Michael Saylor: The Future Is Still Orange

[Music]

Warm welcome to the Risk Reversal

Podcast. You can hear the excitement in

my voice because for the first time

since December 5th of last year, I'm

joined by executive chairman and

co-founder of Micro Strategy Now

Strategy, Michael Sailor. Michael,

welcome back.

>> Thank you, Guy. Great to be back. It

>> it is great to have you back. And

obviously, a lot's changed um since

December. All to your benefit. By the

way, I did a quick back of the envelope

math and I believe of the almost now 20

million Bitcoin that have been mined,

Strategy now owns a little over 3% of

them. I think if memor if not memory

serves me, but I think you right now are

up to 601,550

Bitcoin at an average price of basically

$71,270.

though at $119 $120,000. Congratulations

because I think everything you dreamed

of four or so years ago is starting to

come to fruition. So let's start there.

>> Thank you. Okay. Where do you want to

start?

>> So let's talk about the vision you had.

Um here we are July, you know, 15th as

we're taping this. Did things, you know,

this is sort of an open-ended question,

but I think things are going probably

better than you could have imagined. is

my guess if if we're you know if we're

really thinking about this

>> you know um

the milestones I've been looking for

right where first um embrace of the SEC

and we got that with the ETF approvals

in January of 24 and then uh

normalization of the accounting we got

that with fair value accounting which

kicked in just this year that was a

four-year project or four-year effort

the third um we're looking for is

normalization and bank support of

Bitcoin.

Yesterday, we got a joint memo from the

OC,

the Federal Reserve, and I think the

FDIC

uh that reaffirmed that it's okay for

banks to custody crypto assets. That's a

big deal. Um so, I think the things that

happened that I expected,

you know, uh have happened, I guess.

what I didn't expect that the two things

that are pleasant surprises

um the enthusiastic embrace of the

administration right we got a red sweep

in November and uh you know we went from

being you know sort of a anti- crypto

anti- bitcoin to enthusiastically pro

and then I think if you recall probably

there was one person in the previous

administration Gendler

who was aware of anything in this

industry and his opinion was grudging

acceptance of Bitcoin because he

couldn't stop it and dismissiveness,

you know, toward everything else. And

then not another member of the

administration would have known what

Bitcoin was or or digital assets. They

would have not had any opinion at all

other than the talking points that came,

you know, from the SEC. And I think the

difference we got here post November

is you've got Robert F. Kennedy, Tulsi

Gabbard, Howard Lutnik, you've got Brian

Contez,

you know, you've got Paul

Atkins, you've got Scott Bessant,

you've got um you've got a Cryptozar in

David Sachs, you've got a very effective

executive director of digital assets in

Bo Hines. You've got an enthusiastic

president who's supportive. And I think

never in my wildest dreams would I have

said we're going to go from one lukewarm

cabinet member

to a dozen members of the administration

that are Bitcoin enthusiasts. I mean

including JD Vance, right? So you got

the president, the vice president, half

of the non-financial cabinet and every

financial cabinet member. And I think

that a lot of guidance has come out

that's all been very positive.

That was helpful. And then I I guess the

other thing there are two other real

positives that I didn't expect. Um

massive enthusiasm from Wall Street. You

know, we announced our $2 billion equity

plan and people fell out of their chairs

back in late October and they thought,

"You're crazy. that's the largest equity

plan or or equity registration in the

history of the capital markets. Um and

we thought well maybe we can do that

over three years. We did that over four

months with the stock trading up and

then we reloaded and so the enthusiastic

reception of Wall Street uh for

BTCbacked equity more than we could have

hoped. Uh and then um I think the

explosion in Bitcoin treasury companies

all these comp you know there were there

was one company when we announced in

August then a second uh square announced

in 2020. So in August of 2020 there was

strategy and then there was square there

were two

and last year there were 60 and this

year there are 150. So that this is

there's this

and then the last uh kind of cherry on

top is um we created the market for

Bitcoin back preferred stocks and did

three successful IPOs this year and

those three preferreds are the three

most successful preferred stocks in the

century like in 30 years. No one's ever

seen anything like it. Uh, and so

yeah, I was I believe Bitcoin was going

to grind forward,

but I think at this point we're surging.

