Michael Saylor on The Fiat Standard | The Bitcoin Standard Podcast | (Audio only)| 16 February 2021

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hello welcome to another meeting of the

michael sailor appreciation society

our special guest today is michael

saylor himself

fresh from the bitcoin form for

corporations conference

in which he promoted bitcoin to

corporate america

in very very strong uh made a very

strong

case for bitcoin why it matters for

corporations and why it matters for

corporate

balance sheets we've had michael on

before and we spoke

about his ideas on bitcoin and his ideas

on

inflation and cost of living and he's

been an absolute

thunderball of inspiration and powerful

ideas

since coming into the bitcoin space over

the last year and it's an absolute

pleasure to have him

back again thank you very much for

coming back michael thanks for having me

i guess we'll start with talking about

the bitcoin for corporations conference

so what were your impressions of the

corporations

take they buy your pitch

clearly some of them did tesla namely

but what was the general impression

you had my impression was i was

surprised at how much enthusiasm there

is

you know when we started in august we

were the first public company to make a

serious commitment

and then square followed us and then

marathon

patent did a pretty big bitcoin

acquisition for their balance sheet a

few weeks ago

150 million dollars and and then when

tesla did it

you know we've now got four public

companies

in a row that have all made pretty

material commitments

of course the market's been enthusiastic

the market's

you know generally the market's been

very supportive of

all the bitcoin companies if you look at

square

stock paypal stock riot blockchain stock

marathon stock microstrategy's been well

treated

i think tesla of course is the most

successful you know stock of the year

we've checked off one question which was

how will public

shareholders view this and there was

some trepidation

and in fact they've viewed it

enthusiastically for example since

since marathon did their 150 million

dollar bitcoin acquisition their stock

doubled

if you're wondering how the public

shareholders will view it

oftentimes thing that holds back public

companies from doing something is

they're concerned about how it'll be

perceived by their outside shareholders

and because

it's very difficult to meet with outside

shareholders

they're changing every minute of the day

between 9 30 and 4 p.m right your

shareholder base is changing

so it's like trying to grab uh grab on

to a whirlpool in the middle of an ocean

you can't quite get your hands around it

it's dynamic

that's a challenge but as we came in the

conference i thought

first of all there's a lot of demand

bubbling up we had a lot of people

asking us a lot of people are asking us

how did you do this what should we do

there's illegal issues regulatory issues

you know will you trip the 40 act are

you going to be an etf

what's the accounting treatment for it

what appropriate corporate

governance you know rather than try to

have one

meeting at a time you know say fiden you

realize at some point

if you had 40 hours of meetings a week

for the next 30 years

well that's like 2 000 times 30

right was that 6 000 you can touch

6 000 people in 30 years

you just can't go fast enough so you

can't do these one at a time so

we thought let's just go ahead and add

it as a track to microstrategy world

which was all virtual and i thought by

the way microstrategy world last year

was 2

500 of our customers in a room it cost

us 4 million dollars and it cost them

probably another six million dollars so

we spent 10 million dollars in 2019 to

put 2500 customers into

a convention center this year

microstrategy world

we probably spent 1 15 that much money

our customers spent nothing

so we spent probably one thirtieth

we reduced our travel and ex and

entertainment

and event budget by 97 percent

by the way we've we reduced all of our

travel and events

budget by 98 year over

year if you want an interesting factoid

98

so microstrategy was pulled off for 97

less money we had 21 000

people registered instead of 2 500

we thought we'll tack on bitcoin for

corporations

as an afterthought i thought well if we

get 800 that would be good then i

thought

well we'll probably get a thousand and i

thought well we get 2 000.

and i went on television and i said well

i think we'll get 2 000.

