← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
Phong Le: Inside Strategy's 2026 Roadmap, USD Reserve, MSCI Inclusion and STRC's 10.75% for Everyday Savers
01:07:05
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- [00:00]
Fong Li
Everybody, no matter how rich or poor or whether you're Democrat or Republican, should have a good return for the money that they save. Good is not zero percent. Good is not the rate of inflation. Good is above the rate of inflation. So if it's 10 and 3/4 percent, so be it. Right? Like everybody should have access to that.
- [00:25]
Natalie
Hey everyone, welcome back to the show. Thanks for joining us here. Here with me this week is Fong Li. He is the CEO of Strategy. Fong, thanks so much for having me at your headquarters. Great to see you.
- [00:35]
Fong Li
Thanks for coming and visiting us here.
- [00:36]
Natalie
I feel like we have a lot to talk about, so let's start with some topical things. Market sentiment has been a little bit bearish lately, but I can't think of a company or a group of people more bullish than the folks at Strategy. So talk to me about your reaction to really the negativity that we've seen surrounding bitcoin and the lackluster price action.
- [00:58]
Fong Li
Bitcoin, as a call it 50 Vol 50 ARR asset gets a lot of attention. When it goes up, it seems like the world is beautiful, everybody's happy. And when bitcoin goes down, even if it's 10% and stays at a certain level, the bottom is falling out. It's the beginning of the next four year cycle bitcoin winter. So I'll start with it's very much sentiment driven as a long term investor, as someone who's buying and holding bitcoin ideally for eternity, you have to have a long time horizon. And as I've told others, the fundamentals of the market this year for bitcoin couldn't be better. And so I try not to think too much in the short term. In fact, what you really want to do, when you think about what to do with bitcoin in the short term, you should be fairly methodical and mathematical about it, which is why we focus on things like mnav, why we built out the bit bitcoin treasury while we built out the US Dollar treasury. And in the long term you think about the fundamentals of bitcoin and as you know, they really couldn't be better. We're sitting here 10 miles from Washington D.C. and Washington D.C. is fully supportive of bitcoin like it's never been before. Mike and I have been traveling to visit many, many different traditional finance banks. He was in the Middle East, I was all across the US we were together in New York City. And traditional finance now is trying to figure out how do they catch up and keep their assets on platform, which means giving people that access to Bitcoin on platform. And so if you think about what's happening with traditional powers of the world, the US government, the US banking system, they are all getting on board with Bitcoin and that's extremely bullish for this year and 2026. Why the price action does what it does, it's sometimes hard to explain, but when you're an investor, you think about the long term of the asset class.
- [02:55]
Natalie
You and Michael Saylor have been visiting these big banks, right? We keep seeing these tweets, guess the bank. Some of them we can guess pretty easily. What exactly are you doing there? What are the conversations like? And does it have anything to do with what Michael recently said on stage in the Middle east, which is about digital money?
- [03:12]
Fong Li
Yeah, there are multiple, if you start with, they're all trying to catch up with just the base of custody Bitcoin and providing exchange services for Bitcoin. They've seen for an example, Coinbase or Fidelity and what they're doing and they want to be able to offer their customers native services with Bitcoin so they don't take the money off platform out to somewhere else. So I'll just start that as a baseline, I'll call it a checkings account and a savings account for Bitcoin. Then on top of that, what do they want to do then? They want to offer things like Bitcoin lending, which means you get loans against Bitcoin. And we know a lot of folks are doing that on a one to one private loan basis, but they should provide it in general, perhaps offering instruments that give you yield off of Bitcoin. That would be the next sort of step above that. And then a set of Bitcoin backed products not too much different than what we do. An investment bank would want to be able to underwrite Bitcoin backed securities like MSTR or like any of our preferreds. That would be a next step. And then you get into offering digital credit, right, which would be our preferreds or a bank preferred based off of Bitcoin. And then the last thing, which is what Mike talked about at Bitcoin Mina in the Middle east, which is digital money. How do you give somebody essentially access to something that looks like money backed by Bitcoin that gives them a steady yield that's better than what they would get otherwise called 8, 9%, so the entire stack of services. And then you get into things like tokenization and stablecoins and you move on and on. I think the largest banks in the world and the largest banks in the US Are going to offer that entire stack of services in the next two to three years.