You know, Cynth Cynthia Lumis as well, I

mean, from Wyoming, I know you probably

know her extraordinarily well. I mean,

she's been a great advocate, a great

voice uh for the platform as well. So,

you're clearly people are lining up. And

I saw recently, I think the name of the

company is LQWD Technologies, which I'm

sure you know a lot better than I do,

but they're seemingly sort of they're

putting into position the same type of

strategy, no pun intended, that you did

as well. So there's seem seemingly now

acceptance along a number of different

company lines. And I'm sure that's

something you thought would happen. Is

that happening faster or is that

happening around the same pace that you

would thought? Yeah, that that that

liquid announcement, I'm going to call

him liquid because that's the only word

I can figure out that works with with uh

that acronym. Uh that liquid

announcement this morning was

compelling.

You've got I mean the greater trend is

uh or or the secular trend is for the

first time in a hundred years there's a

capital asset other than treasury bills

that you can use to capitalize a

publicly traded company on

that's that's liquid. uh Bitcoin is a

digital digital commodity, a digital

scarcity. And

theoretically, if you think through the

the implications of having a digital

commodity that you capitalize a public

company on, if it outperforms the S&P

and is more volatile than the S&P, then

you will have positively polarized the

balance sheet of the company, the

capital, which means in theory you can

raise infinite money. And the more money

you raise, the wealthier everybody gets

and the faster the stock price goes up

and the more money you can raise. And

that's blowing people's minds, right?

Because that is such a profound concept

that the more money capital I raise, the

more capital I can raise. That breaks

every textbook at Harvard and Stanford.

And the proof is in the pudding with the

success of MetaPlanet, Blockchain Group,

Smarter Web Company, Liquid, H100,

I could go on. Massive raises at 21.

Strive has just done a massive capital

raise. Nakamoto,

Orange BTC in Brazil, Meluse, right?

You've you've got an avalanche of these

oh similar scientific

cooler.

All of them have adopted uh Bitcoin

Treasury strategy. They've all

discovered that that's good for their

shareholders and now they're starting to

replicate our playbook and it's good for

us. It's good for Bitcoin. It's good for

them. It's revitalizing the equity

capital markets and now we're starting

to re and we're revitalizing the credit

markets. Like ba basically our equity is

the most uh the highest performing

equity. Our options are the most

valuable highest performing options. Our

convertible bonds are the most valuable

highest performing corporate bonds most

high highest performing convertible

bonds. And then our preferred are the

highest performing preferreds.

And what's the commonality? It's it's

Bitcoin behind all these things. And

what we're doing is we're selling a

volatile high-performance.

You know, our preferred are 100x as

liquid as a typical preferred stock.

Liquid, high performance, volatile

security and credit.

>> They've become their own asset class in

some ways given that given the basically

given the liquidity you're just talking

about.

The big idea is a Bitcoin treasury

company can issue Bitcoinbacked equity

supporting Bitcoinbacked options,

supporting bit Bitcoin back convertible

instruments, supporting Bitcoin backed

credit instruments.

And the market is starve for yield, star

for liquidity, starve for performance.

Most companies, most of the Russell 2000

are zombies. The average preferred stock

trades 400,000 a day. Ours trade 40

million a day. It's like the average per

fixed income fund is giving you five 600

basis points. We're giving you 900,000

basis points. It's not complicated. It's

everybody wants more liquidity, more

yield. If you're a trader, you want more

volatility.

And so the conventional financial

playbook is strip the volatility which

strips the liquidity which you know

surrender the capital. You know every

mag seven company brags about buying the

stock back and and upping upping the

dividend. And I just watched on CNBC a

parade of every bank every major bank in

the country. We upped our dividend. We

upped our buyback. We upped our

dividend.

And I'm looking on with horror because

they think it's a good idea. These are

the 20 the 20 best and brightest

corporate financeers in the world

presumably

trained at Princeton or Wharton or

Stanford or Harvard and this and the

best practice of the CFO of every one of

these great companies is to surrender to

the capital, buy back the stock, you

know, destroying the optionality,

destroying the volatility, destroying

the liquidity and we are doing the

opposite. it and it and it's working and

there's a little virus a fire that's

spreading and at some point people are

thinking well wait a minute I'm a zombie

and my life is hopeless or I inject

Bitcoin liquidity comes back to my stock

volatility comes back to my stock a

capital gets attracted to me the world

is not so hopeless anymore and for the

for the 40,000 publicly traded companies

that are not Nvidia

and not JP Morgan. What hope do they

have, guy? I'm giving them hope. Bitcoin

is giving them hope. And your choice is

you're going to get ground into the dirt

by the boot of a trillion dollar

company.

