Michael Saylor & Bill Miller IV: Thermodynamic Savings | Bitcoin 2023

welcome back everyone all right whoa so it looks like people are

just uh a little bit excited for this next one I can't imagine why

you know it's really funny what people remember because you can have a four hour brilliant podcast

full of signal and the main thing people latch on to is there is no second best and to be fair

there really isn't but why is there no second best well Bitcoin is thermodynamic savings and

here to explain exactly what that means we have Bill Miller the fourth of Miller value partners

and Michael Saylor chairman of microstrategy please give them a warm welcome of applause

[Applause]

wow this is awesome I could not be more excited to be on stage with the leading monetary innovator

thinker and educator Michael Saylor

so Michael between the time you and I last met a few days ago to talk content and today I've

been canvassing the crowd widely to figure out if you were in my shoes you could ask Michael Saylor

one question what would it be and there's actually been a common refrain which is

actually get some life advice from him and so I went and looked on Twitter

and apparently you're 10 rules for for life right now are going viral and so people respect you not

only for your thinking around Bitcoin but just your thought leadership in general because Bitcoin

is about finding the signal through the noise I thought would be really interesting to start

by reviewing Michael Saylor's 10 rules for life as they appeared appeared on the Peter McCormick

podcast the other day so if I could I want to start with these 10 get through them quickly and

transition then to bitcoin but Michael Saylor's first rule for Success focus focus your energy

number two guard your time number three train your mind number four train your body number five

think for yourself these these uh rules for life broadly align with the Bitcoin mindset by the way

realize that so when thinking for yourself realize that everyone has an agenda

and assemble your own Mosaic of Truth six curate your friends seven curate your environment eight

keep your promises nine be cheerful and constructive and 10 upgrade the world so

let's talk about upgrading the world let's talk about Bitcoin

let's talk about the topic of our discussion which is thermodynamic savings

you talk to me about a little bit about the importance of energy

maybe the rules of thermodynamics and how they impact Bitcoin and how we should think about it

okay well I think those rules are interesting because those are thermodynamic we sound rules

first for life when you say curate your environment Focus your energy uh it's all

about not dissipating energy keep your promise is exactly what Bitcoin does stay cheerful and

constructive is is the Bitcoin message which is Bitcoin fixes things Bitcoin can help everybody

um the reason that Bitcoin is so sound literally sound is because it's thermodynamically sound

and uh it's it's this masterpiece of engineering because we've created a monetary asset where we've

Stripped Away all the counterparty risk and so the idea that I want to create a digital

Equity without Equity risk and I want to create a digital commodity without commodity risk and

I want to create a computer network without computer risk and um I wanna I wanna create

something which is so simple in its essence that there aren't many moving Parts left to

break and yet it's so powerful and profound in its promise that everybody in the world and

everything in the world can plug into it and benefit from it is what makes Bitcoin special

um and you know the whole idea behind those rules for life and the idea of Bitcoin is

they're essentially the same they're in a world where everyone is dissipating their energy

the most rational strategy is to conserve your energy conserve it and Bitcoin is the ultimate

conservative thing we are we're moving in a world where where uh we can't trust the data

and we can't trust the networks and brain power is about to become a commodity where AIS can

generate billions and billions of fake people and so the real promise of Bitcoin is it's a network

that is backed by pure digital power measured in exahash 350 extra hash and that digital power is

something that can't be spoofed can't be hacked can't can't be tricked there's no there's no way

uh to take a shortcut through it the the if you have a hundred gigawatts of power and 100

million mining rigs you might just slow it down but it would take you 10 years to slow it down

so what Satoshi created is the world's most secure database

accessible via the world's most secure network and we're living in a world where everybody wants

security you want to call it Financial Security National Security cyber security Social Security

if you want security you need to find the most secure network or the most secure resource on

Earth and it's not gold anymore and it's not land anymore and it's it's not anything that

can be created by any human being anymore it has to be something that is uh that is transcending

all of those human institutions and all human motivations in essence it needs to be a network

that runs without human intervention and that is what Satoshi created when Satoshi created bitcoin

[Applause]

