This, of course, is my favorite subject.
There's no better way, no way I'd prefer to start the day than talking about Bitcoin
and why there is no second best.
I had an occasion to consider this phrase as I prepared this presentation,
and I just thought it resonated across so many different dimensions.
And so I started considering, you know, what is the best idea?
Right? What is the best?
And I think that in the modern era, in the 21st century,
I think we can agree that the best idea has been digital transformation.
And the companies that have reshaped the world over the past 30 years are Microsoft,
and Apple, and Google, and Facebook, and Vidya,
and they stand for digital books, and digital entertainment, and digital intelligence,
and digital communications, and digital memories.
And, of course, as they dematerialize those products,
as our recorders drop away, or dematerialize in our CDs, and our libraries dematerialize,
and as our services dematerialize, there's just a massive amount of economic energy
that's been given out. There's an extraordinary amount of efficiency.
Now you can give a buck to a billion people, or you can give Beethoven's ninth symphony to a
billion people, and you can do it for the cost of some incremental electricity.
And the big winners were the investors in these companies,
and the companies themselves became, you know, as powerful as nation states.
Now how good an idea is digital transformation.
Well, it's good enough that in many years, 100% of the return for the S&P
are attributable to just seven companies.
One percent of the companies have all the result.
In other words, if you're not doing this, then you're just working very hard,
and working harder just doesn't get ahead.
This is a snapshot in the year 2023, and it just shows you
A, how good that idea is, and B, just how much trouble you're in,
if you're not actually surfing a digital wave here.
Seven companies have all the returns in the S&P index.
493 companies return nothing.
Okay, this is not a value judgment.
The truth is probably the people that work for the 493 companies worked harder.
They worked harder.
They're probably smarter.
They got paid less, and they're taking an extraordinary beating and a burden on their back,
trying to fight against a digital wave.
But life isn't fair, and certainly the global economy isn't fair.
If you're the winner, you're the winner, and if you get on the wrong side of a trend,
then you just get gradually crushed.
So this is a sobering observation, but it's a reminder that if you're going to invest,
and if you're going to align yourself with an idea, it better be the best idea,
because the second best idea, as you can see, is worth nothing.
You'll be lucky if you just stay in business.
So what's the best digital transformation idea?
Yeah, digital capital is the best digital transformation.
Right? I mean, yeah, for 30 years, we've been transforming books and records,
and email, or letters, and packages, and pictures, and VHS cassettes, and the like.
But that's all digital information.
Digital information is interesting.
It does create enormous value, but the truth is,
the first 30 years of digital transformation will be an order of magnitude less important
than the next 30 years of digital transformation.
And the real bowl here, the extraordinary opportunity,
is the digital transformation of capital,
the digital transformation of property,
the digital transformation of money.
And if you want to be a physicist and be deep about this,
it's the digital transformation of matter and energy.
Not the digital transformation of information, but the digital transformation of matter and energy.
And where are we?
Well, I mean, first of all, you're talking about $900 trillion of assets
that are in the analog world.
So I don't know what apples worth or what Microsoft is worth, but, you know,
books weren't worth 900 trillion when they transformed them.
And nor were CD records worth 900 trillion.
As of today, 0.1% of the capital on the world is digital.
99.9% is this.
Right, we're very early in the digital transformation cycle of capital.
Right, the world is living in analog assets.
We have analog money, we have analog bonds, we have analog real estate,
we have analog equity, we have analog art, a lot of analog stuff.
900 trillion dollars of it, but the 900 trillion doesn't just reflect the value of the physical stuff.
It reflects a monetary premium over and above the utility value of this stuff.
People buy real estate not just to live in, they buy real estate as a store of value.
And they buy equities not just because they want to capture the cash flows of the company,
they buy equities because they want a store of value and they feel like it's preferable to hold in cash.
And for 500 years, people have been buying art as a store of value.
It was scarce, desirable, portable property.
If you had to leave the city, you could take it with you.
And gold is the same thing.
People have been buying gold as a store of value.
So something like half of all this capital is really a monetary premium.
And the other half may be a utility.
We are just one trillion out of the 900 trillion right now, very early.
Crypto proof of work is the best way to create digital capital.
The world wants digital capital.
What's the best way to do it?
Crypto proof of work.
That is to say, when you're running a proof of work mining operation that converts energy
into information that can be secured and transferred via cryptography.
Not all crypto is based on proof of work and therefore not all crypto is digital capital.
A lot of it just looks like a digital security.
But what's special about this particular approach, which is of course the Bitcoin architecture is,
it creates a decentralized asset.
It creates a physical asset.
There is a physical linkage to the real world via the electricity and the silicon
that makes it thermodynamically sound and integrates it into the universe and not just the
metaverse.
It's sovereign.
You can take custody of this.
It's a egalitarian.
The protocol is open.
Anybody anywhere on earth can engage in this network.
It's permissionless.
It's global.
Right?
This is the best idea, the best way to create digital capital.
What's the best crypto proof of work asset?
Bitcoin is the best.
How good is it?
It's 97% of all of the market cap of crypto proof of work.
After Bitcoin, you have to go all the way down to Dogecoin.