and then we had this surge and the day

of the event

no joke it broke the internet like it

actually broke our video server

and the stress was we blew through 15

000 people

and i was on the phone with my i.t

people saying you know

get more capacity you know from our our

vendor

and for like an hour or two hours we

actually were

in the morning leading up to the noon

thing we were like maxed out and i was

worried

so some enterprising cyber hornets

the i love the bitcoiners they're so

enterprising while i'm trying to solve

the problem the conventional way someone

turns on live streaming to youtube

and they set up bootleg live streaming

channels that have thousands of people

on them when we finally got to the noon

session

uh with ross by who you introduced me to

by the way

i think thank you so we got to the noon

session with ross and we had um

8 500 people come into that session so i

thought i'd have 2 000 and we

we went to 8 500. i thought i'd have um

1500 companies represented and it was

actually 7

000 companies represented in the live

session

and then the live session got bootlegged

out and posted on youtube went viral i

think we're up to about 250

000 views now so i guess the summary

would be

exceeded my expectations and we had

people from

spacex there we had people you know some

of elon musk companies

we had people from marathon there

the ones you would expect were there but

of course

there's an avalanche a private companies

and and there were a decent number of

public companies and treasurers and cfos

that were lurking some don't want to

have their names mentioned as you can

imagine

because it's a sensitive topic right as

material for a company

but i think we can call it a success

because

on television for the past few days

we've had the ceo of gm

asked if they're going to invest in

bitcoin we've had the cfo of twitter

asked about bitcoin we've had the ceo of

uber

asked about bitcoin you know we just had

the mayor

of uh miami francis suarez

announced that they're moving forward to

put bitcoin on their balance sheet

and it's become part of the conversation

even to the extent that now people are

grappling with the accounting and the

volatility issues

which i i account to be as an incredible

success for all of us right because

a year ago no one would have even

discussed this

this morning we had a milestone in the

cfo section

of the wall street journal the

challenges of incorporating bitcoin on

the balance sheet for cfos was discussed

in an

article and i think that's the first

time

that the wall street journal and the cfo

section had ever

actually brought up the topic of bitcoin

so

the implication is it's in the

conversation

everywhere and increasingly people have

to

come to terms with why they're not doing

it and they'll be technical reasons

oh it's volatile right i mean it's going

up 200 percent a year but it's

it's going up it's making us large sums

of money in a volatile fashion that's a

technical reason

but if you're an investor and your

reason for not investing in something

is it's making money too fast in an

unpredictable fashion

i'm not going to say what i think of

that it's quite amusing to me

but uh if i had to be criticized i think

i'd like to be criticized for making

money too fast in a

unpredictable fashion and then they're

grappling with the accounting issues

because if you hold it as the underlying

asset it's it's currently accounted for

as an intangible on the balance sheet

which is the most conservative way

i kind of like the way you'd account for

patents or things like that

you know if you hold it as a fund then

it may

under certain circumstances be accounted

for as an investment asset

but then if you have a fund it's a

security

and if you hold the asset it's property

in a commodity

and if you have a lot of securities

at some point you might trip the sec 40

act and become a finance

company because you have more than 40

percent of your assets as securities

there are a lot of nuances and people

are grappling with them but they're good

debates right good discussions to be

having right now and a year ago no one

would have even considered these matters

and so we

we have injected this into the

conversation

i think around the world and i think the

bitcoin conference was part of it

clearly the tesla purchase was helpful

and i think february 8th

you could call mainstream day safedean

february 8th

this year was the date when the entire

story of bitcoin as a treasury reserve

asset

crossed outside of the bitcoin in the

crypto community

and it was on in the wall street journal

the washington

well the the new york times irish news

the straits

times every major financial publication

everywhere in the world and all the

mainstream media

i got invited the next day to go on cnbc

bloomberg fox cnn

npr and i'm like no more i can't do any

more but the point is

cnn npr these are not

you know bitcoin journals these are

mainstream sources

so i think the message is exploding into

the mainstream

you could start the clock you know

february 8th was the day

the shot was heard round the world and

that

combined with the bitcoin for

corporations uh

summit placed this in the public domain

the beauty now of course is i used to

meet with a hundred people

