Let's be clear, Bitcoin is an international asset.
We are spending like drunken sailors.
Bitcoin is the only economic entity where the supply is unaffected by the demand.
If you want to preserve your wealth, you have to convert that currency into an asset that scares, desirable, portable, durable and maintainable.
Hello, I'm Andy Edströmmen.
I'm happy to welcome you to the 21st episode of Scars Assets.
I show that examined scarcity, the most fundamental driver of economics and markets, and the scaricest asset of all, which is Bitcoin.
It's great to be here with my co-host Jesse Myers and our guests, the inimitable Michael Sailor.
Now within the Bitcoin space, Michael really needs no introduction, but we do have some listeners who are new to Bitcoin.
So I'll say just a couple things.
First, Michael has envisioned and implemented a corporate Bitcoin strategy that has allowed him to deliver unparalleled investment returns to shareholders of his company,
MicroStrategy.
And second, I think that Michael has educated more people about Bitcoin than anyone, and since education is the most important path to widespread Bitcoin adoption,
he may be the most important man in Bitcoin today.
So that's why I thought it would be fitting to honor him with episode 21 of Scars Assets.
And I'm so delighted that he is honored us by speaking with us today.
So Michael, how are you?
Thanks for having me, gentlemen.
Happy to be here.
Excellent, excellent.
Well, I feel like already quite a bit of water under the bridge.
I think since we first encountered each other, you laid out the Bitcoin Treasury strategy for your company,
MicroStrategy, about four years ago, and your stock is outperformed all the big tech companies.
Why do you think we haven't seen more companies implement your strategy yet?
I think the three big, three big planks of corporate adoption of Bitcoin are number one, fair accounting.
And we started with indefinite intangible accounting, and we get fair value accounting in January of 2025, this mandatory.
So there's been about a four-year period of normalizing the accounting.
I think the accounting was hostile and prejudicial to a well-run company, just because if you can only lose money,
you can never make money on an investment.
A reasonable CEO or CFO would say, I don't know if I want to make that investment.
And so even though the reality is you would make money on an accounting basis, it would look like you're losing money.
So I think that was the first challenge.
The second challenge is fair treatment as an institutional asset via the securities and exchange
commission or the major financial regulators.
And we started to get that January of 2024 with the approval of the spot, Bitcoin ETFs.
And before that point, a lot of skeptics were of the opinion that maybe it would be banned or they're not sure it's an actual real asset.
You have all the skeptics saying it's Tudalbalbs or it's a Ponzi scheme or something.
But of course, the SEC would never approve an ETF for a Ponzi scheme.
So probably for people that don't really think hard one way or the other about this,
they're reflexive investors.
They're looking for that endorsement from the most important financial regulator in the world or regulators in the world.
So that was Planck II.
And I think Planck III is fair treatment from the banking system.
So right now, it's impossible for most major banks to custody Bitcoin,
buy Bitcoin or sell Bitcoin for you.
There are a few banks in Switzerland.
I mean, they're standard charter banking Europe.
There are some of the banks in Brazil that can handle the asset.
But the major corporations, the Microsoft, the Google, the Amazon, the apples of the world,
they wire billions of dollars a month to a too big to fail bank,
right? A bank with a trillion dollar balance sheet.
And right now, they wire the billions of dollars a month to buy a sovereign debt.
They're just saying, okay, take this billion dollars today and buy T-bills with it.
And it's like a 10-second transaction.
It's routine that they've been doing with the business with the same bank for 30 years, 40 years.
City is national city bank.
National city bank was the bank of John D. Rockefeller run by his brother.
Okay, that tells you how long, how far back, JP Morgan, right?
Try to remember who founded JP Morgan, right?
How far back it goes? JP Morgan wasn't the first, right? He took it over.
So what you have are these 100-year-old banks and 100-year-old relationships.
At the point that a CFO can send a billion dollars of cash to their bank, buy a billion dollars
of Bitcoin, do it and hold it there. No risk, right? Or what they perceive as no risk, right?
These are two big, two-fail banks. So the shareholders of Apple and the shareholders of Microsoft,
they're not obsessing over the risk that Apple and Microsoft take to do business with Bank of America
or JP Morgan or City, right? Or Wells Fargo. So that's a very important thing. When you've got all
three, when you've got fair accounting, when you've got fair, you know, securities treatment
or trading treatment and when you've got fair banking treatment, then you'll see mega corporations
that will think, okay, well, this is a reasonable thing to do and it's practical to do.
Until you've overcome those three, then you've got problems to solve.
Yeah. And it seems to me there's also the track record that MicroStrategy has now shown of
your thesis from a start has always been, hold it for at least four years and watch what happens
and you've delivered on that and now there's this end of one of real success doing that.
Do you think that paves the way, you know, blazes the trail for other companies to follow more readily now?
I think that after you've got the three structural, look, if the accounting is prejudicial
and if the regulator is prejudiced and if the banks are unwilling to do business with you,
those three things are just show stoppers, right? Like we haven't even got to the question of
what's my allocation, right? So I think that the allocation is zero for a court, if you say to
a corporation, you're only going to lose money on an accounting basis, you'll never make money.
The allocation is zero. If you say to an institutional investor that trades on the New York
Stock Exchange or trades in the US and they're regulated and you say you can buy it via iBIT or via
FBTC using what the call to Morgan Stanley or JP Morgan, then the allocation might be something,
but if you say you have to set up an account on FTX or Binance or offshore or even on Coinbase,
the allocation is probably nothing, right? It's probably zero. So this is a zero to one.
So I think those first three things are what's possible for the asset to come to life. After you have
those things, then there's a discussion of, well, what's the volatility? What's the performance?
What's the sharp ratio? What's the duration? What's the holding period? What's the risk? And then what's
what's the communication strategy? So I think that this education, it's pretty important for
individuals. What we've been doing has been important for individuals. It's pretty important for
family offices, especially forward thinking ones for private companies. Maybe they could do something,
but if you ask, who are the most conservative movers in the universe? Well, the second most
conservative would be operating companies that are publicly traded, right, that are disclosing everything
they do every quarter and regulated. And the most conservative are the banks, public companies
that are actually regulated custodians and other people's assets. So the fact that we worked our
way from individuals to high-not-worth individuals to private companies up to the tech innovators.
And now we're working on the mega public corpse and the banks, right? That's a sign of the asset
improving. And education matters, setting an example matters, right? But there's just a lot
of moving parts here. And we're talking about the birth of an asset class and a paradigm shift.
In both cases, it's like an organic viral process, which is, they say, one of the first things
they told me at MIT about this was they said, if you have a pond and there's algae in the pond,
and the algae is doubling every day. And in 30 days, it covers the entire pond on what day of the month
where you notice you even have any algae. And it's like, well, 90% of the days, you don't even know
you have any. And like on the 26th day, you notice something. And then in three more days,
the pond's completely covered, right? So with exponential processes, there's a whole lot of
nothing apparently going on as the process builds and builds. And all of a sudden, there's a little
blip. And then all of a sudden, you have, you know, you have more action, right? Like with Apple stock,
right? It took forever 40 years to make it to a trillion. And it took like 18 months to make it
to two trillion, you know, as I thought, you see that as a phenomenon. And that's the phenomenon
here, organically, virally spreading everyone in the world, I think. So speaking of organic growth
of participants in the industry, one of the, I guess, spicier topics making the rounds right now
how many coins are on coinbase? And I think all the major corporates,
micro strategy included use coinbase. How do you think about, you know, as a fiduciary risk with
respect to single custodian and the trade-offs versus using multiple custodians and diversifying
your custodians or maybe alternatives like multi-institution custody? How do you think about those,
those risks and balances and trade-offs? I think generally any major public company or major
institution that's either a trust company like a, like a ETF or an operating company,
they're going to go through a vetting process and they're going to choose an institutional
great custodian that's regulated. There's maybe a dozen in the world, I suppose. There's about
half a dozen in the United States. It'll take some number of months depending upon how motivated
they are. You could spend as much as you could spend if you were in a super hurry, you could spend
a month and if you're taking your time, you could spend 12 months vetting the custodian.
They're not going to custody Bitcoin anywhere other than in one of them. And then normally,
what happens is you then find a second mate, so maybe a third. So you're going to want to have
a couple of vetted custodians and then you're going to want to review that continually. And I think
it's not right practical to have more than three. It's probably advisable to have more than one.
