Michael Saylor: Why MicroStrategy’s Bitcoin funding is NOT a glitch

micro strategy is the world's largest

corporate holder of Bitcoin we're in

Washington DC to interview its executive

chairman Michael sailor about how his

company has catapulted to be one of the

most highly valued in America really

micro strategies pioneering a new market

we're issuing Securities backed by

digital Capital but backed by Bitcoin

this whole conversion Financial

engineering type strategy is often

referred to online as the infinite money

glitch see the the misnomer there is

it's not a money glitch it it is a

digital transformation of the capital

[Music]

markets meet Michael Sor the technology

entrepreneur who started micro strategy

in

1989 and took it public on the NASDAQ in

98 what is an Enterprise software

company is now better known as the

world's first and largest Cor corate

holder of Bitcoin in August 2020 sailor

converted $250 million of the company's

cash to bitcoin since then he spent

almost 10 billion acquiring more its

total worth is now more than $15

billion making micro strategy officially

a whale it owns more than 1% of all

Bitcoin available the strategy has

transformed its once languishing share

price to a market capitalization of more

than4 billion at the time this video was

made its valuation represents a premium

to its Bitcoin Holdings of about 2 and 1

half times while Believers think it

could shoot higher some short sellers

believe it's only worth however much

Bitcoin it actually holds Michael sailor

is obviously more bullish he says his

company is at the center of the modern

Capital flow to digital assets to

understand how he thinks about the

company's future we flew 17 hour was

from New Zealand to the United States to

interview him at his apartment in

Washington DC a reminder that this show

never offers Financial advice but what

this interview does offer is an insight

into the mind of Michael sailor Michael

sailor thank you so much for having us

in your incredible apartment it's so

good to be here yeah thanks for thanks

for coming I guess you are most welcome

I heard in another interview that you

did that you resed people who worked

from home so I felt like we had to come

and fly all this way to do this one in

person now you were just telling me

before but I'd love my audience to hear

this you spent some time in New Zealand

growing up tell me about that I I did my

father was in the United States Air

Force and uh there was a station down on

the south island in blenham and so when

I was a child I guess I arrived around

age three and I stayed there till age

six I remember walking to school through

a wheat field and uh and every day at

school the highlight of the day was when

they delivered our lunch and it was it

was either fish and chipped wrapped in a

newspaper or it was a meat pie and you

could alternate between one or the other

sounds about right it was like the

culinary highlight of my childhood when

I came back to the US the food went

downhill from there that's amazing so

you actually started school in New

Zealand so I'm going to claim you as a

kiwi for the rest of this conversation

if you're right with that okay now look

I want to get the figures right micro

strategy Bitcoin Holdings

22,2 120 is the number of Bitcoin you

hold is that cor and if we put that at

the current price around

$66,000 that is the total value of about

$16 billion maybe closer to 17 billion

right now but yeah 16 and a half to7

billion now do you mind if I personally

ask how much you how many Bitcoin you

hold personally in its total value I I

have more than

17,7 32 that was the the amount I

announced about four years ago haven't

sold any that's amazing okay we're going

to come back to that and talk more about

the Bitcoin revolution in the later

stage of this interview but first I want

to talk about micro strategy the company

that you yourself started decades ago

now how should investors think about the

underlying software company because you

still operate it right you often talk

about micro strategy as a Bitcoin

development company but I can imagine

the actual software company is quite

critical because its success provides

the means to accumulate more Bitcoin

well um the way to think about micro

strategy is uh three components we've

got a balance sheet which is the Bitcoin

balance sheet we've got a software

business a technology business and and

that was the springboard for us to get

into Bitcoin and now we've got an

emerging Bitcoin securitization business

where we're a Bitcoin development

company and we leverage our Bitcoin

balance sheet to issue uh Securities to

the public market that uh that no one

else could so easily create as us so if

we look at the software business well

that's a 500 million doll a year Revenue

business and it generates consistent

cash flows and that got us to 2020 and

that's still a very healthy business

it's a multinational and we do business

with thousands of companies all around

the world including customers in

Australia and New Zealand and Korea and

Japan and you know you name it um but uh

the best way to think about micro

strategy of your investor is we have um

we're the large

operating company that holds Bitcoin so

if you have $17 billion of capital of

Bitcoin that's permanent so there's no