and i could meet with 10 a week and then

we met with 8 000 people

and then it went viral to 250 000 people

and now we published our bitcoin

playbook and and

that's out there circulating amongst

lawyers and accountants and advisors and

investors and

we just let that percolate and i think

uh good things will happen

absolutely i you know i was going to say

the exact thing that you mentioned which

is

one year ago none of this was going on

anywhere nobody was talking about any of

this stuff

i remember exactly was one year ago it

was a conference

and i was with somebody who works at a

bitcoin company and i was telling them

they were talking about some

blockchain nonsense and i was telling

them that the case for corporations

really is

hold a small part of your balance sheet

in bitcoin and especially if you're

operating internationally it'll help you

to get around

banking closures and that'll uh protect

you from inflation and also

the response that i used to get when i

mentioned this to people was always

no it's too volatile and the accounting

would be too much of a headache there's

no way anybody would do it and it's

incredible

um and and it's almost entirely down to

you

how the conversation has entirely

shifted in a year now to the point where

we have a complete playbook that

you know the lawyers and the accountants

can just go to microstrategy.com

download

your corporate playbook and they have

the complete guide to how they

need to answer those questions and we've

already had

thousands of them show up so i think i

can't what commend you on your

incredible service to the cause and this

unbelievable uh contribution of just

putting this out there

and and forcing it upon people and it's

um people call it speculation and people

say well people are just speculating but

i think um

ultimately every economic decision is

speculation

and maybe the reason this speculation is

paying off is because it is

a better economic decision maybe it's

just that it's a better asset on the

balance sheet than the world is

discovering that

yeah i mean clearly i words can be

prejudicial as we talked about before

you know if i kicked you into the ocean

and i threw a life preserver and neck or

life raft next to you

it wouldn't be a speculation to put on

the life that you know the life vest or

crawl onto the life raft

if you were walking through the desert

and about to drown and i dropped a water

bottle that was sealed

of an uh from a brand that you'd never

purchased in a supermarket before

it wouldn't be a speculation to crack

open the water bottle and drink the

water

and if you if you lived in argentina and

the currency was crashing and you had

pesos and you had the opportunity to buy

a tangible asset or

or convert your money to dollars i don't

think it would be a speculation

i think it would be rational right like

you know if i kicked you out of an

airplane and you had a parachute it

wouldn't be a speculation to pull the

rip cord either i mean

i it's just you know it's only

speculation when you don't understand

the engineering or the science behind

the thing

then it's speculation you could say it

was speculation

for amazon to use the internet to sell

books

and expect people to buy amazon stock as

well

but it works fifteen thousand retail

companies got destroyed

for their lack of speculation hey can we

talk about the fiat

standard absolutely yes so

a couple of thoughts i had you made this

point you said um

we're talking about money progressing

from soft

to hard the gold standard was the

culmination of

uh commodity monies you know from glass

beads and sea

shells and stone coins and and the like

and copper and

brass and eventually we get to gold and

gold as pinnacle and silver is next and

so if gold is the hardest commodity

money

it lasts the longest and then you make

the point

human beings are able to take a longer

view i mean your time horizon stretches

out

you know if you had sea shells as money

or carved wood sticks

your time horizon wouldn't last beyond

the rotting of the wood sticks

or your timer eyes it wouldn't last

longer than when people trekked off to

the seashore to get more seashells

so if gold is the hardest money of that

time period and human beings were able

to take a long

view they can create longer lasting

structures right if you have a if you

have a harder money you can create

a longer-lived structure and that

structure would be an institution

and the hard money is working against

time right time is the uh the impedance

and the money is flowing through time so

i started thinking about that as an

engineer and i thought um materials

progress from soft to hard and we build

with wood

and then we build with the brick and

then we build with stone

and then we build with iron and then we

build with steel

and and steel is right now right the

the winner of the materials and and

using the hardest material

human beings are able to create the

tallest structures

the largest and the tallest they're

working against gravity

right so time is an elemental force

gravity is an elemental force

so the significance of steel is

i'm able to build a 100 story skyscraper

and the significance of strong money

or gold money was maybe i could create a

50

100 year old dynasty of some sort

maybe i could even build a cathedral