- [05:02]
CoinStories Host/Announcer
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- [06:37]
Natalie
So what are these conversations like? I mean are they positive? Are they saying yeah, we're very interested or are you more teaching them about Bitcoin and why they should be doing this?
- [06:46]
Fong Li
It varies depending on the bank, right? Like what I'll say is three years ago you would find the one person in the bank who has been designated as the head of digital assets given no power but they want to say that have somebody so when you come in you can speak to them and they have access to nobody else to this year you get in a room of 15 people, five of them are positive, 10 of them are very skeptical. You have a risk person in the room to more recently they're building out products and what do they want? We're the largest corporate holder of bitcoin in the world. They like us as a customer, but they'd also like to know what are we looking for in the experience. Again, that varies based on the bank. Some of the banks are extremely early in the exploratory phase and some are very far along and progressed. The other thing I would say is going from the one person who is designated as a digital assets person to talking to the most senior people in the banks, they all realize that this isn't going away, that bitcoin is for everyone and people are asking for access to the asset class and they're either gonna get it from their or they're going to get it elsewhere.
- [07:59]
Natalie
But it sounds like you're almost teaching them how to compete with you. Is that what you're doing? I mean, what if they were to issue bitcoin backed instruments like the preferreds that we saw in the market this year? Or are you okay with that?
- [08:12]
Fong Li
Yeah, I'm not too worried about the competition from the banks, just like I'm not worried about competition from digital asset treasury companies. We're at a phase in the life cycle of bitcoin where access to the underlying asset is the most important thing. And if somebody who's making $40,000 a year that has a Chase bank account that lives in Minneapolis or somewhere wants to be able to access bitcoin and the only way they would consider doing it is through their Chase account and being able to transfer money from a checking account to bitcoin, they're not the ones who are likely going to this month go and buy mstr, go and buy Stretch. And if we find a way for ordinary citizens in America and around the world to onboard to bitcoin, frankly one is great for bitcoin, but I think it's great for the country and it's great for the individuals and it solves some of the issues we're seeing today. The income gap that we have, the lack of hope that you've talked about. And so it seems like it would be very small minded if I was like, well I don't want to help the person making $40,000 a year with a JP Morgan Chase account living in Minneapolis because I'm worried about my own product. That's the great thing, as you know about bitcoin is team. Bitcoin is team everybody. It's not winners and losers. Everybody can win. And so I don't think It's a tradfi versus defi debate. We sit at the intersection of the two. That's what we've done successfully. I think the more the traditional finance System, which runs 99% of the money in the U.S. the more they open up to Bitcoin, the more individual citizens will have access to Bitcoin and the better it is for the country.
- [10:04]
Natalie
You brought up a really interesting point. That person that has their traditional bank account, they're making their regular income. The paycheck comes in as a direct deposit. The idea of a 10% or higher yielding savings account is very attractive. But I've heard the feedback. Sometimes people just don't know how do I do that? Because their bank's not offering it. Can you kind of break down a what stretches who you're trying to reach? And how do people actually invest in it? How do they get a 10% yielding account?