Redemption rights to that um there are

there's ETFs like black rock or Fidelity

that are comparable to us in size but

those are overnight

deposits so if you said hey I've got17

billion in deposits people can take the

money out of the bank tomorrow well they

just basically are are a trustee holding

the money and they and they return it

when they're asked to return it you

can't leverage it and you can't uh you

can't build businesses on top of it

micro strategy has permanent Capital so

for example we can do things like uh we

can issue convertible bonds on top of

that Capital so if you have you know we

have 16 to 17 billion in in Bitcoin

exposure we have 4.2 billion in

convertible bonds the bonds we can issue

fairly cheaply because we have a a a a

stock the stock reflects the permanent

capital of the Bitcoin but that's not

redeemable either that means that it can

generate a premium to the Bitcoin so as

people trade the stock and they trade

the options on the stock the stock

trades at a premium to the asset value

and when the stock trades at a premium

to the asset value the company issues

either Equity or convertible bonds at a

premium to the underlying assets when we

do that we don't just put the money in

the bank or in t- bills we actually

invest the money in Bitcoin so you could

imagine when the company issues if we

were to sell a billion dollars of equity

in the market and it's backed by 500

million of Bitcoin at 100% premium then

we buy the Bitcoin and three days later

we've generated a $500 million gain for

our shareholders in Bitcoin so that's

very interesting that generates what we

call a BTC yield now now if we do the

same thing with a bond a billion dollar

convertible Bond we don't do it at 100%

premium it might be a 200% premium

because the bond comes at a premium to

the stock so when you go up 40% over a

stock which is 100% now you're looking

at something looks like more than like

180% so now a billion dollar Bond sold

into the markets back by $350 million a

Bitcoin we buy back the billion of

Bitcoin we we capture the

$650 million gain another BTC yield so

the real operating business of the

company isn't uh the the software

business anymore I mean that's that's

still there it generates 75 million in

cash flow but one of those bonds would

generate 10 years worth of of

earnings in five days and so really

micro strategies pioneering a new market

we're issuing Securities backed by

digital Capital but backed by Bitcoin

and then we're buying the Bitcoin back

so what that means is I could issue the

bond in one week buy the Bitcoin capture

the 34500 million gain announce it to

the market the stock would trade up I

could do another Bond the next week so

instead of a traditional model where I

raise a billion dollars I go find real

estate in Aquin I invest in the real

estate I leverage it up and in 5 years

you determine whether I was smarter

stupid right history of our property

Market you'd be pretty smart it's a

5-year investment cycle and if I was

smart after five years I come back to

the capital market and I say I'd like to

raise another billion now I have to find

another set of real estate in Ackland or

blenham or Sydney or

Melbourne and it takes another five

years to figure out whether it worked so

what you have there is heterogeneous uh

credit and you have a slow investment

cycle micro strategy has homogeneous

credit we're going to raise a billion

buy Bitcoin show you that we bought

Bitcoin that it created bitcoin per

share the investors look at it it's an

immediate gain we just live through five

years and five days and and then once

we've we've done that fast rapid

investment cycle what's your next idea

I'm going to do the same thing again I'm

going to buy another billion of Bitcoin

and so if you look at that against the

backdrop of this year in the first

quarter we did an $800 million

convertible Bond we bought Bitcoin the

market liked it the very next week we

went back to the market did a $600

million convertible Bond bought more

Bitcoin it was a creative the market

liked it so what we do we went back the

next quarter we did another $800 million

Bond we bought Bitcoin the market liked

it in the middle we sold hundreds of

millions of dollars of equity and the

next quarter we sold more Equity the E

we sold 1.1 billion of equity in

Q3 we uh we BAS basically did that at a

massive premium so we captured a large

BTC yield we announced that the market

liked it and then very next week we did

a convertible Bond and uh that became a

billion dollar convertible Bond and so

what you see is we're running a very

rapid investment cycle we're developing

a city in cyers space we call that City

Bitcoin it's like if um if we were the

first public company to show up in

Manhattan and we started selling debt or

public Equity instrument in order to

raise money to develop Manhattan and

everybody else was using cash or going

at a slow rate and if if we found that

the two innovations are one we issue

public Securities to develop Manhattan

and the second is we can build the

building in five

days right so you can't do that in real

space it takes five years to build the

building right and you can't you can't

uh hit the public markets for Capital

but in

cyberspace I can raise the capital every

month I can build the building in five

days our

