the waterfall you know it's very

beautiful and and it's very turbulent

right water is turbulent in a waterfall

water is not turbulent in a glassy lake

so the the turbulence is

volatility right and the and there's

waterfall and then I look at it and now

if you look and you say I don't know why

that water falls downhill you know I

don't know if it'll keep falling

downhill but I hate the volatility then

I guess you can take a selfie in front

of the lake go swimming get cold and

leave but if let's say you're not a

tourist but you're an engineer so you

come across the same Lake and you see

the waterfall and you see the 500

trillion gallons and you think about

gravity and you think about

sunlight and now I know how the water

got there the water got there because

the sun Shone on the ocean the O the

water evaporated from the ocean it rose

up in the clouds the wind blew it

against the mountain it condensed and it

rained into the mountain and the and the

water ran off the mountain into the

mountain lake I know how it got there

and then I think well if I create a dam

near that waterfall I build myself a dam

I put a turbine on the dam and then I

drop a billion gallons of water I

Channel a billion gallons of water

through the dam drop it 60 ft and then I

plug that into a hydroelectric power

plant I spin the Dynamo I make

electricity and then if I'm really smart

I run the Electric power line to a

village down in the valley and I light

up the village or I light up the city

now someone can come along that doesn't

understand physics and they can say

good idea Junior but what are you going

to do when the water stops flowing

downhill well I'm like uh well I

actually think the water's flowing

downhill because of gravity new Newton

solved that for me and then someone else

comes along and says good idea Junior

but what are you going to do when you

run out of water in the lake I'm like

well there's 500 trillion gallons and I

take out my calculator and a billion

gallons or whatever it's going to last a

long time like well it's eventually

going to run out I say well you know the

Sun keeps shining on the ocean and the

ocean keeps lifting the you know the

water out of the ocean and it drops it

on this mountain and that's why there's

water in the mountain but you're right

there's some kind of natural limit and I

suppose there's a limit to the amount of

energy I can pull off of this Dam but

it's a large number it's a lot more than

your donkey cart and it's a lot more

than your steam you know wood stove and

it's a lot more than your Coal Power

Plant and maybe it's a lot cleaner than

burning you know gasoline so I'm an

engineer and you're seeing you're seeing

performance thinking it's random and

that's why it's going to stop and you're

seeing volatility and you're thinking

it's random and maybe it'll stop and and

here with Bitcoin the reason bitcoin's

performing is is a it's volatile but B

it's more en it's a more energy

efficient State the water is Flowing

down 5,000 fet because it's more it's a

lower energy State a th000 feet below

the mountain you know it's a it's a low

energy State you've got potential energy

in the water and it wants to go to

ground and that's just physics the 500

trillion gallons of water is $500

trillion dollar and the $500 trillion

dollars of assets are sitting in real

estate and currency and B and Sovereign

bonds and corporate bonds and artwork

and equity and they're s they're

invested in the stock of a company in

Africa that's going bankrupt right

there's in they're invested in real

estate in Cuba in Venezuela in Nigeria

they're sitting in a warehouse that's

crumbling it's got a 40 useful 40-year

life and so entropy and inflation there

you know you you invested hundred

billion dollar in a war zone and then a

war broke out and your money got Deval

your asset got

devalued all of the things going on in

the world the war the chaos the

competition the inflation the entropy

the passage of time the hurricane the

covid you know vac vaccine the covid

virus all of these things impaired the

value of your assets what the reason

Bitcoin is going up it's not an

accident it's because capital is is

economic Mass it is Flowing from a high

energy State the Mountaintop to a lower

energy state to a more efficient state

it is steam condensing to W condensing

to water condensing to ice giving off

energy just like in any chemistry lab

you would learn this and at the same

time there's this volatility driver Tom

which is you have an open Capital Market

and and on Saturday night when there's a

missile crisis someone can make A1

billion short bet levered up 100 to one

and panic and they can do it in Bitcoin

and then on Sunday morning when the

missell crisis is has passed and nuclear

war did not break out they can go long

and they can reverse the

trade and bitcoin's the only asset where

you can sell a billion dollars of it in

a minute at a 100 to one leverage and

you can buy a billion back in a minute

with a 100 to one Leverage on Saturday

night and Sunday morning if you could do

that with your upper east side apartment