>> No, it's not. So, I think most people

would be surprised. I know you know

this, but since 1930, so preWorld War

II, post World War I, the US dollar has

lost 95% of its value. And I think to a

certain extent, we've had this

conversation. I think my instinct

suggests that Bitcoin was born out of,

you know, fiat currency gone wild,

central banks gone wild. If there is a

bare case, is the bare case some sort of

renewed fiscal responsibility around

whatever administration that um somehow

magically strengthens the dollar or is

that genie completely out of the bottle?

>> You're correct. It was born out of

frustration with fiat currency and

Satoshi made that point clear.

I think that it has morphed over the

last 15 years into digital capital and

now uh the more powerful explosive use

case is to revitalize and digitally

transform the equity and the credit

markets.

I don't think the bear case is um in

this particular case fiscal

responsibility because the likelihood

that that's going to happen is next to

zero. As Len Alden says, nothing stops

this train. It's and I don't think it's

easy if you're a politician. Like I

don't I don't know how any politician

finds a way to run a surplus

consistently. It's hasn't been done, you

know, in the history of the world.

You got 10,000 years of that not

happening. So, I think that chaos,

disorder, inflation, uncertainty,

entropy,

war, famine, pestilence, act, you know,

competition,

you know, all of those things can be

counted on.

I think that the bare case for Bitcoin

is uh explosive socialism leading to

authoritarian communism

or the like, right? I mean, the thing

that threatens Bitcoin is if we decide

to go Cuba, North Korea, and we deprive

people of private property,

>> right?

>> So, it's it's more of a political threat

when someone decides they don't like the

fact that someone has any money. I don't

want you to have property. I don't I

want to deprive you of your property

rights. I would say on the margin it's

far more likely that a government flips

communist or or radical socialist

than it is that Bitcoin stops working or

that or that people start exercising

fiscal responsibility or that entropy

and chaos disappears from the world

>> which which you know ironically in the

aftermath of what you just described is

probably another bullcase for Bitcoin.

But let me move on from that and say

this and this is going to be a question

that you don't have to answer. You don't

have to give any specifics, but have you

fielded calls from governments or or

CFOs that would shock people? In other

words, you know, a a call from the

bankage or the finance miners of Japan

or something saying, "Michael, we need

to pick your brain."

Have you had conversations that I'm not

asking specifics, but would surprise the

the normal the normal viewer of

podcasts? I I would say that if you take

the top 20 or 30 best run companies in

the world or the top 20 strongest

countries in the world,

the only one of those entities that's

seriously interested in Bitcoin where I

have had very constructive conversations

is the United States

under the Trump administration. the

Trump administration and the cabinet

members

and Senator Lumis and the Senate and the

leaders in the House, they get it and

they they're thinking very hard about

how do we harness the power of Bitcoin,

the power of digital assets to

revitalize the economy, do the right

thing for the American people, right?

I don't think I don't think you're going

to see that from the MAG Seven or the

mega banks. I don't think you're going

to see it from other countries because

as we say, Bitcoin's on a need to know

basis. They don't have a need to know.

They'll be like the Charlie Mongers and

the Warren Buffetts of the world. And

it's it's not that they're not smart and

they're not focused or they're not

hardworking. It's just that people are

steeped in their paradigm. They're

distracted. They have a hundred things

coming at them every day. Tim Cook and

you know Satcha Nadella, they don't

think that the future of their company

is based upon a monetary paradigm shift.

That's not what's on their mind right

now. They're focused on AI.

They're focused on war. They're focused

on tariffs. I mean, B, they're all

focused upon first order things. And

this is a a second order thing that's

almost too innovative for people to get

their heads around. until they face a

near-death experience or mortality event

and then they have to embrace the new

idea.

