"Bitcoin To $1,000,000!" Michael Saylor on The Future of Cryptocurrency, Money, and Freedom

you have 100 billionaires in a room one

middle class dude with a $300 gun walks

in who's the most powerful person in the

room the number that matters if you want

to either get wealthy or stay wealthy is

the rate of expansion of the currency

Supply and so if you're not actually

investing growing your cash flow growing

your assets you're getting poorer

Bitcoin is the system so diffuse that no

one entity or person is systemically

important or influential and everybody

shares this common an economic protocol

in a fair Equitable transparent

Unstoppable immutable fashion it's

famous that you've lost $6 billion in

one day what were your thoughts like

during this

[Music]

day Michael sailor thank you so much for

coming on the iced coffee hour this is

an absolute honor we really appreciate

it Jack gr thanks for having me your

house by the way is gorgeous thank you

so we've seen plenty of your podcasts

we've been absolutely just binging all

of these different shows you've been on

the Lex fredman one got like 10 million

views why do you think people care so

much about what you have to say there's

like 450 million people in the world

that have crypto some kind of crypto

asset Bitcoin is spreading virally

there's hundreds of millions of people

that own Bitcoin this is an idea whose

time has come and it's a and it's a

fundamental idea it is we have developed

a technology that empowers humanity and

empowers the indiv ual it provides

property rights to 8 billion people it

provides Freedom economic sovereignty

and the promise of sovereignty and

dignity of the individual to 8 billion

people and we do it with cryptography

semiconductors and the internet so it

punches all the buttons right it's about

technology it's about Freedom it's about

empowerment and it's about money and

those are all interesting topics for

people why should people listen to what

you have to say I think that everybody

ought to ought to do the own research

and listen to a lot of different points

of view so I'm certainly not the only

voice my particular uh voice is is that

with the background of an engineer I

went to MIT and I studied Aeronautical

Engineering and spaceship design so I

have a

engineering background um I have a long

enthusiastic history as a tech investor

as an early investor in Amazon and Apple

and Google and Facebook um I wrote a

book about the impact of Technology

especially mobile technology on

civilization and on the economy that's

based upon my studies at MIT I studied

science technology and society and the

history of science is another one of my

degrees and then when I saw the Advent

of the mobile phone it became clear to

me that that mobile phones were going to

dematerialize cameras and tape recording

and entertainment and relationships and

money and commerce and Retail

storefronts and news newspapers and

books and when I thought about the

dematerialization of all that I thought

the world's going to change there are

going to be these trillion doll

companies like like there are today

apple and Amazon Google Microsoft I

thought um that's going to make it

difference I wrote that book back in

2010 published it in 2012 I rode that

mobile W for about a decade and um I did

that while I was running a company I

created I created a company when I was

24 called micro strategy in 1998 we came

public and micro strategy is is uh mstr

it's still in business and I was the CEO

for 30 something years now I'm the

executive chairman so I spent a career

running a public company our company

sells enterprise software to Banks and

governments and Airlines and large

corporations and most of the retailers

in the world so so before I discovered

Bitcoin I had an engineering background

a tech investor background I was a bit

of a academic in the in the history of

Science and I had a background in the

real world running a software company

that was

multinational and I had a background as

a public company CEO and and along the

way I picked up lots of bruises as a

tech entrepreneur I picked up uh lots of

wisdom learning what it's like to do

business everywhere in the world and

Along Comes 2020 and the pandemic crisis

and and and there there's covid and

there were lockdowns and then the

interest rates went to zero and there

was Financial hysteria and and the world

was uh turned upside down and split in

half you know all of our office cultures

they all got thrown out the window and

we all went to remote work and we did it

like overnight um all our prejudices and

biases well we think we should do it

this way they got thrown out the window

and maybe we have to do it a different

way all of our thoughts about uh money

and banking it's like okay here's your

money in the bank could earn 0% interest

well what am I'm going to and by the way

we're inflating the currency and

eventually everything's going to cost

twice as much houses are going to go up

in price and yet your money is going to

earn zero that causes people to open

their mind to new ideas so in my case I

uh approached this existential risk in

2020 running a publicly traded company

and we happen to have two things we had

about 500 million in cash earning 0%

interest and we had a $500 million

software business generating about 75

million in cash flow and our stock was a

bit more than a billion dollars in value

so the marketplace put 1X multiple on

our business and 1X multiple on the cash