Literally a joke, literally a joke created over the weekend by an engineer as a joke
to find the second best.
Obviously, there is no second best proof of work asset.
You know what?
There's no second best crypto.
Bitcoin is the best crypto asset.
Now, why is it the best crypto asset?
Because it's increasingly clear that no other crypto token is going to achieve
institutional acceptance this decade.
Bitcoin is the only crypto that's going to cross the chasm.
You could see the writing on the wall when the spot ETF of Bitcoin was approved in January.
By the end of May, you'll know that Ethereum is not going to be approved.
And when Ethereum is not going to be approved,
sometimes this summer it'll be very clear to everyone that Ethereum is deemed a crypto asset
security, not a commodity.
After that, you're going to see that Ethereum, BNB, Solana, Ripple, Cardano,
everything down the stack is just a crypto asset security unregistered.
None of them will ever be wrapped by a spot ETF.
None of them will be accepted by Wall Street.
None of them will be accepted by mainstream institutional investors as crypto assets.
This is the one universal consensus accepted institutional grade crypto asset in the world.
There won't be another one this decade.
I can't speak to 20, 30, 40, 50 years out.
Anything can happen that far out.
But between the year 2024 and the year 2030, the die is cast.
The writing is on the wall.
This is the winner.
There is no second best.
And Bitcoin is the best crypto network.
It's not just the best crypto asset.
This is secured, this asset is secured by the most powerful computer network in the world.
It's rapidly growing stronger.
Hash rates growing by 70% a year.
It's growing that fast and good in bull markets and bear markets.
It's an unstoppable thing.
How much is 624x a hash?
It's enough that all of the computer power of Microsoft or Amazon is not going to outdo this.
This is a silicon machine because the genius of an open crypto proof of work network
is that very intelligent engineers can harness the power of ASIC chips to create
orders of magnitude more efficiency and Shaw 256 hashing.
So the silicon ratchet is 2000 to 1, 3000 to 1 more powerful than a general purpose CPU.
A GPU is not appropriate and is not capable of doing this.
It's not the right technique.
So you're not threatened by all the GPU capacity.
And what you have here is enough hash power to create a wall of encrypted energy that's
nation-state resistant, that's corporate resistant, that's doctor evil resistant,
that's hacker resistant.
There is no trick, there is no gimmick, there is no social attack.
This is just raw digital power standing in the way of anybody that would try to undermine
the integrity of the network.
And it's also driven by electricity, 20 gigawatts of electricity, 20 full on nuclear reactors worth of electricity.
But it's a lot better than 20 full on nuclear reactors because this electricity is spread everywhere
to the ends of the earth.
The network is feeding on electricity and that creates a decentralizing dynamic that drives all of
all of the network to the end of the grid in the quest of stranded energy.
So this network and the dynamic is going to continually decentralize, continually dissipate,
is going to continually move away from population centers where the electricity is expensive,
it's going to move to places where the electricity is stranded,
where it's where it needs to be recycled.
And that 30 gigawatts is going to create a thermodynamic connection between the virtual network
and the physical world.
This is what makes the network stable, this is what makes the network ethical, this is what makes
the network politically sound.
The fact that that electricity is going to be coming off of a dam in Bhutan
or a volcano in South America or Africa means that this is going to be a global neutral asset,
there's no way anybody is going to centralize the Bitcoin network on top of a single data center.
That's what makes Bitcoin the best crypto network.
Now beyond that, Bitcoin's the best crypto brand.
Why is it the best crypto brand?
Well, 220 million Bitcoin holders, people that have an economic interest in Bitcoin,
420 million crypto users around the world.
The crypto industry has been aggressively marketing and aggressively expanding on the
backs of lots of different use cases, not just Bitcoin as store of value or property, but also
cryptocurrencies, stable coins, NFTs, everything under the sun. And this continues to grow.
It's a incredibly aggressive, fast growing, creative market.
The marketing is extraordinary, but there's an important point to be made here.
As the other crypto assets fail because of competition,
as the, you know, Solana competes with Ethereum competes with whatever, as they fail due to
regulation, as they get shut down or they get labeled unregistered securities by regulators,
as they fail due to entropy, just the complexity of what they're attempting to accomplish,
and they crash or they get hacked or they unwind, or as people move away from their projects,
as those failures take place, all the users in the crypto ecosystem and all the capital in the
crypto ecosystem is going to flow into the best network. It's going to flow into Bitcoin, because
Bitcoin has 100% crypto acceptance. If you talked everybody in the world and you say, well, do you like
crypto? Yeah, I do. Well, it's Bitcoin legitimate, which what's the most secure, what's the most
credible crypto network? Well, it's Bitcoin. Bitcoin's the old positive, right? It's the universal donor,
right? Everybody can't agree on anything else. If you talk to people in the crypto ecosystem and
you ask them whether or not they like Solana better than this or Tether better than that or NFTs
they can't agree on that. That's competitive. That's controversial. That's confusing. Everybody
agrees on this one thing. Bitcoin. Bitcoin will be around for the long term. The industry was built on
it. It'll be around long after most of the other industry participants are gone. Well, Bitcoin's not
just the best crypto brand. It's the best investment brand. There is no second best investment brand.