Two is not unreasonable. And then it's a continual process, right?
The thing about Bitcoin is that I think it's important to point out is a lot of the security comes
from the optionality to move the Bitcoin from one custodian to another.
If you had a $10 billion real estate portfolio in New York City, you don't have the optionality
to move the real estate from New York City to Tokyo. And if an uncertain extent, if you have a large
holding of an ETF, you don't necessarily have the optionality to move your holding to a different ETF
provider without taking a tax hit, right, without a taxable event. This is why cash creates and
redemption are much less efficient than in kind create and redemption. If you had an in kind
create redemption, you could actually take a redemption without a taxable event and Bitcoin move
it to another ETF provider and then swap that for shares without a redemption. So being able to
relocate your asset between various counter parties and various custodians and various places without
a taxable event is very important. So if you own underlying Bitcoin and you have it with a
custodian and you lose confidence in them or you don't like the business relationship, you can
move it to a second custodian without a taxable event, you could do that in an hour, right,
practically speaking a big company would take more than an hour to do it because just like there's
a ton of people on the custody side, there's a ton of people on the institutional side, you know,
and so there'd be a set of processes you would go through. But that keeps everybody honest and
keeps the market competitive because you know, the mayor of the city knows that you can't move the
building and so they can double the property tax rate and you're not moving the building and
you're only recourses to try to vote them at office. But if you're a custodian, a Bitcoin in
Singapore and you double or triple the maintenance fee or the you know, the custody fee,
then maybe the Bitcoin finds its way to fill in the blank another place Paris, London,
US, different country or even if you had two custodians in New York City, the Bitcoin can move
between one and the other. You know, we talked about the 19th century gold issue, gold was like a
settlement T plus one year and Bitcoin is in the worst case T plus one hour. So if you, you know,
people oftentimes they fixate their like they think the lesson of Satoshi is don't trust any
counter party. I don't think that's the lesson of Satoshi. I think the lesson of Satoshi is
if you can store your money for a thousand years without a counter party you've created perfect
money, right? I think our perfect digital capital. I think that's the first lesson and I think the
second lesson is if you can move the Bitcoin without a trusted intermediary, now you've got an
open global network and what it really means is that 300 million companies can settle with each
other and that means that 50,000 banks can settle with each other and so this becomes a settlement
network, right? When we teach people that corporations are not to be trusted, banks are not to be
trusted and governments are not to be trusted, we become crypto anarchist, but apples
of corporation and the hospitals of corporation and insurance companies or corporations, you know,
an Uber's a corporation and the United States government for better words does useful things,
right? Just like your city government, you know, sewage, sewer, power, water, etc. The power
company is a corporation. So if you embrace the idea there are some companies that provide you
with food, electricity, transportation, you know, airline service, freight, etc. Then you know,
okay, companies are probably okay. And if you embrace the idea that yeah, you could be like, okay,
well, I got a self custody. Well, like how's the 12 year old kid supposed to self custody? How does
an 85 year old with Alzheimer's self custody, right? This idea that corporate that you should never
trust a corporate custodian is also a kind of orthodox, zealous ideological notion. The truth of
the matter is there's a lot of circumstances under which you want a company to fixate on custody,
just like we use Apple to custody our photos and custody, you know, our documents and the whatever,
and you can rail against it. But I don't I haven't seen any crypto anarchist that's proposed a
solution to the dependence on Apple and Google and Microsoft that we currently have today. So I
think that the deeper idea is not that Bitcoin allows you to avoid depending on a custodian.
The deeper idea is Bitcoin gives you a competitive market, a global competitive market for custody,
and you have the option to move 10 billion dollars in one hour anywhere in the world to any of
hundreds of millions of potential custodians. And so that creates a competitive market, a
global a free global capital market and an arbitrage between every type of custody and every country
and every form of possible custodian. And what is it? The last resort, right, as a last resort,
you can take self-custody. And you don't have the ability to take self-custody of 10 billion
dollars of Apple stock as a last resort. And you don't have the ability to take self-custody of
10 billion dollars worth of real estate as a last resort. And you don't have the ability to take
self-custody of 10 billion dollars of gold as a last resort. And so the last resort is useful. But really
a more practical thing you find in life and every corporation finds this out. It's like when you
need to buy electricity or when you need to buy oil, you know, yelling at general electric or
yelling at the at exon that if they don't give you a better deal, you'll just drill for the oil
yourself. That's not credible, right? The salesperson looks at you and they laugh you like, yeah,
sure, you're going to start your own petroleum company, drill for your own oil. I bet you will,
right? A much better negotiating strategy to say to the gas station. If you don't sell me gasoline
at a reasonable price, I will go across the street to your competitor that will or I will do
business with Chevron instead of exon. And so generally, if you want to get treated fairly,
you know, any business goal would say to you, okay, you create a competitive auction and you find
the two or three specialists, you know, when you're the restaurant and you want to lever Coca-Cola
for a better deal on Coke and Diet Coke, you don't threaten to create your own, you know,
beverage company or do it yourself and create Mikey Cola. What you do is you bring in the pet,
you have the Pepsi sales guy and you have the Pepsi hat sitting on the table, you say, you know,
I just met with the dude from Pepsi and he offered me a better deal. And the Coke sales guy goes back
to the district manager and says, you know, Pepsi's in there talking to them. So I think we better give
them a better deal. And of course, there's only Coke and Pepsi, and that's only two. As a practical
matter, you have to have two. When there's one, you're in deep trouble, but Satoshi gave us 10,000,
right? 10,000, there's 50,000 banks, right? If you get like 100 custodians competing with
you, so you're going to have a pretty good market and a pretty fair market. And I think that's
what's going on here. So the big institutional holders like MicroStrategy or the big ETFs,
yeah, they're going to use regulated custodians. They're going to put pressure on them.
By the way, you know, there's the crypto anarchist and there's the libertarian view,
not your keys, not your coin. And it's a good, it's an important mantra. But barking at coin
base and telling them or barking, you know, at Mt. Gox or, you know, yelling at some exchange to be
better on Twitter doesn't work, right? You know, what I'll tell you what works when BlackRock has
20 billion dollars of assets. And then the guy that runs the BlackRock ETF goes to talk with coin
base. You know, or when, uh, fidelity, you know, fidelity looks at it like, well, I think we'll just go
and do it ourselves. When a mega corp with trillions of dollars of assets decides that they want
better service or they don't trust the exchange, now you have a market dynamic. And that works because
there's huge amounts of assets at risk. And there's armies of lawyers and armies of account.
It's like, you know, you have to go through a, you know, uh, a Sarbanes Oxley, you know, risk control audit
in order for me to do business with you. And that means we've got a list of 10,000 things. So I
think that the institutional players, the SEC 40 trust companies and the SEC 33 hack operating companies,
those are applying pressure to the crypto exchanges to become much better. But they're also the ones
that are lobbying for the repeal of Sav 121, right? And the repeal of Sav 121 will result in all of the
major banks in the United States. And then the rest of the world started to consider becoming crypto
custodians and Bitcoin custodians and the like. And so so that's again, that's going to happen because
BlackRock and Fidelity, you know, and other mega corpse talk to their senator, talk to their
Congress person, talk to the regulators and point out that they want more options. And the banking
lobby gets involved, et cetera. And so Bitcoin is going through this seasoning process where
really it's encouraging new companies to buy it. And it's encouraging new custodians to custody it.
And we should welcome both, right? The more corporations that own it, the better we are,
and the more corporations that custody it, the better we are.
It strikes me as if there's any risk in crossing the chasm for Bitcoin, you know,
getting to the mainstream necessitates infrastructure where the 12 year old and the 85 year old don't
have to do self custody. And so, you know, I think that's what we've we've been working on
trying to improve the options there and improve the format of what's possible. Because when you
you know, when you have this digital value, you dematerialize value, you have the ability to reduce
the friction so much in the custody options, custody formats and the competition. I think that
you are articulated so well there. I guess a two part question here of, Michael, do you think there
are risks in crossing the chasm for Bitcoin? Or do you think that that that coins endogenous
properties make it so that it will not have a problem continuing into the mainstream?
