The 100K Interview

I guess I just want to start with the fact that Bitcoin broke $100,000.

Is this your first interview since this milestone?

Yes it is.

And I said this to Tucker Cross and on television, I said,

I'm going to be buying the top forever.

No, it's okay.

Now everybody's got to do their thing.

The shorts got to be short.

The longs got to be long.

The traders got to trade.

The haters got to hate.

This is a global monetary asset.

It is worthy of attention.

If it's not going to zero,

it's going to a million.

And that's where we find ourselves today.

Welcome to GalaxyBranes.

An infinite amount of cash, cash, and pop.

When your host, Alex Thorpe,

the US banking system is sound and resilient.

Bitcoin made a new world by my.

If you're not long, if you're not long, you're short.

Satoshi is going to come on there.

We have to stirrically go quiet.

I hope Bitcoin's going to be erased.

Bitcoin, Bitcoin is the best crypto asset.

Bitcoin is going to zero.

Welcome back to GalaxyBranes.

As always, I'm Alex Thorne, head of firm wide research at Galaxy.

Bitcoin not zero.

And we have a great episode for you today.

Michael Sailor, founder and chairman of MicroStrategy is our guest.

We flew down to Miami to interview Michael the day that Bitcoin hit 100,000 for the first time.

And this 90 minute interview is the first long form interview with Michael since that epic milestone.

MicroStrategy is the largest single entity holder of Bitcoin in the world.

Its stock is the best performing this year in the world.

And we get into it deep with Michael about his thoughts for the Bitcoin Strategic Reserve,

nation state game theory for dollar dominance and Bitcoin.

We talk with Michael about MicroStrategy's treasury operations, both now and its plans for the future,

as well as some Bitcoin native topics like proof of reserves, Bitcoin development, and much more.

It's a fascinating interview.

I know you will enjoy, but before we get to it, I need to remind you to please refer to the link to the disclaimer in the podcast notes.

I note that none of the information in this podcast constitutes investment advice or an offer recommendation or solicitation by Galaxy or any of its affiliates to buy or sell any securities.

This is a great episode. Michael was on fire.

We were down there the first day after Bitcoin hit 100K.

And I know you'll enjoy this interview.

Bimnet is off this week. We'll catch up with him next week.

So let's get right into it with Michael sailor.

Michael sailor, founder and chairman of MicroStrategy.

Thank you so much for coming on Galaxy brands.

Yeah, thanks for having me.

It's great to be here, Michael.

And I guess I just want to start with the fact that Bitcoin broke $100,000.

Is this your first interview since this milestone?

Yes, it is.

Do you feel vindicated? What's your take? Is it an important milestone?

I think it's an important milestone because when you get to the 100 to the six figure level, I think it sends the message to people that Bitcoin is here to stay.

I think there's been multiple stages of Bitcoin, right?

I think there were the early years when it wasn't clear what it was or whether it would survive.

Then there were the block size war years when there was the big fight over the identity of Bitcoin and what was Bitcoin and what wasn't Bitcoin.

And then I think from 2020 to 2024, I would say those were the crazy years.

The big question was, is Bitcoin an institutional great asset?

Will it be embraced by governments, by corporations, by institutions, by traditional capital markets?

And there was back and forth and there was a lot of skepticism.

And some people said it's too good to be true. Some people said it's so good. They'll ban it. Some people said, well, there'll be a little bit, but it won't be much.

And then there's big fight over is it a currency or is it capital?

And I think that since November 5th, right, we've seen kind of a surge from like 68, 67 all the way through 100.

I think the answer that's been question, the question that's been answered is, is Bitcoin here to stay?

Is it an institutional great asset? Will it be embraced by the wealth and the power of the world?

And I think busting through 100,000 is a numeric punctuation to the infatic answer to that question, which is yes.

Yeah, it will be embraced.

And I think that's the most important and biggest story in global markets this year, certainly from a stock.

It's the best performing stock in the world. What's that ride been like this year?

It's been exhilarating. And it's full of highs and lows. I think in the middle of 2020, it started with an act out of frustration and desperation.

We're going to take a strategic move because the alternative is a slow death or quick death.

And once you get to the point where you're back is against the wall, you're going to do something.

So at that point, we were a bit frustrated and we took our first Bitcoin position.

Then Bitcoin began to rally. And when Bitcoin rallyed back toward the all time high at the time, which is heading toward 19,000, we moved into an opportunistic phase.

And we were opportunistically found we could raise money in the convertible bond market for less than 1% interest.

And it's like, if someone wants to give you billions of dollars for free to pursue your business strategy, what CEO wouldn't take the money for free.

And so, yeah, we did that. And then we moved into sort of a, what is it, the terrorized zone?

I think Bitcoin soared up and it crashed on the Chinese.

Yeah, the China ban.

First the China ban. And then there was the environmental ESG fund.

Elon discovered that it used electricity all of a sudden.

Yeah, we fought away through that. And then it surged back up again.

And then we went into the crypto winner. And we we fell from 66,000 to 16,000.

And so that 80% draw down. I think that was, you know, the big test because it shook out.

It shook out the tourist. And it also shook out everyone that didn't know how to manage a capital structure.

So, you know, the poorly capitalized, you know, entities that had lots of credit risk and had had unhealthy leverage got taken out.

And there was a lot of forced liquidation and panic selling of Bitcoin that took us to the 16,000, 66,000.

And you just had to grit your teeth and get through that. And I would say, you know, that was sort of the low point right around the point where silver gate bank failed.

Like the Q123 from from FTX to silver gate bank.

And it was also sad. I mean, it was, I mean, a lot of poorly run companies failed because they were poorly run.

But then there were a lot of good companies. I thought, you know, signature silver gate were forced out of business to no fault of their own. They just, they were caught in choke point two dot oh, and that was somewhere between tragic and.

This tastes full.

Yeah, it's overgating particular to me because they didn't go bankrupt. They orderly was an orderly wind down. They didn't lose anybody's money.

I know signature is like almost like an assassination. I would say they're both political. Yeah. Yeah.

Are you optimistic that that's that's going to change under the new administration?

I am. Yeah. I think we crawled out of the valley, the crypto winner. And we crawled, you know, recovered back into the 30s or the 40s. And then I think we got into 2024.

And 2024. You know, there's we started with some cautious optimism. Bitcoin grinding up.

A lot of questions about the rest of the digital assets economy, but Bitcoin, you know, recovering from the bottom on its own without help from anybody.

And then we got the approval of the spot, Bitcoin ETFs. And then we had the having and the consequences of the having were were a number of things.

One, there was a big secular rotation of of capital from a bunch of Bitcoin miners to micro strategy, the options market and Bitcoin move from the miners to micro strategy.

So all the sudden, micro strategy emerged as, you know, a leading volatility liquidity trade in the crypto ecosystem.

And we became aware of that. And I think the second thing is 450 Bitcoin a day, which is $45 million a day of selling got taken out of the market.

And so the supply tightened and the natural supply tighten the market matured the ETFs legitimized the asset class and we went into the summer.

And it was a big summer. The summer where the Trump campaign, first of all, you know, caught a huge amount of electricity in the greater political economy.

And then Trump embraced Bitcoin and embraced crypto and the crypto community and the Bitcoin community embraced Trump.

That took us into the November 5 elections and and two things kind of happened around that timeframe on October 30th.

Micro micro strategy announced our 21 21 plan. We had basically gone and done one convert, a second convert, a third convert, a fourth convert and a few billion dollars of ATM issue.

And so we had raised quite a bit of capital, but we were doing it piecemeal quarter by quarter and we decided it was time for us to be more strategic.

So we announced the 21 billion dollar equity shelf registration and a 21 billion dollar fixed income plan over three years.

That was the biggest equity shelf registration in the history of capital markets.

So no one ever sold 21 billion dollars of equity like that ever, right? And that kind of flies past some people because it's like what I'm saying is like out of every company ever.

Right. Never done before the Bitcoin demand and the Bitcoin company did it. Yeah, one Bitcoin company did it. And of course it's we did it because we have the world's best use of proceeds.

Right. The first time in human history, you have a commodity that returns higher higher than the S&P with higher volatility than the S&P.

So you have 60 vol 60 ARR on Bitcoin going for many years versus 15 15 for the S&P. Now you had a commodity high vol high performance.