and I looked at it my first concern was

will the company survive the crisis you

know in in March April May of 2020 we

were all worried about you know our

lives our family our businesses our

business model and once I realized that

wasn't going away my second my second

thought was how is it possible that

every Main Street business is having the

worst year of their life every

restaurant every bar every gym every

yoga Salon everyone you know that shows

up to work not only are they not working

they're not allowed to work and if you

open up your gym you know people getting

arrested for opening up a gym to get

healthy so on one side you have this

crisis half the people in the world or

half the businesses are having the worst

year of their life and then in the

summer of 2020 all the Wall Street firms

had the best year of their life all the

stocks doubled all the real estate

assets went through the roof When we

dropped the interest rate to zero real

estate property values double you know

all of a sudden you know all the big

tech companies are shooting through the

sky and S&P shooting through the sky and

I just saw this Paradox how is it

possible that one part of society thinks

everything's great

and another part of society thinks this

is the most awful thing so we were

worried a little bit about that but

really we thought you know $500 million

is going to be worth $500 million in

four years except that you're going to

need a billion dollars to buy the same

amount of stuff as you could buy with

$500 million today so we're destroying

shareholder value to sit in our position

the market doesn't care about us and we

and on the other hand we don't own

anything that's benefiting from all this

inflation and from these low interest

rates so we started looking around and

and you know in that year my mind opened

and I embrace a lot of new ideas I

embrac the idea of podcasting I'd never

done any podcasts until 2020 I embrac

the idea of Zoom I would have fired you

in February if you wanted to do remote

work but in by the end of March it was

mandatory you know so yeah it's like 10

years or 20 years of of innovation or

Evolution you know all coming in a week

or two weeks then I thought well what am

I going to do with this money I either

got to give it back to the

shareholders you know and

decapitalize and if I decapitalize I

thought that's a fast death right our

company was looking at a fast death a

slow death

or uh do something new and uh I wasn't

interested in the fast death uh the slow

death didn't have a lot of appeal just

just uh get chipped away at by big tech

companies and so it's kind of a

desperate moment a Moment of Truth where

you have to make a decision and take a

risk and so we looked around and we and

we said well what is what do we need

right now well we need a hard

asset that uh is scarce that um that

people all want in the world and we need

to get on top of the next big Tech Trend

you know like is it is it uh digital

relationships is it digital books is it

digital photographs well it's too late

to jump on top of Apple Amazon Google

and Facebook you had to hit them and

invest in them in

2010 2012 I said what's the next big

thing and I thought what about Facebook

for money what if someone actually

invented a bank for that that a billion

people or in this case 8 billion people

needed that ran on the internet that

actually had an asset which no

government could debase which every

wealthy investor wants which you could

move with the speed of light that you

could program into an iPhone what is

this digital gold digital Capital

digital property what if the next wave

is the digital

transformation of money of property of

energy of all these ideas they weren't

transformed in the first internet wave

and I looked around I thought well that

feels like crypto gold to me and so what

if I could create something that was

better than gold it had none of the

defects of gold and and and it offered

the promise of sound money to 8 billion

people and then I could combine that

with a digital Network like Google like

Android or like iOS or like the

internet that struck me as being the

next big idea and so micro strategy

became uh the first public company to

buy Bitcoin and we bought 250 million

dollars of Bitcoin in August of 2020 and

no one had ever made such a large

commitment to this scary new crazy

crypto idea you worried about volatility

at the time that you could make that

investment and have it drop by 80 90% in

a year yeah I was worried about

volatility and and and the way that we

dealt with that was we had 500 million

in capital I wasn't worried that it

would drop and we would Panic sell it I

was worried that it would drop and our

shareholders would would uh have a big

issue with it and we might get suit yeah

and so the way we dealt with it was we

announced that we were going to do a

$250 million stock

buyback at a premium we call it Dutch

auction and we paired it with a $250

million Bitcoin purchase and we allowed

all of our shareholders to get out like

if you didn't if you didn't buy into the

Bitcoin strategy you could tender your

shares back to the company out at a

premium that rotated our shareholder

base and and and we didn't have neutral

or indifferent shareholders we had all

Pro Bitcoin

shareholders and that changed the

dynamic of the company it turned out

that uh that Dutch auction uh resulted

in only about $60 million of shares

being tendered so we had 175 million

left at the end of the Dutch auction