Bitcoin does change though so if we think about the past year

not only has Bitcoin changed in certain ways in the potential optionality of it but the broader

environment around Bitcoin has changed over the past year can you talk a little bit about those

things yeah I think the past 12 months have been very auspicious what we're seeing is uh

regular Clarity is coming to the entire crypto space and the clarity is

Bitcoin is a commodity an asset without an issuer IT is ethical it is uh it is stable

it is um it is virtuous and the rest of the crypto ecosystem the crypto exchanges

the cryptocurrencies in the form of stable coins the crypto tokens the other crypto applications

they're all all being viewed with increased skepticism and there's an awareness that that

Bitcoin is not crypto there's an education process where all the Regulators all the legislators

all the media figures all the investors are realizing the benefits of the Bitcoin Bitcoin

is an asset an asset without an issuer and now they're beginning to realize why Bitcoin is a

commodity and the reason why it's a commodity is because it it is backed by digital power

and so the appreciation for bitcoin's energy use and bitcoin's computational power is growing

the confusion between Bitcoin and crypto is shrinking disappearing

capitals flowing from the crypto ecosystem into the Bitcoin Network

uh development effort and Innovation is Flowing from the crypto ecosystem to the Bitcoin Network

um there's an explosion and development effort on lightning there's going to be an explosion in all

sorts of other development efforts anyone that wants to implement a cyber security application

is going to have to ask the question how can there be any Security in cyberspace if I don't

Peg it into the Bitcoin network if it's not built on bitcoin those interested in National Security

are going to look to bitcoin to provide cyber security and cyberspace for National interest

those interested in Financial Security are going to look for the most secure financial

asset in the world and Bitcoin is the most fine secure financial asset in the world so in short

although there are people that can focus on negatives the Mel there's the Meltdown of Terror

the Meltdown of Luna the Meltdown of Celsius the Meltdown of blocked by the failure of Alameda the

failure of FTX the failure of all the crypto tokens right the the Meltdown and failures of

the defy exchanges the Meltdown of some crypto exchanges right and the skepticism that people

are taking with regard to crypto tokens that are stable coins all of those things which could be

viewed in a negative light are actually positive for Bitcoin because they're all accelerating the

conclusion of the mainstream investor that Bitcoin is special and ethically sound technically sound

and economically sound and it's accelerating the understanding of the technology community that

Bitcoin is the world's most secure database in the world's most secure network and maybe in that

way the most promising crypto Network in the world and you it was a very expensive marketing campaign

to convince people in Congress in the Senate The Regulators and the media that uh that Bitcoin is

the world's number one crypto network but Bitcoin is also the world's most promising new asset class

but uh but if anything today if you look at all the utterances of the lawyers all

the all of the talk on Capitol Hill if you look at all the regulatory

Publications if you look at the mainstream media coverage what's pretty clear is that

the consensus today is Bitcoin is an asset Bitcoin is special Bitcoin is a commodity

Bitcoin is uh without an issuer Bitcoin is here to stay Bitcoin is the future [Applause]

and microstrategy has been the biggest proponent on the corporate front of Bitcoin now I attended

microstrategies conference the other week to learn more about what microstrategy is doing

and how they're incorporating Bitcoin with regard to their client offerings and I was incredibly

blown away and more bullish than ever about some of the new optionality being created that you all

are working on can you talk a little bit about that and how it improves the case for Bitcoin

sure microstrategy first embraced Bitcoin on its balance sheet and we used it to fix our balance

sheet and there's a very interesting story there but the other half of the Bitcoin promises Bitcoin

can fix your p l Bitcoin can make your products better can make your services better and so one

of the most exciting things I've done over the last 12 months is I have actually gotten much

more involved hand on Hands-On in the development of Bitcoin related products at microstrategy and

and one product we rolled out two weeks ago or at least we announced two weeks ago is microstrategy

lightning and the idea there is to allow all of our Major Brands all of our customers uh the big

marketing companies instead of buying 50 million dollars of advertising and then running banner ads

to drive clicks to their websites we're going to let them buy 50 million dollars of Bitcoin

and then give it away in micro transactions via the lightning Network to 50 million of

their customers to drive traffic to their website so the [Applause]

the promise of lightning is that it is now possible to move money at the speed of light

to move it for a 30th of a penny friction free to uh to to settle in a couple of seconds instead of

a couple of months and so if I wanted to do direct marketing where I offer 10 million people some

amount of money to show up and become a customer or do a referral I couldn't do it with a credit

card because of credit card minimums I couldn't do it because of of the cost of the transaction but

in a world where you have satoshi's running via lightning channels and you have a very a