You can put 100% of your balance sheet. Well, that means in theory, you can issue infinite equity. Right. I mean, as long as you can return more than the S&P.

Every other commodity, I mean real estate, art, gold, it's 10 vol 10 ARR, 7 vol, say our seven AR 5 5.

So everything other than Bitcoin was always less than the cost of capital, micro strategy, you know, we kind of discovered we discovered a crypto reactor that could be fueled by Bitcoin.

And we put a crypto reactor in the middle of our company. It's kind of like turning on a nuclear reactor or putting an internal combustion engine in a horseless carriage.

And you know, that's what we learned in 2024 and we came in October 30th and we said, this is what we're going to do.

And that was very well received by the capital markets. That was a big success. Yeah.

And the day after we did that, our stock outperformed every magnum since seven company and our stock outperformed every Bitcoin company and outperformed Bitcoin.

And that was a very important signal to the market, which is the capital market is going to line up behind an operating company to pursue a Bitcoin treasury strategy in size.

Yeah. In size.

So we were ready to go. The market kind of started to take off and then we get to November 5th.

And at 8 p.m. on November 5th, Bitcoin is high 60s and nobody knows whether it's going to be a blue sweep or a red sweep or a red and white blue or a split.

And really, the timeline is if you get a blue wave, Bitcoin's going to grind up 20 to 40% a year against resistance.

The rest of the digital assets industry is going to trade sideways under onslaught, you know, gradually, you know, and who knows hoping just fighting on it.

It could be bad. Yeah. It could be bad.

But with the red wave and by 8 a.m. the next morning, we knew there was a red sweep of Congress, the Senate, the House and the White House.

At that point, Bitcoin is going to surge up 40, 60, 80%. The digital assets industry has a new lease on life.

Now you're going to get a digital assets framework. You're going to get an end of the war and crypto.

We don't know what it means, but we know that the alternative was fight on a guerrilla war that's very painful, a war of attrition.

Yeah.

And now what you've got is a favorable tax regime, a favorable, you know, a low regulation regime, a pro crypto regime, a pro Bitcoin, you know, regime.

And also the dominoes start to fall, Bitcoin surges up.

And you know, it goes from 69 to today, we're plus 100. So I don't have to say the implication of that to everybody, right?

It's pretty obvious the impact of that on 20 million, Bitcoin's right. You create.

800, 800 billion dollars. Yeah, since the election 700 billion dollars in weeks.

But the other thing that happened was, my strategy had, we took 30 years to accumulate 500 million in capital, which we invested by September, October of 2020.

We took four years grinding away through the crypto winner to find another 10 billion dollars of capital to invest in Bitcoin.

And then the next four weeks of November, we raised 13 and a half billion dollars of capital.

So and in November, we bought nearly like 150,000 Bitcoin.

The biggest slug of Bitcoin ever added.

There were 15,000 Bitcoin mind in the month of November.

And so when you start to work through the math of what's going on here, you can see the political landscape changed.

The headwinds became tailwinds. The capital markets aligned. They aligned. They're aligning behind the ETF providers.

I mean, BlackRock has had record flows.

Incredible. Yeah. Right. And micro strategy as record flows are option interest surge to like 100 billion dollars.

Right. And our liquidity surge the point where we're the number three stock after Nvidia and you know, and after Tesla.

And so the capital markets discovered and supported Bitcoin, the political system did.

And now we're starting to see the dominoes fall. I mean, the favorable comments by Jerome Powell, not a surprise. Right.

See smart guy. I mean.

And everybody else, it's you can see at this point, the consensus is building.

This is a global monetary asset. It is worthy of attention.

If it's not going to zero, it's going to a million.

Yep. And that's where we find ourselves today.

Can I ask you about the 21 21 plan, which was absolutely you're absolutely right earth shattering in earth shaking in capital markets.

I think and then proving the demand in fact so much demand that I think the latest convert that you guys did at a 0% interest rate. Right.

Zero coupon up 55 points. And we started to looking to raise 1.75 billion, which is twice as big as our previous largest.

Convert. We started twice as big and it became $3 billion by the time we finished and you've already raised 13 out of the 42.

That's 30% over three years though. Aren't you ahead of schedule like or what what what is your pacing going to look like you think?

Yeah, we are ahead of schedule, but you know, there are a lot of unknowns on October 30th.

We weren't sure how enthusiastically the capital markets would embrace us. You've got you've got the convertible investors.

You've also got the equity investors. You've also got the options trader. So so we have many, many constituencies.

So we had to see how they would react. And that was big thumbs up from all of them.

And then we didn't really know the outcome of the election. And I really do think the red sweep on November 5th is probably the single most important thing that's happened.

Maybe to the entire crypto economy in the history of the economy.

Do you think there might ever be interest in those capital markets for like a minus 50 bips coupon?

Because you're you found a way to turn free money into Bitcoin basically. What about making them pay you?

Okay, well, I think the most important point to to make here is we're not really limited to the convertible bond market.

Right, convertible bonds just happen to be one form of fixed income. We've experimented with all sorts of fixed income.

We've tried asset backed financing. We've tried senior debt, the junk bonds. There's also preferred stock.

And there are and there are various flavors of that and structured products.

In October 30th, we laid out our treasury strategy and our treasury strategy is it looks like this.

It's you've got a crypto commodity called Bitcoin, which is 60 ARR 60 volatility. Okay, 60 60.

Okay.

The the performance the 60 are that's a form of energy.

And then the volatile is another form of energy. It's kind of like a potential and kinetic energy or you could think of it as a you know you got a train moving 60 miles an hour and you got a fly wheel spinning 60 RPM on the train and that's your energy.

Okay, so that's what's coming out of the crypto economy, the macro economy. There's a drive shaft and that's being driven into the spot ETFs and if you wrap it with I bet or FBTC, you can buy 60 60 right in the form of security or you can buy 60 60 and the form of commodity.

Micro strategy as an operating company, what we're doing is is we're stepping that up and we're stepping that down. Right. So some people want 15 what they want is 25% of the return of Bitcoin and you think we're crazy.

Well, they'd rather have 15 ARR 5 vol.

No risk or be 10X over collateralized right. Just give me 15% but tell me there's a very, very small chance I you know I don't get my principal back some people want 15 15.

By the way, the entire S&P index is people buying 15 15 right. All you got to do is take 75% of Bitcoin away and you can create 15 15, which is a hundred trillion dollar right market right now.

So one form of fixed income or one form of investors is a target that you can target that in a fixed instrument where you're giving people a cash coupon or you can target it in a in a structured instrument where you're giving the capital gain over time a convertible instrument.

But you could just target 25% of Bitcoin and I'll give you 15 15 or maybe I'll give you 15 ARR 5 vol and people would lose their minds right because that's like 3X the sharp ratio of the S&P.

So you can create that you can create 30 30 you can basically give I'm going to give you half Bitcoin.

I'm going to take the other I'm going to take half of the performance and I'm going to take half I'm going to take all the volatility way and have to performance and I'll give you the other half do you want as a coupon or do you want it in a conversion.

And then I can give you 75% of it and then I can give you you know so when we do that convert but we did a convertible bond and zero coupon up 55 but it's it's a 144A offering so it's a note it's something you sell to qualified institutional buyers but you can't sell it to retail and it doesn't trade like on a four letter ticker right so that that's a market and a pool of capital.

But they're all these other pools of capital right so if you sell something which is just the same performance as the S&P but less risky.

I mean how big is that pool of capital massive market or give you another idea what if I gave you the performance of the ETFs with downside protection what if I give you the upside of Bitcoin but no downside that sounds pretty good doesn't it yeah that's what our bonds do our bonds are actually more than the performance like convertible bonds and micro.

Strategy here more than the performance of Bitcoin more than for the Bitcoin but with the downside protection there a bond and so if you think about that the thing an operating company can do is we can strip the volatility strip the performance strip the risk we can embed something the senior 10% tranche of the capital structure and we spit out one type of returns but by the way the capital is not going to be a good example of the same thing but we can do that.

But by the way some people hate volatility right the mainstream normies they do they hate it yeah but if you go to Susquehanna and you said we're going to strip the volatility from micro micro strategy we wouldn't have a hundred billion dollar 95 billion dollar open interest you know you know what happens when you strip the volatility from a company our size I know because I I have another company that I started and I'm going to do that.