That people know about the dollar, but dollar is not an investment unless you're in a country with
the currency collapsing. And if the currency is not collapsing, then you need a different investment.
Bitcoin's the most widely held investment asset in the world, right? People are coming to grips with
that. I travel all over the world. I get on the runway and the middle of Switzerland and the guy
with the yellow vest knows me. He's buying Bitcoin for his daughter. He just got married. I walk to
the beach in Italy and someone swimming off the beach yells at me and they know me. I walk into a
room full of billionaires. They know me. I walk to a bar and the guys at the bar turn around and they
know me. This happens in Urgway. It happens in Mexico. It happens in Brazil. It happens in Italy. It
happens in Greece. It happens in Switzerland. It happens in London. It happens in New York City.
It happens in Asia. Right? Why? Right? Bitcoin's a sports team with hundreds of millions, arguably 400
million fans. And they're all rooting for the same thing. And when Bitcoin's doing well, they're
on a good mood. It's like their blood sugar's up. When Bitcoin's doing poorly, it's all their
own. They're in a surly mood. Their blood sugar is down. But give me another example of a team
that's got 400 million passionate fans and they're all winning or losing together. Right? What's
making news on Sunday afternoon? Bitcoin. When there's a scare of a war, what's crashing? What can
you sell, Bitcoin? When you decide the war is not coming, what can you buy, Bitcoin? What is
there to tweet about? Talk about Bitcoin. What do you cover on YouTube on a Saturday or Sunday or
midnight on the East Coast? Bitcoin. Right? Everybody's got something to say about it. What is it?
Well, and why is it? Well, first of all, it's the most widely held asset in the world because it's
a standardized economic unit. Right? I mean, maybe we own watches, but we own different watches.
Maybe we own buildings. We own different buildings. Right? Maybe you're building as worth more in
Paris, but how does that help my building in Los Angeles? We're not on the same team. We're not on
team building. Right? We're not on team watch. You know, we're, you know, and good luck, you know,
trying to invest in like Apple stock in Nigeria, right? And so what is Bitcoin? Well,
Bitcoin's the economic solution to everybody. It's a global economic solution to billions of people.
Right? And what does it become? It's become cool. Bitcoin's cool. It's useful. It's global. It's
standard. Who's the last person to standardize something? Well, I mean, people have been standardizing
things for thousands of years, but you might know the name of one company, one standard oil.
John D. Rockefeller launched standard oil and it became such a household world. In fact, just
about every oil company in America came from John D. Rockefeller's company. Half the oil companies
in Europe came from John D. Rockefeller's company. We all zoned out and we thought oil, we forgot
about the standard part. The standard part was this is the oil that's not going to blow up in your
face and set your house on fire. This is the oil that's actually got clean chemical properties.
Standardizing energy was the most powerful idea in the 20th century. Made the richest man in the
20th century and created every single energy company. But what is this? This is standard capital.
This is standard wealth for 8 billion people. It's, you know, so tell me the next standard, right?
Give me another asset that goes up in value, not down in value that's standardized,
opened and global to everybody, right? And the answer is there is no second best, right? There's
a standard investment brand. It's called Bitcoin. It's always interesting. It's a egalitarian. You can
buy a billion dollars worth of it and it's a pretty good idea to buy a billion, but you can buy
23 dollars worth of it. And if you look at wealthy in the world, they buy buildings, but you know,
how's a cab driver in Nigeria supposed to buy a fraction of a building, right? How does it impact the
other 7.9 billion people that can't afford a building, right? This is a egalitarian capital,
egalitarian property. And it's prestigious, right? So this is the ultimate luxury brand.
You know, people used to buy the nice watch so they figured they could sell it if they ever
needed to eat or pawn it, right? But you'd much rather have Bitcoin in your watch.
Bitcoin's the best digital commodity. There's no second best digital commodity. What is a digital
commodity? It's the only crypto in the world recognized as an asset without an issuer
by all major regulators. By all major regulators. Okay, the Chinese recognize it. The Russians
recognize it, right? The enemies of the US recognize it, you know, in Singapore and the UAE
and the US and Brazil everywhere. This is the one thing everybody recognizes. This is a question
is why? Why? It's not the first. It's not the only. There's two and a half million copies. Why?
It's because of the immaculate conception. What is the immaculate conception? By the way,
it's such a simple idea and yet everybody that's copied Bitcoin hasn't got this simple idea in their
head. Satoshi created a way. He gave it away and he went away. Walked away. That's the idea.
There's not a single major company in the world where someone created the company, gave it to
the world and walked off. And in fact, if you look at every other crypto asset, there is no Satoshi,
right? In fact, the way you know that they're not commodities is they're all arguing that they're
commodities. Satoshi is not arguing anything. Satoshi went away, gave it to you, right? And this is
the essence of it. If something's going to be a commodity, there can't be a beneficiary. Satoshi
gave up control of the protocol. Satoshi gave up the Satoshi coins. Satoshi stopped trying to
influence the network. It was a gift to the world. That's what makes it an asset, whether an
issuer. If you go and make a list of the next 100 cryptos and you go down the list, you're going to
be hard pressed to find that. But that's a simple asset test. By the way, it's a lot easier than the
how we test. You know, if you wanted to figure out whether you're a security, if you created something,
did you give it all the way to someone else? Did you never sell it? And are you gone and not
arguing over it? And then maybe it is. So I have simple advice for someone that wants to create a
digital commodity, right? Give it away and walk away. Bitcoin is not just the best digital commodity.