[Music]

When you were um the founder uh and CEO

of then Micro Strategies, I mean

respectfully and I think you would agree

with this until your vision to transform

the balance sheet uh this you know the

stock was basically flatlined for a

period of time. I only mention that for

the context of the following statement

that I'm going to make. Is it shocking

to you that Vanguard um and I think

everybody has heard of Vanguard, I mean

there's no there might be similar names,

but there's no um better franchise uh is

now the largest holder of your stock.

>> It's uh it's ironic and amusing, but

it's not surprising.

It's not surprising because if you look

at a chart that we put in our last uh

stride ATM presentation, we showed that

there's $700 billion of active capital

that can invest in commodities. There's

35 trillion that can invest in equities.

There's 65 trillion that can invest in

credit. And you know how many trillions

of dollars are invested in passive index

funds?

So if you think about those categories,

active credit, active equity, passive uh

index funds, none of them can buy

Bitcoin, but the passive index funds

don't get a choice. They're going to buy

the biggest market cap companies if you

qualify for the index. And so Vanguard

is running the biggest index fund. So it

doesn't surprise me that they're the

biggest index fund investor in our

company. Um,

it takes a a a company like Strategy to

issue equity. It takes a company like

Strategy to issue credit and it takes a

company to be in an index.

Those indexes aren't holding palladium

or soybeans or natural gas or oil.

They're holding companies.

So, we've created a bridge between the

traditional capital markets and the

crypto economy. Um, and there's one last

twist here.

Every well-run company in this country

that you talk about on CNBC is doing

everything they can to decrease their

equity market cap.

Think about it. They're literally

surrendering capital either by paying it

off in a dividend or by buying their

stock back. And so when you have $500

billion and you buy the stock back,

you're decreasing the equity market cap.

Therefore, you're decreasing your

waiting in the passive indexes.

My company is issuing equity

increase. You know, our market, our our

enterprise value is touching on 140

billion right now, guy.

It was 1.2 billion five years ago. So,

we're a 100x more. So, what happens when

our equity uh rallies? we issue more

equity. So, we're becoming a greater

percentage of the indexes,

whether it's the MSCI or the NASDAQ 100

or the total stock market, and we're

just going to keep becoming a bigger

fraction. And all these other companies

are going to become a smaller fraction

because, you know, if you want like a

athletic analogy, we're lifting with our

legs and our arms, our whole body. when

we use our balance sheet, they're

lifting with their arms, right, in a

wheelchair.

And it's like, okay, heroic, but you

know, if you think about how you throw a

hammer or a javelin, you don't do it

from a wheelchair, right? And and so

that's why Vanguard is now our largest

investor. And that's that's why the

financial strategy is going to generally

attract more passive capital, more

equity capital. And this last issue,

you know, there's no company that's

well-run who's got a strategy to issue

superior credit. like they, you know,

they apologize for it, they're

embarrassed by it, but you know, JP

Morgan is not enthusiastically issuing

credit as part of the strategy of the

bank. If they were, they wouldn't have

100 JPM.197

QIPS trading 144A over the counter,

right? Nor is Apple issuing credit to

grow the company.

We are issuing credit like strike,

strife, stride. We give them happy

four-letter tickers. We put them on a

shelf registration.

We make them a hundred times as liquid.

We, you know, there were 10 big

preferred stocks issued in the past four

years. Three of the 10 were ours, but

ours were the only ones that were

perpetual.

All of the others have call options

that the instrument. So

conventional wisdom of the banker is put

in a call so you can buy it back if the

price goes up. You know, and my view is

you're crippling the security. Take the

call out so when the price goes up, you

can sell it at 150 or 200 instead of at

par and make sure that the guys that

bought it make a fortune. And they're

like, well, that that's crazy. You know,

how are you going to do that? Well, the

answer is, I'm going to buy Bitcoin

forever. And so, we have a different

approach to capital markets, and that

approach is going to benefit us with

these passive income investors.