And the other company is twice as big as micro strategy and revenue and twice as big and EBITDA and it's well run and it's it's just a great company the open interest is five million dollars well where 98 billion as I'm speaking to you right now so stripping the volatility out of the business is not going to be a good example.

It's like spraying the fire with a fire extinguisher or literally not pouring gas in the flame you're pouring water on the flame intentionally right whereas what we're doing is pouring gasoline on the flame if you ever study a you know study an internal combustion engine and look at how it works the point is to channel and you know and compress you know super charge the super charge turbo charge the fire and direct it not put it out right.

So so there's a big market a three hundred trillion dollar market for you know fixed income coupon generating principle protected low volatility instruments there's another massive market one hundred trillion dollar market for equity like S and P S P Y Vanguard 500 QQ Q that kind of and something that gives you 15 just beat the S and P.

Performance and if you beat the and if you have to do it with less ball or less risk then why don't I just give you trillions of that so there's that market then there's the Bitcoin market which is all take I want Bitcoin upside and of course there's hundred billion dollars now I guess in that market right now.

But you know at my strategy what and then there's a convertible arbitrage right and the convertible arbitrage that are like I'm going to buy 50 million of your of your paper I'm going to short 40 million or 35 million of your stock and then it's the stock moves around I'm going to adjust the short right and I'm extracting that premium risk free and that's their thing and that's what they do.

When I meet with them by the way I'm like you know I see you I see you guys every you know a few weeks or every quarter nice to see you again by the way that thing that you shorted tripled by my advice what I say to them they don't take my advice no it's okay nobody it's okay not everybody's going to do their thing the shorts got to be short the longs got to be long the traders got to trade right the haters got to hate the Maxis are going to Maxi everybody's going to do their thing that's fine.

But what I say to them is you know this is this is like 75% Bitcoin upside actually it's it's like 70% microstrategy upside it's a hundred percent Bitcoin upside no downside like that is to say Bitcoin crashed 90% tomorrow you're still getting paid Bitcoin could go about 95% tomorrow and stay there for five years you're still getting paid it's like why is it going to be a big deal.

So where are you you're already hedged you're already 10x over collateralized why are you hedging it again yeah it's interesting right and but there's some people to do head they double hedge it so there's a group of people that buy that convert and they they just buy the convert they're already hedge and they out perform Bitcoin without the risk there's other people that that's one type of view there are other people they don't want to take the risk for an hour like look at that.

Literally the afternoon they're buying the bond there I mean when the stocks moving around they're buying 50 million shorting 40 million.

Minute by minute they don't even want to take an afternoon of race right but that's okay so I think that it's a long when it answered your question but it's we're just going to provide securities to every pool of capital if what you want is that instrument.

If we think it's good for our common stock shareholders will sell it I mean ultimately there's a lot of instruments we could create that are kind of dilutive to us so we're not going to but you know there's the dude that once investment grade fixed income guaranteed coupon 10x over collateralized with a bit of boost past that we're going to give them their thing there's someone else that once 20% coupon yield you know outperform private credit they want lots of cash we'll give them their thing.

There's somebody else that wants Bitcoin upside but they want principal protection and less volatility and we'll give them their thing right and as we do each of those things there's a certain economic spread that we capture when we're doing it for example if I sell a fixed income instrument deep in the capital structure 10 10x over collateralized I've 40 billion dollars a capital and I sell a billion or two billion dollars a day.

So we're going to give you a billion or two billion dollars of this senior strip and I give you I give you 25% of the gain of Bitcoin.

Okay when you worked that out in your head you realize at a minimum 75% of the economics goes to the common stock right but it's better than that because we also get the float but it's better than that because we also get the volatility.

So most people don't have the math but if you're a quant right model the value of selling a fixed income instrument where what I gave you was a guaranteed coupon and I gave you over collateralization and principal security but in return I took the float I took the ball up front I'm getting a billion dollars from you and it's going to trade with a 60 ball right anybody you know it's like a billion dollar fly will spending 60 RPM there's energy in it right.

So when I get the billion dollars and it's spending 60 ball I can probably sell the volatility for a hundred million a year.

Right so you hand you handed to me I'm making a hundred million a year holding it then it's going up 30 to 60% I'm getting that yeah and then I've also got another float which is another intangible I'm holding the capital and the

field economy and that provides collateral for something else when you put it all together that means that really the cat the spread is like 85% 80 80 it could be easily 80 to 85% yeah.

Okay well that means you sell 10 billion dollars of that instrument you capture eight to eight and a half billion dollars of Bitcoin that you stack on top of your existing equity that's the leverage and the common okay so so the strategy we pursue is we strip away the risk and the volatility the people that hate it and we just give them something which is just better than everything else.

It's better than all the bank prefers and it's better than all the real estate prefers and it's better than corporate investment grades and it's better than junk and it's better than private credit and it's better than you know better than the S&P it might be better than a Bitcoin ETF we'll just give you something how much better 20% better 30% better.

But then we keep the rest and the rest goes into MSTR MSTR then does one and a half you know our target was one and a half X Bitcoin but the truth is we got to 2x yeah so it's just and then all of that compounds on itself and well when we're running at 2x Bitcoin and 2x vol like we have a vol Bitcoin ball is 60 we're 120 140.

Plug that into black shoals.

Right. What that means by the way is if you sell the if you look at the call rate if I sell it and at the market call 30 days out on I bet you generate 100% interest if you sell the same call 30 days out on MSTR you generate 220% and it's insane.

That is insane.

200% right you sell that same call on SPY 15% right and then you go and try to sell that call on BND.

On the bond or on V and Q the real estate or on gold good lot right there's no mark like there's no vol there's no market nobody wants to even make a market in that right and you basically hold the dollar okay well you get 30 days so far you get 480 basis points so

so us levering our permanent capital gets us to more vol and then the uncertainty the fact that we're operating company means I can sell equity to premium but I don't have to I can do a convertible bond but I don't have to I can issue prefer I don't have to

right you don't know what we're going to do we can buy our stock back we don't have to so the uncertainty plus the permanent capital person plus the the there's no redemption right like right like you know black rock or someone else I envy them because they have more capital but it's it's overnight deposits right

okay so you could have what would you rather have a hundred billion dollars in overnight deposits in your bank or 50 billion dollars that you have forever right no one gets back right so we have the permanent capital we can lever it we have the option to lever it the combination of those things means that

we would even if we weren't levered I think we would trade at 130% of Bitcoin ball yeah because just of the uncertainty right but when you layer a little bit of leverage on top maybe you get to to 2x and maybe you could get to more than two she might get to 3x if you do that right gives you all this not

no pun intended all this optionality right you mean okay and now we're back to the turbocharger or the supercharger right what we do is we compress this capital we put leverage on it and then we feed it right back into the engine because we're we can issue convertible bonds that are actually boosted by

mst r right that's how the bond the bond could be half you know we could sell a bond theoretically that zero coupon up 100 right and if mst r is 2x Bitcoin the bond is 1x Bitcoin right but the bond is still got theoretically 50 to 65% spread in it or economic boost to the common stock so if you understand the float to spread the volatility

when you when you plug everything into everything we basically use the common to go back even we could use the common to pay the cash coupon to pay a cash dividend but when we're paying the cash dividend we wouldn't be paying 6% in cash we would be raising the cash by selling equity which is valued 3 to 4 to 5 to 10x the underlying assets so our effective cost to capital

is in 6 to or 1 right and then you're like well where's the premium company because we're actually getting an 80% boost on the strip that we sold the fixed income and we're feeding it back into the common so we're in the business of creating this capital amplifier

triple amplifier you know we're boosting the leverage on the common we're we're boosting the return on all of these other instruments because we're using the common and then we're feeding it back into the Bitcoin network which is driving up the price Bitcoin right which is helping everybody else which is bringing more companies so so it's a very virtuous cycle with about 3 or 4 very good

powerful positive feedback loops that are all engineered yeah and then one last point which is you you got to be 100% Bitcoin like the reason we can do it is because we are we are 40 billion dollars of Bitcoin capital 60 or 50 million dollars of USD

and nothing yeah of anything out no real estate right no other coin no other no other good idea the thing that I try to get across to people with the laser eyes and the focus is is sometimes the least risky thing is not to diversify right when you've got an engineering solution when you're building an airplane and someone says aluminum is the right metal

diversifying into copper bronze steel and aluminum doesn't make the plane less risky right if the you don't need it's it's not like this everybody's got to have their turn we got to we got to like use a little bit of art and a little bit of real estate and a little bit of gold a little bit of Bitcoin and a little bit of what Nvidia stock right it's that doesn't work it breaks the machine right

it's the homogeneity of the of the fuel right we don't put 16 different types of radioactive elements into the you know yeah pick the thing engineer the reactor for the thing you know you put dirty fuel into the into the yacht the engine fouls you put dirty gasoline into the car it fouls right so you have to engineer the reactor in the right way

and it's you know it's like the Austrians would say about money any amount will do you just have to pick the money right right by metalism silver and gold is a recipe to disaster yeah

pick one focus on it so what we've done is we focused on Bitcoin we've created a Bitcoin treasury company it's a crypto reactor with Bitcoin is the fuel because we do that we can give our converts the highest performance of any convertible bonds and we can give our fixed income the highest performance of any fixed income

and we can give homogenous credit and transparency and here's the other point i make a lot of times people come and they're like i want to do the Bitcoin standard thing but but i think i should i'm gonna hedge i'm gonna i'm gonna put in this put hedge thing yeah maybe i should do some of this and some of that

you know i'm like no that's not the engine no no don't you know you don't hedge you don't want to be