It's the best commodity, right? Bitcoin is the only commodity in the world, A, that's digital.
Everything else is a physical commodity. And because it's digital, it's fixed and supply.
Everything else is physical, therefore not fixed and supply. That makes Bitcoin superior to gold.
And gold is the king of commodities. Then I started my career, Dupont.
Commodity was a dirty word. Every single business decision made by the Dupont Corporation was to
escape a commodity business and create a specialty business. Nobody wanted to manufacture or sell
commodities. And the reason why is they knew they were all eventually driven to zero profitability
or your or every commodity provider eventually has to produce the commodity at a loss
in order just to run their capital. And so commodities are awful investments. And gold is simply
the least worst of an awful investment. Why is Bitcoin the best? It's global, it's digital, it's
programmable, it's inelastic, it's durable, it's divisible, it's portable. These are all the things
that every other commodity is not. Okay, well the numbers don't lie. I can give you words and rhetoric,
but look at the last four years in a inflationary environment, gold is up 13%, Bitcoin is up 394%.
Any good investor will tell you all physical commodities make poor investments. Gold is just the
least worst. Now for those of you who are Bitcoin advocates and you go and you talk to people,
right what you'll find is the very controversial narrative of Bitcoin is this digital currency.
That gets everybody rocked around the axle because they think well it's competing with the
yen and the dollar and the euro and the rubble and the CNY and the like and it's a medium exchange
and it needs to be legal tender and it shouldn't be taxed. It becomes a very controversial thing.
If you put that aside for a second that's the ugly narrative and you go to the bad narrative.
Bitcoin is digital gold. It's sort of true but it's not a very good narrative. Why? Because if you
talk to a thousand billionaires and you say well how many of you made a billion dollars investing in gold,
the answer is zero. And if you go to a thousand wealthy families and say now that you're wealthy,
are you going to go buy a billion dollars of gold? The answer is no. And you say well we've got
digital gold. It's great. It moves at the speed of light. It's programmable. You can teleport it.
It's great and they go well that's nice but I don't know in any gold. Okay I can't find anybody
that owns gold. The people that are advocates of gold don't own gold. Peter Schiff on the record
has spent 15 years advocating gold and when you ask him Peter do you own any gold it's like oh no
I don't own gold. It's a very small part of my portfolio. Okay so find me someone that actually
owns gold that you could even debate on the topic and the answer is it just seems to be one to three
percent oddity you know in any portfolio. So yeah Bitcoin is the best commodity but the truth is
all commodities are dogs and Bitcoin actually fixed the commodity but that word commodity is a
dirty word. Every intelligent business person, every intelligent investor knows that you should run
as fast. Run don't walk away from commodities. So what is Bitcoin really? Bitcoin's the only
scarcity. It's not a commodity. A commodity is something you can create infinite amounts of and
anybody's allowed to create infinite amounts of and dump it on the market and if you want to hold
you know a billion dollars of soybeans for a hundred years that's probably not going to be
generational wealth for your granddaughter. Right pretty obvious why but a billion dollars
of gold won't be generational wealth for your granddaughter either. Bitcoin's the first absolutely
scarce commodity in human history. So you have to say it represents a entirely new asset class.
It's not an equity, it's not property, it's not a commodity, it's something different, it's new.
Given the fact that it's new there's nothing to compare it to. So you've got to ask the question
if there is no scarce commodity in the world. What is scarce? Find me anything that's scarce and
I got the hourglass up here to make a point. No amount of money will buy you more time
or more Bitcoin. So if you consider the nature of the universe as a physicist the one thing
that's that's scarce is time. Right no politician can make more of it, no capitalist can manufacture
more of it, no AI bought can create more of it. Time is the is the true ultimate scarce
yardstick. Right that's how the universe works. That's that's how God makes the universe work.
Einstein had a lot to say about it, physicists have a lot to say about it.