- [10:32]
Fong Li
Yeah, and it's 10 3/4% now, paid monthly in cash. I'll start with what is stretch. All right. Stretches the fourth of the five preferred securities that we've offered this year. But in plain layman's language, it's a security. It's an equity that you can buy in the NASDAQ four letter ticker strc. And when you buy it, our objective, it is designed to be price stable. So unlike most securities you buy where the price is quite volatile. Right. If it's mstr, it can be extremely volatile. If it's Tesla, it's pretty volatile. Or Nvidia, even if it's AT and T or whatever T, it's still a pretty volatile stock. The price goes. We've designed a security to be price stable and the volatility right now is 5%. We want to take it down to 1%. So first, the idea of a security with a stable price is quite unique. It's a major innovation in the capital markets. If you're able to take a security and make it price stable, take the volume down to zero and we're able to pay 10 and 3/4%. The Sharpe ratio, the risk adjusted return goes first to infinity because the volatility is the denominator. And if the volatility gets to zero, then the Sharpe ratio goes to infinity, which is sort of a cool concept. Right. It's a risk adjusted return. So we pay 10 and 3/4% that we can vary. What you end up getting if you buy strc, right, is something that's designed to be to take volatility to zero and you get paid monthly into whatever brokerage account you get. So if you have a Schwab account or if you have an E Trade account or you have a Robinhood account, what you do is if you buy that at $100, then basically over the course of the year you get $10.75 paid back into your account. Monthly tax deferred. That's what it is. So think about, there are other preferred securities out there, but think about a dividend. Think about a dividend on a stock. You get a stock that pays a dividend, it might be quarterly, it might be annual, but the issue with that dividend is the stock price goes like this and the dividend can be flat. But really if you want something where you put short term money somewhere, you want the dividend to be to go a little bit change and you want the price to be flat. It looks a lot like a money market. It's not a money market, but it looks a lot like that because you can put short term money into it and get a yield that is 2 to 3 to 4% x better than what you would get otherwise. And let's go back for a minute to that person in Minnesota. Is that where the person lived? Minnesota, who is making $40,000 a year, has 1,000, $10,000 if they're lucky, in a JP Morgan Chase checking account, they're not getting 3.5%, they're getting zero. And so when you get zero and inflation is 3, 4%, if I'm getting paid nothing, you know what you do? You spend the money right away. Because the longer you take to spend the money, the less the purchasing power. Exactly. If you get 4% and inflation is 2.5%, you might still spend the money right away. If you get 10 and 3/4 percent, you are more likely to save money. And it drives people in any income bracket, but especially in a low income bracket to think, hey, now I have a place to put my money where it will return something greater than inflation, therefore I'm going to start saving money.
- [14:07]
Natalie
You bring up such a great point. I mean, it's true. People are making their income. It's sitting there in a checking or savings account earning nothing. If you have it in a money market, it's like 3.5% or so. And there's what, $8 trillion I think right now sitting on the sidelines in money market accounts. How do you get them from that to stretch? How do you get them? I mean 10 and 3/4%. How do you get them to make that move though?
- [14:32]
Fong Li
It's distribution. It's marketing, right? Like any product, the distribution channel of money today is the traditional finance system. And I'd love to say that it's new applications, it's online, it's the Coinbase, the Robinhoods, the Square cash apps, the PayPal's, the Venmos, et cetera. And those are certainly a burgeoning trend. PayPal now is getting a bank license. But it's the traditional finance system where people are making decisions with their short term money. And so that's why it's important for us to work with the traditional finance system. And they want the same thing, right? Like they also want to be able to provide better outcomes to their customers because if they're not providing 10% or 8%, somebody else is going to. Right. Ultimately the best product here I think wins the challenge. I think for a lot of people, when you think about money is such an important asset and for many people the financial system is such an esoteric concept, right? Like I think about the food system, right? Like, and there's this movement towards farm to table eating, right? You go, you plant, you put this, the cucumber seed in the ground. You see the plant come up in the spring, you pick the cucumber, you peel it, you eat it. That's the purest sense of farm to table. And what's happened over the course of the last 50 to 80 years, the industrialization of the food system, from where the seed goes into the ground, to the cucumber at the grocery store, to in your mouth, you have no idea what's happening in between.
- [16:15]
Natalie
Exactly.
- [16:16]
Fong Li
I feel like that is our financial system today. As a software technology innovator, when I started to understand how the financial system works, the money that you get to the money that you spend is cycled through wholesalers, distributors. I won't call it washing of the money, but the money doesn't look like it does at the end. And as I get into, okay, so you've got the banks, you have the asset managers, you have the fund managers. And now we're figuring out you have all these indices, you have the ratings agencies, you have and then you have all the government regulation around it. We're not like bitcoin is farm to table money. It's like the best thing you had before that was gold. You could go mine gold, you get your flake of gold, your gold rock you hold in your hand. That's your goal. Bitcoin is farm table money. Because the monetary system, now nobody knows how it works. Just like you don't Know how that cucumber that you buy at the grocery store down there, is it even a cucumber? What the heck is in it? Where did it come from? And so I think bitcoin solves that problem, but it will solve the problem of the traditional finance system, too. People will get back to this idea of, I earned, I put in an hour's worth of work, I made $20, I convert it into bitcoin, it sits there and it grows over time. Or I work, I get $20, I put it into stretch, I get 10 1/4 percent, and I know how it works over time.
- [17:53]
Natalie
And can you explain the tax advantage?
- [17:54]
CoinStories Host/Announcer
Because the way I understand it is.