based upon the gold

money progresses from slower to faster

when we get to bitcoin you've got a

harder money than gold

so if it's harder that means in theory

you can build structures like

institutions that will last longer than

the gold institutions or the fiat

institutions

i had the thought when jack dorsey just

announced today that he put 500 bitcoin

into

an institution or an endowment to

finance bitcoin

development and with a focus on africa

and the like so presumably bitcoin

development lightning development

etc and i thought 500 bitcoin will

eventually be

if you don't spend it it'll be worth 500

million dollars

you know we'll get to a million dollars

a coin and then maybe bitcoin will start

to appreciate it 20

a year 30 and eventually it'll slow down

but

but you could borrow against 500 million

dollars

50 million a year which is enough to

finance 100 you know a development unit

of hundreds of software developers

forever you know a simple rule of thumb

500 btc might reasonably support 500

professionals

working an organization forever

okay now uh you know

that's why right because it number goes

up it's a store of value

if i put the equivalent amount of money

into government bonds you know the

half-life is

you know it's not going to support

anything right like

500 bc you can calculate it today right

that's

what is it two and a half no no 500 btc

it's 25 million dollars

right yeah so 25 million dollars

invested in

in what something which is going up less

than

20 a year is losing value right so

you're gonna i can't do it in the s p

wouldn't work gold doesn't even work

they're both clocking at 15

a year sovereign debt doesn't work so

the nasdaq sort of works it's going up

big tech

sort of works but you couldn't really

say forever

with big tech you know like because it's

tied in

to you know it's got so many risks and

complexities

so if i endow an institution with with

the hardest money

i could recently have a 100 year

multi-hundred year time horizon and i'd

look in the face i say

yeah it looks to me like 500 btc will

support

250 to 500 people i mean 250 at 200 000

a year

500 at 100 000 a year i mean are you

supporting people if you're supporting

people in africa

developers in africa the cost per

right now the cost per engineer is 25

000 to 50

000 a year probably 25 000 a year

so you could support 500 people forever

let's call it a thousand years i mean i

mean we can go back and forth but

so hard money lets you work against

time with a with an institution

and then i think you've just got you've

got this other dimension which is

is it smarter and is it faster

bitcoin is maybe 10 or 100 times harder

than gold and so we can look

we can look out hundreds and hundreds of

years but it's million times

faster than gold yeah i pointed this out

the other day if you have

if you have a billion dollar block of

gold is 30 000 pounds moving it

across a continent is probably a five

million dollar

thousand hour exercise thousand hours to

organize it it's view 747s

lots of armed guards lots of diplomatic

issues so

five million dollars thousand hours and

if i want to move a billion dollar block

of bitcoin five dollars one hour

million times cheaper thousand times

faster

right now and so that means money

progress when money progresses from

slower to faster humans are able to

create higher frequency

structures and they're working against

space

or against friction right so

longer lived structures have to work

against time how

how am i going to endow the foundation

for a thousand years

and higher frequency structures are all

about

i need to move a billion dollars of gold

every two hours

or a billion dollars of money every two

hours not

every two months and the gold of course

is so low frequency

it doesn't oscillate at all right i mean

like you have a billion dollars if you

have 30 000 pounds of gold how

frequently does it move

i mean didn't the french send that

aircraft carrier to pick up their gold

once in a century

yeah like like is it like once a decade

type thing

we're talking about a lot of millions of

dollars to send it

uh when they uh when uh they repatriated

their gold from the fed

i can't remember how much it cost but it

was in the tens of millions of dollars i

think

and it took years to move germany's gold

so it's very slow compared to bitcoin

yeah people that criticize bitcoin

for being slow they're running these lab

experiments in a garage

on their on their little alt coin moving

no money around

and it's kind of like criticizing

someone

you know running a power reactor when

you've got like a

a lighter in your hand you know it's

like like it totally unrelated

right it's it's silly if you're gonna

compare the speed

and the efficiency of bitcoin you have

to compare it to the gold network

because you need to have final

settlement on a billion dollars of money

uh of tangible property and uh you're

not really getting a million a billion

dollars of settlement on a fiat network

you know without so many other things so

i guess my point is

we have something which is going to last

a lot longer it's harder and we have

something which is

which moves faster so you create the

potential of high

frequency structures which are

inconceivable like a bank

that actually makes billion dollar loans