72% Bitcoin with 30% hedges on to generate guarantee yield

you want to be 150% Bitcoin no hedges on but but but yeah because you're robbing the investor of their opportunity when you put your hedges on

there's a there's a concept in system dynamics and political economists the shifting of the burden to the intervener yeah okay it's like

because you you chose to do it i don't have to okay so when i give you a 150% Bitcoin

company and i don't hedge it and i tell you i'm not gonna hedge it you don't believe me for a while though you're gonna you're gonna

wrongpull me you're gonna take profits you're gonna right it takes a long time for people to trust you

right but your best chance to get people to trust you is if your laser like focused and committed and

transparent and you never break faith with them they're like this is by the way this is tough love when

Bitcoin trades down yeah 80% and you wanted me to bail out i didn't i'm sorry you know all those

bondholders they came to me when when the bonds the bonds were trading 30 cents and 40 cents and

they wanted me to issue equity to buy the back now we're keeping our position they said well this

is a big opportunity for you could buy these bonds back below par i said no this is a big opportunity

for you you're the convertible bond investor you have to buy bonds with your capital for a living

that's your opportunity my job is to issue the securities and stay and stay long Bitcoin

buy Bitcoin hold the Bitcoin manage the structure don't get liquidated that's my job your job is

to buy the equity or if you don't want to buy the equity buy the bonds the short story is the bonds

went from 30 to 300 right like they were they were screaming home runs the most lucrative thing

you could have done the simplest most brainless thing imaginable was at the bottom of the crypto

winner you could have bought all of these micro strategy convertible bonds at 50% 60% below par they

were and the joke of course is they were guaranteed to pay at par right i was like i would have bought

them guys if my lawyers would let me buy these i would have bought them they were guaranteed to pay

off right and yet what you the only thing you had to know to make that money was you just had to

do the research and figure out the Bitcoin was something real once you figured that out it was very

straightforward so coming back to this point it's when you hedge and when and when you're heterogeneous

you rob the rest of the market of their opportunity the opportunity for the convertible arbitrage

is they get to arb that instrument the options traders get to trade the options the haters get

to short and they get a great short up to the guys that are along get to go long the degenerate

traders they get their thing everybody can go take their bloomberg they build a little model and

they're like you know well the the eight hundred dollars call strikes two years out or mispriced

versus the one year out seven hundred dollar call strikes i'm going to sell one and buy the other

one and lock the difference yeah everybody's got to have their thing and so at the point is if

you're thinking as a public company that you're going to take a bloomberg and trade you're a full

because what you can do that they can't do buy Bitcoin hold the Bitcoin issue the securities

that they need you to do that yep and what they what they can do is is buy trade arbitrage short go

long and you want them to do that so when you start to to move into the territory of your partners

and you take their opportunity like like if i was like could you imagine if i put it at a press release

yeah a bitcoin zoomed above a hundred thousand we decided to take money off the table we locked in our

games everybody would go ballistic and then they would never trust us ever again yeah i mean for all

of those people and i'm like you don't understand like the world doesn't give a they don't care

that you're the world's most brilliant trader and you do like a hundred and eighty seven opaque

things to make a billion dollars if you show me a hedge fund that makes a billion dollars and an

opaque way i don't want to invest a dime in you like not not like what how would i i'm not going to

why would i you're like some smart guy that makes some money in a way i don't know how but maybe

you won't next year good for you but i don't i can't bet on that yeah i would rather invest in a guy

that loses a billion dollars in a way that i understand it's like oh bitcoin traded down five a

thousand dollars oh yeah you just lost a billion dot you know bitcoin when bitcoin moves like

two thousand five hundred dollars down we lose a billion yeah but now i can go you know i go by that

yeah and you and everyone knows exactly why yeah it's like the world's got infinite capital they want

they want the security so the real key here if you're running a public company is pick a strategy

solve a problem for the market be consistent reliable trustworthy and you know if the market

trades down 90 percent you know the most lucrative trade in the world was like to buy

micro strategy stock at the bottom of the crypto winner right absolutely right i mean i think our

stock got down to thirteen dollars a share third you know not that long ago thirteen dollars a share

over four hundred right now yeah and so and so for us to unwind the trade would have unwound

like i think literally it's a ninety eight billion dollar mistake

yeah to basically flinch yeah at the bottom of the market and by the way it never occurred to me

like why would we had a strategy of course i'm not going to it's just the conventional rest the

world they were all asking they're like you definitely should i'm like you guys out of your mind

i saw stories that were like michael sailor bet big on bitcoin and lost i think it was like a

four you know it's like headline in the wall yeah yeah it's like um let me ask you michael you

talked about other companies you you i was um i was at your bitcoin for corporation conference in

Las Vegas earlier this year yeah um you gave a great presentation there you just gave a presentation

to the microsoft board of directors uh which had a lot of the slides from your uh talk in

Las Vegas um they have like eighty billion dollars in cash on their balance you know like you're

talking about not how it's not efficient it messes up the engine if you in in this pod whether it's

your operating business or on your balance you have all this other stuff of course they have a

lot of stuff what's the pitch exact like broadly speaking for an operating company not for a

micro strategy or meta planet where where it's a bitcoin engine company at this point but for like

a Microsoft like like should they be doing two percent like or should they be plowing a lot more in

right i mean i've seen this the talks i think two percent is silly i think i think traditional

financial advisors that want to talk work bitcoin into their talk scripts so they sound cool and

adding one or two percent say one or two that's buying an insurance policy right that's like

me pitching you on life insurance just in case i mean it's not a way to live it's not a you know

you're not going to you know live joyfully forever and put your family you know you're not going to

provide generational welfare family and put your kids through college and get a yacht and a third

vacation yeah home and be university idolized because you bought flood insurance right

so yeah i'm not against buying insurance or auto insurance i just think uh not that interesting um

here's my view on Microsoft and this is the same for pretty much every company yeah certainly the

magnifson seven you have a good company you're generating cash flow a lot of cash investors invested

their money in you so now your choice is you can invest in the core business to grow the business

you can but but let's assume you're investing as much as you can come up with and then the cash

flow you've got that's excess you just don't know how to grow the P&L anymore well then you either

hold it as bonds on your balance sheet you pay it out as a dividend you buy your stock back

or you go and you do a merger and you pay cash for the merger and so we tick those off uh doing

mergers and acquisitions 90% to 95% failure rate right i mean hp did a disaster's acquisition i

mean the number of disasters acquisitions where the company is overvalued by two to ten yeah most

like if i were to say five percent of the acquisitions are successful economically i think i

might be overstating the case but i'd be very optimistic but i i'm sure 90 to 95% are a disaster

and you don't really know whether they're a disaster for like three two to four years so you can

embark on that course which is statistically you know a bad outcome and it's a slow outcome

it's costly just to affect and how many of these big mergers they're still fighting

and litigation over the merger to get approval or whatever a year after they announce it

it takes forever it's very dilutive it's distracting and most of the time it destroys shareholder value

so that's not great yeah so the next thing is i pay a dividend yeah okay well so

that's the CEO of the company saying you know i'm advocating my responsibility to invest your