investors are bitcoiners right so if

you're a bitcoiner what do you think you

think bitcoin's going to go up forever

with some volatility so what do you want

you want more Bitcoin per

share so how do you know whether the

company is succeeding that's giving you

Bitcoin per share well we do the deal we

announce BTC yield this is how your

Bitcoin per share Creed how long does it

take it takes a few days so the real

micro strategy business is to be the

leading public issuer of Securities in

order to acquire Bitcoin and as we

acquire the Bitcoin we're driving up the

scarcity of the Bitcoin we've now bought

more than 1% of the Bitcoin now there's

only 450 Bitcoin available for sale from

na every day by natural sellers the

miners you know so 450 time 67,000 a

Bitcoin it works out to 20

20 million in change so you can see what

happens is if we're raising Capital via

tapping into the public Equity markets

and the public fixed income markets and

we're bringing that Capital back and

we're structuring our balance sheet and

we're buying the Bitcoin then that's

good for Bitcoin uh and of course that

leverage that we get via issuing the

debt that's $4.2 billion of debt at 80

basis point so we pay you know we pay

less than 1% interest for the 4.2

billion which creates The Leverage on

the equity and because there's leverage

on the equity that creates more

performance it also creates more

volatility now who wants volatility the

option Traders want volatility so in the

options market we've gone from a $3

million open interest in micro strategy

options to some days 40 billion

right so the options Traders are trading

High volatility you could think of them

as the options Traders want 10x leverage

on bitcoin 10 to 20x leverage and maybe

they want it long they want calls or

maybe they want to short it 10x they

just you know the haters want to short

it the lovers want to long it right but

then micro strategies like 1.5x Bitcoin

and then if you build a derivative on

micro strategy like mstu or

mstx they're like 2x micro strategy so

that's like 3x Bitcoin and so how well

have they done in like two weeks they

raised like $700 million in two weeks no

marketing so on top of this stack if

you're looking at spot Bitcoin ETF spot

Bitcoin you either buy Bitcoin or you

buy ibit or fbtc they're offering

you standard Bitcoin returns 50 AR

with 50 Vol 50 volatility and 50 AR and

100% upside 100% downside that is the

digital

commodity micro strategy the stock is

1.5x and the way we get to

1.5x is we issue these bonds which give

you half the upside of Bitcoin little

downside if what if I want half the

upside 5% the downside right well that's

you buy a convertible Bond senior in the

the capital structure of a company

that's

4X over collateralized right so people

that are risk adverse they can actually

buy the bond and get half the

benefit people that are Bitcoin

maximalists can buy the equity and get

1.5% benefit the degenerates the Traders

they can get three to 10x and then the

haters can short the common stock or

short or short with puts and we have

sometimes $15 billion doar or2 billion

of open put

interest you know when I was a younger

man when we first came public you know I

was in my early 30s and and if people

shorted my stock I would be like they're

shorting my stock I don't like them but

you still called them degenerates today

though know that that's that's a term I

I would Reserve to people that are

trading with so much leverage they might

get wiped out on the weekend but they do

it for the Thrills in Li of going to

Vegas now but when I was a younger man I

you know I would have been concerned

about people shorting my stock but now

I'm not because micro strategy is really

just providing a set of uh a set of

institutional um instruments that

institutional investors can use to

tailor a portfolio that's long short

hedged they can sell the volatility they

can Arbitrage the volatility they can

Arbitrage any instrument against any

other instrument they can generate yield

they can buy

insurance uh some of those people that

are short they'll short a billion

dollars of micro strategy and they'll

buy a billion dollars of Bitcoin and so

if we didn't exist then billions and

billions of dollars of capital from the

traditional Finance markets wouldn't be

invested in Bitcoin because they can't

buy or hold the underlying crypto asset

they can only buy Securities or bonds or

options or other instruments so we

become an Institutional Gateway for

crypto exposure by all types of

investors and you know my real

aspiration now is if you really hate

Bitcoin I want you to love us like we're

the perfect instrument to short right if

you because I promise you I won't sell

it right we're going to be levered long

Bitcoin and if you're if you don't like

it or if you just want to hedge it you

get to sell our stock or sell our or

sell puts or or buy puts right and uh

and the worst thing I could do is to

take your side of the trade or to

interfere with what you're doing so so I

think part of micro strategies rise to

prominence in the space is we have been

laser light focused we're very

consistent we're very

transparent we're going to buy Bitcoin

never sell Bitcoin we're going to borrow

money intelligently

if you like Manhattan and if a company

said I'm going to borrow $5 billion at