period 20 days later yeah and we bought

another 175 million of Bitcoin and then

we had 425 so at this point no one in

the world I think the largest public

company might have had one1 or2 million

dollar of Bitcoin before that and we

come over the top with 425 million and

we declared to the world that we thought

this was going to be our primary

treasury Reserve asset right this is the

way we're going to run our Treasury and

that was that was a a brand new idea

there's 43,000 public companies and we

were the first one to say let's not put

your capital in bonds or cash or just

give it away let's invest the capital in

this new liquid asset and this crypto

asset called Bitcoin when we did that

the stock doubled and we raised an

another uh $650 million MH and then the

stock went up again and we raised a

billion dollars and and we raised a

billion dollars about six months after

this initiative in a convertible debt

offering at 0% interest so we borrowed a

billion dollars at 0% interest for about

six years I think yeah and we went to

buy Bitcoin with it so that point you

know we had said not only do we think

we're going to invest our free cash in

Bitcoin we're going to go ahead and

we're going to borrow money to buy

Bitcoin and while we were doing it other

public companies like uh square and then

Tesla started buying Bitcoin and then

all these Bitcoin miners came public and

so from 2020 to

2024 that was the the crazy years of

uncertainty people weren't sure you know

will Bitcoin be banned will it be copied

will it be hacked um is it a long-term

thing the Skeptics thought well maybe

you know some people the deniers said

it's just tulip bulbs other people

Skeptics said oh yeah it's it's really

good it's better than gold but it's too

good to be true and so the government's

going to take it away from you and at

one point china banned Bitcoin mining

and that created a crisis and then they

banned Bitcoin trading and that created

a crisis so a lot of uncertainty there

but our belief was Bitcoin is the

solution to 8 billion people's problem

it's the solution to 300 million

companies problem it's it's the

Innovation the the biggest innovation in

money or property rights in the history

of the human race it's like fire or

electricity right it's this new monetary

protocol which is going to elevate

Humanity to new levels so so we became

obviously very big Advocates we raised

500 million in a senior debt issue to

buy more Bitcoin then we sold a billion

doll of equity to buy Bitcoin then we

sold another you know then we borrowed

money against Bitcoin to buy Bitcoin

then we issued more Equity to buy

Bitcoin if you fast forward through the

four years today as of today since we

started well we've invested $7.5 billion

in Bitcoin which is worth any given day

14 to 15 billion the market cap of the

company went from 1 billion to 30 the

Enterprise value of the company went

from 600 million to more more than 30 so

and the stock 10x so during that time

period the company's stock outperformed

just about every stock on the S&P index

it outperformed Nvidia and Tesla and

Amazon and Apple and Google and Facebook

it outperformed Bitcoin

itself and and and it's not very often

that you 10x a stock 20x a market cap

40x the Enterprise Value and 44 months

so we took a particular position which

is Bitcoin is is a good strategy it's

good for the world and we're not going

to be

shaken and uh while that was happening

obviously Bitcoin Bitcoin when we bought

it at at 11,800 it crashed down into the

9,000 so we took a m like a $40 million

hit in the first week or two weeks so it

was very stressful losing 40 million of

250 million right it's it's a it's a big

thing but we double down and then

Bitcoin rallied up and it eventually

rallied went through the alltime highs

and red to 66,000 then crashed down in

the 40s then rallied to the 66 again and

then this brutal crypto winner went from

66 all the way down to 16,000 brutal and

then it rallied up and so it is today

where it is you know and yeah

everybody's got their own Bitcoin

Journey but Micro strategy Bitcoin

journey is we started out of desperation

it was like do this or maybe just

shutter the company we went from you

know desperate offensive too

opportunistic hey you know someone wants

to give us $1.6 billion for nearly free

for six years if I offered you 1.6

billion for free for the next six years

to invest in anything you wanted would

you take it absolutely we asked Dave

Ramsey the exact same question he said

no he wouldn't take it like

like yeah yeah crazy um and you must not

believe in anything right I mean if

you're in business and someone's

offering you in essence free money to

invest in your business for the next six

years and you don't want it well what it

really means is you've run out of ideas

you don't know what to do with the

capital but um you know we went to we

went from the first step to

opportunistic and then it became

strategic and we realized this we are a

Bitcoin development company our job is

to issue Securities and to engage in uh

technology projects and advocacy and

education in order to spread uh you know

the the virtues of Bitcoin and and the

opportunities of Bitcoin to the world

how are you able to develop an ey to

spot Innovation like that before the

general public were you always like this

at growing up as a kid to be able to

spot Trends but before we get into that

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and back to the podcast how were you