money i don't know how to invest the money in fact i'm so confused about how to invest the money

i'm just gonna pay 40% of it in tax to the u.s government and give you the remainder

and then tell you to go figure it out which is kind of rude to the shareholder is that i think it's

i think it's so it's awful it's off especially for i think it's awful for a bunch of reasons one

they bought a stock they wanted to they wanted a capital gain and the stock they want the stock

to go up in value and so you're converting a capital gain you're forcibly converting a capital gain

into a taxable distribution for an equity investor if they wanted a taxable distribution they should

be a fixed income investor if you're gonna do that my view is issue a preferred stock or issue a

bond and pay it to someone who's a willing recipient i think actually jamming a dividend on an

equity investor it converts your company from a growth company and in tax efficient equity

it converts you into a hybrid where you're kind of half fixed income half equity you're basically

telling the world you're not a growth company anymore you're not sure how to grow and you really

would like to find a lot of risk-averse investors that don't even believe in growth right that are

happy to pay tax you know excessive taxes so that strikes me as you've lost you've lost focus

on your investors you're tri-fricating or bifurcating the investor community you're incurring an

unnecessary tax bill you're signaling weakness insecurity confusion and you're waiting for a bunch

of retirees who are risk-averse and terrified of losing their money you're you're waiting for them

to figure out how to reinvest the dividend right and so i can't see that that makes a lot of

strategic sense and so then that leaves you with the buyback yeah okay you got a company and

you don't know how to grow the company with your cash so you're just gonna buy your own stockback

it sounds kind of good but you're surrendering the capital you're surrendering the capital so

if the company had you know it had a hundred billion dollars of cash when you know the companies

worth at least a hundred billion but when you buyback ten percent of the stock the company has zero

or a billion in cash or you know a razor-thin layer of working capital now the stock trades up ten

percent maybe but the company has lost 95 percent of its tangible assets how is that not risk-aer

what you're doing is you're leveraging up the company on forward expectations yep so we come

back to Microsoft Microsoft the entire enterprise value is bay is 95 sometimes 97 to 98 percent

between 98 95 percent of it is based on just forward expectations nothing tangible wait

it's it's it's you're gonna generate x billion dollars of income this quarter i multiply it by

a hundred and forty four lord help you if you're a billion short right okay that's a hundred

forty four billion right if you actually change the guidance right these stocks basically

that people this is the irony conventional wisdom is well it's responsible to pay out the

dividend and buyback to stock but you realize you're literally creating a hundred and forty four to

one lever on your next quarters result or 150 or 200 to one and you're asking the market to value the

company based on future expectations so we come back to Microsoft Microsoft is just valued on

expectations right now if there's an anti-trust ruling or about negative negative regulatory thing a

competitive development a management failing right i mean half of the market cap can just go away now

how do you solve the problem well the conventional solution if you live in a us dollar standard world

and you're buying your stock back and dividending your stock back or dividending the cash flows out

and you're holding a very razor thin amount of of uh

pleasures yeah then the way that you derisk the share the shareholder dilemma is you require your

customers to sign three year agreements enterprise agreements then you bundle into the enterprise

agreement sixteen products and then you build in escalators every year and it becomes uh you

try to turn it into a real estate rental project a rental company and now the the

now the customer's got to buy everything you sell and how do they not renew right that's that is

the software as a service model that wants to be a long term lease and it's it sounds kind of good

by the way i lived that i was a CEO of that company i'm like it sounds kind of good and that's the

mantra of software companies and that's the you know everybody wants to be i sell three year

agreements with cpi plus three percent escalators and then i just bundle another thing uh and so

now what do you got you got harvard b school cfo and he's like i stripped the volatility off to

balance sheet by getting rid of everything other than t bills oh but i got rid of the law the 10

year and the 30 year t bills i just have 30 day treasuries yeah good for you check and i stripped

the volatility off of the pnl because every every customer has to buy our software on three year

renewable contracts with the price escalator and you know good for you how do you think the

customers feel about that how do you think the competitors feel about that you just bundle the

competitors product into your enterprise agreement so what do they do they go to the regulators

they sue your franta i trust so the conventional strategy for microsoft which is the conventional

strategy for every software company and i don't know how many companies go down this path that can

you know apple service revenue we're just going to have apple prime and you're going to buy

you know everything and you get all the one device you got to carry everything like what's your

monthly fee on that you're going to cancel you know did you buy the gaming thing that you don't use

the iCloud data storage yeah okay okay use forgot to pay your bill and of course all your memories

disappear yeah and your friends and your photos yeah it's it's a hostage situation okay so

that's a conventional strategy i view that as a road to surf them for the company

because the this is the fiat strategy right you're going down the strategy of it i have no assets

i have no capital therefore i only live on expectations therefore i make my executives work harder

my employees work harder my customers have to sign into this program eventually you get this

customer revolt or competitor revolt you have to choose between one constituency or the shareholders

someone is going to be out so how do you fix it there's a there's a path to prosperity and the path

the prosperity is bitcoin you adopt a different capital structure you recap the wise on btc instead

of usd and if you if you start thinking differently btc is 60% arr 60 vol instead of zero zero yep

okay when you recapitalize on btc now let's take that excess cash if microsoft takes their excess

cash and buys bitcoin they add a hundred and fifty dollars a share and a trillion dollars to the

market cap they don't even have to change the dividend right or the buy box you just make a trillion

dollars and you and you crank a hundred fifty bucks or more into the business because now you're

investing in something that's that beats the cost capital now there's a little chart you should

have in your head the s and p indexes the cost of capital it's plus 15 for the last four years

if you normalize that then bitcoin is up 48% over that yeah microsoft stock is up 4%

and bonds are minus 19% so when you have a hundred billion dollars a capital if you put in a bitcoin

you're getting ten times the arr you get from just buying your own stock back while you de-risk

right the difference over 10 years choosing to buy your stock back with that that cash instead of

buying bitcoin is minus 97% destruction of the capital choosing to put that money into the bond is

minus 99.7% destruction of the capital so it's blood curdling and what and so you follow that to

its conclusion it's like convert the cash you make a trillion convert the dividend you make

another trillion out another hundred fifty dollars a share convert the buy back you make another

trillion it's another hundred fifty dollars a share take all that bar of money at 4%

microsoft could borrow money at 3% you know 10% loan to value at 3% invested at 30 to 60% make

another trillion and so literally using the balance sheet doubles the value of the company

instead of being valued 95% on expectations you could get it down to 50% on expectations

and the other 50% is tangible assets appreciating in the worst case 20% a year right so that's

the logic of the bitcoin strategy and of course it's not a 2% insurance policy no it's a policy to

increase the growth rate of the company by 50 to 100% and decrease the risk by a factor of 10.

It's a very powerful pitch I've got some other questions by the way I recommend everybody check

out that three minutes pitch are you gonna go back by the way I heard maybe you're gonna go back

and present again I probably go back and do it in 30 minutes because there's a lot of subtleties

there that you don't get through in a hundred eight seconds totally totally but you did a good job

compressing that um you know I have the people have this question they asked me this I don't I don't

know the answer you've talked a bit about it you've got 400,000 bitcoin microsoft it is

about 2% of the bitcoin supply how much is enough when does that step do you like how much

bitcoin will microsoft have you know I laugh you know Dave Portney complains about buying it at 10

and panic selling it and then he's like oh I bought it at 40 it oh I hit the wrong button you know

you know all these things and now it's a hundred thousand and and what I've said and I said this

to Tucker Cross and on television I said I'm gonna be buying the top forever I mean here's what I

tell you when bitcoin's a million dollars of coin I bet you I will probably buy a billion dollars

at a million coin probably in one day yep and when it's two million I will probably be doing it

again in one day and when it's ten million I will be doing a billion dollars or more in one day

right and so we're not stopping the big idea here is there's 450 trillion dollars of assets

in equity real estate fixed income that store value assets in the 20th century economy

there's two trillion in bitcoin in the 21st century economy where the bridge we're going to

continue to create bitcoin back securities to channel that capital from an inefficient

an inefficient energy form to a more efficient structure when you if I give you a billion and you

invest in a diversified portfolio of African real estate companies and equity investments that's

a very inefficient portfolio if I take the same billion and I pull it into bitcoin and I eliminate

your counterparty risk to every country in Africa and every company and every currency in Africa

that's a much more efficient thing that gives off energy so I don't see why we wouldn't just keep

growing every year forever there'll be a point when bitcoin is a three four five hundred trillion

dollar asset class and maybe there's you know if if I don't know if it'll ever equalize we'll see

but I mean this could be this will probably be a thousand trillion and this will be five hundred

trillion and there's still going to be normies there's still going to be people that are like I'd

rather buy my government bonds or the government told me I had to capitalize my bank on the bonds

or I want to buy this there's still going to be that there's there's always going to be in my opinion

there's going to be a spread between say the S&P if the S&P is 15-15 and bitcoin is 60-60 I think

the bitcoin is tracking toward the S&P and the S&P is going to track up because the S&P companies will

flip the whole bitcoin but there's always going to be this risk premium which you know theoretically

is up to 6% because of the counterparty risk of you've got an attack surface you've got a

company you've got a currency you've got all this and as long as that that risk exists there's

always going to be some kind of arbitrage opportunity I think it's super interesting let's stick with

this longer term vision let's say you call it a five it could be 500 trillion I don't know pick the

most bullish utopian outcome for BTC in general like maybe it's the he does become the global reserve

look I would just focus people on my 21 year forecast is it goes up 29% ARR on average which means it's