1% interest and I'm going to develop

Real Estate in

Manhattan you might think that that's

kind of company you would like to invest

in but if you hate Manhattan and we're

150% exposed in Manhattan You' got this

investment t-shirt like that's the

company I want to short and the most

important point in the marketplace is

you just have to be very pure true to

your focus have integrity and

consistency and

transparency because it's it's not my

job to trade hedge Arbitrage or

construct that portfolio there are guys

with hundreds of millions or billions of

dollars in a Bloomberg and that's what

they do every day so my my contract with

them is we're going to do what you can't

do we're going to buy Bitcoin hold

Bitcoin and we're going to issue equity

and we're going to issue debt

instruments and you can't do that we're

a public company in on the you know the

NASDAQ Stock Exchange in America with a

nearly 30-year track record

and we have 16 billion of permanent

Capital that's Bitcoin right so I can

create an equity with 80 or 90 ball I

can have permanent Capital we can stand

massive

swings because of our capital structure

that's what we can do what you can do is

decide if you want to buy it sell it

hedge it or short it short it so let's

talk about micro strategy rise then in

the past few days it hit $43 billion a

52 we High all of those functions that

you spoken about are the reasons why you

think that your stock can currently

command a premium to its net asset value

43 billion at its High versus that 16

billion in its net asset value being the

Bitcoin Holdings give me the rationale

beyond what you've mentioned about those

functions for you think that you think

it may be able to continue to expand to

perhaps 1 trillion

us uh because I mean if you wanted to

make it simp put it simply we're the

only company that can issue Bitcoin back

bonds so any anybody can buy Bitcoin and

have all the downside and all the upside

and all the volatility but what if I

want half the upside but no downside

what there's a lot of people if you look

at the at the uh fixed income market

look at the corporate debt market look

at the preferred stock market look at

the convertible bond market people in

the convertible bond market they have to

buy a convertible Bond I can buy I can

sell a billion dollars of bonds in one

day to people that have to buy the bond

they can't buy Bitcoin they can't buy

the equity so who in the market is the

leading issue of convertible bonds well

we are micr strategy we've issued like

$5 billion worth of convertible bonds

and so we've got that uh that

credibility and what's going to back the

bonds Bitcoin well what if I had $50

billion of cash and in treasuries and I

wanted to issue Bitcoin bonds it

wouldn't work why because uh the

volatility of a t bill is five the

volatility of Bitcoin is 50 the

volatility of micro strategy Equity is

80 if you want to buy convertible Bond

you want to buy a a bond from a issuer

that has volatility more than

45 you want High volatility you want

High liquidity and of course you also

would like the Bitcoin upside if Bitcoin

R if it

doubles the convertible Bond will will

provide you a Bitcoin return but only if

it's sold to you by a company that's all

bit all Bitcoin so micro strategies this

Bitcoin Securities company

and if um if I want High Vol high

performance Bitcoin Equity well you have

to have a company that's 150% Bitcoin if

you want High volatility High performing

Bitcoin converts you need a company

that's backed by Bitcoin if you want to

buy you know a bond that that pays 100

200 basis points more than conventional

things you need a company that can sell

you that bond that has a way to generate

better than that so there's an entire

swap Market out there where a lot of

people would love to get paid 7%

interest fixed income

retirees people literally have hundred

billion dollar funds and they have to

buy bonds that deter that generate fixed

income that's the name of the the fund

fixed income right they can't buy

Bitcoin they can't buy the equity they

might not even buy the convertible Bond

so micro strategy can we can generate

that Bond and of course bitcoin's been

going up 50% a year okay so we have

crude Capital digital capital on one

side this is 50% with massive

volatility there's a lot of people that

would love 10% fixed income with 10

volatility so how do you turn you know

high voltage Capital into low voltage

fixed income you need a Transformer

okay so what's the perfect Transformer a

company with 10 2030 billion dollar of

Bitcoin and then I sell a billion dollar

Bond here that gives you this percentage

and this low volatility and I invest the

money into this which is high

performance High

volatility and so what micro strategy

does is we're scraping or stepping down

the volatility and we're stepping down

the

performance now you would think why why

would you want 10% instead of

50% that I mean like why would you want

that well micro strategy's gotten 50%

every year for the past four years but

we took 50% Vol right the world's full

of people that would rather have

five% and five Vol or 10% and 10v or 15%

and 15 Vol so in essence micro

strategy's opportunity is to be that

leading public company and securitizing

ing this asset class and then providing