I don't I don't view them as risk as much as just it's like asking me in 1650,
are there risks in building Manhattan into a great city in North America?
There's steps that have to be, you know, if I find you, the greatest port in North America,
you know, an island of granite sitting between the East River, the Hudson River with the great
natural harbor, right, in the right location. And everybody's decided it's their favorite city.
And the year is 1650, are there risks with growing the city? I mean, I suppose, but I don't think
about that way, right? Just I just think there's there's challenges to be overcome and opportunities,
right? Yeah. And so I think I think Bitcoin's going through all that, right? There's stuff to be built.
Yeah, right. Working if the accounting changes for every company in the world in February of
our January of 2025, then I guess that means the accounting profession has to learn a bunch of new
things. There's new stuff to be done, right? New procedures and accounting systems to be, you know,
review. And likewise, it's one thing to say banks should custody Bitcoin is another thing to create,
you know, our 10,000 banks going to create their own Bitcoin custody service. Well, is that a risk
or is that an opportunity? I guess I'm back to 1900 and I'm in New York and we just
have been in electricity. And I'm just pointing out that I think like one day all buildings
be wired with electricity and you're asking me are there risks in the wiring of New York City with
electricity and I, you know, I guess there's going to be some electric fires, right? And there's
also going to be a lot of fire insurance to get sold and there's also going to be electricians
and there's going to be electricians union and there's going to be a lot of projects and there's
probably going to be a bond and somebody's going to complain about it. We're going to dig a lot of
trenches, right? Where are those power lines running? And someone's probably going to put a, you know,
a drill, you know, jackhammer through one of the power lines and stuff's going to happen.
But and then we're going to fight over whether we burn coal or we run the power line in Niagara Falls.
And there's going to be stuff, but I just think there's just a lot of work to be done. We're building
out the future. One thing that's nice too about Bitcoin as compared to Manhattan is with the city,
you might have a single regulator jurisdiction that you got to deal with and of course you got a
negotiate to rights of way to build out the infrastructure. Nice thing about Bitcoin being that
it's global and open. Anybody can build on anything as you say, you know, a bunch of banks can
give it their best shot and they'll be competition among them to provide the best service and the market
to the market will decide. Are there any areas within Bitcoin infrastructure? You mentioned custody,
you mentioned banks. Obviously you've got corporate adoption. Are there other areas that are
particularly fruitful or interesting with respect to the story right now that you're that you're
watching carefully or are those the main ones? Well, you know, I'm focused upon Bitcoin is the digital
is digital capital. So it's the transformation of financial and physical capital to digital capital.
And that's not complicated. That's a very simple idea if you just say it like that.
But the implication is it's also driving the digital transformation of the capital markets.
So the capital markets are fragmented, right? The bond market trades in Japan at different times than
the bonds trading in Germany and then the bonds trading in Brazil and the bonds trading in the US.
And the equity market, right, are existing capital markets are built around equity and debt.
You know, and there's some derivatives, right? Equity debt derivatives and they trade 930 to 4
Monday through Friday and they don't trade on the weekends or they don't trade on holidays.
And they're all fragmented and they're you know, they're limited in access. So
the implication of somebody being able to trade in a capital market in Australia on Saturday
and having an impact someone in the United States, you know, 12 hours off on the time zone or
something, that's interesting. So a real time 24, 7 global capital market is interesting and
up until now it has been again, it was .01% of the money in the world. You know,
when it was 6,000 or 7,000 a coin and now it's .1% of the money in the world.
And so it is a global digital capital market but it's still
diminimous in the amount of capital. And so I think that as you see bigger players come
into the market place and it gets to be 1% of the capital of the world. Now you're going to have
the tension of the 20th century. The 20th century capital markets, they're fragile,
they're limited to a certain set of people. They're very limited settlement options. They're
they're slow, they're not smart. You can't trade Apple stock 100,000 times on a Saturday afternoon.
So you can't you know, you can't vibrate it at a high frequency, you don't have global, you can't
self-custody, you can't program it. Right? So the capital that's in the traditional markets,
it's not programmable, it's slow, it's fragile. And the capital in the in the 21st century,
it's going to be smarter, faster, stronger. And so the interesting opportunity is what happens when
the investment bankers and the commercial bankers and the money managers realize that digital capital
is smarter, faster, stronger, universal. Right? Because it has a lot of implications, right?
Like there's 50,000 publicly traded companies. And how many of them are capitalized on Bitcoin?
How many of them are capitalized on bonds? So 99.99% of the corporate capital
is financial capital, which is fragile, fragile, fragmented, right? And defective, right?
Digital capital is appreciating at 45% a year. And over the last four years, and financial capital
is depreciating at 4% a year. And Fiat, this is in USD terms, right? But you know,
I think that is profound impact on investment banking. Right? Like why wouldn't you go and recapitalize
every company? So that's interesting. I think what's also interesting is, is, you know, it's like
the same set, the financial world, brands about taking settlement from T plus five days.
Like in 1970 to 75 was like T plus five days, T plus five to 10 days, then T plus three days. And
it was T plus two days as of a year ago. And now we're going to T plus one day. But we're not T plus
one day on Friday, you know, it might be from Friday at four until Monday at 10 a.m. or something
to settle something. So money still moves very slowly. And it has to pass this fragile network
of corresponded banks that anybody can block the move. And, and you can't program it. Right? So,
so I, you know, I, I use this phrase, you know, I mean, when you think about digital capital,
digital capital is invisible, right? It's intangible. It's immoral. Right? It's, it's indestructible.
But while you're working your through your balls, like comparing it to a building,
it's all those things, it's musical. And the musical is something to think about, right?
Think about a symphony. Think about vibrating the strings of a guitar.
You know, think about, you know, energy frequency and vibration. And think about
Mozart's or Beethoven's seventh symphony or Beethoven's ninth symphony. Think about what happens
when you start to vibrate on various frequencies. And literally, you hear it and it's beautiful.
And then think about how fast you can vibrate a building. And think about how fast you can vibrate
a billion dollar block of Apple stock. And see, they don't play, right? They, they vibrate like a rock,
right? You can't, right? The answer is you can't play that capital, right? You can't. But with
digital capital, you can, you know, on the bass network, you can move it once an hour. That's
actually comparatively high frequency compared to moving gold once a year, right? 80, 87, 160 hours a year.
So 8,760 times faster than the fastest gold seems like high frequency. But really, when you put it
on a layer two network, the real point is if I can settle on the underlying network, then when you
put coin bass against Binance's counter party or you put block against, you know, set up layer two
and layer three counter parties, they can move the stuff, you know, at 10 kilohertz on the weekend.
And now you combine that with the, you know, high speed trading has been a fixture in certain
equity markets. But we've never had high speed global trading. And now we've got AI. And so if you
actually created an AI and you said to the AI, and once you'd like, go ahead and scan 100,000
possible counter parties that want to borrow the Bitcoin, assess the risk and I want you to make
the micro loans, chop it up, send it to them, then fetch it back and optimize the yield or the risk
return on that. I mean, it's quite, it's quite likely that the AI is not going to make one decision
per three years. But if you look at most corporations, they pick one custodian, they place their
capital with the custodian and they generate, you know, if you have $10 billion of Apple stock,
what do you think your yield is on it when you actually have it at a wire house? I mean, most
people don't get any yield. For the most part, you know, when's the last time someone paid you a
yield on a million dollar block of stock? Occasionally, you could find someone to law for you
something. But generally, that's not a very competitive market. It's a very slow market.
I would suggest to you that 99.99% of all equity investors have never been delivered any yield
on any equity asset that they hold. And yet, except that if you hold government securities,
if you hold the dollar or you hold, you know, you hold this favored capital asset which we love,
you know, you would expect to get paid interest on that. But stop and think about it for a second.
Why is it you get paid interest on a million dollars of US treasuries, but you don't get paid
interest on a million dollars of Microsoft stock. And ask, well, by the way, couldn't I just take
the Microsoft stock and give it to a big bank and they could loan it out to someone that wants to
short it and charge them so far and they could split it with me? By the way, they do.
