Bitcoin Is The Most Certain Thing In An Economy Full Of Uncertainty

Joining us now, MicroShottyG executive chairman Michael Sailor.

Michael, great to have you on the show.

Speak with you again.

Yeah, thanks for having me.

So when it comes to MicroShottyG,

you really have this dual strategy.

It's both an operating company focused on business intelligence

and what some analysts would call

modestly leveraged investment play on Bitcoin.

Does the marriage continue to be worth more than

some of the parts?

Yeah, absolutely.

The operating company provides diversification for investors

versus the volatility of Bitcoin.

And it also allows us to borrow money very cheaply.

Our blended cost capital is like 1.5%.

And we're able to invest that money into Bitcoin.

And on the other hand, our Bitcoin investment is,

Bitcoin itself is up 145%.

Since we started buying Bitcoin.

And that Bitcoin position creates the volatility

in the stock that allows us to borrow and raise capital

cheaply in order to buy more Bitcoin and grow the business.

Now, I know you retired one loan earlier,

I guess last quarter, and brought your leverage down.

What are you talking about being able to borrow cheaply?

Are you doing that right now?

No, we're not borrowing right now.

But we go through successive cycles of leveraging

and de-leveraging.

We've been de-leveraging now.

And generally our decision about whether or not

we leverage or de-leverages a function of the market opportunity

in what we think is most accretive for our shareholders.

OK.

So in terms of this rally, we have seen in Bitcoin.

What do you attribute it to?

Especially on a day where we've seen other folks

who are invested in the asset class, say,

soft landing is really what the rally is contingent upon.

Well, really, there's a growing consensus.

The Bitcoin is unique and valuable international asset.

And that's being endorsed by politicians.

It's being endorsed by regulators.

It's being endorsed by investors.

You're hearing money managers like Larry Fink say this.

And that has created a change in sentiment.

The odds of spot ETF being approved were 1% six months ago.

Then they went to 50% and this morning they were 65%

according to Bloomberg analyst.

So that's really driving the near-term sentiment.

But plus the fact that there's so much chaos

in the crypto industry, Bitcoin is emerging

as the safe haven institutional asset

if you want to play this space without trying

to parse through the politics, the legal,

and the regulatory complexity.

Would a spot Bitcoin ETF be good news?

Because it's a tide that lifts all boats in terms of the price

of Bitcoin and thus the price of microstrategy shares?

Or is it something that could actually

dent your investor base as you see some folks

that are invested in microstrategy specifically

to have a liquid option in Bitcoin shift there?

I think spot ETF is great news for the space.

Bitcoin you could think of is this beautiful house

and a scary neighborhood that you have to pay for and cash

takes a year to buy and you can never rent it.

The spot ETF is like that same beautiful house

in a nice neighborhood and you can buy it tomorrow, no money down.

And you can rent and refinance it from your bank.

It's not a threat to microstrategy.

Microstrategy is like that beautiful house

with 10,000 acres of ranch land behind it.

It generates cash flow that has a management team

that can borrow money at 1, 2% interest in order to develop the land.

So we offer yield and we offer leverage

through active management, which is unique for a set of our investors.

We obviously don't have room in our capital structure

for tens of billions of dollars of sovereign wealth

or major hedge funds.

So they need a spot ETF in order to take a position in the space.

Michael, I know that in talking about the price performance

of Bitcoin, your time frame is going to basically determine

whether it's done amazingly well or has been disappointing.

But if you go back three years, it's

about where the price was in dollar terms three years ago.

In the meantime, we've had the most inflation in four decades.

We now have a lot of questions about the size of the fiscal

burdens of the United States.

And also, as you mentioned, Bitcoin has emerged

as kind of the survivor and the original digital asset of this type.

In other words, it's kind of seemed to have

great some distance against other tokens.

In that context, are you disappointed that we're still at 30,000

or does it matter what the dollar price is today?

Now, I think looking back three years is very clarifying.

Three years ago, Bitcoin was about 10,000.

And so if we look at the three-year chart

from August 10th of 2020 to today,

Bitcoin's up 145%.

The S&P is up 37%.

The S&P is the cost of capital.