the derivatives you know fixed income

high

yield

convertible high performance equity and

you can't really do that if you don't

have a public company with permanent

Capital you you can't do it with an SEC

40 an ETF or a trust see they've got

overnight deposits they can't generate 5

years duration l

on some kind of preferred or Bond likee

instrument so I guess the last metaphor

I give you is you know Standard Oil

created the oil business so I give you a

petrochemical Refinery and think about

what goes in one side it's crude oil

what comes out the other side

gasoline why do you put gasoline in the

car because that's the only thing that

works kerosene what do you put that in

Jets that's jet fuel right what Pro

opine you know goes and paint product

comes out all of those petrochemical

products come out this side the refinery

does a lot of work and incomes crude oil

so think of micro strategy as we take in

crude Capital there's no doubt it's the

best performing asset in 15 years it's

theoretically the best digital the best

form of capital is digital Capital it's

just scary to a lot of people it's too

volatile it's too difficult to manage so

they want someone that can you know

domesticate it step it down package it

in safe components and then connect it

into the fixed income Market the high

yield Market the you know the convert

market and the public Equity market and

micro strategy you know we

inadvertently we just inadvertently

backed into that because to do what you

what we did you have to start with a

very small company a billion doll

company and then we become a $40 billion

company and now we're 150% Bitcoin so if

you take another billion dollar company

and do what we're doing you can't catch

us because at this point we can we can

grow5 10 billion dollars a year in

capital or faster you can't catch us if

you start with the same thing but if you

take a big company like Google or meta

or Microsoft or apple and they took 50

billion and they bought 50 billion of

Bitcoin well that would be good for

Bitcoin and that would be good for their

shareholders and if Apple did it a lot

they might add a trillion dollar the

market cap but it would be a trillion on

top of three trillion so at the end of

the day Apple would be an Enterprise 25%

Bitcoin 75% Apple micro strategy is an

Enterprise 150% Bitcoin so how do you

create a company which is 150% Bitcoin

coin that can sell billions of dollars

of fixed income instruments or billions

of equity into the market with a

permanent Capital base that's going to

oscillate it's going to vibrate with the

frequency of Bitcoin right that that is

I'd love to say we had the idea four

years ago and that's what we're trying

to do no we just kind of stumbled on to

just a really great business I do want

to get to Apple and how you perhaps plan

to convince companies like that to

follow your Bitcoin adoption strategy

Playbook but this whole conversion

Financial engineering type strategy is

often referred to online as the infinite

money glitch but I wonder if it is

infinite or not and if it's not do you

perhaps see it running into more of a

supply issue first or a demand issue

first Demand Being perhaps there might

not be potential buyers of all of those

other options like bonds or Supply that

if you create too many shares and can

make too many conversions from your

stock that investors existing investors

will be diluted too much that they run

into a a sort of cap with that or can

this just get gone forever Michael see

the the misnomer there is it's not a

money glitch it it is a digital

transformation of the capital markets

like when when uh you have a system that

moves from a higher energy State a more

disordered state to a lower energy State

lots of energy gets given off think of

steam becoming water like is it a money

glitch it's just steam becoming water

and it condenses what happens when water

becomes ice it's not a heat glitch but

heat what what you and what happens when

you add heat the ice becomes water the

water becomes steam so if you look at

the capital markets you've got $ 800 900

trillion dollars of wealth in the

capital market and you've got this

wealth you've got people invested in all

these

heterogeneous assets uh why did 98% of

the companies in the S&P 500 not perform

right how come 1% of all the Returns

come from like seven companies right uh

what I talked about with if you study

the the convertible bond market someone

issues a convertible Bond it takes them

five years for the investors to figure

out whether it worked and then when they

come up with a new convertible bond is a

different credit proposition it's very

inefficient right if you think about

preferred stocks very inefficient junk

bonds very inefficient private credit

very inefficient you know um fixed

income people get very low yields what

if I you know I'm getting this yield and

I'm taking all this credit risk and

counterparty risk so of the 900 trillion

in capital in the global Capital markets

half of it is just long-term store of

value long-term capital you know that is

pure Capital people with money just want

to keep their money rich just want to

stay rich I give you an organization a

billion dollars in the endowment you

just want to not lose the billion

dollars precisely right so that 450

trillion is invested in buildings that