able to develop an ey to spot Innovation

like that before the general public were

you always like this at growing up as a

kid to be able to spot Trends I was a

science fiction fanatic by the time I

was in third

grade like I think I think my parents

they they uh hacked me when I was in

first grade I had this comic book

addiction and they offered me a dime for

every every real book I read in some

reading competition and comic books cost

25 cents and I calculated if I read two

and a half books I could get a comic

book and so I read like 60 70 books in

the summer and I'd be like reading one a

day you know and uh I got into science

fiction I discovered all the great

authors Robert heinlin Isaac azimoff

Arthur C Clark got very interested in

that it led me to a bit of fantasy I you

know I'm the kind of guy who played uh

board games simulation games before we

had computers to simulate them on we had

to use you know dice you know and and

then I played Dungeons and Dragons and

that got me into fantasy and all of

that's about imagination and you know

one of the more famous books is have

space suit will travel by hind line and

and in the book you know the hero

discovers a spaceship a space suit fixes

it up it's broken barking at the sky a

spaceship lands he gets picked up he

gallivant across theit Universe saves

Humanity from the bugey monsters comes

back and uh and as his rewarded gets a

full tuition scholarship to MIT and I

guess is stuck in my mind you know that

if if if you're the you know the

upwardly Mobile Alpha Male you know Tech

forward thinker maybe you want to go to

MIT so I went to MIT to study spaceship

design and I was going to be an

astronaut and a spaceship designer and

that that brought me in touch with you

know some just extraordinary individuals

extra extraordinary professors

extraordinary students like every one of

my fraternity Brothers was like an eagle

scout right like like okay welcome like

everybody's a Valtor and everybody's an

eagle scout and they're all brilliant

and what they do for you know for fun

they design space equipment or they hack

the phone system or or or the like and

while I was there studying uh aerospace

engineering I stumbled on the history of

Science and the history of science is

all about you know how did we discover

Immunology how do we discover that the

Earth you know revolves around the Sun

you know like how do we how do we get

through the capern revolution what's the

significance of Optics why do we stop

bleeding people to death what's the

significance of nuclear power what's the

significance of Maxwell's equations or

Newtonian physics or relativity and you

know what Madam curri do for us and how

does the society react when you

introduce a new technology whether it's

a railroad or an internal combustion

engine or an airplane and and uh so if

you look at the history of the world

through a technology lens right then you

you start to see things differently so

when I came out of MIT you know I had

the science fiction background I had the

fantasy background I had the history of

I I always loved history in general but

then the history of science really

opened up my eyes to Paradigm shifts I

mean one of the most basic principles of

science is the Paradigm Shift everybody

Dr Harvey is the guy that discovered

that the heart beats blood out through

the arteries it circulates back through

the veins for 10,000 years no doctor

knew what the heart did and they didn't

actually accept circulation Harvey

discovers it and everybody in the

medical profession rejects it like no we

don't believe you now despite the fact

they could probably determine this with

some experiments but they don't believe

him and Harvey says no physician over

the age of 40 will ever believe me ever

right then I think Max plank had had a a

quote he goes you know science advances

one Death at a time and Thomas cun says

in the structure of scientific

revolutions when you come up with a new

paradigm shift whether it's you know the

capern revolution right the universe

doesn't revolve around the earth your

diseases aren't caused by spirits and

demons but rather by little germs and

you know in the blood or relativity that

Einstein put forward in the Paradigm

Shift of quantum physics which Einstein

rejected or you know Quantum uncertainty

cun says these Paradigm shifts take

place only after the old dies or in a

war there only two ways you get people

to turn the world upside down and see a

new idea they either they either have to

you have to see the Old Guard die we're

seeing this in crypto right now I mean I

go around and and I'll meet people and

they'll say yeah my son told me I needed

to talk to you it's like the 20s

somethings the 30-some the teenagers

they all know the 50s something 60s

something 70 somethings that they're

hearing about they're hearing it from

their kids so this is a generational

thing up and um I think you know so I

was fortunate because my advantage was I