They just don't give you any. Right. Like these big custodians of equity, they do loan out your
equity to short sellers and they do get compensated. They're just not cutting you the owner of the
asset. And why not? It's not a competitive market. It's not a transparent market. You don't have the
option to take self custody. Right. You can't shop. Why are you not so easy to shop, right? And
there are some people who like to topple that, but in a regulated marketplace,
innovation goes a thousand times slower. So back to your question, what's interesting? You know,
the formation of the global capital markets, right? Money moving at the speed of light, money vibrating
at, you know, 440 vibrations a second, right? Stuff happening smarter, faster, stronger.
Right. That's interesting to me. And I think that's where the opportunities are, right? If you're
if you're trying to make money, how do you make money? Well, you securitize Bitcoin or you become a
banker, an investment banker or commercial banker of Bitcoin or you create these radical new
products that have Bitcoin embedded in them, right? Or for it. And those are all very interesting.
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secure it right. Learn more at onRampBitcoin.com. You mentioned yield, Michael. I noticed in your
filings a new notion called BTC yield as you're reporting it. I think that you call the key
performance indicator representing the percent change period to period of the ratio between the
companies Bitcoin holdings and its diluted shares. Basically, it sounds like Bitcoin per share.
I guess my question for you is, is this in the same vein as the yield you were just describing
and is this metric really central to the company's strategy? Or is it just one of many going forward?
Well, first of all, there's a thousand interesting business strategies for people that want to
launch a business or generate something of value on Bitcoin. And so this is one. This is the first
derivative of Bitcoin per share. It's the rate of increase in Bitcoin per fully diluted share.
That's the idea behind the KPI. So if I have a hundred dollars and I buy a spot, Bitcoin ETF,
and I pay 25 basis points fee, that means over the course of four years, I'll pay a dollar roughly
in custody fees. I pretty much got $99 of Bitcoin. So there's a slight delusion of my Bitcoin per share
after fees in that situation. It's a very simple value proposition. And I'm paying the 20 or 25
basis points for someone else to handle the custody and the compliance and the like. And it's not
a bad deal. It's a pretty good deal. You know, it's, you know, some people pay to 100 basis points
for a custodian before. So 20 basis points of 25 is not bad. What my strategy is doing though is
we're securitizing Bitcoin. So if we can sell $200 worth of stock back by $100 worth of Bitcoin,
and then we buy back $200 as a Bitcoin, we've actually captured $100 or Bitcoin premium,
if you will. And so what we're doing is we're generating a yield as we're, if we're selling a
security back by less than 100% Bitcoin, and then we buy back to Bitcoin, we're arbitraging the
difference and capturing that as a benefit to our shareholders. So you can do that
variety of ways. You might do it by selling equity at a premium and that asset value. Another
way you could do it is you can sell a convertible bond. If you sell a convertible bond to 40% premium
to the equity price. And if the equity was already at a premium to the underlying asset, you get a
double boost. So you might very well sell a, a convertible piece of debt at a 200% premium to the
underlying asset. If you do that, if you do a $300 million bond offering at a 200% premium,
you're like capturing $200 million of benefit in the arbitrage. And then you're holding the debt,
and the issue is do you think that the thing you bought with the debt, the Bitcoin is going up
or going down over six years. So let's assume you basically issue a convertible debt, and then you
hold the Bitcoin for six years. And you do it. What you're doing is you're offering shares six
years out, and you're swapping a set of shares at a premium to the underlying asset for the asset.
If the asset trades up, you're going to capture another, another Bitcoin premium or a benefit
on the backend, right? The $300 million of Bitcoin you buy doubles and doubles again. So you make
$900 million in sort of an investment gain on the backend, and you make $200 million in arbitrage
gain on the front end. BTC yield is a KPI we're using to help our investors figure out how we
think about each of these transactions. And if you thought about it, you can realize that if our
stock was trading at exactly net asset value, and we sold $100 million of stock and bought $100 million
of Bitcoin, we'd have no BTC yield, right? It's a net neutral. And you could see that instantly.
Right? And if we sell the stock at, you know, back $200 million of stock back by $100 million of
Bitcoin, then we capture that. And now how much yield is it? Well, it's the $100 million divided
into the total asset position or another way to do it is you, you know, you look at the Bitcoin
and then you look at the fully diluted share account. Of course, it's lots of complications because
you have to look at all of the various elements of the capital structure over time. And then they're
also risk factors like what happens between now and then if the stock trades down and what youth
and a convertible bond that you thought would convert into certain numbers shares converts a different
set of shares. So that's why it's not really a normal gap metric. It really is just a KPI. But
the general idea is if you simply want to take a plain vanilla investment position, then you buy
a spot Bitcoin ETF. And you just hold it. And that's a very safe, simple, straightforward thing to do.
You're taking counterparty risk to the ETF provider and the narrow vendors, right? You've got risk
to BlackRock and you've got risk to BlackRock's custodians and you read the filings and you've got
risk to Bitcoin, right? Those are your three risks. With an operating company, a Bitcoin miner,
a Bitcoin miner can generate BTC yield and operating company can generate BTC yield.
If you generate 100 million cash flow and buy Bitcoin, you'll generate a yield, right? If you
issue equity at a premium and buy Bitcoin, you'll generate a yield. If you issue a convertible bond
at a premium, you're generating a yield. I mean, there's some things you could do. If you buy
an ice cream truck company for equity and you get no more Bitcoin, but you issue a bunch of shares
of equity, that will be dilutive. You'll have a negative yield, right? If we were to go and buy a
billion dollar ice cream truck ice cream truck company, we would have a negative BTC yield, right?
And if you're a BTC investor, you would say, you know, what are you guys thinking, right? So it's
by the way, a lot of times people do dilutive acquisitions all the time and no one can figure out
if they're dilutive or not, the beauty of BTC yield is if you're on a Bitcoin standard and you
calculate that metric, the way that we've defined it, any investor, any Bitcoin maximalist investor
can see immediately whether the companies they're invested in are doing rational things that
increase the amount of Bitcoin per share or they're doing foolish things that decrease Bitcoin per
share, right? And so I think it's a very useful thing for companies on the Bitcoin standard or if
you're an investor that wants to, the wants to accumulate more Bitcoin because you as an operating
company, you can do things to create BTC yield. An SEC 40 company or a trust probably can't,
right? If you want to understand the difference between microstrategy and marathon
and say black rocks, Ibit and FBTC, microstrategy and marathon can create BTC yield, right? We can
also, you know, create negative BTC yield, right? Like, we can buy a portfolio of apartments in
San Francisco with billions of dollars of equity and we can brag about what a great deal it is,
but it didn't generate any yield, it generated, you know, minus something, right? So we have the
option to do intelligent things or not intelligent things and that's the counter-party risk, you know,
you're taking risks to the management team and the management strategy. So operating companies can
do that and this is an interesting metric to evaluate them. Trust companies, they can't and that's
kind of like why you want to put, if you want to put an ad, if you want to buy gold and you want to
leave in your portfolio for 40 years, you don't want to wake up and find out that the CEO of the GLD
decided to do a mortgage back, you know, a junk bond to buy ice cream truck companies and speculate
on whatever, because it's just too many, you know, complications for you. So there's a place for both
strategies, but I think people have struggled with the idea of how do I know what's a creative
and delutive and BTC yield is a simple metric that we're doing because our shareholders want more
Bitcoin per share and they've set it loudly and frequently. But I also think it's a contribution to
the entire community and I think that any company that wants to pursue a Bitcoin standard would be wise
to stare at that KPI and think about adopting it because it's just a useful, a useful communications
tech tool. Yeah, it's incredible. The tools that you're able to stack together to create quite a bit
of tailwind for the value of micro strategy. But it creates a conundrum for people like me, Michael,
because I adhere to your advice, I've never sell your Bitcoin, but now there's this asset out there
that's creating yield on Bitcoin that I don't own because I'm already all in on Bitcoin.
It's a funny problem for, I guess turn that into a question, is there any
condition by which you think that Bitcoiners who are holding Bitcoin should consider switching
into an asset that generates Bitcoin yield like this? What I think is Bitcoin is the risk-free return
for a Bitcoin maximalist. So just start there. Bitcoin is the risk-free return.
And the question is, do you want to take risk or not?
And I ask this question, like in my personal life, like we've created the Bitcoin 24 model.