are rusting it's invested in cars it's

invested in fleets it's invested in

things that suffer from 20th century

risk

factors credit default War tariff

tornado tax Tech you know like you had a

good business at Kodak and your family

had all their money in Kodak and then

what happened or you own Xerox and what

happened then you own the best business

in Ukraine and then there's a war that

happen right I I could give you 10,000

examples of risk factors that destroy

wealth so you've got that 450 trillion

on one side and then you've got one

trillion digital

Capital it's like well I had a building

I get rid of all the things that make

the building a problem and I make it an

invisible Immortal indestructible

teleport digital building that' be cool

okay well that's what Bitcoin is so this

thing that people think of as a glitch

it's not that it's it's energy flowing

from a from a steam state from highly

disordered inefficient bouncing into

each other into a more ordered state

right it's moving it's moving from a

you're in Africa I give you a billion

dollars I say go invest in any real

estate in Africa and anything you want

any country hold it for 30

years there's not a single thing you

know that you would want to invest in

and I say well you know would you rather

own a billion dollars of real estate in

Africa or a billion dollars of real

estate in New York City well you can see

you'd rather swap the New York City risk

for the for the Nigerian risk and then I

say well would you rather own a billion

dollars of real estate in New York City

or a billion dollars of Bitcoin or

billion dollars in in cyber Manhattan

there's no mayor in cyber Manhattan

there's no property tax in cyber

Manhattan there's no storms there's no

weather in cyber Manhattan everybody

lives forever in cyber Manhattan you can

you know you can teleport cyber

Manhattan 60 times a second you can

program it as an AI it's like so what

you see is it's not um it's not a glitch

it's simply Capital flowing from a

disordered economy like in in Argentina

and Nigeria they have

hyperinflation okay so if I happen to be

there and I'm selling pesos and buying

dollars and you know the peso used to be

one peso to the dollar and today it's

like 1,400 or 1,200 pesos to the dollar

was that a glitch like was it or was

that just a market at work that's

basically the free market it's it's

Capital flows to where it's treated the

best and so if I have Capital you know

in in Argentina I would put it in the US

and if I have cap on the dollar let's

take the dollar 100 years ago in Miami

Beach uh an acre of land on the

waterfront cost

$10,000 today $10

million the dollar lost

99.9% of its value against Real Estate

waterfront property in Florida okay is

that a glitch right and the the peso

lost

99.9% of its value against the dollar in

20 years is that a glitch that's really

just capital flowing from a weak asset

to a middling asset to a stronger asset

and bitcoin's Advance is capital flowing

from 20th century analog assets

financial and physical assets to the

21st century digital

economy and it's going to go fast early

on it went really fast the first decade

has been going 50% a year AR for the

past four years but as the 1 trillion

equal equalizes with the 400 trillion

and this becomes 20 when this becomes

four probably this 450 trillion will

become 700 trillion but this one

trillion will become 100

trillion and so as this becomes a

fraction of the 20th century economy the

difference between the cost of cap

capital and the Bitcoin Universe which

is 50% right now and the cost of capital

in the dollar Universe which is about 12

to 14 % look at basically that's the

return of the S&P so the SNP sets the

cost of capital for for traditional

conventional assets and Bitcoin is the

opposite and so Bitcoin is like three

and a half times the SNP and it's also

three and a half times the volatility

look at uh Devol Bitcoin volatility 55

versus the vix and so if you look at the

two it's it's not a complicated thing

it's a thermodynamic idea that any

physicist will tell you this is a hot

fluid this is a cold fluid I pull up the

gate and I mix the fluids and how hot is

the bathtub it's somewhere in between

right the temperature is going to it's

going to be in between scalding hot and

freezing cold and in the middle if there

were some ice cubes in this one and I

released scalding hot water here some of

the ice cubes are going to melt but

you're going to end up with a warm bath

with the exception that there's always

going to be you know if you look out if

you look out 10 years instead of 50 vers

50 Vol versus 15 Vol maybe it'll be 45

to 40 to 38 to 36 to 32 to 28 this

volatility is coming in this ARR is

coming

in now this comes up because what

happens when when like when Apple and

Google and Microsoft and Facebook or or

whatever when they buy Bitcoin what

happens when that you could take the

bottom 98% of the S&P 500 if they bought

Bitcoin their performance would start to

approach the big Tech and so the

performance of the S&P index will move

toward Bitcoin as they put Bitcoin on

the balance sheet Bitcoin performance

will move toward the

SNP as we move from you know a 100 to

one ratio to a 10:1 ratio to a 5:1 ratio

and these things equalize but you know

if you understand it as

thermodynamics and and collapsing into a