very healthy ecosystem of lightning wallets and you have an ethical money Bitcoin an ethical

commodity then you can actually build all sorts of interesting employee incentive applications

prospecting applications customer applications you can even redefine the product like and if

you buy a book on Amazon and you pay for it where the or the credit card it gets shipped to you that

was the old way but the new way might very well be that if you buy the book on Amazon I'll give

you a Satoshi refund and if you post your review of the book I'll give you another Satoshi refund

and if other people like your review I'll send you another Satoshi refund and if people buy the

book based on your review I'll actually give you a percentage of that so I could Implement and I

could Implement customer referral fees and ongoing Community engagement payments that will change the

nature of the offering for the company that it that you know kind of puts frequent flyer miles

into the obsolete obsolete trash bin of History and we replace them with satoshi's as universal

Universal uh monetary units and your reward for engaging with me for buying my product

for working to help support my community is to get immediate compensation and I I see a world a place

where Amazon does that or Coca-Cola does that or Nike does that or McDonald's does that I I don't

want McDonald's to give a hundred million dollars to a digital marketing company to run banner ads

and send you spam emails or whatever it is I want McDonald's to buy a hundred million dollars worth

of bitcoin and offer people Bitcoin rewards when they download the McDonald's apps when they engage

in a McDonald's marketing campaign and I think if we can get the lvmhs and the McDonald's and the

coca-colas and the Airlines and the hotel chains to embrace the idea that the universal frequent

flyer mile is the Satoshi right and lightning is the method to deliver that to billions of people I

think it's a chance to get thousands of companies to see the benefits of Bitcoin as a technology and

as the benefits of Bitcoin to make their products and services better and Delight their customers

and I think that will help us expand the ecosystem to the benefit everybody in the community

thank you

so the functionality of Bitcoin and micro strategies adoption of it and ability to

make others understand how powerful and what what UniQue Ideas micro payments allow that's a really

interesting concept and the decentralization of it has immense implications potentially for

investment purposes around the decentralization of major centralized advertising firms today

on the Internet or all kinds of other things so help me think through what that could mean from

an Investor's perspective buying microstrategy stock today versus how someone may have thought

about it four or five years ago and how it's different and how the options may have changed

well Mike rashadi discovered Bitcoin we had a p l and our p l was the the source of shareholder

returns we had a balance sheet of 500 million dollars that we had accumulated by a you know

by cash flow over time but the shareholder looked at the company and said the balance sheet is a

liability because 500 million dollars is never going to be worth more than 500 million dollars

you're not going to get a 30 return on 500 million dollars right so the cash the conventional

treasury strategy on a balance sheet man your balance sheet is a liability and your p l has

to grow faster than the monetary inflation rate so I think of it as everybody's got a left arm and a

right arm and when your balance sheet is weighed down with cash or sovereign debt is like putting

your right arm behind your back and you're just fighting with your left arm and it's really really

hard and so company and then when the the Federal Reserve raises the monetary inflation rate from

5 to 15 percent every company fighting with the one hand has got to grow 25 percent and they're

trying hard and they're reaching beyond their fingertips and when they fail they crash and burn

and it might be even worse they might actually say the 500 million is a liability so I'm going

to give it all back to the shareholders I'm going to borrow a billion dollars I'll go

to negative working capital and then not only are they fighting with one hand behind their back but

they have a two billion dollar weight around their neck and that's why all these indebted

companies fail in an inflationary environment so when we discovered Bitcoin we said well we're not

going to like leave the right arm behind our back we're going to turn the 500 million dollars in of

of liability into 500 million of an asset the long story short is we went from 500 million dollars of

a liability yielding nothing to today we have a hundred and forty thousand Bitcoin which is

four billion dollars plus and so we are able to convert our balance sheet from a nothing

or a liability into an asset and once we did that we we provided our shareholders with um a benefit

because all the you know if you wanted to actually buy ten thousand acres of Timber you would buy a

company to invest in Timber and if you wanted to buy oil tankers you would buy a company invested

in oil tankers and if you wanted to buy Bitcoin and you only had 30 seconds and you wanted 10

million dollars of Bitcoin and you're a hedge fund you pick up the phone you say buy me microstrategy

because I know they're backed by Bitcoin and so we provided a on-ramp for institutional capital

that allowed them to to buy some Bitcoin exposure quick and easy without the alternative would be

three to five years of vetting and stress and Communications and so we let them do in uh three