The Bitcoin 24 model is based on a lot of your work, Jesse. You'll find we started with your work
and then we created it. We put it in the public domain. And the Bitcoin 24 model,
you can go Google it and find it on GitHub. I think 20,000 people have grabbed it since I tweeted it.
And in it, you've got all of the assumptions about the macro environment. You can put
crank in your own inflation assumptions, your own innovation assumptions, your own monetization
and demonetization assumptions about gold and art and real estate and bonds and currency.
And then you can put in all your own Bitcoin growth assumptions and create a bold case and a
base case and a bear case. And then after that, there are micro models. And so you can model your
family and decide, do you want to move to UAE or not? And how much money can you generate and win?
And how much assets do you start with? And you're going to inherit money from your rich aunt and
the, you know, what? And then you could decide, you know, if you can mortgage your house or not
mortgage your house. And so you've got a micro model. And it's also got a corporate model.
And, you know, if you're a corporation, you can crank in your corporate model. You can also build
your own. I mean, it's an open spreadsheet. Just grab the thing, duplicate it and be off to the
races. And you can create a institutional model. Look, if you're, the answer is different. If
you're running harbors endowment, then if it's you're running, you know, the Myers family trust,
then if you're an individual, then if you're a Bitcoin minor or if you're an operating company
or if you're a bakery or if you're Tahini brothers, right? I mean, everybody's got their own
thing. So, so that model is very open. But what I, you know, what I've done is I cranked in my
assumptions and I have presented my base case and, and, and in Nashville and my base case is
Bitcoin goes to 13 million coin and is the ARR of 29% ARR over 21 years.
Yeah, it's again, it's like you don't have to accept my assumptions. Make your own. Just go down.
If you can use a spreadsheet and type in numbers and hit save, you can do your own model for the next
you know, and you can do it in 10 minutes and you generate lots of beautiful graphs and you'll
decide whatever you'll decide. But if we start with my base case, my base case is the risk-free
return is 29% ARR for 21 years, which means that when you pitch me an idea, if you come to me and
say, Hey, I got a new Bitcoin custody thing or I got a new hardware wallet or I got, you know,
a new Bitcoin whatever banking thing or I got a new whatever. I'm like, well, so can you guarantee
29% plus the risk premium, which is probably 8%, 6, 8, 10%. You know, it's like the risk premium on
a mega corporation like Disney or whatever is 4 or 5% and the risk premium on a small startup has
got to be 20%. Okay, and so if you pitched me an idea and said, Okay, I guarantee you 40% ARR for
the next 21 years. And I'm like, and is it going to be capital-free? Like, I, you know, I don't have to
bother with it and I don't have to put any more money in later. I like, well, if you promise me all
that stuff, I'm going to like, Okay, well, let me think about it. But probably if you gave me 10
of those ideas, I probably still don't want them because it's just a distraction because my
my view is 29% ARR risk-free. And then I guess I would say when you look at it like that and you
compare it to the next 50,000 publicly traded company ideas and the next 500 million private ideas,
it's like they're all kind of distractions with the exception of this, which is the only thing
that's better than Bitcoin is more Bitcoin. Okay, so, so what's what is my personal idea? My
personal view is like my personal holding strategy is I own Bitcoin, you know, I'll either hold
the asset 17,732 Bitcoin, you know, which I tweeted, you know, four years ago, which I'm still holding.
Or I would hold like the ETF if I needed to, you know, to buy, if I had extra cash flow yesterday
and I just wanted to have it and I thought, well, I don't know if I can hold it for a decade,
I might need to spend it in two years to pay some expenses, but I'm going to hold it for now.
So if I'm trading in high frequency in and out or whatever, you know, it's like, you know, I would
buy an ETF of Bitcoin and I would take the counterparty risk to BlackRock or Fidelity or something,
but, you know, would I put my Bitcoin with Celsius, you know, or in BlockFi or FTX or Genesis,
long list. They all pitched me by the way. I already said no to every one of them. No, no, no, no,
but why? Because the counterparty risk to an unregulated, entrepreneurial
custodian is like 25% a year. Like there's a, they're going to fail every three years, right?
So I mean, just rationally thinking and I just don't need the headache.
So if you offered me 40%, I mean, I mean, think about this, right? If you thought you've got 25%
counterparty risk and your risk-free rate is 29% over 21 years, you're already up to the point
where they have to offer you 55% interest to put your money in their custodian, right?
So did any of them offer me 55% interest? No.
And by the way, if they did, then my next question is, well, how are you going to generate 55%
interest? Well, we're going to like put it in a defy-levard protocol on what I'm like, okay, well,
no. Now I've got like, towers of counterparty risk, you know, that's like seven layers of risk.
And eventually there's a degenerate trader, you know, offshore and a dark pool that's
levered up 20 to one that's paying that. So none of those things are very compelling.
So I would say those don't make any sense. But you know, on the other hand, like if J.P. Morgan
offered me 5% interest on my Bitcoin and they pledged their balance sheet,
too big to fail, if they said J.P. Morgan won't back it, not, not, I'm going to, if they said,
we'll take your Bitcoin, we'll loan it to someone who wants to short it. And if they short it,
then you're out of, I wouldn't take them as a broker. But if I was facing them as the counter
party, I'm like, I think that I think that the US government will have to fail before J.P. Morgan fails.
And so, you know, if it's one of those top four, two big to fail banks, and they offer me sofer,
and sofer was 550 basis points, then would I take that yield? Probably. Yeah, maybe. I mean, I,
I mean, don't, don't hold me to any amount forever, right? But some portion of my assets, I already
trust those banks, right? And, you know, you don't trust those banks. Keep in mind that the US
government trusts those banks, right? The entire civilization runs on those banks. Apple,
Google, Facebook, all run on everything else you own is, is clearing through those banks,
right? So you're probably going to starve to death and the supermarket shelves are going to
empty out of those banks stop working. So, yeah, there's a certain degree of trust there that I
might take. And I think there are certain things you consider taking, but I don't recommend any of
them. I don't even recommend my own stock. My point, you want to buy a stock? Why don't you read
every single SEC filing, every 10K, every 10Q? The irony, of course, is on Twitter, people all
old pine on all this stuff, and they have a lot of strong opinions. Most of the time, if I post a
paragraph of text, I can count on them to not read the fourth sentence in the paragraph.
Right? I generally assume that people will read the first sentence.
I discount the fourth sentence. If there's two pages in the 8K, very few people read to the
sixth paragraph of the second page of the 8K. And if you're a professional investor, you're
expected to read all 100 pages of the 10Q or the 10K filing. We hired very expensive lawyers and
very expensive accountants to write all this stuff down so you could think about it.
And if you're prepared to think about it, right? And if you understand you're taking risk,
there's risk. It's interesting. There's an ETF called MSTY. Have you heard of it?
Yes. Okay. Well, MSTY basically sells something like, it feels like un-headge to microstrategy
volatility. So if you buy it, you're taking downside risk and they purport to be selling the upside
via synthetic long position selling calls or something. And right now on my screen, I look at it,
it says they've got $476 million of capital and it yields 226% interest.
Wow. Okay. So that's yield. Now, the question really is, is it, you know, what is the risk associated
with? It download the prospect, this study, the strategy, look at, you know, back test it,
does it actually constitute taking downside risk and getting paid 226% for giving up the upside?
Is that exactly what it is? Or is there an embedded leakage where, you know, you're actually losing
20% of your principal per year? I don't know. Right. You want to do an interesting podcast, right? I mean,
do that analysis, back test, it's study it, take apart all the, take apart all of the risk factors,
have the people running the ETF on your podcast, quiz them on this and try to figure out,
have they figured out a way to generate 226% yield on MSTR? Yes, no. Right. Very interesting. Yeah.