kind of had the academic B grounding I

had the passion I was always very

interested in in how do we invent new

things with technology I grew up in a

coming of age where you know we started

there were three channels of broadcast

television and then a rapid succession

you got to where we are

today so um I obviously some people are

a little bit more uh what is the word uh

open-minded they've got more of a

inclination an INT intellectual

inclination to appreciate that than

others so I always had a bias toward it

and I just had some really good um

formative experiences and opportunities

in order to feed that inclination I'm

curious who were some of your biggest in

influences or like Inspirations when you

were younger that kind of like

I don't know maybe made you think the

way that you think and as you elevate

the financial ladder and you make this

crazy decision or controversial I should

say to put hundreds of millions of

dollars into Bitcoin to turn it into

billions of dollars now that you have

all of that money who do you look to now

for inspiration and how's that changed

you know the great science fiction

writers you know were Inspirations uh

you know hline in particular not only is

a good science fiction writer and he

tells good story but he's also

libertarian he's also a sound money

advocate so his his writings are laced

with with uh you know e conservative

economics

practical practical observations about

politics you know so so a and uh

inspirational stories of of improving

Humanity with technology I think that's

a very important fora of experience you

know Reagan Thatcher they were very very

successful

uh politicians in their day and they

both preached limited

government right uh power to the people

Ein Rand and and uh her her books Atlas

Shrug The Fountain Head very

inspirational science historians you

know and the you know the historians

Alvin Toffler you know the people are

Mega Trends Future Shock all those books

that were you know how is the world

going to going to turn upside down I

thought that was very in very

interesting inspirational and I think um

you know arthury Clark's got a phrase a

very famous statement I put it on the

back cover of my IPO perspectus in 1998

when the company came public that's how

important the phrase was and his phrase

was any sufficiently advanced technology

is

indistinguishable from Magic right and

that and that was the Mantra of the

great science fiction writers where it

blends with fantasy it's like what's

magic mirror well you know I look in the

mirror and I talk and then somebody

talks back well now you take uh you know

an iPad or you take an Apple computer

and you look at it and you zoom to

someone in Singapore and you talk and

they talk back and that's getting pretty

magical but then at the point where they

take your photo and they plug you into

an AI and they bring you to life and

they put you into the into cyberspace

and I'm talking to an AI That's talking

back to to me with your gestures am I

talking to a demon a witch a demod a

person you know what where did the

science stop where did the fantasy begin

and and uh that inspired me to start

micro strategy and our idea was

Intelligence everywhere's let's make

everybody super

intelligent like think about what some

of these AIS can do today you you can

basically ask the thing to scan the the

body entire body of human writing M you

know give me a Shakespearean Sonet you

know but and in the style of Eminem and

in 100 milliseconds or 500 milliseconds

it comes back you know what uh Jack did

that last night yeah we plugged uh we

said to chat GPT if we were to interview

Michael sailor what should our format be

and my gosh it gave us an outline that

we would have probably spent an hour

thinking of ourselves and it did it in I

would say probably more than an hour it

was pretty I mean we already had an

outline I'm just kind of curious what

chat GPT could provide and it was good

that did you pray to your patron saint

or your AI and your your demon or your

angel in cyberspace for the

answer you kind of did yeah right you

actually is I asked a hundred years ago

a thousand years ago ask God to guide

me and and fantasy novels God's God

becomes

Gods I ask the god of of of my podcast

to guide me and this is what they

said right and and so where does where

does fantasy where does science end I

think I think it is extraordinary

inspirational because it starts it opens

up your

mind right it's like what happens if I

dematerialize every book that's uh

that's ever been written and I can put

it an iPad okay well I just gave a 100

million books to 8 billion people for a

nickel okay well that's interesting that

that's not linear thinking that but

that's like second second order thinking

third order thinking is okay let's just

dematerialize every book and then let's

read every book and let's give you you

know the equivalent of a professor

that's read every book and you can ask