60% grinding down to 20% over 21 years and it grows to 13 million a coin and it grows to 280 million

in the asset and of course there's plus or minus rails there's the bear case and then there's the

bull case it could go faster yeah yeah it could go less by the way you did put out a great model

which is on GitHub but it's it's Bitcoin 24 you can download it you can plug in your own assumptions

about everything come with your own model but you know like I'm focused on the 21 years because I

think that's as much as any politician any business executive any normal investor can manage and

and I'm sure that if I'm lucky enough to be in good health yeah you know I will come

trot out in 21 years and I will give you the next 21 year model and that will be a much a much

better articulated more nuanced one that'll take into account the the 8 billion robot flying cars

you know and all the other stuff the telepathic DNA nano bot you know inlays we have

but right now I think that that's enough and you can you can imagine and build any kind of

business and chart a strategy for your family your business or your country based upon that model

which I think is beneficial to most people I think that makes a lot of sense yeah thinking 100

years in it I don't think anyone can really do that in any case it's not realistic yeah a lot will

change and I think 21 months is too short yeah yeah I think a lot of people follow the 21 week 21

day 21 month trap and that paralyzes them it's like it's like Dave I miss Bitcoin he missed Bitcoin

in 20,000 40,000 100,000 and my response is Dave you could still buy it for less than a million yeah

what the heck are you what's your issue it's currently trading at point you're getting a 90%

discount to a million I'll be buying a billion at a million so why just can't you man up

up by 100,000 dollar Bitcoin and stock you quit your whining I love it right you know a couple of

other questions that are interesting here what about you know FDR executive order 6102

tried well made the private band the private ownership of gold doesn't feel certainly right now

like there's a risk of that for Bitcoin but does that's something that you worry about it all with

my I think the crypto community is really just just wrapped around the axle on this issue and I

think it started 15 years ago with someone saying this is a cryptocurrency and then someone else

said there has to be a currency and look what happened with the and and it's like the reserve

currency and look what happened to gold and so that'll happen to us I think what they're missing

is it's not a currency it's capital I think that's the fundamental issue you just have to come to

grips with it it is not digital currency it is not cryptocurrency it is digital capital

it is crypto capital and if you think deeply about this you realize that money money it bifurcates

into a medium of exchange legal tender which is a currency and store of value investment asset

which is capital and once you get to that point where you embrace the idea it's capital not currency

it frees you from this pernicious notion that it's got to replace the dollar it's got to compete

with the dollar it's got to compete with other currencies that the truth is the cryptocurrency the

digital currency is tether and circle it's it's a stable coin you that is the digital currency

and if you want to fixate on it that's the one and the debate is whether or not that's going to go

to ten trillion dollars or a hundred billion and it's and it's all about the regulatory regime yeah

now if we come back to digital capital and you know not like for kicks I read history I read

monetary history I read Murray Rothbard's history Austrian you know history of economic thought

from an Austrian perspective I read his money in banking in the US I read his great depression

I read the history of the Rothschilds I read Willand Durant's history of the world I have read like

monetary histories you know from 17 different directions every philosophy and you know there are

these there are these ideas that are tropes that just aren't really true like oh yeah the fiat

error that's 1971 well no the truth is we've had debased currency like in every century

42 times for the past 4,000 years the Romans alone like debased and rebased their their currency

multiple times yeah and so and so hyperinflation pops up everywhere credit credit dollars pop up

everywhere bank failures pop fiat currencies pop up everywhere you know it yeah the cotton the US

government and the revolutionary war issued the continental you know and yeah and they they debased

it 200 to 1 like 99.5 percent collapse yeah I like but every state issued their own credit at the same

time they all collapse and defaulted and that's sort of interesting but it happened again in the civil

war multiple times that it happened a few more times but if you go back to the Massachusetts Bay

colony you'll find that the Puritans did it in 16 2016 17 like every 40 years it happened

in in Massachusetts before we even had a country yeah like you know why they wanted to issue paper

currency to go fight wars they wanted to invade Canada but but the point is like you're gonna

take you're telling the story about hyperinflating a currency and defaulting on it it happens all

the time so now let's go to you know Franco and Roosevelt yeah what happened there well the dollar

was we were on a gold gold exchange standard we weren't on a gold standard we went on we we by the

way ever it's like when we had the gold standard where we had the gold standard for like 40 years

sort of here and it flitted in and it flitted out and like you find a few years in every century

going back 2000 years when you find some gold standard and then you get on the you know the random

debased coin token by metal standard and then you go back and then the empire collapse you do it

again right so you know everybody was off the latest gold standard in a world war two and then they

debased all their currencies and then the Treaty of Genoa we sort of went on a gold exchange standard

but that was really that it was really the dollar standard and the pound was based on the dollar

and the dollar was based on gold and everybody else was based on dollars or pounds and then

everybody def inflated that and officially the dollar exchange for you know 20 dollars to an ounce

of gold and Franco and Roosevelt wanted to lose money policy and they already basically took people

they took gold coins away so individuals couldn't exchange and then and then they went to a gold

bullion standard and and they were never backed one to one they were never back they were probably not

even back 20 to one and and and you get to a point where you know countries can exchange their

dollars for bullion and I think the French set the warship or whatever the French wanted to exchange

their their pounds for gold with England and England didn't have the gold and there was a deal

this is like back in the late 20s and eventually the US said well you know we'll give you the gold

and they stepped in and at some point the US realized they couldn't keep doing it and Roosevelt

wanted to devalue the dollar so the way to devalue the dollar was I mean close the go they close the

gold window then they then they devalued the dollar to 35 or something you know and and then

they still froze the wind there was no settlement network right right you know it was still basically

you can have some dollars or you can have some pounds and they played with that and then they see

you know and by you know World War II they basically put all the gold in the same fort knocks

and then Bretton Woods they just kind of seized it forever yeah and then we kept debasing and at

some point when the French wanted it again we went completely off it but here's the point

the US is not on the Bitcoin standard the US is not pegged you know if the US said you know

100,000 dollars equal you know equal one Bitcoin and we will not print any more currency than that

they would be straight jacketing the US currency and then there would be some

political dynamic there when I want to inflate the currency and fight a war or pay a bill then I

have to get off the Bitcoin standard but the point is it never went on the Bitcoin standard

went on on the Bitcoin standard number one number two it's not currency Jerome Powell literal the

reason Bitcoin rallied past 100,000 is because Jerome Powell on stage said to the world

Bitcoin does not compete with the dollar it competes with gold

guess what gold is not currency you don't buy coffee with gold you can't settle with gold

right I mean the point is once you realize gold is capital asset gold is capital asset that's like

seven seven balls seven AR seven ball or something it's it's a garbagey one you're better off to

use the S&P index is a 15 15 ball capital asset but Bitcoin is a 60 60 capital asset so Jerome Powell

underscored that I think the you know if you thought about you know I've got a phrase you did not

sell your Bitcoin right and there are a lot of you know again Max he's like no we want it to be

a currency we want to be able to pay for coffee with a Bitcoin pay me in Bitcoin and it's like

pay me in gold it's like pay me in a building it's pay me with a slice of your professional sports team

pay me with the Picasso yeah it's you know the point is a Picasso in a sports team in a building

or better investments than the dollar or the peso but if you could just open up your world view

and say the dollar is better than a peso the dollars are perfectly fine capital asset if you're

in a hyper inflating economy if the if the local currency is going to zero in 36 months and you

switch to and you recamplify on dollars you're going to get rich so this is all like a frame of

reference right and once you understand the frame of reference this thing is minus 20%

to a dude to a dude that's got minus 25% capital if you offer minus 7% capital it looks like a plus 15

yeah yeah percent you don't need to go to plus 60% capital so you know what I would say is you just

really have to understand Bitcoin is digital capital if it's digital capital you know