What have we done with Bitcoin? We have bottled time in a Bitcoin. Right that the process of
proof of work mining is an essence digitally transforming time into an asset. Our goal was to create
a digital money but now it gives new meaning to the phrase time is money. How do I actually create
digital time, digital scarcity and then how do I put it you know on a hardware wall at how do I move
it how do I compute with it. Right scarcity is it's it's it's very underwhelming to say oh Bitcoin
is like it's digital currency or it's digital property or it's digital gold or it's digital
something because what it really is is this digital time, this constant. Right if I give you 100
trillion, could trillion dollars you won't get more than 21 million Bitcoin. If I give you all the
money in the world and you crank the miner up we know how fast Bitcoin is coming out every 10
minutes. Right we have created the perfect monetary asset because we have figured out how to duplicate
the benefits and the characteristics of time and ultimately when you measure your life and
everything in your life you have to measure it against time because times the one thing you're
not getting back no matter how rich you are. Now people oftentimes they try to buy land right land
is the scarce asset. Now not making any more beachfront property right I want to buy land
I you know and the truth is in the 20th century if you're a rich family and you didn't make money
on technology then you made money on property and the property you bought was the middle of London
or Paris or New York or you bought some beachfront and the Hamptons or Palm Beach or something but
probably you bought very desirable commercial real estate in the middle of the city but you know
it's kind of a bromide people you know people will say things oh yeah well I guess commodities
can be manufactured but land they're not making that anymore not making any more land right when
the mark twain said that okay look at the picture here the truth is they are making more land
this is Boston over the course of 300 years half a Boston was made
I live in Miami Beach three quarters of Miami Beach was manufactured in the last 100 years it's all
made right they dredged it Dubai made they make land Amsterdam Rotterdam they made the land
the truth is given enough money you can make land and if you want it you'd be surprised how much
of it you make right most people don't think about this but at the end of the day
storing all of your economic energy and land is is not truly going to be effective because
it's going to it's going to inflate and it's going to be it's going to be impaired by a whole set of
other challenges so bitcoin's the best property what's the best property bitcoin's the best
property what's the second best property there is no second best property right this is the
greatest city in digital city in the world there's 220 million inhabitants there right now what's
the second best digital city in the world right there is a second best city in the world why is this
so powerful it's global anybody can go there it's digital you can zap there on a mobile phone
and there's billions of mobile devices it's open this is a city that's got no mayor to tell you
what you can't do and on the other hand everybody can zap there with their capital when they want
it's permissionless and you don't have to buy a building and you don't I mean how many people
can afford apartment in New York most people can't afford apartment in New York you can buy a fraction
of a piece of property in this city it's totally divisible and this is the immortal city
maybe New York is there a couple hundred years this this city could be there 10,000 years
it's a virtual city and you know we talk about sustainability but sustainable here means there's
no painting there's no tornado I'm gonna hit this city there's not a there's there's not a flood
insurance obligation on this city you don't have to worry about you know neighbors getting together
and creating a zoning ordinance this city will last and this property in this city will last
Bitcoin's the best property right why do you why would you buy it you would buy it because it's a
heck of a lot better idea than buying an apartment to Airbnb for the rest of your life what are you
gonna do when you die you're gonna leave instructions for your grandchildren on how to operate the
Airbnb and you know and the where where are the instructions for how to actually commit the
commits the mayor to not tax away or rent control your Airbnb you know one one of the problems with
property it's it's inherently corrupting in the physical world because if you're not a political
actor in your own property then the politicians take it away from you and that convinces you that
you have to then influence the political process and take control of the government whether it's the
city the county the state right entire states were created right why is Las Vegas here
why are you in the city you know why you're here it's because they drove all the way down to the
cross the straight this the state line and when they were out of California they said okay this
is a good state and we'll put the city here in this part of the desert if the city had been a few
miles on the other side of the highway there'd be no Las Vegas everything that's going on here
would have been shut down regulated away made illegal or taxed away sometime in the last 50 years
so the problem with physical property is you have to become the political actor or another
political actor will just take it away from you and there's no there's no middle ground and at
the point that you're no longer politically capable of defending your property when you're a
children or grandchildren aren't as well-wired and not aren't as politically sophisticated or charming
or charismatic as you are then then the county the city the state the the whatever they just
crank your property taxes expropriate your property turn into an airport or a school or whatever utility
line and someone writes a little bit you're worried saying oops third generation they lost the
family farm I guess they weren't as smart as their grandparents were they probably deserved it
right and that's the best thing about this property here's a city you can move to a cyber man
hatton there's never going to be more than 276 to the third blocks 276 cube that's the number I
want to plant in your head a bitcoin was a city in cyberspace it would be 276 blocks wide
276 blocks high 276 blocks deep when you buy a bitcoin you're buying one of those blocks
that's all there is 276 is the cube root of 21 million to the nearest integer
there's no second best property but again as I say properties really it's it's
underselling what bitcoin is bitcoin is much better than digital property
bitcoin's the best capital asset capital what is capital pure economic energy
bitcoin's digital capital it is the first occurrence of pure economic energy in the history of
humanity if we look at every other asset there's no other asset there's no second best