the professor anything you know and the

first order is hey do I can you just

give me enough money to print a bunch of

books and give you a big library but you

know printing the books is fish

expensive for the

civilization giving you know making you

read them is double

fishlyn you just read every book look

over my shoulder think about what I

ought to do and just do it

yeah you're placing a lot of trust

though in the AI do you worry about that

and and people not having the

self-sufficiency to be able to maybe see

through some of that that might not

apply to them or or or rely too heavily

oh yeah well look we're all going to

worry about a lot of stuff right when

you get on an airplane you get in a tube

and you fly 6,000 miles and you know the

window blows open you'll freeze your

death or you'll suffocate you know

before anybody can do anything about it

but meanwhile on on probably don't think

about it you want me to make you worry

cuz I'm an aeronautical engineer on

approach right if the pilot takes his

eye off you know off the approach for

and gets unstable for two seconds the

plane may go into a stale SP Tail Spin

you're going to crash and burn and

there's not a single thing you can do

about it and does it ever occur to you

to worry about what the pilot drank the

night before he got into the plan see

what I what I'm concerned about is if

you have a mentally unstable pilot that

wants to like you know do a lot of of

harm to a lot of people that's what I'm

concerned about but we can speculate all

we want Graham and I are horrified of

flying as it is like I look over at him

fine for a while but like yeah I was I

was fine up until let me f with you a

bit more which is okay are we going to

worry about AI Bots driving your car and

are you worried about someone taking

over the car and you know and crashing

the AI driven car or next time you go

into New York City or wherever you go

and you call an Uber does it occurred to

you that no matter how well you eat how

well you drink how well you live your

life how careful you are how good a

shape you're

in that the random person that picked

you up in the Uber in two seconds can

drive you off the bridge and kill you

with no chance to appeal right your life

is basically in the hands of a random

driver every time you get in a taxi cab

and you ought to be a lot more afraid of

that than getting on the airplane

because least with the airplane there's

two pilots and they and by the way it's

it's against professional rules and he

will get fired or or she will get fired

if they drink or and there's another

person to look at them and assess

whether they're sober when they walk on

the airplane and if they lose it or

sneeze or or have a seizure there's

another person to land the plane now I'm

going to put you back in the random Uber

in a foreign country that's swerving in

traffic and okay if you think oh I'm too

smart because uh I own

you know I breathalyze tests and I

personality test the Uber driver when I

get in the car maybe you think that has

it occurred to you that the guy on the

other side of you know of the median

strip can just take a drug drink a thing

and do

this but I think about that from time to

time as I'm driving because you hear

just random stories of exactly that of

just a car that just made the wrong turn

and just hit somebody who was in their

Lane doing exactly as they should

driving the speed 's a point to all this

yeah which is people used to die falling

off their horse a lot you just don't

read about it because we didn't take

good records and if you roll the clock

back to 1950 without technology the

average life expectancy was 50 if you

roll the clock back to 1770 the average

life expectancy was 32 people actually

walked past the swamp got bit by

mosquito and died of of malaria or some

fever or they just they lived in a house

that didn't have heat

and they died of pneumonia and people

are dying of all sorts of things before

we had technology now we live in the 20

you know the early 21st century and

there's a million things for you to

worry about but if comp if we unleash Ai

and the and the robots drive the cars

and they fly the airplanes it's more

likely than not the case that the

average number of traffic deaths fall in

this in the same way that in the modern

era of antibi biotics and hospitals and

Modern Dentistry you live in extra 30

years even though you're taking some

kind of risk when you do it yeah we can

worry about it all there'll be a debate

there's going to be politicians that'll

say you're safer in a car driven by a

person than in a car driven by a

computer that probably won't be the case

but people will believe it's the case

and and that's above our pay grade right

it's going to be determined you know

regardless of what you think about it

with High likelihood H but before we get

into that something you guys may not

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this episode and back to the podcast you