and moves the money tangibly

every day every hour every minute there

are certain structures people can

conceive of because

they never thought about being able to

tangibly move a billion dollars of

monetary energy in 37

minutes and then move it back in the

crypto world they got this idea of flash

loans

you know maybe that's the closest thing

i don't know how enamored i am with a

flash loan that lasts for like

400 milliseconds i don't know like that

it seems to me to be

interesting but cute maybe a little bit

more gimmicky i can definitely see the

application

of a loan that lasts 87 days

or 31 days or maybe moving a block of

money for 187 days

if i can do it cross two with two

counterparties two institutional

counterparties without the banks in the

middle and the government's in the

middle

and we we get to that in a second this

fiat issue that

opens up a new world you could imagine

in like 1600

in renaissance europe they're building

buildings with masonry and they're five

stories high

and someone says you know one day we'll

have steel and we're going to build

hundred

stories skyscrapers and they'll be

shaped differently

you know and the architects couldn't

even conceive of that because they

didn't have a

material strong enough i don't think

people can conceive of the kind of banks

or the kind of institutions that will

have with high frequency

money and i think this last issue is

money progresses from dumber to smarter

humans are able to create more complex

structures

and they're working against entropy

maybe complexity

maybe entropy is the word so we're

either working against

time we got to be harder we're working

against space we have to be fast we're

working against entropy

we got to be smarter and the material

is the semiconductor chip to make a

smarter

combined with bitcoin and the material

is the network to make us

faster combined with bitcoin i mean

bitcoin is basically sitting on

on the network on the chip getting

harder

faster smarter and

the conclusion you come to is just like

architecture

where i can break the laws of gravity

what did steel give us it didn't just

give us 50 50 100 story buildings it

also gave us

cantilevers and then also gave us

bridges right and carnegie made all his

money by the way

i read his biography his big customers

were

were municipalities buying uh

iron and steel for bridges bridge is a

pretty big deal actually and you can

make the argument bridges may be even

more important

to civilization than skyscrapers i mean

knock out the bridges in manhattan

and everybody starves to death yeah you

ever seen a bridge

you know the bridge that connects san

francisco and oakland or the bay bridge

that

connects the eastern shore of maryland

dc with the bridge it's a one-hour

commute

without the bridge it's a 12-hour

commute or

18-hour drive in one case i drive to

work

and the other case i don't

yeah it ends the civilization

so i think that this this element of um

money

i think you put your finger on something

very fascinating

which is as the money gets harder

we can see further into the future with

our institutions

but i think as it gets smarter and

faster

we can construct institutions

or relationships that are inconceivable

before with slow soft money

and i would say that takes us to fiat

right

i mean fiat is softer money it's

faster than a block of gold but it's

still

so much slower and stupider right than

bitcoin

it's manual at the end of the day at

least gold is somehow automatic it's a

machine in a sense it has its own truth

within it

you can verify it even though it's a

little bit expensive but

uh with fiat you know it's it's

ultimately manual but

day-to-day use it is generally faster to

move it around than moving around

physical gold

but it's real drawback as as you were

saying is in

holding on to value for the future

that's where it's really not good and

in that sense i the way that i look at

it is the higher the money

the more it incentivizes us to lower our

time preference and therefore makes us

think more and more about the future

because

the harder the money the less uncertain

the future

because now you have something that you

know i have these

this wealth this monetary energy that

i've stored

and i have more certainty in the fact

that it's going to be there in a year

or in two years in three years so then

one year and two year and three years

becomes

more of a foreseeable thing for me less

of an uncertain thing for

you so i start discounting less when i

start discounting it

less i start effectively lowering my

time preference and providing for the

future and

this is why i think you know the harder

money got

you know silver and gold were

continuously getting harder and then

silver was eliminated and gold was

hardest

that was the pinnacle of human

achievement arguably this one

this was when we made the most

incredible technology this is when we

invented

all these incredible things like the

airplane and many many many things

of the 19th century discussing the

bitcoin standard and i think

in the 20th century maybe we've reversed

that process because our money is

getting easier and so

the future is becoming less certain and

so we're becoming more high time

preference because we discount the

future more