Jerome Powell is totally right it is competing with gold you should sell your gold gold is

going to get demonetized it's it's gold is a crappy settlement network how do you move 10 billion

dollars of gold in an hour from here to Tokyo like warships it's a but by the way as an aside

two things the Spanish Empire peaked in the 16th century at 16th century two reasons

the gold settlement network failed they wanted to send gold from Spain to the Netherlands to pay

the Spanish army to fight to hold the Netherlands for the for the Spanish king and the fleet carrying the

gold got washed into a port and Queen Elizabeth stole the gold it just it collapsed into the ocean

and they they no no Queen Elizabeth stole they had to dock there and she just they got swept into a

British port and a harbor and she stole it she's like I'm not sending it you're a guy enemy yeah

so the settlement network failed and she intercepted all the money and she bankrupted the Spanish

army in the Netherlands and that's why the Netherlands is Protestant today instead of Catholic okay

that's the first point gold was never an effective settlement network second point

the Spanish had hyperinflation in the 16th century why because they brought back too much gold

yeah right they they discovered all this gold great well what does that mean fam every single

local economy collapsed the prices went through the roof and this and the Spanish Empire peaked

when they found the gold so take away gold's not that good as money everybody you know like the

Austrians they wrote the book and everybody's looking back to sound money gold was just the least

crappy money yeah right the real story of civilization is copper tokens and glass beads and

tomahawk arrowheads and giant stone coin of the yacht people and bales of tobacco and and silver

you know gold they were you know and and clippable gold coins versus better gold coins

they were all just attempts to flee from dirty you know imperfect money or dirty defect

dirty defective money and we're you know and we're getting to the point where we just had

you know heavy not good money and then Bitcoin comes along and the entire 20th century

okay there's some gold there but I don't think for a hundred years there was anything looking like

any gold parody and so I I don't think it's rational and it's not even constructive to just fixate

over and over again on what happened to gold and how gold got demonetized gold was demonetized

in the 16th century right I mean if you study any empire like the Rothschilds they traded

bearer bonds they were bonds they were pieces of paper they occasionally used gold at points in

time but the entire 19th century economy was moving on you know on sovereign debt issued by the

French government and the UK government the Rothschilds didn't get rich because they were gold

dealers right and so there's a certain fiction or a myth that somehow there was this point when

we had perfect settlement of gold yeah it didn't happen in any century I'm aware of there's

always been a credit layer yep and and Bitcoin is its property it's capital it's going to compete

with the S&P it's going to compete with bonds it's going to compete with gold it's better settlement

network if you live in Cuba if you live in if your country goes communist you should fear for it

and when the politics turns socialist with wealth taxes and unrealized capital gains taxes and

less yeah will will the socialist expropriate your property yeah okay so if you if you believe in

property rights you should agitate against socialism expropriation fascism state control of of things

and communism but Bitcoin is still the best settlement network we've had for a capital in the history

of the world it's the best capital it is emerging as the world's reserve capital network

and it's a lot more constructive use of your time just to tell the US government or any government

just buy it let me ask about the strategic reserve idea because it's it's very interesting as you

point out it's not it's not a Bitcoin standard there's been many versions of proposals obviously

senators and the alums is Bitcoin act is one you said people should sell their gold to buy Bitcoin

that's what the act proposes right and there's a bunch of other varieties how should the government

be thinking about this in your view gold is a shiny dead rock sell it all like you really want to

if you want to elevate uh US's economic leadership in the world there there are two very simple

strategies almost three but two dump the gold and buy Bitcoin because you simultaneously demonetize

the asset held by your enemies who owns the gold right you just sell it all and demonetize gold

once and for all put a stake in its heart and buy Bitcoin and you get 20 25% of the Bitcoin network for free

but it's better right you could just print the money and buy Bitcoin and keep the gold but it's so

much more intelligent to demonetize the your enemies network and everybody else's network you

might as well drive gold from a 20 trillion dollar asset to a four trillion dollar asset devalue

the assets of gold held by every non-US entity drive Bitcoin to the roof and then have 25%

of the Bitcoin network forever and so that's a very straightforward thing the second my second

observation is the autoges create a normal regime to issue digital currency back by US

treasuries like I mean the US ought to have a framework so tether relocates to New York City

like that's what you want right and then you ought to basically have a free for all where jp morgan

or golem and sacks can issue their own stable coin you know people you know if you want to be

non-constructive you can fixate on i yeah the US is good you know the the Bitcoin is going to demonetize

bonds not really that's not the constructive thing I would focus upon the fact that Bitcoin is going

to demonetize the s and p index all your real estate all your gold right and other random store of

value assets us bonds are still going to stick around because banks need to hold them the regulated

entities need to hold them they're the safe haven everybody outside the us would give their left

arm to be capitalized on us bonds right so what's really going to happen here at my strategy would be

and I really think it's evil genius strategy right if it's like it's so good right that our

ally our enemies would hate us but our allies would complain to and the US would make a hundred

trillion dollars in a heartbeat right here's the strategy you dump gold demonetize the entire

gold network you buy Bitcoin you buy five million or six million Bitcoin you monetize the Bitcoin

network all the capital in the world sitting in Siberian real estate or Chinese natural gas or

every other currency derivative that's held as long-term store of value europeans african south

americans asians that you know they all just dump their crappy property and their crappy

capital assets and they buy Bitcoin the price of Bitcoin goes to the moon the US is the big

beneficiary US companies are the big beneficiary and while you're doing that you you normalize and

and and support digital currency and you just define digital currency as the US dollar back by US

dollar equivalents in a regulated US custodian that's audited what happens next 150 billion dollars

of stablecoin goes to a trillion two four eight and probably somewhere between eight and sixteen

trillion dollars and you create six ten to twenty trillion dollars of demand for US sovereign debt

and say why you're taking away a little bit of the demand because the capital asset of Bitcoin grows

you're adding back the demand to back the stablecoin what is the what is the digital currency goes

it replaces the CNY the rubble it replaces every african currency it replaces every south american

currency it replaces the euro i mean if you really if you really believe in US world reserve currency

and US values every single currency in the world will actually just merge into the US dollar if it

is freely available there isn't a stronger currency no there isn't there's only there's only currencies

peg to the dollar explicitly like a d-romb or the CNY literally plagued the dollar explicitly

then there's implicitly pegged to the dollar like the euro and then there's currencies collapsing

against the dollar and like you know so what were we on you know after world war two during world war

one we're on the dollar standard after world war one the dollar standard treaty of juneau

of the dollar standard Bretton Woods dollar standard that is like we're like oh we just discovered

the dollar standard 1971 we've been on the dollar standard since we financed world war one for the

Brits right and we took over the world financial system since then you want to stay on the dollar

standard you really need to release ten trillion dollars of digital currency and then you'll be on

the dollar standard but what i just described basically replaces every currency in the world

with dollar which the US controls right and it siphons off hundreds of trillions of dollars of