mentioned on Lex fredman that if you

look at civilization half of the

problems are due to the fact that our

understanding of money and economics is

defective what do you mean by that and

what is the common and incorrect

perspective versus The Uncommon and

correct perspective the common

perspective is to think that money is

the currency that the government gives

you and uh uh that the policies of the

economic policies of the government are

for the good are for your own good and

you'll benefit by complying with them or

accepting them and that most Eon most

conventional economic

principles uh and conventional economic

education is useful or that conventional

economic figures are valid

economics as we enter the 21st century

really is a pseudo cyle science and and

I would argue that before Bitcoin all

economics was an art it was somewhere

between art pseudo science and religion

and

philosophy uh and and political science

and it wasn't uh a scientific discipline

or an engineering discipline I'm not

even sure the economist would disagree

over that by the way so we lived in a

world where human race never had

perfected money we never engineered

money and that and in the absence of

perfected money you can't have economics

as an engineering discipline and that

means that all of the political policies

and political economic wisdom generally

is is subject to debate and there is no

right and wrong so people capriciously

do what they want to do and they

generate facts and metrics to support

whatever they want to do it's kind of a

religious again religious pseudo science

uh and and it's not

rigorous engineering is not anchored in

mathematics scientific discipline and

you can't characterize it as an

engineering discipline now let me go

back to the question of what is

money fundamentally people think

currency is money but but really the

academic definition of what is money is

is a medium exchange a unitive account a

store of value what is it really well

money is just you know the most tradable

good the most uh the most durable

tradable element or unit of something

that we can trade for something else of

value so in the history of the world you

know you go back 10,000 years people

might have traded sea shells or they

traded Stone coins or polished glass

beads or they or they might have traded

arrow heads what is the universal

commodity that we know people will

accept and we use it to to create a

market economy to solve the problem of

Coincidence of once right everybody

produces something different and you

need to and if if you have stone axes

and I have food and you know I want you

know I want the stone Axe and you want

the food we trade for some ratio but if

everybody doesn't have exactly what

everybody else needs that barter economy

breaks down it gets too complicated

so we know that have been sophisticated

economies for a million years you can

you can find Stone axe factories that go

back a million years the issue really is

how do you make those economies work um

through a process of trial and error

people eventually arrived at at uh

Metals copper coins silver coins then

gold coins and and they they worked with

some kind of metallic unit of account

and type of money but even in modern era

you know you could see people use bales

of tobacco as money in in the colonies

before the Revolutionary War in prisons

people use cigarettes as money and PS

use cigarettes as money what's the

problem the problem in is in the modern

era we use fiat currency as money for

the most part and is it a medium

exchange sure it is is it a unit of

account sometimes is the store of value

it's a store of value with a halflife

of some amount so what's the half life

of the money how long does it take for

the money to lose half its economic

energy well that's what we'll call the

inflation rate uh but the problem is the

actual monetary inflation rate isn't

reported nobody tracks it so if you

actually have um a million dollars of

capital and you invest it in the dollar

and you hold it there for a 100 years

the dollar supply increases 7% a year on

average over 100 years which means that

your Capital loses half its value every

10 years and over the course of a 100