If you're bored and you want something and you want, and by the way, if you, if you're running
an investment fund and maybe there's someone that wants to generate yield on Bitcoin,
like, you know, some people just want to hold the asset and pursue the capital gain on realize
forever. I get it. If you had a fund, if you're an institution, if you're Harvard Endowment or
a church and you don't pay tax on operating income, I look at 226%. I think, well, oh, that's a pretty
big tax bill. But then I think, well, what if I didn't have a tax bill? What if I lived in UAE
or Singapore's, right? Or what if I had a trust which was tax advantage? Maybe you would feel
differently about that. What if I've raised a billion dollars to invest, you know, I get paid
two and 20 and I'm supposed to find all these ideas? Well, I think, I think there's a lot of
interesting ideas. I think that if Bitcoin is a 55-vol ARR or 50-vol ARR with a 50-vol
you know, 50-volatility and 50-percent ARR, there's a lot of people that they would rather have 20 ARR,
20-vol. Like, they don't really, it's like high voltage power coming into your house. It's nice
to have it, but then you don't want it in your hair dryer, lest you drop it into the bathtub and
electrocute yourself, right? Or on your electric razor. So you've got this big transformer box
that steps down high voltage to low voltage digestible power. So some people, some people, what they
want to do is they want to lever up, like, micro strategy levers up Bitcoin to get to higher
vol, higher performance. And that's the high volatility equity and that's why some people
like our stock. And some people are degenerate crypto traders and they want 10X leverage. So
if you want to have real leverage, you buy the calls, you don't even buy the equity, right?
We're leveraging 1.25 to 1 or 1.3 to 1. There are people that want 2 to 1, 4 to 1, 8 to 1.
You know, there's MSTX, have you heard of that? Yep. That's Andy's on top of this. Jesse,
I got you guys pegged. Andy is the trader. And Jesse is the fundamental macro analyst thinking
about the long term and the philosophy. And I think the two of you paired together is probably a good
thing. But because you need the one and the other, MSTX has got $185 million in capital they've
raised in two weeks. And they're offering 1.75 X levered long MSTR exposure. Okay, put this in
perspective. There are a lot ETFs that have been out there for years and years. They can't raise
100 million in capital, right? 500 million in capital. And these are ETFs that, you know, they charge
fees 99 basis points, 129 basis points. Somebody created a business, you know, overnight that will generate
$185 million or $10 million in fees that will scale. And it's just like one person with a Bloomberg
trading an hour a day. Right? But so there's a lot of appetite for that. Obviously, in the options
market, MicroStrategy has about $22 billion of open interest in the options market right now.
And 11.5 billion is short. It's puts. Okay. And 10.8 is long. So the put to call ratio is like 106.
The duration is 172 days. This is my best guess right now. Don't hold me to it. You can do your own
calculations if you like. But I look at that. It's like, okay, well, a lot of people just want a short
Bitcoin with leverage. So they basically or they want a short, they short MicroStrategy or they
or they and they can bar the stock to short it. But then they can also just buy the put.
And then maybe they go long the underlying Bitcoin with call or they own the spot ETF or something.
And you know, it's like their favorite trade or somebody's favorite trade. And I don't mind like
I say my my belief is we're here to provide an institutional bridge. If you want to go long
short with leverage without leverage, there's one set of people that want more leverage and more
volatility. And we're giving it to them. And there's another set of people that want less volatility
and less leverage. You know, so you know, you buy our convertible bonds right now. My last snapshot
was you get 82% of the upside, 9% of the downside of the equity.
Okay, well, maybe somebody wants that. Yeah. Right? Like maybe $300 trillion a bond market once that.
But so coming back to your question, I think if you're a normal person, you know, and you just want
the risk-free thing, the risk-free thing is buy Bitcoin whole Bitcoin forever and turn off the
television. Right? And I think there's a lot of investors for which that's wise. If you're a
professional or if you have a very particular, you know, entity, right? I mean, it's
or a particular portfolio. If you're a professional investor, a money manager, you've got
you've got a particular client. If you're client saying, I want fixed income. I want to generate
this much. I need to generate, you know, yield, et cetera. Well, I mean, one thing I do think is
I don't think you should go. You should chase after yield with FTX or offshore unregulated opaque
exchanges, not wise. If you're going to chase after yield, you should do it with regulated
entities with full disclosure knowing what kind of risks you're taking and with clarity as to
who's accountable for the risk. But I don't I don't recommend anything because I really do believe
there's 50,000 publicly traded companies. It's the question is, are any of them underpriced
versus the risk expected return? And that comes and goes, that's very complicated. And then you've
got, you know, there's 50,000 nice pieces of art and there's 50,000 cool buildings. And those
are all things you can invest in. I just think you want to be an expert and fixated on it.
And I take the position that probably they're all going to underperform Bitcoin. And, you know,
29% ARR is pretty good. I mean, a very simple idea is if you can figure out a way to borrow money
long term at one third of that. If you can borrow money at 8% and you could then loan it to the Bitcoin
network at 29% and you've got a duration on that on that debt instrument of eight years to 12 years.
Now you're three epics, right? You're probably going to be fine. That's brilliant. I mean, how do you
do that? You could have done that with a 15 year mortgage at 2.8% interest 24 months ago,
right? On your real estate, right? So if you can do a 15 to 30 year mortgage at low interest rates
and just, and then buy Bitcoin, your arbitraging 368% money versus 29% and that's, that's intelligent.
If you can create a company that raises equity or debt to buy Bitcoin, that's intelligent.
If you can borrow money at 4%, that's even more intelligent. If you can borrow money at 1%,
and buy Bitcoin with it, no recourse more than four year duration. I think you ought to do that.
Right? That would be intelligent. So, so, levered Bitcoin, levered long, as long as it's not
marked a market degenerate, right? I mean, like when you're trading 10X leverage, what that means
is Bitcoin trades down a few thousand dollars, you get forced liquid A, did why you're sleeping,
and you lose everything. That's stupid. Don't do that, right? But, but a simple idea is if you have
capital and you can hold it more than four years, I think you buy the Bitcoin and just forget about it.
If someone will give you a loan and they're not going to ask for the money back in less than four
years, you can consider it. You see, if they're giving you a loan for one year, right, you might get
wiped out on that, right? If they're giving you a loan where you have to actually post additional
collateral every day of Bitcoin trades down, right? That's actually anxiety inducing. But when the
loan duration goes to more than four years and there's no mark to market, well, that's probably
interesting. And of course, if you can get out to eight years, I would kind of say four years
duration on equities in no brainer, eight year duration on debt starts to feel safe. And I guess
my issue with all these other ideas is you can either give me a very complicated entrepreneurial
idea and I stare at it, but it's just so complicated. And it's you probably don't even know the way
you're going to fail. I might rather you just give me a financing idea like, hey, we can take over
this cash cow company for one time's revenue and then we can convert its balance sheet into Bitcoin
and then we can lever it up by borrowing two billion dollars at eight percent interest. I mean,
I like that idea better, right? Just a very simple idea. I'm going to borrow a billion dollars
at less than the cost to capital, the risk-free cost to capital is fill in your number,
minds 29 percent, but if you're pessimistic, maybe yours is 12 percent. Okay, if you're if your
base case forecast is 12 percent, and borrow the money at four percent, and it works, right?
And this is all still in the context of $899 trillion of value is not earning 29 percent
annualized. And you know, the best asset class historically is venture capital earning 25 percent,
but you have to lock it up for 10 years and all the returns come from the top desial. So, you know,
that's what everybody else is looking at as their riskiest, longest term bet, or you could just get
the most liquid asset returning 29 percent plus. Yeah, I think people work too hard at this. I mean,
it's very simple idea. You've got a trillion dollar asset going to a hundred trillion dollar asset.
It's a hundred X. And so what's the best way to make money? It's it's basically capitalize a private
company with Bitcoin, capitalize a public company with Bitcoin, you know, convert debt to Bitcoin,
borrow money and buy Bitcoin. If you're if you're a VC, you can try to find the next 10-allee bobbas
that's hard. Or you can just go and invest in 10 private companies that do anything that are
cash cows. How hard is it to find a company growing 0 to 5 percent that makes money? It's easy.
How hard is it to find a private company that's going to grow more than 20 percent a year
for the next decade without consuming capital? Hard. Go find one of the cash cows that's private,
invest in them, convert their treasury to Bitcoin, over-comptalize them, take them public.