>> Let me ask you this question because I

know you think through these things. The

market has not only allowed you, but

encouraged you to do all the things that

you've just talked about for the last,

you know, 20 minutes or so. Are there

other and again forgive me for the use

of the word but are other strategies

sort of in your quiver that you're just

waiting for the right time to unleash or

do you sort of cross that bridge when

and if

the general strategy is to issue BTC

back credit instruments. So if you think

about what we can do, well, we've got a

convertible preferred that's got a long

duration like it's like a 40 delta

instrument that's like 16 like if if I

look at my credit stra stack right now,

strike has got a macau duration of 15.7

years. Strife has got a duration of 12

and a half years. Stride has got a

duration of 10 years. So um

we have the option to to issue converts

that are you know different delta maybe

instead of 40 delta 60 or 70 delta or 20

delta we have the option to issue

shorter duration instruments instead of

a 10 15year we've issued the equivalent

of a 20year uh treasury bond what if we

issue the equivalent of a one month or

three month what to go to shorten the

yield curve or what if we build out the

yield curve and issue one year, three

year, five year and sevenyear

instruments,

>> right? That's sort of what I was getting

at like you know you've there there

there's optionality there. You use the

term I'll use it again.

>> Yeah. I mean a lot of optionality for

for different parts of the yield curve

and different parts of the risk and

different uh different delta

instruments.

The other optionality is to do a euro

swap or yen swap.

Like the uh the average corporate issuer

in Japan pays 50 basis points,

you know, 50 basis points for a for a

corporate bond, they're yield starved.

What if you offered them 500 basis

points and took the currency risk? or

the investment grade market in Europe. I

think it's like 220 300 basis points,

330, something like that. Well, what if

you give them double? So, I think that I

think there are interesting types of

credit instruments in Europe or Japan. I

think there are different credit

instruments at shorter parts of the

yield curve.

We're not gonna, you know, we're not

going to just launch 100 products

because it would dilute the liquidity

and dilute our focus. You know, the idea

is how like how many if you've got the

electric car, the Tesla, how many models

do you need? Probably more than one, but

less than 20,

right? And if you've got a flying hover

car that's got a nuclear fusion reactor

in it, you know, how many models do you

need? you know, you you probably need

the the cyber truck and you need the

sports car and then you need the self

the the family one. So a few models but

not too many. And then uh our focus is

you know the the typical corporate

credit market is I sell debt 500 million

or a billion at a time and I do 20 30 40

tranches of it and I keep redeeming it

and it all trades over the counter with

bid with wide bid ass spreads

low liquidity and I'm I'm like well what

if I just issued one thing and sold 50

billion of it and gave you two billion

of liquidity. I'd rather have a model uh

a credit model where I sell 10 20 30 50

billion of it than have a bunch of you

know like I have if you look at our

credit stack we have these convertible

bonds if you calculate the risk some of

them are 70x over collateralized guy and

yet they trade somewhere like in the

range of distress debt it's like we're

going out of business but they're 20x

over they should be investment grade and

the point is those 144A markets, you

know, the OTC markets, they don't trade

true and so the securities are

undervalued.

You're never going to get that's bad for

the for the investor. It's bad for the

issuer. You know, it doesn't make sense.

So blow all that stuff away and replace

it with a four-letter ticker that trades

a billion a day and get it to trade at

fair value with a fair credit spread.

The investors are winning, the issuer is

winning, the capital markets are

winning, Bitcoin is winning. That's our

strategy.

>> There always concerns out there. If

there's one overriding one for you, what

is it? I think the primary challenges

that we face in the entire crypto

industry is regulatory clarity,

right? Versus confusion.

So when people people get nervous, well,

what does this mean? What does that

mean? Will this will the Genius Act

pass? You know, will the Clarity Act

pass? Will it be good? Will it be bad?

you know that that kind of regulatory

confusion and clarity

is the thing that creates most

volatility in the space and uh so I

think that'll be the near-term thing

over the next four years. The long-term

black swan is the world plunges into a,

you know, Orwellian communist, you know,

big brother situation and you're not

allowed to own anything. And so I think

we got to fight for property rights and

freedom and and capitalism and

sovereignty on the long term. In the

near term, we just kind of campaign for

clarity. This is what banks can custody

Bitcoin. It's so it's safe for your bank

to hold Bitcoin. It's not a scam. You

know, that sort of stuff.

>> Well, let me say this. I'm thankful we

met. I think it was in the February

right after you sort of had that weekend

where you sent the board members away to

sort of do their homework. You know, we

talked uh on the I think it was the

afternoon show and we've grown our

friendship since and I'm extraordinarily

thankful for that. And I'll say it and I

mean this sincerely, you're a visionary.

So, thank you so much for joining us,

Michael.

>> Thanks for hosting me.

[Music]