What Is Money? Michael Saylor Tells Us!

the separation of property from Earth is

a very important very important topic

and you know then we have to ask these

existential questions what is money what

is energy what is

security and they all the roads seem to

lead to

bitcoin what please add to that Michael

you know I never thought about what

money was until um the co lockdown

pounds and then uh the Federal Reserve

lowered the interest rate to zero and I

had a lot of money in the bank

generating zero and then it occurred to

me that the prices were going to go up

quite a lot and I started thinking about

a couple of Concepts one is what is

money and the second is what is

inflation and um and then the third is

you know what what is wealth and how do

you preserve wealth well a simple answer

to what is money is money is money is

economic

energy money is um you know you have a

certain amount of wealth uh and economic

energy could be viewed as capital could

be viewed as wealth um and

uh we often times store our economic

energy in different assets we could

store it in a currency like the dollar

we could store it in a bar of gold we

could store it in diamonds we could

store it in a Ferrari we could store it

in a house in a building in a warehouse

or we could buy a share of stock these

are all different ways to store our

wealth our economic energy and they all

serve as sort of money now the question

is which of those assets is the best

money now um I think the the thing to

keep there in mind there is um is if

money is energy the energy dissipates

with a certain time frame so for example

if um if you had um a 100,000

in the year

1930 you could have bought a very very

nice house in Miami Beach I know because

I own a house built in 1930 and the deed

of sale is for

$100,000 on two acres and the middle of

Miami

Beach that house was appraised at $46

million in uh about 90 years later okay

so if you actually are good at math you

can calculate that what that means is

approximately a

99.8% loss in the purchasing power of

the dollar over 90 years or if you do

exponential math in your head I I can

tell you the answer it's 7% inflation

rate the inflation rate of real estate

in Miami Beach over the last century is

7% a year now the

politicians and the government agenc

gencies will tell you the inflation

Target is only 2% well they'll tell you

CPI is 2% but in fact the inflation rate

of consumer goods that are manufactured

like I don't know like cardboard boxes

of milk or cardboard boxes of water or

drywall or Netflix videos or uh or

biscuits coming out of an assembly line

or chocolate bars that come out you know

a million an hour yeah those things are

going up in price but they're but

they're not going up at 7% a year

because technology and capital

investment and human Ingenuity is

actually making it cheaper right uh you

can reasonably conclude that we're

better at manufacturing things today

than a hundred years ago so of course

things that are manufactured get a

little bit cheaper but what can't you

manufacture more of that's like

beachfront property in

Miami okay so if you actually calculate

the inflation rate of scarce desirable

assets like beachfront property it isn't

2% it's seven or 8% the same is true of

real estate in London Paris La any place

desirable it turns out the inflation

rate of the S&P index of a scarce

desirable company one of the 500 bestr

run companies in the United States

that's also

7% right the um the government would

tell you that's not inflation that's

just uh investment appre that's asset

appreciation they'll say you know know

good for you homeowners values of their

homes went up 7% this year and the value

of your stock went up by 7% this year

but what they're missing is that the

average person's salary isn't going up

by 7% so it gets harder and harder and

harder for people to buy scarce

desirable

things I think once I got into this

business I realized that that uh the

dollar is not a good uh monetary

instrument because it loses 7% of its

purchasing power a year but foreign

currencies the like the peso or or the

ler or something they lose 14% or more

of their purchasing power every year

they're even

worse now if you're an engineer you

think in terms of halflife the question

is what's the halflife of your money

like what's the halflife of your

economic

energy when uh the inflation rate of the

dollar is 7% it means that every 10

years you lose half your

wealth when the inflation rate is 14% it

means every five years you lose half

your

wealth gold has an inflation rate of 2%

it turns out the gold miners create 2%

more gold every year that means every 35

years you lose half your

wealth so the halflife of money in each

of those instruments each of those

assets ranges from a couple of years in

a commodity to 10 years in the world

Reserve currency to 35 years in the

dollar now what's the halflife of money

in Bitcoin see Bitcoin is designed to go

ASM totically to 21 million so in fact

the inflation rate of Bitcoin over the

next hundred years is effectively

nothing like we've got 19 and a half

million Bitcoin uh now and we'll have 21

million in a 100 years so you're going

to get another few percent over the

course of a hundred years and then

you're going to get nothing more for all

of eternity so if you think about it

like that you realize that the half-life

of your money in in the right crypto

asset in this Bitcoin network is in e in

essence

infinite which makes the money

Immortal

now think about the implications of

having a halflife of a 100,000 years or

a million years or forever when uh the

halflife is forever the money is

Immortal that means your economic energy

doesn't

dissipate now you want an analogy um the

analogy is um uh what if I just bled a