The equity becomes a Bitcoin derivative. The volatility is off the charts, right? If half the
enterprise or more is Bitcoin, you get to a 55-vol, then you've set fire to the company,
a McVorchin, right? What risk did you take? You have Bitcoin risk. You see, everybody, but here's
the thing, right? I mean, this is a big ego thing. Everybody's got a big ego. And the biggest idea,
and the biggest, most important thing in the 21st century was already invented and discovered by
Satoshi. Satoshi created digital capital. Digital capital is worth hundreds of trillions of dollars,
400 trillion dollars by my last estimate. Somebody's already invented a better idea than you're going to,
if you're going to, you think you're smart enough to come up with a better idea than 450 trillion
dollars idea. What's the second best idea? The point is there is no second best idea. There's
an idea. It's called Bitcoin. It's digital capital. So you've got the best idea and you're a business
person. If you humble yourself before Satoshi and you recognize the brilliance of digital capital,
and you recognize the fact that this is inevitably going to go from a trillion to 10 trillion to 20
trillion to 40 trillion to 80 trillion to 160 trillion, nothing stops this train, right?
Nothing stops this train. Once you recognize that, you're a VC investor. What do you do? You invest
in private companies, put them on the Bitcoin standard, take them public, and they strengthen the
Bitcoin system, and then they draft off the Bitcoin network, right? You're a private equity investor.
You find big private companies, you invest in them, you recalculize them with Bitcoin, you take them
public, you're an investment banker. What do you do? You don't negotiate 1000 complicated mergers
between 1000 different counter parties or how many different pairs? 1000 companies and a thousand
options each. So it's a thousand times a thousand combinations and you can solve all of the
combinations because you're brilliant or you just merge a thousand companies with Bitcoin.
Bitcoin is a universal merger partner. I've got 1000 zombie companies at the bottom of the
Russell 2000. How do you fix them? Re-capitalize them on Bitcoin. Bitcoin is the universal merger partner.
Okay? But I need to come up with a new idea. No, you don't. Satoshi already came up with the idea.
Right? Everybody wants to come up with a new idea. Well, I got a company. I got to grow my company.
Oh, is your company going to grow faster than 29% a year with no cost risk-free for the next 21
years? You have a better idea than that? Right? Again, you have pride, come up before a fall.
A bunch of alpha males running around and they all look at that. Yeah, Satoshi was smart, but I
got a better thing. Yeah, Bitcoin is good, but I got a better thing. It's like, but you know,
how am I going to get rich and famous if I just embrace Bitcoin?
It's like, by the way, there are ways to get rich and famous by embracing Bitcoin.
Right? The problem is when you stray from the path of righteousness, you embrace Bitcoin,
you become a great Bitcoin custodian, then you trade shitcoins. Right? You embrace Bitcoin,
you create a Bitcoin fund, then you start to trade altcoins. Right? You embrace Bitcoin,
you securitize it, and then you drift off to do the next thing. Right? The world's full of people
that they found it, and then they thought, well, I've conquered this. Now I got to do something else.
You know, by the way, I was that guy. Right? When I came public, I had a good thing. Micro strategy,
the greatest business intelligence software. We grew for a decade. We conquered the world. I was
like, okay, well, I've declared victory. Now I got to invent 10 more things. So I launched 10 more
things. I launched alarm.com. I launched angel.com. I launched wisdom.com. I launched alert.com. I
launched blah, blah, blah. It's like none of those work as well. It's like, guess what? Just because
you can do one thing doesn't mean you could do the next 10. It's like, you know, Napoleon, he,
you know, he ended up taking over France. Good for him. He was an Italian. He took over France.
But then he's like, I think I'll take Italy too. Oops. He took it. He lost it. I think I'll go
conquer Egypt. Oops. He took it. He lost it. I think I'll go into Syria. That didn't work so well.
I think I'll go take over Spain. Oops. That didn't work. Now I'll go conquer Germany. Oops. Got it.
Lost it. I think I'll take Russia. Get to Moscow. Oops. You know, he drops three armies along the way.
One in Russia, one in Egypt, one in Spain manages to get whatever millions of people to follow him.
They die. Right. It's like, congratulations on that seriously. It's like the, it's like the,
the, you know, the Alexander the Great Napoleon complex. Everybody thinks that because they came
up with one idea that they were put on earth to, you know, as God's gift to deliver their brilliance.
And the point, and there's a point of humility when you realize that maybe your brilliance was
to discover somebody else had a good idea and to embrace the idea. So yeah, I think there are a lot
of good business businesses to be created on Bitcoin. But the, but the operative words are on Bitcoin,
on Bitcoin and, and focus. And, and that's why laser eyes matter so much. It's just laser-like focus.
Right. And just because you can do a thing doesn't mean you should do a thing. And some people have
to do a thing. Or maybe there's a responsible way to do the thing because you're solving a problem.
Like in Shanghai, they want Bitcoin, but they need a state regulated, you know,
custodian that the Chinese government will support. So the guy that sets up a Bitcoin ETF in Shanghai
will open up a gateway for one billion Chinese people to buy Bitcoin. And that'll be good for China
and good for the world and good for Bitcoin. And, you know, that's, that's an idea, right? There's,
there's probably another idea is probably a regulated Chinese company that could be the
micro strategy of China. Because what is micro strategy doing? We're giving people bonds.
We're giving them high-vol equity. We're giving them options to people. I mean, some people,
how do you buy Bitcoin at the all-time high and take very little downside risk or no marked a
marked risk? You buy a bond. You don't want the equity. So once you embrace the idea
that the world's full of a lot of people, they're in different regulatory regimes, they're in
different cultures. They're different, you know, that the 80-year-old has a different risk profile
than the 20-year-old, you know, institutions and churches and endowments have different tax
treatments and different regulatory requirements than a hedge fund, than a vault trader,
the institutional investor, right? So Satoshi gave us a big idea, like perfect money,
profound, big, huge paradigm shift idea. But it's not different to electricity. It's like,
or fire, right? We can extract energy from material, right? We can actually move energy
cleanly, you know, powerfully over hundreds of miles into your bathroom. Okay, that's the big idea,
but how many different businesses got launched based on fire? How many businesses got launched based
on electricity? A lot, right? Like a lot. How many businesses got launched or will be launched based
on digital capital, digital energy? Oh, a lot. I have no doubt. But it's just like, just remember,
you know, pick the right protocol, you know, and don't get distracted and try to avoid blowing
yourself up, you know, in the process. Sage advice. I can't help myself, by the way, going back
to MSTXY and MS, yeah, or MSTY and MSTX. Just this is like public service announcement. And again,
none of this is an investment advice. But for the DGENs out there, be advised that these are
quote unquote daily trading investments. So if the share price starts at $10 and it goes up to 11
the next day and then the next day it goes back to $10 to where it started. Actually, the way
the math is you'll lose money. And that, by the way, is if the instrument works. And in my, you know,
I've been watching these daily levered instruments for years now, not specific to Bitcoin, but
sometimes they blow up and sometimes they deviate significantly from their, from their benchmarks.
So it's all in the same vein as do your own research. Be careful. Watch out for leverage.
Yeah, those are all securities trading ideas. And you should become a securities expert on the idea
and think hard, right? The empowerment of Bitcoin is wouldn't it be great if we took our money,
we invested an asset and we could turn off the TV and forget about it for a decade.
That's why at the end of the day, you have to keep coming back to Bitcoin,
and come back to this idea of an asset without that counterparty risk, right? Without them,
there you could, you could talk for 20 hours about the risks.
Right? And for the most part, most people would benefit just understanding Bitcoin
and Bitcoin, I think, is the solution to the great majority of the people's problems.
These other things are, it's like, there's a professional guy who has an equity investment fund
who might have $10 billion of capital, and their charter says they have to invest in publicly
traded operating companies, the trade on the NASDAQ or the New York Stock Exchange. And so
that guy can't buy Bitcoin, even though I would say that's the risk-adjusted best thing
in the day. It's like that guy can't buy that. And that guy took money from a pension fund
that represents 8 million retired firefighters or something, and they can't buy Bitcoin.