years you're cut in half 10 times which

means that you start with a million

dollars and you end up losing

99.9% of the million dollars it gets

worse if it's in a weak currency like

the peso in that case you'd lose 99.9%

of your

capital in 20 years so what is capital e

economic energy purchasing power most

the time when people think about money

they think about currency but currency

is an awful way to store your economic

energy so so you can't really hold money

very long and then when they think about

the inflation rate they always focus

upon the CPI Consumer Price Index that's

just um it's just a manufactured

synthetic metric and what is it uh you

know the The Establishment would have

you believe that CPI is the rate at

which

consumer prices increase and that's what

you ought to be concerned about neither

of those statements are necessarily true

those are those premises are wrong it's

not the rate at which uh consumer prices

go up and it's not the it's not the rate

you should be concerned about it's

simply the rate at which a arbitrary

basket of goods defined by an economist

goes up in price in a certain place so

if I Define a basket of Goods in

Kansas and uh I track the price of them

then I've got a CPI for people that live

in Kansas that live solely on that

basket of goods but even that's not

quite true because once I Define that

methodology there's something called

honic adjustments which means every year

or every few years or every 10 years I

can just arbitrarily take things out of

the basket you know a late one Economist

took coffee out of a basket but but for

example if I Define a market basket of

goods and that includes one concert

every two months for the average person

and concerts go from

$10 to $500 I could just take the

concert out of the basket and I could

say well you know in the modern era

people can watch Taylor Swift on Netflix

and that's free so instead of giving you

Six concerts a year that cost $33,000 a

year that looks like inflation I mean

how's the average person spend $3,000 a

year on it'd be more than that after you

add the merch and whatever okay $5,000 a

year on concerts it used to cost a 100

now it costs 5,000 that's inflation but

if I just rotate that into Netflix

Taylor Swift concert not only do I not

notice that that everything went up to

$5,000 a year I actually announc

gleefully that cost went down to you

know to go to concerts now so

conventional wisdom is people accept uh

the conventional definition of money

they they they accept a certain asset as

money that's not really money and then

they accept uh you know conventional

definitions of inflation as being

relevant and proper which is neither and

then that causes them to make a whole

host of mistakes like I'm going to give

you 4% interest in your bank account the

CPI is only two our Target is 2% if

you're getting 4% then you're staying

ahead of inflation well what if the real

monetary expansion rate is 12% and I'm

giving you 4% or 3% after tax well

you're actually losing 9% of your wealth

every year that you actually have your

money in the bank and uh I think it's

just really important for people to

understand what's the true uh the true

rate inflation rate or what does

inflation even mean um what the number

that matters if you want to either get

wealthy or stay wealthy or live a decent

life is uh the rate of expansion of the

currenty

Supply and if the currency Supply in US

dollars is expanding at say 10% a year

then that means you can expect every

scarce desirable asset that any anybody

with money in America or anybody with

money with dollars in the world is going

to want to buy it's going to go up at a

rate of 10% a year or more and so if

you're not actually

investing growing your cash flow growing

your assets via that number you're

getting poorer right you're not getting

wealthier and and once you actually uh

do that and you do an analysis of asset

classes and investing what really pops

out which is fascinating is is the S&P

index uh is simply tracking the currency

supply of US dollars for the past

hundred years as when you invest in a

diversified portfolio of stocks you're

not making money all you're doing is

preserving the capital that you had