then property values in the Upper East

Side would also be more volatile and if

you could do it with

picassos that would be more volatile

because if people get drunk and they

panic and they short your ass at 100 to

one and change their mind six hours

later when they get up with the

hangover you're gonna have volatility so

the volatility is a feature it's not a

bug it's because it's the most useful

thing in the world from a capital Market

point of view and if and if it is that

useful then a a Bloomberg jockey in in

Singapore is going to raise 20 billion

in capital and they're going to make it

available for you to trade one Saturday

night or they're going to make $10

billion do of credit available to you on

Sunday morning because they're getting

paid an obscene fee to do it

and once you understand the assets

appreciating because it is

thermodynamically sound and it

represents a lower more efficient energy

state for capital or for money and once

you understand it's volatile because the

network is more useful and more

leverageable it it is basically the

number one it is the number one source

of credit or leverage in the world for

everybody all the time and once you

understand understand it like that you

see the volatility and the performance

are a feature of the engineering and the

technology they're not a happen stance

they're not accidental they're going to

continue in the same way that water will

flow

downhill and you're just like the Normie

that sees a fire and and it's like I'm

GNA harness the fire and I'm going to

sell it and the Nory goes well what if

the fire goes out and the engineer goes

I'm actually going to create a machine

an internal combustion engine with eight

cylinders and the fire is not going to

go out and don't you see how the

six-year-old boy scout like the fire

goes out and then Henry Ford creates a

machine such that the fire doesn't go

out and when you get on a jet airplane

and fly across the Atlantic for 12 hours

do you realize that your life depends

upon the fire not going out in the Jet

Engine and you're surely dead you will

freeze death before you before you

happen to um suffocate should that fire

go out and Engineers solve that problem

for you and so the difference between

fear and risk and anxiety and and

competence and commitment is

understanding the physics and the

engineering of the money

involved okay uh I think treating it

like um physics is brilliant I think the

more we can get out of the metaphor into

the reality the better off we're going

to be so let me set the stage and I'm

going to walk us through some of these

beats of the non-m metaphor version of

this so um you just made a presentation

to Microsoft uh to get them to

recapitalize using Bitcoin and they

voted against it so was 0.55% of people

were for it uh the rest were not so when

we when I listen to you I often get the

sense that you really have come to

understand the nature of capital Flows

In A Way certainly as it integrates

Bitcoin better than anybody else and so

I feel a bit like I'm talking to the

Future um so I really do want to map

what you just said about it being the

physics I thought the the waterfall

analogy is really really brilliant um

I'm curious to see if you think this is

a water if the waterfall is the better

metaphor or if a siphon cup is a better

metaphor um so let me walk through what

I'm understanding so when you say high

energy state of money I assume you mean

High entropy that that there's so much

chaos happening the goal would be to get

out of a high chaos environment with

inflation money printing all of the the

chaos that that reeks on one's ability

to store Capital this is where again

people need to differentiate between

currency and capital so we want to move

that into what you're calling a low

energy state but it's basically uh there

are fewer influences on it it is it is

going to be there um it has the

volatility which we'll get to in a

minute but in terms of a place to store

your Capital once you're not in a

short-term time Horizon you're in a

longer term time Horizon there are just

less influences on it so far so good

yeah yeah so far so good okay so I think

what makes that metaphor so powerful is

that if I'm understanding you um I'm

going to use a siphon metaphor instead

of perhaps the more complete waterfall

metaphor I'm not sure yet so let me use

the the siphon metaphor and see if I'm

understanding where you're going here's

what I read when I if I were going to

make a um a bull case for why this is

going to play out exactly like you're

saying I go uh everybody who's awake and

paying attention to Capital markets is

going to watch people get their 60% ARR

year after year after year after year

after year for people I know you said

the stats but for If people really

understood what you did with micro

strategies taking it from a company

where you're like well I guess this is

dead to being uh perhaps the most

valuable stock on the stock market

insane and we'll talk more in a minute

about how you did that but the siphon

effect is capital paying attention so it