So what you have is you have a, you have one pension fund that represents the interest of unborn
children. You know, people that don't even live right now, right? It's, it's truly a public
institution with a long duration. They're looking out a hundred years. They have allocated their capital
to a variety of money managers. They, they might have 2% with a commodity trader. That guy can buy
Bitcoin maybe. They've got another X percent with an equity trader. That guy can't, the pension fund
can't do anything. So when you look at the way the capital is structured in the 21st century,
if you're a public company, you can create public securities that meet the requirements of all
these pools of capital. That's just useful. That's a solution for them, right? Just, just like a
Chinese pension fund that cannot, and probably cannot buy a United States-based software company,
just we have lots of pools of capital, and they represent real people living dead or about to be
born. And, and Bitcoin represents the digital transformation of the capital markets. And if you're
going to rebuild hundreds of trillions of dollars of capital, and you're going to give them a path
from physical capital and financial fiat capital to digital capital, right? I mean, there's a lot
of commercial banking to be done. There's a lot of investment banking to be done. There's a lot
of money management to be done. There's a lot of journalism and analysis to be done. Someone has
to create the securities. You, we need the auditors and the accountants to account for it. We need
the lawyers to figure out how to disclose and assess all the risks. There's a bunch of regulations,
that have to be formed to clarify. There's a lot of work for a lot of people in the ecosystem.
You can make your career being a leader in any one of those areas.
There's a dude that figured out how to create electric shavers. And the contribution is it works
and it doesn't electrocute you. And it was probably a, probably there's an entire company that
dedicated their, you know, 30 years to perfecting that thing. And we're going to have the equivalent
of those sort of things, right? In the digital assets ecosystem. And that's the inspirational part.
There's something to do in your day job. That's how you earn money. But, you know, never forget,
right? You got to see the world as P&L and balance sheet. On your P&L, you should do something,
whatever you're best in the world at, whatever you're best, if you're a dentist and you're the
best dentist in your city, or you'll have a good job. My advice is make sure you stay on top of
the dentistry thing, right? And be a good dentist. On your balance sheet, that's where you want to take
the lowest risk. You know, I would generally recommend someone figure out how to buy Bitcoin and
just figure out, are you going to custody it? Or who do you trust to custody it for you? And
that's about the extent of the risk you want to take. And leave all of the other risk taking
to securities professionals who do it for a living. And, you know, and they can, they either obsess
over it or they obsess over it and then they diversify. Like, like, my view is, I think diversification
is a dirty word with regard to Bitcoin. Like, once I've decided it, I don't want to diversify.
But if I'm trading securities, you know, if you said, well, here's 100, you know, 100 companies
backed by Bitcoin or 100 AI, what are my two best ideas? Digital capital, digital intelligence.
If you came to me and you said, well, here's, here's a dozen digital intelligence ideas. Well,
I don't know if I'm going to put all of my money into one of them, right? And here's 10 companies
on the Bitcoin standard. Which one do you trust? Well, you got to think really hard. You got to
study all those, right? You know, and my job is to obsess over micro strategy. That's my day job.
That's what I do. I'm not obsessing over the next 27 companies, right? I don't have
information into their transparency one way or the other. So I think, I think people should
be very thoughtful about that. It's very interesting that I don't think I've heard anybody articulate
this before. And I think you're kind of laying out the outline for what could be the next big wave
of like private equity, like the leverage buyout phenomenon of the 90s that were a ton of people
made a ton of money by deploying this playbook with private equity of, you know, go buy cash
loan companies and lever them up. And this strategy is like the LBO craze, right? When you had
cheap debt, you go and you basically LBO, how many companies did we LBO? Like 1000? Yep.
Well, what kind of company? It doesn't matter. All I need is a company that I can lever up,
right? So the point is it's like the LBO craze was the last 30 years or so. Yeah, and actually
the next 20 craze, right? Yeah. That's kind of wild to think about. I mean, there's always some
frontier and finance where there's some fortunes to be made by deploying a playbook. And I think
you just articulated the outline of that for the next 30 years of private equity.
That's it. Notice to investment bankers out there. Even if the Fiat system
recedes, there's still plenty of work to do, turning existing Fiat based companies into Bitcoin
based companies. Lucrative work. That's it. Lucrative fees that can be stacked further in Bitcoin.
Wow. Well, you've given us a lot to think about, Michael. This has been a tremendous conversation.
Of course, I want to call people's attention to all your other fantastic content. Hope.com,
your recent presentations, HC, Wainwright Conference, of course, the Bitcoin conference, key notes.
Are there any other final words you'd like to leave us with today?
I think this is an exciting time. 2024 is like year one of institutional adoption. I mean,
I feel like the gun went off with January approval VTFs. Next January, the second gun goes off
with FASB account, a fair value accounting. And then the third trigger is going to be full bank
custody. And I don't know when that happens, but I think it happens definitely in the next four
years. Maybe it'll happen faster depending upon the outcomes in November 5th. And so I think all of us,
we should grant ourselves, view ourselves as being fortunate to be in the Bitcoin ecosystem right now,
as the entire asset class is coming to life as a mainstream institutional asset. And as people
start to recognize the power of the digital capital transformation. I encourage everybody,
just do your own work. Go to Hope.com. There's a lot of information there. I post a ton on X,
slash Twitter. And there's a lot of other good content. Everybody's putting out. So
so I think you'll find it to be interesting. And then depending upon your situation, there's
opportunities. Everybody's got different opportunities. You have to just internalize it. I would laser
like focus and on Bitcoin. And then think hard about, you know, what are your professional assets
that you can bring to bear? What kind of financial assets can you bring to bear? You know,
what kind of political assets can you bring to bear? What kind of communications or marketing assets
can you bring to bear? And everybody can do something to both benefit themselves and benefit Bitcoin
and benefit all the other Bitcoiners if they think long and hard about what's about to happen.
I would encourage people by the way they got the Bitcoin 24 model downloaded play with it.
Create your own versions of it. Jesse, you know, you're the dude. So you should take it and
start to play with it because you know, your initial chart with the 900 trillion of courses become
quite famous by now. Thanks to you. Thank you for so much for using it. It's been, it's been,
probably the biggest honor I've had in Bitcoin is you taking those ideas and broadcasting them to
millions of people. So thank you. Well, I would add, I'm happy to do it. It was, it was a great
contribution, but I also happy to point out that there's any number of 2045 charts that can be
generated depending upon your assumption. I've been tinkering a little bit. Yes, sir. And
and we just need the best and the brightest of the analysts in the community to think really hard
about what's going on. Because I think the Bitcoin community is special because the people of
the community think longer and harder and deeper about fundamental issues like inflation, demonetization,
innovation, monetization, you know, asset macro economics. You don't see any goal people thinking
super hard about the future of gold with a with the open source community goal model. And you don't
see the art people doing that. You don't see the real estate people. You don't see the people
pitching the S&P index. At the end of the day, their position is just, well, just do it just because.
And in fact, the most common position is, well, we know it's probably all risky. You know, don't
don't invest any money. You can't afford to lose diversify and, you know, or just or give me your
money and trust me. There's a lot of that. And I think that I think that Bitcoin 24, that model is
is us moving toward a position where, you know, the Bitcoin community, we're actually looking out
21 years and we're thinking about this and you can take that and you can crank in different
assumptions about the US debt and the growth rate of, you know, any government, you can create
models for any country, any company, any family, any endowment, the United States, all the other
assets. And so there's a lot of very good discussions to be had there. And then there's a lot of
reasonable debate. But I think that I think that welcoming the debate is the beginning of a
conversation that elevates everyone's thinking to new levels of sophistication. And ultimately,
there's just a lot of businesses. I mean, most corporations, what's your treasury strategy?
Oh, well, we just buy treasuries and look for something better. What? We just have money parked
there until we find a good merger. Right? What? I mean, of course, they'll have a strategy.
Their strategy is just not to lose too fast. And Bitcoin is about a strategy of winning.
And most public companies, most private big companies and most startups, they all could immediately
benefit if people started talking a lot more about Bitcoin treasury strategies and
you can go ahead and take Bitcoin 24 and you can spend out, spend up these models to help everybody
figure out where they want to take their company, their endowment, their whatever, and elevate their
thinking. I think 10X because most of these models are just intellectually vacuous. They're garbagey
things short-sighted, not very thoughtful. And I think it's, I think it's incumbent upon us to
elevate everybody's thinking and sophistication. And it'll be a benefit to the marketplace in general.
Well, to our listeners, there's your admonition. Have those conversations, help people figure out
what they can contribute to Bitcoin, how they can capitalize on Bitcoin, how can they be a part
of this exciting and rapidly growing sphere. And thank you, Michael, for all you've added to the
conversation. And thank you for coming on Sears assets. Thanks, Jesse. Thanks, Andy.
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