capital asset there's no asset that represented pure economic energy the closest thing we have to
it is the myth of gold and the idea that you know if I'm successful in business I'll basically
convert that success into gold when I'm a powerful king when my kingdom is successful it'll be the
kingdom of gold when my city is successful it'll be the city of gold right the gold standard right we
talk about gold but gold was never pure economic energy just as the Spanish when they had all
their gold wash up in Queen Elizabeth's harbor during the great wars and she took it all and then
they lost the war in the Netherlands because she took their gold because their gold had to be
shipped on wooden ships it wasn't wasn't quite energy at all it was a little bit too clumsy and
and gold of course as we talked about it's a commodity it's inflationary the Spanish had
hyperinflation you know in the in the 16th century after they brought all the gold back from
the new world 500 percent inflation they collapsed their entire civilization they destroyed their
empire because they found too much gold must not have been pure economic energy the way it worked
out the problem with every other asset and the primary capital assets are equity credit the bonds
that is currency and property they're all impaired by physical constraints the physical constraints
lead to political constraints lead to lead to entropic effects chaos disorder fragility risk
bitcoin is better than that bitcoin is immortal immutable and destructible the whole idea of
bitcoin is I create an asset which doesn't live in the physical world that lives in the virtual world
and because it's immortal I mean immortal is a pretty big word I mean what's the difference between
inflating the gold supply 2% a year and inflating the bitcoin supply 0% a year over 10,000 years
well the useful life of gold the half life of money and gold is or half life of capital and gold
is 30 years it's a difference between dying in 30 years or living forever that's what when people
tell you 2% inflation doesn't matter well 0% inflation is lived forever or immortal and 2%
inflation is die or half die in 30 years die fully in 60 to 70 years it really does matter so the idea
of a mortality in your energy is pretty critical immutable right is someone going to corrupt it
indestructible is an act of God a force measure going to destroy it everything else all these other
capital assets they suffer from those risks and because bitcoin doesn't it's inevitable it's
inevitable idea why look at bitcoin man here not stupid right people aren't stupid I mean go
back 10,000 years and then find everyone that disagreed with you on every ideology and every
religion and then ask the question what they all agree on and they generally all agreed that
they didn't want to lose their stuff right just about everybody whether you know whether they're
socialists communist capitalist every possible ideology they all agree that that generally being
wealthier or having economic powers better than not having economic power there's a few people
that kind of forsake all their property and and surrender their economic power they end up losing
control the government and lose control the society and they certainly lose control the armies
because one of the lessons of history is if you can't pay your soldiers then they're going to
mutiny and then your empire is going to collapse so in this particular case every self-interested
human being that that's going to compete in a Darwinian world is going to agree that they want
immutable immutable and mortal indestructible capital right who doesn't so back to the numbers
what's the best capital asset bitcoin what's the second best capital asset well actually the
S&P is the modern surrogate for cost of capital so that's been the case at least for 30 years
probably 30 40 years since the Vanguard 500 and since spy was launched by state street and so if
you're looking for the cost of capital what is the cost of capital it's kind of like the rate at
which your capital has to return for you to not get poor or and it's kind of interesting here 50
percent over 40 years about 12 percent a year the cost of capital is about 12 percent if I had
to guess at what rate does the US dollar money supply expand probably 12 percent because that's
kind of copying it I mean the probably the dollar supply expands a little bit faster that probably
slightly underperforms the monetary inflation rate but but if you had to pick one metric and say
what's the metric that gives you a sense of how rapidly the world currency supply is expanding in
dollars probably the S&P 500 that's the cost of capital and as you can see when you have inflation
the money finds its way into the strongest asset and it does not find its way into the weakest
asset so this is another way to see inflation this is last four years and what do you see here you
see that when the money supply expands perhaps 50 60 percent I wouldn't be surprised if it didn't
expand 60 percent I don't think we measure it by the way I think that all all of the official
measurements of M2 I think all of them are incomplete and perfect in the same way that unemployment
statistics are imperfect in the same way that GDP statistics are imperfect in the same way that
inflation is imperfect they're just synthetic numbers that certain organization decides to focus on
but what do you what's the story here the story here is that the bonds don't hold value right they're
awful capital assets silver doesn't work gold bear doesn't keep up with the cost of capital the
Nasdaq you know interesting it underperforms the S&P why well you know sometimes you get you get
some big winners with technology and sometimes you don't but maybe the S&P is a more broad index
and it just got a little bit less of a sharp edge to it let's risk in it there's a lot of low risk
businesses in the S&P 500 and then count and then obviously what we see is Bitcoin's the only asset
that exceeds the cost capital another way to say that is everything else is deludive you invest
in anything other than Bitcoin you're destroying capital you're destroying wealth right you invest
in the S&P 500 it's a conventional capital asset you won't look stupid you're probably still losing
a bit of wealth but nobody will notice because the rest of the societies using that is the benchmark
but you know if you if you're not doing the 50% then you know you're running a hedge fund underperforming
the S&P 500 you're destroying value most of them underperform the S&P 500 and they destroy value
what's the best capital asset Bitcoin what's the second best there is no second best
but that makes Bitcoin the best treasury asset treasury meaning you got a company a private company
a public company you've got a treasury you know a treasury means you got a country you've got a city
you know you have municipality you have an institution you have an endowment you have a treasury
well most operating companies surrender their capital to avoid shareholder delusion