pint of your blood every time uh the day

before you ran a track

race and if I just did it you know every

week you run a race and just before the

race I just take a pint of your blood

and I send you out to race the mile

maybe you don't run quite as fast and

then and then one day someone comes

along and saysi have a new idea what if

we didn't bleed our

Racers you know and you know the gift I

give you is I stop bleeding you at

before your athletic competition I mean

obviously you'll probably do better

right you feel a lot better about it

when the money is being debased you're

in essence draining the economic energy

out of the currency you're bleeding

every company

now if I raise uh the supply of dollars

7% a year

for a hundred

years any Corporation that's valued

based on cash flows has to grow its cash

flows more than 7% a year in order to

maintain its value

constant if you're growing at 3% a year

and the money supply is growing at 7 and

a half per a

year over the course of a hundred years

a million company is only worth

$30,000 see see you're you're getting

destroyed because you have at a

negative3 and a half% real yield if you

actually have a stock and you want the

stock to hold value and your value based

on cash flows your cash flows have to

grow faster than the monetary inflation

rate now bear with me what happens when

the monetary inflation rate goes to

14% you have to grow at 20% what happens

when it grows to 20% you have to grow at

30% how many companies can grow their

cash flows 20% a year for 20 years in a

row

well uh since the beginning of the

year the S&P 500 is up about

11% seven companies in the S&P 500

account for 52% of uh 52% gain every

other company is zero zero% gain 493

companies have

zero one and a half perc of all the

companies are all the gain and that's

because if you're not a digital Monopoly

right if you're not a monopoly with the

ability to create a product with no

variable

cost you can't keep up with the

inflation rate now which Co which

companies can actually create products

with no variable cost or monopolies

right big Tech right so they sort of do

Okay now what's the other organization

that can create money with no variable

cost it's a

monopoly the central

Bank the Federal Reserve right they can

create a trillion dollars of dollars

that cost nothing that are worth the

trillion dollars now they they sell that

into $50 trillion dollar economy so they

kind of in you know they debase

Everybody by 2% or something right but

you know that means that they created a

trillion dollars that are worth

99% of what a trillion dollars were

worth a year ago it's pretty good

business for them if you have the world

Reserve currency

but what this means in the economy is

the only companies that will actually

last for

Generations are companies where the

majority of the balance sheet is

denominated as scarce desirable

property right so if you think about all

the rich families the ones whose

grandfather bought city blocks in the

middle of Manhattan or they own

buildings in London

right or they own the New England

Patriots if you own a piece of

intellectual property or real estate

property if you own a billion dollars

worth of buildings on January 1st and

the bankers are going to print 10% more

money or 10% more currency to be precise

then you can expect that your billion

dollar building will be worth 1.1

billion at the end of the year with you

doing

nothing and if you have a company which

generates a billion dollar of cash flow

by being a restaurant or a hotel chain

or dry cleaner or sweeping the streets

or manufacturing plastic straws or

operating cruise

ships that company is going to have to

generate 10% more cash flow a100 million

additional cash flow in order to be

worth the same amount as they were on

the first day of the year so you see how

pernicious this is right it's very

unfair to property poor operations rich

like The workingclass suffers whether

it's a workingclass company or just a

workingclass

person the doctor that makes $200,000 a

year has to make 10% more after tax next

year to be worth the same as they were

last year so the workingclass suffers

the workingclass company suffer the

property

class they sort of benefit if you just

own stuff right Wall Street you just own

things you don't do anything you just

own stuff and then the question of how

well you do is a function of the quality

of the stuff you own so if you own

scarce desirable property the best is

probably real high quality luxury real

estate or or commercial real estate that

everybody wants you kind of keep up with

inflation you might get one or two% more

than inflation maybe if you own the S&P

index you just kind of keep up with

inflation it's the same 7% inflation 7%

S&P

return if you own Bond portfolios you

know you're going to lose half your

stuff right your your yield is negative

-3% a year you lose you lose 3% of

everything you own every year at best

maybe

faster so

Bitcoin represents something special

because it's sound money which means you

know if you have sound

money you actually don't have to grow

your cash flows faster than the rate of

inflation to to actually live happily

ever after for example that that doctor

that's making $200,000 a year if they

sweep their excess savings into Bitcoin

and Bitcoin has been going up 40% a year

but let's say over time it goes up about

14% a year versus the 7% of the in

inflation rate and 7% of the S&P

index a company with a low growth rate

but holding a balance sheet that's got a

high growth rate is a well-endowed

institution right you can grow your

salary by 3% but your balance sheet will

grow by 14% And the inflation rate only

is 7% so you actually get ahead of the

curve by investing in something which is

a higher quality asset than all the