minutes what would take three years so that was our transition and over the last two and

a half years we transitioned from a company with a 600 million dollar Enterprise Value

that was uh was growing uh fairly conservatively in a very mature business

to a company with a six and a half billion dollar Enterprise Value so 10x

that has been growing steadily throwing off cash flow conservatively

but we and this is stage two I'll get to stage three stage two is we showed the world that you

don't have to grow twenty percent a year on the top line to not have to wind down the business

right 98 of companies can't grow 25 percent Top Line If I told all of you if your salary

doesn't go up 20 a year you're going to fail and then you all of a sudden have to do that

three four years in a row you're going to have a lot of stress with your customers or or your boss

or your organization and so I think that the Fiat world without Bitcoin on your balance sheet forces

people to try too hard to grow and the result is they take risk that blows up in their face or they

do bad Acquisitions or eventually they don't quite hit the growth Target and then their stock crashes

and the business gets sold off and the result is a 99 mortality rate so so uh stage two was us using

our balance sheet to show that it's okay to have a low growth business as long as you have a high

growth balance sheet stage three is US putting Bitcoin and lightning into our product offering

to offer to our customers so true Innovation so that we can drive our revenues up and so we

can drive our cash flows up and begin to grow much more rapidly than we have but in the past

and so ultimately the business is all about occasionally we sell Equity when

it's accretive to buy Bitcoin occasionally we issue debt when it's accreted to buy Bitcoin

always we sweep our cash flows into Bitcoin and now we focus on using Bitcoin and lightning and

other apps to grow our cash flows to buy more Bitcoin and uh if we actually

sweep if we keep innovating on the p l side then I think our growth rate will will continue to drive

our revenues North over the next decade but we'll get a double benefit because we're reinvesting

our cash flows into Bitcoin and we're getting the back end appreciation in our balance sheet

such that you know today if um 100 with 140 000 Bitcoin when Bitcoin moves one thousand dollars

we have a hundred and forty million dollars of investment appreciation which is equivalent to

three years of after-tax cash flow of two thousand people working as hard as they can

and so we have we have managed to fix the business with Bitcoin [Applause]

and since the time you made the decision to put that Capital into Bitcoin in August of 2020.

your Stock's up 140 percent and the Market's up 35 percent

why haven't more companies done this or considered it and what do we need to do

to get them to more seriously consider this I think uh there's some great Milestones coming

I I think um the the fasby accounting of rendering Bitcoin indefinite intangible has been toxic for

conventional CFOs because if they bought 20 billion dollars of Bitcoin they could never

realize an investment gain only investment loss so the current move toward fair value

accounting that's being pursued by fasbi is very very bullish and auspicious and and so the first

Milestone will be the adoption of fair value accounting for Bitcoin sometime in the future

the second that's a good one the second one is is I think The Regulators are hammering over and

over again the theme that Bitcoin is an asset without an issue where it's a commodity and as

the entire uh mainstream the crypto Community is they see that Bitcoin is special they will start

to reorganize their portfolios and differentiate Bitcoin versus the Securities I think that's very

auspicious and I think that causes the mainstream investors as they start to see that Bitcoin is

distancing itself like Bitcoin is going to be the last crypto asset standing in the U.S and it's

going to be the winner and they're going to right now they're looking at this confusing situation a

year ago it wasn't clear whether Terra or luna or this yo-yo coin or that thing was the winner and

a lot of people even know the difference between Bitcoin and crypto and I think right now there's a

very expensive campaign being driven by the world to illustrate the diff between Bitcoin and crypto

12 months from now I think that most mainstream investors will have seen that that Bitcoin is

here and embraced and a lot of the other things that were confusing that had bad reputation have

been diminished diminuated or exited the market so I think the emergence of Bitcoin as uh the

king crypto commodity I think will also cause the acceleration of institutional investors and also

the acceleration of corporate adoption oh and the third thing I really should say this right

the first is the accounting the second is the asset designation and the third is the

emergence of Bitcoin applications on the on the layer twos and the layer threes the

lightning applications even all cyber security applications National Security applications

and uh and payment applications all of those are attracting a new class

of Technology investors they know how to buy Google they know how to buy Facebook and Apple

they see Bitcoin as the emergent technology Network and the most secure

the most secure database and the most secure network you're going to want to own a piece of

that of your technology investor and I think that will open the way for lots of corporate adoption

thank you

I have a very hard time understanding why more people don't own the fastest growing monetary

payments and security technology Enterprise in the entire world growing at a rate of 70 a year

massive amounts of adoption and optionality longer term and I personally couldn't be more excited

about the future of Bitcoin we personally are as bullish and heavily invested as ever

and we're excited to see where it goes over the next decade as are you Michael so with that I

wanted to thank you very much for your time energy and support of an amazing technology