right because if they hold the capital and they invested in T-bills they're going to get 3% after
tax against a 12% cost of capital per year and so you hold a hundred billion dollars of capital
you destroy nine billion dollars of shareholder value a year you know Berkshire Hathaway's got
160 billion of capital that's a 15 billion dollar a year cost and in order to use that as a treasury
asset cash and credit are both delutive Bitcoin is the first treasury asset that's a creative that is
you carry a hundred billion dollars of Bitcoin it goes up 40% of the area is earning 40 billion
dollars of accretion a year instead of nine billion dollars of delusion a year
that means Bitcoin changes the rules of modern corporate finance finance for the past 50 years
and B-school you know is taught like this you have to operate on the P&L to strip away all volatility
we want you to pursue the Microsoft model we're going to sell you three year enterprise agreements
and they're fixed for the next three years we'll renew them every three years the CFO of Microsoft
can predict the quarterly results 12 months in advance plus or minus 50 basis points or a hundred
basis points the only moving part is the cost and the cost are controlled by the corporation so
modern finance says you're a good CFO if you strip the volatility off the P&L
and then you're a good CFO if you return all the capital the shareholders via buyback or a dividend
no matter how tax inefficient it might be and then if you want to be a really good CFO you borrow
50 billion dollars and you get that back to the shareholders so you actually go to negative working
capital also you know and that's happening where it's happening at Apple it's happening at meta
it's happening most places why well I mean partly it's happening because you need to get your
EPS to go up by 12% a year if you're going to beat the 12% cost to capital and make your stock
a store of value and if you're organically only growing one two three percent a year which is the
people do the math if the economy grows two or three percent a year and you need your equity to
grow or your cash flows to grow 12% a year per share the only way to do it is to borrow money
and buy back your equity and lever up but at that point you go to negative capital okay so if you
hold positive capital that's what the that's what bonds do to you and if you hold negative capital
now your fragile you have one bad quarter you go bankrupt right so the problem here is that the
treasury asset that's conventional is toxic and it's killing the companies the corporate life
expectancy is 10 15 20 years okay and we've we've simply accepted the fact that our company is
going to die in 20 years but the reason they're dying in 20 years is you're injecting poison into
their veins if they just stopped injecting the poison they live hundreds of years right that it's
a very a very basic insight so what's the what's the way to flip that the way to flip it is you stop
injecting toxic assets onto your balance sheet and you'll actually put a creative or healthy assets
onto a corporate balance sheet this is what happened to micro strategy since we adopted a Bitcoin
strategy in four years you've all lived these four years SAP IBM sales force and Oracle that's
what they do Oracle looks like the winner they beat the cost of capital 50 percent right the S&P
Oracle's the winner the rest are losing they're not keeping up then you've got Amazon Netflix they
can't cut keep up with the cost capital apples barely track in the S&P meta-microsoft google looking
a little bit better and then you see where the assets are any company that simply had a large
portion of their assets and Bitcoin is getting 435 percent micro strategy levered up by borrowing
cheap debt and buying Bitcoin and therefore we do better now if you had asked someone is a 500
million dollar company growing 0 percent a year in the in August of 2020 are they going to beat
every one of these companies performance people would have said no stinking way right and the truth
is it's not us it's Bitcoin stop bleeding the patient the patient mortality rates plunge when you
stop bleeding the patient and when you sterilize the equipment you used to operate on them right it's
basic medicine eliminate the toxicity so what's the best tech investment Bitcoin's the best tech
investment best the best tech investment investment and something everybody needs no one can stop
few understand apple in 2010 Amazon Facebook Google everybody needs it nobody can stop it people
understand it if people agree with you when you say I like Bitcoin that means it's not a good
investment anymore you understand at the point when it's not controversial and everybody agrees with
you everybody will own it the price will be 100x you won't be able to afford to buy 1 percent
of what you want right you want to know it you don't want them to understand it let them take 10
years to figure it out because that's how you 100x
what's the best new investment idea Bitcoin's the best new investment idea okay financial
advisors they're always they're looking for an alternative investment that's going to provide
performance without direct correlation to risk right and they've been stuck in a rut for 30 years
right this is JP Morgan's family office survey what do people own they own some private equity some
public equity some real estate some cash some bonds some commodities infrastructure you notice
commodities are the least popular a lot of people just think it's a no fly zone the other stuff for
pretty conventional but coming back to this chart you know I think this is probably also JP Morgan
this is none of these assets are beating the monetary inflation rate you just feel smart because
you tell yourself the the inflation rate is the consumer inflation but for the most part the
screaming winners are 1 percent better not nobody's got a great solution right you can either do
really awful or you can just you know keep your wealth without generating anymore nobody can out
out perform inflation so what do they invest in well these family offices this is capital-weighted
they put 45% of their capital into alternative investments they don't want a whole public equity
their view as public equity is fully valued they certainly don't want to own bonds
right so so much for the 60 40 portfolio their portfolio is not 60 40 they want something else
now something else is more like real estate or something private or some special situation
but what's the best alternative investment Bitcoin's the best alternative investment
right what's the second best there's no second best right there's hundreds of thousands of
financial advisors and every wealthy family in the world is looking for the best alternative asset
okay why is Bitcoin the best alternative asset well just a little bit of inspection will will
demonstrate that it's uncorrelated to currencies corporations or counterparties no corporate execution
risk no currency debatement risk and none of the counterparty risk that comes with bonds and credit