20th century capital assets and half of the capital in the rest of the world and most 75% of

the capital of our enemies gets siphoned into bitcoin and the big beneficiary is the US government

and after that every US company because we're the ones that own and run it yeah and so what i'm

describing there you can do for free snap your fingers all you got to do is make the observation

the goal failed as a as a money and a monetary network in the 16th century for the Spanish like

you're not going to save it yeah and given the fact it's failed let's just eliminate the fiction

demonetize it go to digital gold sell the past on the future easy i love it very it is i love

you describe as evil genius almost a couple questions michael have you thought about either your

uh either qualify custodians or in general if microstrategy would perform a cryptographic proof

of reserves is there interest in that um because in addition to being the world's best settlement

network and best asset it's also the most transparent asset right yeah well we're we're continually

auditing our custodians and we're continually auditing our reserves and there's an auditor there's an

auditor backing up the auditor there's a finance team backing that up and there's another process

backing that up uh the question of what we disclose is is a more complicated situation because

you know there there there are certain practices for a regulated entity and the united states like

like for example right jp morgan's not going to disclose to you where they keep the computers that

run your bank accounts in order to create transparency and so there are certain disclosures that

would actually be viewed as more risky for a public regulated company and there are other disclosures

where where the people that we work with wouldn't be allowed to make them either so that's that's

a balance i what i would say is that that entire uh best practice is evolving pretty rapidly at

this point because there's so many eyes on it and there's a lot of people thinking hard about it

and i think it'll continue to improve interesting um talk about bitcoin development a little bit

we had a conversation on the sidelines of the micro strategy conference in in las vegas about this

there is some momentum building for an upgrade to bitcoin i think one of the least controversial

and more widely accepted one is this upcheck template verify gives you some better um

incumbrance tools so you could do like bolts and like other types of custody do you have thoughts

on on that specifically or in general bitcoin upgrade sort of philosophy i'm very conservative on

development i think we i think we should go forward very carefully very very carefully with consensus

and think hard um i i feel a lot i think i won't go on the record i think the biggest threat to bitcoin

is overfunded enthusiastic developers that want to do something cool that want to make it better

and i actually think if you look at the history of every empire and the fall of every empire

everyone rom bris they always reach a peak and they collapse from within because a bunch of

overfunded lawyers write laws to make things better right and i think in this particular case the

developers are the lawyers and the code they're writing are the laws and they kind of look at it

and they're like well i learned how to write code and i want to be meaningful i want to make my

fame i want to be famous i want to earn my fortune i want to make you know you could be cynical

right and say look they're lobbyist that want to you know it's like when a guy shows up in dc and says

i have a new idea to protect a snail daughter of fish and improve the environment and it cost

everybody a million dollars right they're like well it seems like they're very self-interested

that's the cynical view the the you know what is it the more graceful or the more charitable

the more charitable view is they learned how to write code they want to help and make a contribution

right and the world's full of you know 20 something 30 something males with a lot of energy that

want to make a contribution right we we get a lot of our you know one out of a out of a thousand

ideas is a good idea and 99.9 percent of the ideas fail and i don't i don't think there's that much

risk what i would say is if you have all these good ideas launch a company risk your own capital

and you know risk your own credibility there's a 99 percent chance you'll fail and there's a point

one percent chance you'll be an instagram or a meta or a google and you'll succeed and then there's

a hundred percent chance the when you succeed in the aftermath people will criticize you right i mean

think about the great successes oh yeah think about think about what people think about microsoft

facebook instagram apple after they've succeeded right there's always an unintended google youtube

there's an unintended consequence that comes from that great success and 99.99

nine percent of the people that tried to do that they all failed so my view on this is

it works don't break it and i can give you a hundred examples of how all these all these ideas

go awfully horribly wrong right and and i think the burden of proof ought to be on the person

if if someone comes into your life and proposes that they want to forcibly inject your kids with

a hundred vaccines to make them better i mean i think the burden of proof ought to be on the person

that wants to give you the hundred vaccines and each one of these ideas including all the covenants

they're all they're all vaccinations you know or upgrades boosters to make us better just in case

in order to deal with something and i and i got to tell you man the global warming thing you know a

lot a lot of damage has been done in favor of grand ambitions to make the world a better place

so i i think it's inconsistent with the community to basically idealistically

charge forward jamming upgrades because it might make things better in the future

i really think that's an ethereum thing i think if you look at the ethereum road map it's like

never saw a good idea dank sharding yeah you know something i never saw a good idea i didn't want to

get into the protocol and i have ten years of good ideas and i think i think that's kind of like

forcible mutation that leads to monstrosity right and and so i think with bitcoin we should be very

careful i'm very thoughtful and it's not that i can't be convinced sure that there's that there's

something we need to do but but i'm on the opinion that we should do things we need to do and i

would say also there's a political schism here which is which is you everybody shows up at the

capital and they want to force their politics it's like my view is that all human beings should

potentially starve in order to make sure that we don't chop down a tree and you know

like there are people that will basically people who believe that

well look if you look at every war right i mean napoli and drafted every 18 year old in france

15 years in a row and murdered a third of them because he thought it was very important to spread

the code of napoli and but it turned out to be not that important to them right so the

world's full of people that have an agenda right and maybe your agenda is you you know you want

bitcoin to work but you don't want banks to use it you don't want the government to use it you

don't want corporations to use it so so if your agenda is is true crypto anarchist then you're

going to want to drive a certain set of developments into the protocol but that actually

may result in the failure of your agenda and the thing that's going to hundreds of trillions right

right clearly right now my my view is bitcoin without anybody's help is going to make it to hundreds

of trillions of dollars right and provide the economic capital framework for the world without

anybody's help so you're you know all you can do is break it at this point right now so every

every proposal by by every actor ought to be viewed with a with a lens of you know is this

essential and I don't see anything essential right now right show me that it's essential

to avoid the failure of the network right yeah I think I mean that's a reasonable and conservative

approach I think I think pursuing functionality for the sake of functionality and all these domains

on the leash it opens up a Pandora's box on intended consequences which could which which likely

will perniciously backfire to the detriment of everybody uh Michael you were once a skeptic of bitcoin

and we just were about to wrap in a moment but you were once a skeptic of bitcoin um you've

obviously come around completely you're now the best performing stock of the year uh

micro strategy is the largest holder individual entity holder of bitcoin in the world um

what would you say to the perpetual no-coiners who can't reckon with this the people like the

Peter Schiff soup and bearish on bitcoin for the entire time or people that called it a tulip bubble

five times in a row since 2013 do they have bitcoin derangement syndrome I would just ignore them

you know again Harvey Harvey determined that your heart beats you know and it beats blood out

through the arteries and it comes back via the vein and when he discovered the circulatory system

and that was a big breakthrough because for thousands of years people didn't know what the heart

did and they didn't believe that and when he rolled it out the medical establishment everybody rejected

it all the doctors rejected it even though they could run a simple experiment to determine it

and he said um no physician no doctor over the age of 40 will ever believe me

okay so there's just no point uh Max Planck said uh science advances one funeral at a time

and so I really think you've got you've got three constituencies uh you've got the

the old guard that is successful traditional set in their ways and they don't need a new idea

they don't want to hear it they created their reputation and staked it based on an old idea they

will take it to their grave you're wasting your time there's no point you just should ignore them

you've got the new generation the 20 something the 30 somethings the guy wants to get rich he wants to

get famous he's got nothing he can't afford a house he wants a yacht he wants respect okay everything

again nothing to lose right those are the people that pick up guitars and become led Zeppelin

or the Beatles right I mean it's always the young generation using the new technology to make their

way in the world that's uh that's the beauty of life and and that's not hard you don't have to

work that hard to convince them and then you've got the the the middle people that are reasonably open

minded over time initially they'll be dismissive and then they'll be less dismissive and then

they'll start to notice and maybe their daughter or their son will tell them or maybe they'll run

into a crisis a near death experience like I did and they'll have to find a new idea

or maybe they'll be persuaded by someone they respect and then they will gradually study it and

they will flip right and and I think you're better off to to focus your time on that middle group

those who don't haven't really made up their mind or they have reasonable open minds and maybe they

have a motive like they they have a like how am I going to 10x my value right the the best run

companies in the world that that everybody loves they probably won't switch first because they

have more to lose than they have to gain right it's the zombie companies that are forsaken by the

market that no one cares about that are competing against Microsoft and against Apple or against Google

that are kind of in a hopeless situation but not dead yet you're not dead yet I have a solution

for you right and I think that's that's the ones that you focus on I think it makes a lot of sense

Michael sailor founder and chairman of micro strategy thank you so much for coming on galaxy brains

thanks for having me that's it for this week's episode of galaxy brains thank you to our guest Michael

sailor chairman and founder of micro strategy bimnet will be back next week and we will also see you

next week so have a safe and happy weekend

thanks for listening to galaxy brains the weekly podcast from galaxy research if you enjoy the show

please like rate review and subscribe wherever you get your podcasts to follow galaxy research

sign up for our weekly newsletter at gdr. email read our content at galaxy.com slash research

and follow us on twitter at glxy research see you next week