I'm not all right I'd like to thank all of you and I would just say um uh keep building

on bitcoin keep educating the public uh keep up the faith I mean everybody in this room

is very inspirational to me um I said uh in my rules of success and life curate your friends

and I think I've curated my friends here and I hope you do the same thank you for your friends

welcome back to bitcoin 2023 at the Bitcoin magazine live desk brought to you by Marathon

so we heard about curating our friends we've curated a great uh panel returning we got Dylan

we got Matt and we got Jesse so that three-step analysis from someone from a product point of view

thinking about on-ramps Jesse you were mentioning how much that struck you and how clear that was

how clear his thinking is around that a little bit on that yeah I think he's thinking well so he

talked about how there have been major strides now with accounting Clarity for Bitcoin for corporate

adoption in particular um and and then he talked about uh the asset designation how Bitcoin is the

asset without an issuer and that's very important because that that means it's a commodity there's

no company that's keeping a pre-mine of Bitcoin and trying to Hype it up and get people to buy in

on it that's that that's everything else that's not Bitcoin Bitcoin is a commodity and the SEC

is getting much clearer about that in in how they're articulating what Bitcoin is and how it

contrasts with everything else out there the third thing he talked about was um the applications the

application layer that's developing and growing in Bitcoin and so I think in that three-part analysis

he really focused in on what are the things that um the indicators of you know Bitcoin moving in

the right direction of the barriers to entry for corporate adoption uh decreasing um the the

quality of the infrastructure being built out and the clarity in terms of regulatory status being

instrumental in those things so you know when when Michael Saylor's talking about Bitcoin I see

you know his vision is quite clear about the direction it's moving in and the recent progress

and how that points towards you know Clarity for the future of of where this whole thing is moving

and so I think that he has like a a unique ability to to see from a corporate executive point of

view what's needed and point to exactly what's happening that will make it easier for other

treasuries corporate treasuries to adopt it and businesses in general he had a lot of advice out

there he didn't say stay humble and stack SATs but he did talk about the auspicious nature of

all these things that people say are murky and bad but somehow are just driving so many great things

for Bitcoin he mentioned uh energy he mentioned Financial Security he mentioned people losing

faith in crypto and that energy that economic enthusiasm all finding its way into Bitcoin and he

talked about the apps right and so you're I have a bird's eye view of everything that's actually

about to become fulfilled and blossoming on the network you know when you heard him say about that

about crypto finally uh going away let's say and all that energy coming is that what you're seeing

I think um if you're a technical person coming into Bitcoin you can verify the code uh you can

use your own node you can read all the books you want to read you can listen to podcasts you can

watch videos but for non-technical people there's really two main things that that brings confidence

in Bitcoin as a as Freedom money as something that you can hold something that you can spend

without permission on your own and that is time just simply time in the market so many people say

um you know 21 million cap is going to be broken they're going to add more Bitcoin

well if you can't verify that yourself in five years six years seven years eight years as that

cap doesn't change you will get conviction and then the second thing is touching the

stove right bitcoin's best marketing department is all the institutions breaking all around us as

people touch the stove as they get burnt just like a child they will realize that they need

to seek out better tools and one of those tools is Bitcoin and Dylan you're not just known as a

market analyst on Twitter these days you've been talking a lot about the uh Spin and noticing spin

noticing Moscow time being produced by the media regularly right complete fake news uh but we got

a guy who's promising to destroy Moscow Time by telling the truth tell us what you think about

RFK coming up next next uh yeah I'm excited for it I uh I mean he's obviously he's a politician

right but uh you know someone that has uh you know uh anti-cbdc spin uh is someone that I

can get behind so I'm for it well uh you're gonna hear all about it in a few minutes uh stay tuned

because one of the highlights of this show is RFK Jr coming up to maybe talk about uh fauci

maybe to talk about vaccines but most importantly we're going to hear his thoughts on bitcoin clear

and unadulterated coming up in just a few minutes thanks everyone we'll see you back here after RFK