other

assets right and and that means over

time you can sort of just be a

doctor and go about your trade and

you'll or a restaurant owner or

something and you just don't get

squeezed out of existence so I mean

there's something nice about that

um we've normalized some ious ideas in

our civilization one one idea I pointed

out is like your grandchildren will lose

the family farm and they'll be poor

because they can't afford to pay the

property tax on the farm that's we've

normalized it like like somehow we blame

them like they should be like

why because because um they're just who

they are right that's one it's kind of

normalization of theft of of property

from future

Generations just because

the other thing we've normalized is the

idea that if you're a company and you're

not growing 10% a year you're a failure

or if you're if you work at a job as a

nurse or a baker or a doctor and your

salary or your revenues don't go up by

10% a year or more you're a

failure like why why like like if you

went to Harvard University and you said

well you gotta actually train 10% more

students every year or you're a failed

Institution

if you went to a you know to a woman

with three kids and say if you don't

have three kids next year six kids the

year they're after 12 kids the year

thereafter and keep doubling the number

of people in your family you're a

failure right it's like that's silly

what why why do we have this insane

quest for exponentially more output

we're basically just working everybody

to death and and the reason why is the

money is broken

right the societal incentives are

broken so like my you know my 80s

something father he has to be a hedge

fund manager and he has to pick stocks

in order to Lo in order to avoid losing

his life

savings we've normalized this idea you

work your entire life and then if you

store it in the bank well you're losing

it all over the course of 10 years or

less and because of the inflation rate

of the dollar

so why is it why is it I have to pick

stocks why and it's because we keep

printing so much money so the real

promise of Bitcoin

is if you're an

individual you can do whatever you do

best and then you can save your life

savings in a Apex property asset which

will appreciate faster than the rate of

currency debasement no matter where you

live if you're a family you can do the

same if you're a family you can expect

to create generational wealth to give to

your great great great great

grandchildren and you have every reason

to think that it might still be

there if you're a company you can do the

same

thing you don't you don't have to um

risk the company in this insane quest to

try to grow faster than the inflation

rate what the the net result of this

hyperinflation of the currency and even

the dollar it's 7% a year

it's 7% monetary inflation but they say

it's only 2% inflation but the result is

the hurdle rate for companies is

89% so what happens is they either lbo

thems themselves they basically have to

load up on debt and go to negative

working capital like the Toys R rust

situation even Marvel Comics why does

Marvel Comics have to have billions of

dollars of debt like that you know why

do why do we load great companies with

lots of debt it's because because the

common of taxes and inflation makes it

impossible for the equity to work or

hold value and so we have driven so many

companies into debt and so many

companies into

bankruptcy or what happens is companies

go on acquisition binges and they start

buying up company after company after

company because they have to grow their

Top Line more than 7% and the organic

growth of all their divisions is less

than

7% and uh you know it's the result of

all those things is capital destruction

we're destroying people's lives we're

destroying good jobs we're destroying

communities we're uh destroying the

manufacturing base of the

country instead of having a hundred

different healthy companies that will

all give like what happens if like

there's only one University left in the

world you know like instead of having a

100 choices a 100 cities a 100 companies

a 100 colleges a 100 whatever you end up

just having the monopolies left and we

just keep driving all the small midsize

companies out of business and destroying

uh the Vitality of the culture and we're

doing it because we keep we keep uh

inflating the money supply and driving

centralization of power

structures so when you have a a powerful

Central Bank you end up with powerful

fractional Reserve Banks and then you

have with powerful big Tech monopolies

then you have monopolies in every

industry big defense big Pharma big

banking big Tech big government big

Regulators over and over again and it's

the

centralization that creates such an

unhealthy body

politic because you know pretty soon you

can't you got to be careful what you say

online and you can't say certain things

and you can't do certain things and and

everybody you know everybody has to live

concerned about what that organization

thinks because they're just too powerful

and uh we people haven't been aware of

the impact of money on this but money

definitely drives this

centralization the bit the

bitcoiners have uh have done a lot of

work on this and and they point out that

you know World War I World War II all

the wars in the 20th century they were

much more brutal than the 19th century

Wars because governments were just

better at printing money if um if it

hadn't been for going off the gold

standard and printing infinite fiat

currency World War I wouldn't have only

would have only lasted a year he was

would have W to run out of

money but uh when the governments get

really good at uh at uh printing

infinite

currency they can just run those things

forever and the result is sea of human

misery