will first be smart Capital who actually

understand what's going on they'll move

first this is obviously what we're

seeing play out then all the adoption

Stacks that you walk people through and

then it it and this is why I say it's a

siphon it just gets to the point where

you can't justify the money not going

into it and so now it's just by you no

longer need people to understand what's

happening just just in the same way that

there are bonds of water there sort of

bonds of narrative about where one

should be preserving their capital and

of course people are still going to

preserve their capital in buildings and

an art to some extent you've mapped this

out for people you estimate that um I

think it's I have the exact numbers here

but there's a a percentage of capital

that people store into so 450 trillion

this is rough numbers 450 trillion in

assets are held for utility so buildings

things like that it's not going to

change but there's 450 trillion that's

long-term capital pure store value and

so the siphon becomes everyone will see

over time that by moving out of this

chaotic state where there's inflation

etc etc uh down into the low energy

state of Bitcoin where there is not uh

that over time you will approximate I

don't think you would ever say 100% but

just for Simplicity you will approximate

100% of that long-term store of value

Capital going to the most efficient

highest return place and as of today

there's nothing even close to

bitcoin yeah I think I think that's

reasonable to say I mean I'm not saying

100% of long-term capital becomes

Bitcoin what I'm really saying is uh

long-term capital is like 450 trillion I

think there's 3% entropic lapse there

there's 3% loss in that Capital every

year either due to inflation or entropy

whether it's a financial asset or it's a

physical asset and that works out to

13 you know 13 to 15 trillion dollars a

year of efficiency and that's just uh

people or institutions owning things and

the building falls down the company

fails right Etc I think uh I I would

liken it to well I mean all the waters

in the lake and all I got to do is carve

a channel and the water's going to flow

downhill and why because that's just the

law of

physics if I took all your money like I

don't know how much of your money do you

have stored in a bank in Africa right

now Tom what percentage of your wealth

what if I took it what if I took it all

what if I'm what if I'm Dr Evil and I

took all your wealth and I moved it into

a random Bank in

Africa and then I said hey uh April

fools Tom I moved your money here but

here's the key you can leave it there or

you can move it back to the US would you

leave it there or might you move it back

I would be moving it back yeah but so

would I have to force you to move it

back I mean what wouldn't there be a

natural tendency on your part to move

the money to a place where you feel more

secure with the money like human nature

is such that that uh there's a lot of

people in the world um do you know that

if you went to China and you gave

everybody in China the option to move

their money to the US not all of them

would but a lot would enough so that the

Chinese government makes it illegal to

do so right the reason there are capital

controls there's a limit of $50,000 a

year is because if people could they

would so there's a natural tendency of

people to want to move their capital

from a less secure more chaotic more

uncertain place maybe where their

property rights are left less I mean you

remember the you know remember in Cuba

when the boat people when everybody

wanted to leave Cuba and come to

Florida right uh people generally want

to move from the less secure to the more

secure place they want to move their

person they want to move their money Etc

it's it's human

nature I think if we come to this uh to

this siphon

analogy well what there's just so much

energy that gets released um when you

move uh from uh from an uncertain unsafe

uh environment to a to a more certain

safer uh more sound

environment that sometimes you don't

have to convince people like for

example a lot of times if if the head of

the household could leave uh a war zone

don't you think they'd bring their

entire family with them like the kids

might not want to go my dad made me go

to places I didn't want to go you know

why when I was growing up because his

job you you know how many children go to

a place they don't want to go because

their their parents get a job that

they're chasing money Tom so people Che

you know why why did everybody come to

the New World money you know everybody

comes up with different ideas it was all

about property rights and property

rights was money that's why the dupants

came that's why everybody came so so

generally you will find why did people

go west money they went they went West

for land they went they went left West

for property so um if you come back to

micro strategy stock well micro strategy

capitalized on bitcoin and our stock

started working so people started buying

the stock and uh it was volatile well

it's so volatile that we have a hundred