more efficient energy State like how is

it not more efficient to be able to

teleport a building 60 times a second

between New York and London right that's

efficient versus your family made an

investment in London 30 40 years ago and

they changed the law last month and now

you're going to lose all your wealth

that's inefficient right so Bitcoin is

the digital transformation a capital

micr strategy Y is just a business

taking advantage of of the digital

transformation but if I was talking to

Apple I would say don't buy back a 100

billion of your stock buy a 100 billion

of Bitcoin it will go to 500 billion

you'll have a $500 billion do business

growing 20% a year you'll make a 100

billion investment gains a year your

investors will look at it and they'll

add a trillion or two trillion dollars

to your market cap and now the company

will be valued 60% based upon the

operating business 40% based on the

balance

sheet right and the risk will shift

because the risk in a conventional

company is the balance Sheet's

worthless and the company's value based

upon the p&l and so if you make a

billion dollars a quarter I basically

value it at 20 P to e so I take the

quarterly result I multiply by 80 and I

say oh you're worth 80 billion doll

because I took one billion and multipli

by 80 and the balance Sheet's worthless

but the next quarter I say well my

billion went to

zero well that's 80 times a billion

dollar change you've got a a massive

whip saww that's why these company

stocks crash if the company had $40

billion of tangible assets on the

balance sheet and it was that puts a

floor right on the equity and and really

what you want is you want a well balance

come company

where I it's like Harvard University or

Yale they're not valued based upon the

earnings of this semester of freshmen

entering Harvard they're valued because

they have 18 billion in the endowment

you know and and if they close the

university is still Rich they have 18

billion in the endowment so micro

strategy just pioneering uh yeah it's

kind of Common Sense your family

wouldn't give away all your money and

just say we're going to work harder and

a university wouldn't give away all its

money and say we're going to raise

tuition cram the classes cut the teacher

salary and work

harder but conventional wisdom in

finances your company ought to Dividend

out its capital it ought to buy back its

stock it shouldn't actually hold any

capital on the balance sheet and it

should just raise its prices and tell

its employees to work harder and cut its

cost and that in a nutshell is why 99%

of the companies in the world

underperformed from the Magnificent 7

and why they all could benefit by just

adopting Bitcoin as their treasury

Reserve standard that was an interesting

point you made about analyzing and

coming to the valuation in terms of

analyzing the performance of a company

right investors historically as you

mentioned just look at a price to

earnings forward-looking ratio or look

at the profit and loss how should

investors analyze micro strategy because

if you mentioned that to give you a

metaphor micro strategy is the tap to

that Capital flow as you mentioned

there's nothing else like that like are

you a Bitcoin Bank do we value you

similar to do we analyze you similar to

a bank or do we I've seen a

simplification perhaps is analyzing

micro strategy like a re like a real

estate investment trust but that feels

too simple I mean is there anything we

can compare it to Michel I think I think

you got to look at the balance sheet and

say okay that's one component they've

got this much Bitcoin and then you got

to look at the p&l and say well how much

investment income can they generate so

if the company gets to 50 billion dollar

of Bitcoin and if Bitcoin goes up 20% a

year the company generates $10 billion a

year of investment income and that

compounds 20% a year so if you if I said

to you hey here's a big tech company

that makes 10 billion a year and they're

growing that 20% a year how would you

value that I mean through through the

roof right there you go so it's not very

complicated the thing that's held people

back is we've used indefinite intangible

accounting for the last four years and

we and it's not until 2025 that you

actually start to do fair value

accounting and when you and and when you

start to do fair value accounting you

can actually see investment income and

you can see the income potential and so

the it's not complicated to figure out

what the balance sheet is everybody

knows you know 252,000

Bitcoin the complicated thing is to

grasp the idea of a company that secur

that issues Securities back by Bitcoin

and the real franchise the micros

strategy has is we're the leading issuer

of Bitcoin back Securities so the

question is how much Capital can we

raise how much permanent Capital we have

and the second question is how much

leverage will we use and what and how

intelligent will it be and the third

question is what's your forecast for

Bitcoin right I mean and so there's

three variables there if we borrow 10

billion at 7% and we invested in Bitcoin

and Bitcoin returns 21% then we scrape

14% Arbitrage on 10 billion we make 1.4

billion a year in the swap we roll that

into the business and then 10 years out

you've got $50 billion doll business or