and the like what is it it's global it's non-sovereign it's a store of value it's liquid you know buying
a building in San Francisco is not liquid you can't buy it in a minute you can't sell it on the weekend
and the truth is and this is the irony of ironies everybody thinks Bitcoin is risky because it's
volatile it's volatile because it's not risky it's low it's the lowest risk thing you can own in the
world because it's the thing that has the most risk stripped away the reason it's volatile it's
that it's the most desirable most accessible thing which means that everybody else is expressing
their sentiment and their emotions every minute of the day everywhere in the world however they
wish to and why is it the best alternative asset because it's a long-duration asset right you buy
a building on the beach at last for 30 years do you want to buy a building a man hat and it's good
for 50 years or whatever or do you want to buy the granite or the shist under man hat and it's
been there for 200 million years buy a hundred blocks of granite and man hatten right don't don't get
caught up in the building the zoning the corporation the parties the conferences and the whatever when
Howard Hughes came to Las Vegas he looked around and he bought all the land he bought so much land
that they're still building on the land that Howard Hughes bought and he's been dead 50 years
summer land it's all Howard Hughes everything he did he looked and he's like well if this is going
to work I'm just going to buy all the land because I don't know which casino will work right the land
still here the casino is a gone the restaurants are gone the politicians have come and gone every
other good idea is gone they built you know it used to be the morons was cool treasure island was
coal the blogging was cool the wind was cool the onco was cool here we are some cool place
the land still here by the land that's the alternative asset and of course that makes bitcoin
the best asset class it's an entire ecosystem of product services companies securities derivatives
and professions it's the global digital asset network it's the internet of money
is the securities are bitcoin back securities are being issued worldwide everywhere at an accelerating
rate this year right you saw an explosion of spot ETFs in the US but look at all the ETFs in Hong Kong
look at all the ETFs in Europe this is the beginning right you're going to see more and more and more
every one of these companies is joining the ecosystem they're securitizing and it's not just this
microstrategy security options are security there are options and derivatives on the securities there
are bonds on the securities this is exploding it will continue every bitcoin miners the security one
day there'll be a thousand securities or 10,000 securities all backed by bitcoin same with corporate
treasuries bitcoin treasuries are growing rapidly right they keep this chart up every month
it's never declining the chart's not ever decreasing it only goes one way bitcoin is a capital
ratchet it's a one way ratchet right Archimedes said give me a lever long enough in a place to stand
and I can move the world bitcoin is the place to stand the leverage is coming via all these securities
all these corporate treasuries right and the leverage is getting to be extreme microstrategy
showed you how how you can actually generate performance with leverage but we're just the first
we're not the only you could do it 10,000 more times the more leverage that gets put on this network
the bigger the network's going to get you know and a final few points bitcoins the best bank it's
the bank bank say it's the same as account for billions of people no company no currency no country
no agenda is egalitarian is open there is no second best bank bitcoin's the best path the
peace it's open permissionless transparent decentralized it's a fair and equitable way to
settle differences between global counter parties that have conflicting interests what's the
second best way right second best way maybe as we shoot each other up right with weapons but
this is the best way there's no second best way it's not just the path to peace it's the path
to prosperity right this is a global monitoring network giving equal property rights to all economic
classes in every nation what's the second best way to do this there's no second best way
where are we now bitcoins on a path of evolution from the idealist to the institutions
the first dozen years it was the it was the era of the idealist the cipher punks you know the
libertarians the entrepreneurs the crypto cowboys all right you know the story it's been written
about people will it will probably make many more movies about it what was 2020 to 2024 the crazy
years right starting with covid ending with the approval of the spot ETFs it was the crazy years
what's going to happen to crypto who's going to control crypto will it be regulated right
will will bitcoin be banned will it be hacked will it be copied we resolved that and those four
years and now we've come out of the crazy years now we're in the air of institutional adoption
institutions corporations and investors are going to define the future of this network from one
trillion to a hundred trillion and that's appropriate right from 20 2008 to 2020 the network went from
zero to a hundred a hundred and fifty billion and between 2020 and 2024 it went from the
hundred fifty billion to one point four trillion so you can see how this is lining up of course
institutions and corporations are going to join this network they have all the money it's a
monetary network right at the end of the day you have a monetary network then people with all the
money that run the money the need the money are going to join the network so in summary like
bitcoin's the best idea there's no more powerful idea than the digital transformation of capital
right what are you going to do with this well you're going to improve your life your family your
product your service your company your institution your government or your world right and prove
them all right it's pretty straightforward how you do it you've got pure economic energy it's
not the solution to every problem in the world it's just the solution to half the problems in the
world but every other problem in the world you're going to need economic energy or economic power
to solve it and this is how you harness and channel that power no force on earth can stop an idea
whose time has come this is an idea it's time has come it's unstoppable and so I'm going to end
with the observation the bitcoin is the best the best what the best it's the best one it's the
best idea once you found the best idea everything else you can invest your time which is scarce
or your energy which is scarce everything you can invest your time in energy and is delutive
everything else so what do I suggest I suggest study bitcoin buy bitcoin whole bitcoin build on
bitcoin advocate bitcoin defend bitcoin and then you can enjoy bitcoin so bitcoin there is no
second best thank you