Gold is down 3%, bonds are down 18%.

Microstrategies up 254%.

And our enterprise values increased by a factor of 10

by $8 billion or something.

So we're glad we adopted Bitcoin.

We would say that Bitcoin is returning 4x the cost of capital.

And if you're not getting 37% gain in those three years via the S&P,

then you're not keeping up with the cost of capital.

Hey, Michael, we talked to you so much about cryptocurrencies.

And the stock is arguably a proxy for crypto.

I wonder if anything about the AI boom has made you wish

the street viewed micro strategy as an AI play or a software play.

And if you'd like the street to view it through that kind of lens.

Well, I think microstrategies have a lot of options,

a lot of opportunities to harness AI.

And we're bringing out a new product based on AI shortly.

So we're excited about that.

What I'd say about AI is AI is devaluing assets

that are created with pure information or white collar type

straightforward labor.

And AI is going to create value to assets that are energy rich.

That acre of beachfront property and Palm Beach that an AI can't create.

Bitcoin, AI can't create.

And ultimately, Bitcoin is the solution to a lot of problems AI creates.

And if I was looking at the AI revolution, I would think,

how do I buy scarce desirable assets that the computer can't spin out of thin air?

And if you own those, then you're going to be good

because the stuff that the AI creates in a split second,

that's going to get devalued.

Yeah, I mean, I do want to dig into the AI piece of the puzzle

where microstrategies concerned as well.

Because you did this multi-year partnership with Microsoft.

You're going to integrate Azure Open AI service

to enhance those AI capabilities with your analytics platform, microstrategie one.

What is the uptake Ben so far on this?

And I guess how do you expect this to continue?

Kind of touched on it just now, but how do you expect that to continue to contribute

to this broader flywheel?

Well, microstrategies have been in the business intelligence business for 30 years.

And we brought this AI module to our customers recently.

There's a lot of enthusiasm about what we can do.

Anybody using microstrategies software is trying to sift through billions of lines

of data to get an insight to run their company or their organization better.

AI does a good job of joining with our software

and our proprietary semantic graph in order to get them that answer faster and quicker.

We think this is going to be really good for the business intelligence industry.

And ultimately, it's just going to make every enterprise more nimble, more agile, more intelligent.

Of course, I want to ask you about regulation, something we talk about every time we see each other.

Ross and Ben, I'm the commissioner of the CFTC was on CMBC earlier today.

Here's what he had to say.

There needs to be action by Congress so that we can fill these gaps in the crypto space.

And I've said as the chair of the commodity futures trading commission,

we've been bringing enforcement cases without clear authority over the space.

And a huge portion, and I've argued up to 70% of the market,

is largely unregulated because they constitute commodities.

Want to get your thoughts on that, especially since we have seen regulators,

the SEC, for example, cracking down on cryptocurrencies and exchanges in recent months.

But Bitcoin has been the exception thus far.

Can the case be made that Bitcoin is a commodity and doesn't require the same regulation as everything else?

Or is it coming?

There's universal consensus, generally everywhere in the world across all parties.

That Bitcoin is the decentralized global asset that has value.

It is without an issuer and it is a digital commodity.

In fact, it is the gold standard of digital commodity.

So you study Bitcoin to figure out how to create a digital commodity.

There's also pretty general uncertainty and conflict and controversy surrounding the role of crypto exchanges,

stable coins, digital securities, tokens and DeFi.

I don't think that that uncertainty is going to be resolved any time in the next two years.

And the chair of the CFTC is correct in saying we do need a political solution coming from Congress.

It's pretty clear that there's not going to be a quick solution coming directly from the regulators

or organically from the industry.

So we're waiting for political leadership to resolve that ambiguity.

Meanwhile, Bitcoin is the one unambiguous thing, right?

It is the most certain thing.

And a very promising, innovative economy, but full of regulatory uncertainty.

And so if you want to participate in the space, the way to do it is with Bitcoin.

Yeah. And of course, we're also looking for changes to those FASB accounting rules,

which I know affect you every quarter as well.

So always lots to talk about.

Great to get your thoughts, Michael Saylor.

Thanks for joining us.

And just thank you for having me.