50 billion in in in capital and you're

generating $10 billion your investment

income just off of that one piece right

but it all comes down to you know what's

the nature of the capital how much can

we get and raise and then how will we

invest it and we'll be

responsible you know and and you know

the the haters right the haters think

well bitcoin's just uh going to go up 0%

a year right so of course from their

point of view the balance Sheet's going

nowhere and and if Bitcoin goes 0% a

year you can't raise any Capital right

so if that's your forecast you're not

that interested you know my my view is

Bitcoin is going to appreciate 29% a

year ARR for the next 21 years right

that's my to what what's the dollar

dollar figure on that 13 million per

Bitcoin yeah okay and so what do you

think my shareholders think well my

shareholders are pretty bullish on

bitcoin right there's no one buying

micro strategy that hates Bitcoin no

they're shorting it yeah so at the end

of the day I mean the methodology would

be figure out what's your forecast for

Bitcoin but by the way you can go to uh

go to Google type uh Bitcoin 24 and

you'll find the Bitcoin 24 open- Source

model it's a 21-year model model you can

download it it's a spreadsheet you can

put in your forecast for Innovation rate

inflation rates all the asset class

monetizations demonetization Bitcoin

assumptions supply all that you can put

that all in and you can run your model

and you can get your own answer right so

do that and then you just got to

consider well how much Capital do you

think the micro strategy will raise via

Securities offerings and after you do

that you decide are we respons ible

custodians and then you create a five or

10 year model for our investment income

and you figure out how much income can

we generate and how fast can we grow and

of course all those things are very

integrated and you know if uh the more

you know about the capital markets the

more enthusiastic you get because we

look and we say the convertible markets

are inefficient the preferred stock

market's inefficient the high yield

Market's inefficient the corporate debt

Market's inefficient you you know the

real estate market is inefficient so you

know we our view is we kind of want to

be the Amazon of fixed income we want to

we want to build a better product direct

to a new distribution Channel and uh you

know I don't blame people for not

necessarily understanding that because

sometimes you have to see it and in the

in the absence of you know fair value

accounting and and the like and

three-year forecasts and those you know

don't exist it's it it's a lot for

people to to grasp right now well you've

even had to come up at micro strategy

with your own measurement to to measure

the success of the strategy you already

mentioned it earlier on in this chat the

BTC yield currently had a date that's

around 12.2% that yield but over the

next 3 years according to your most

recent quarterly report you're targeting

something between I think 4 to 8% is

that correct so that so that then

implies a diminish a diminishing in that

yield so once it decreases or compresses

that yield what happens then do you need

to come up with another means to convert

Capital let's just focus on BTC for a

second what is it it's the rate of

increase in Bitcoin per

share so if uh I think we're getting

close to almost an 18% like 177% BTC

yield for the year so far that means

that uh between January 1st and today

you've you've gotten more than 177% more

BTC per

share um if I if I gave you a company

and I said it's got a dividend yield of

177% and I give you another company say

it's got a dividend yield of zero you

know it's like well you would value the

second one based upon the underlying

asset but you're not get to any more but

the first one you would actually take

the underlying asset and then you would

take the yield and then the question is

how long will they generate that

yield right and what's the average yield

over the lifetime of my holding period

so in that case I mean you could say if

I expect four to 8% yield you could put

a 10 20 or 30 pte on that sometimes

people will you know it's basically your

earnings per share in a way but you know

we can't really call it that because

it's it's a non-gaap measure and it's a

it's a it's a Bitcoin per share type

measure for that's valuable to people

that love Bitcoin but when you think

about it that way right the simple model

there is is the company should have a

premium equal to the multiple of the

yield right if you think the multiple

should be 20 and if you think the yield

will be 8% then you could say the

company should trade at 160% premium to

the underlying asset right so so um the

ability to generate that yield will

justify that

premium and it's a it's a simple model

but it's not it's not the whole model

the real issue is how you generating the

yield and and the the way you're

generating the yield is through issuing

Securities to the public market you know

that that come that generate that yield

and one way to do it is by issuing

Equity at a premium that's a that's a

simple way the most simple way

imaginable right another way to do it is

to issue convertible bonds at a premium

to the equity which may or may not be at

a premium to the asset that's a slightly