i agree with that yeah i think you put

your finger on something there which is

the future gets hazier and you see more

anxiety

i mean i know as a corporate ceo in

march

as i was staring at a block of 500

million u.s

dollars and i was watching the the money

supply expand

and the dollar devalued my anxiety went

through the roof

my anxiety went up so high

that it kind of kicked me out of the

fiat standard into the bitcoin standard

right

like if like boiling a frog or jumping

out of the boiling whatever i mean

it literally shocked me it's all about

engineering

a mechanism or engineering security for

yourself

right i mean steel allows me to stand on

a cantilevered structure

a hundred feet over a canyon or it

allows me to stand on a bridge a

thousand feet

over the hudson river or or the east

river

with security i can even drive a car

over it and steel allows me to drive

to stand uh 800 feet in the air

right and and you imagine the insecurity

of that taking the structure away

the human beings are able to go to

places

with engineering space stations right

we're able to go places with engineering

where

otherwise you literally can't live like

there is no life

there without the engineering you know

you got me thinking about

the fiat standard and you know some of

the criticisms i've heard

lately about energy consumption of

bitcoin got me thinking about well

what's the comparable

system and again the critics are people

that

again they have like they have a little

um

toy railroad train in their garage and

they think well my toy railroad train is

more efficient than bitcoin

but they don't really contrast the

energy consumption of bitcoin

to the energy consumption of of the

alternative system

that it is replacing so if you look at

the fiat system

money's got to do two things it's got a

it's got to be a medium of exchange and

a store of value

and uh bitcoin kind of is a is one

structure

and and the fiat is another structure so

i look at the current system and i think

well to make this work when we replace

the gold standard i mean

the gold standard and it's when

commodity money reached its pinnacle i

suppose

after all the shuffling around we

eventually arrived at gold coins and

silver coins

and gold in my opinion is store of value

and silver is the medium of exchange or

you know one of them was the day-to-day

currency a gold coin with like

what eight grand eight grams like a

quarter of an

ounce feels like it's about five hundred

dollar coin

and so the gold coin is about one week

salary

for a you know for a lot of a laborer

and you wouldn't have used a 500 coin or

a thousand dollar

coin to pay for things routinely but you

know if i gave you a stack of 10 of them

that's your

that's your treasury so the silver coin

is the medium

exchange and and in that standard you've

got a very clean structure

gold coin silver coin you mine the gold

you mine the silver you mint the gold

you meant the silver you store the gold

you store the silver they all circulate

around

and eventually maybe their gold notes

right there

maybe some notes that are fractional or

fully reserved banks

moving that around when we went to the

fiat standard

we replaced that with um the treaty of

genoa got me thinking about this safety

like

we replaced this with diplomats

corporations accountants lawyers

programmers security guards contractors

buildings armies software mints

we kept the mints we kept the printers

we kept the gold mines

we kept the vaults and then we tacked on

ideas like etfs bond indexes

bond funds financial managers

and everything else around them

in order to create a medium of exchange

and

a store of value i'm trying to figure

out how much energy is consumed

by you know what is it like uh

a hundred thousand bank buildings or

jp morgan has 200 000 people so i'm i'm

guessing there must be

in the finance industry around the world

in the us is like 8 million so half

of the finance industry is tied up in in

store of value medium of exchange so

if we could figure it out it'd probably

like 40 million people in the world

maybe it's 20 to 40 million people

so what's the carbon footprint and the

building footprint and the concrete

footprint and the steel footprint and

the electricity consumption

of and i and i was kind of kind i didn't

i'm not really allocating

all the armies and the like but you

could probably say

if you really wanted to to keep track of

the real cost

of of the system the proof of work

system so you got to put in the military

yeah i mean you the first cost of the

system is probably

20 million 30 million bankers

and financial advisors and the like

and then the secondary that's the

primary cost the secondary cost

is all the government infrastructure the

diplomats and the military officials and

and uh the aircraft carriers and the

armies and the back and forth

i guess the third cost is actually the

wars themselves

that get wage back and forth and then i

think the fourth cost

the pernicious cost i guess is the

inflation

yeah if if we're burning

you know you said what seven or eight

percent was the monetary inflation

on average if there's 500 trillion

dollars of monetary assets and

you're debasing five percent of it a

year even

it's 25 trillion dollars so i don't know

50 trillion dollars a year