- [17:56]
Natalie
You almost stumbled upon that. It wasn't even planned for, that there's.
- [18:00]
CoinStories Host/Announcer
This return of capital.
- [18:01]
Natalie
Right. Which is not subject to taxes immediately.
- [18:04]
Fong Li
Yeah. Well, I'll start with in the last five years. There's a lot we stumbled upon, but the more time. Bitcoin's like that too, right? Like I think I've told people, if I look back at my life, I can find steps of the way in my life from being a child to going to college to my career, it was all sort of set up for bitcoin. And you realize it looking at it in retrospect, but not as you go along. That's how I felt with Stretch and a lot of the things we've done in the last five years, if I look back, it's extremely clear, thoughtful. You might even say, hey, you know, Fong, you and Mike and the board and everybody, you sat down, you planned the five years out almost perfectly. Not really. Right. We can go back and pretend that it was perfect, but it was a set of innovations found because we were very focused on providing a set of innovations to our shareholders and ultimately trying to increase bitcoin per share. Now, what happened with Stretch was what happened with our first four or all five of the preferreds we did this year is we structured them in a way that they were sitting as part of our overall organization, our overall cap structure, our corporation, which has negative taxable earnings and profits, which is different, by the way, than the negative accounting gap earnings and profits. Your taxable income is different than your GAAP income. I'll start with that. And as an individual, you sort of understand it too, right? Like what? You know, you have your W2, the money you take home, you put in your bank account. Then when you do your tax return, the numbers all change a little bit for a variety of reasons. Certain investments, some things are deductible some things are not. We as a company, because of our software business have negative earnings and profits. And a lot of that is because of what would pay out in stock based comp on an actual cash basis is negated against earnings and profits. And so because our company has been growing, our equity has been growing, our stock based comp payouts have been growing, counts against the earnings of the software business cause us to have negative earnings and profits. When you have negative earnings and profits, the dividend, if you will, that's paid out of the preferred can't be paid as a return on capital. Return on capital because there is no return, there's nothing to pay out of earnings or profits. So you're actually paying out of the capital itself, which makes it a return of capital. So basically, if you have $100 in stretch and you get paid $10 in dividend, the instrument itself goes down to $90 and we've paid you $10 of that. And because of that, the cost basis decreases and you're not taxed on it until you sell the underlying. And this, it actually makes logical sense, return of versus return on capital when you think about it. But tax sometimes doesn't make logical sense to a lot of people. But in this particular case, this tax deferred until you sell the underlying.
- [21:20]
Natalie
That's fascinating. One of the recent headlines that we've seen from strategy is this USD Reserve. I think it's like $1.2 or $4 billion, $1.44 billion, $1.4 billion so that you can pay the dividends for several years. Really, if anything were to happen to Bitcoin's price, if it were to stagnate or go into a bear market. Can you talk about the process of making that decision? And was it a response to the credit agencies? Was it a response to the sentiment or the questions online surrounding how are the dividends paid? Like what came to that decision?
- [21:51]
Fong Li
There are multiple factors and one key factor is the quality of our credit. And we want the credit to ultimately go from having no rating to what we now have, which is considered a high yield rating, to being investment grade. And from a rating agency perspective, one way you increase the rating is to have cash to cover the dividend. So that was one input. It's not the primary driver, but that was one input. Another which is related to that is for people to get more confident to buy into our preferreds, which causes the preferreds to increase in price, which allows us to issue more preferreds, which ultimately increases the amplification of the Company we realized that by putting together a US dollar reserve that would help the amplification of the preferred or the quality of the preferred amplification of the company. And there are two factors that works a little bit in contrast there. One which is issuing equity at a premium to build up a US dollar base is accretive in terms of US dollar gain, but decretive in terms of bitcoin per share. So if you look at it just purely on math, you wouldn't put together a US dollar reserve. But if a US dollar reserve allows you to improve the credit quality of your preferreds, issue more preferreds, that's accretive to bitcoin per share. So you put those two things together. One that on a math basis is dilutive to bitcoin per share, one which as you build the preferred base increases bitcoin per share. They actually work together properly. So that was the second reason. The third reason is this FUD about we're going to sell our Bitcoin. And there was a concern that if the company operates at below 1 XMNAV for a sustained period of time, we would have to sell our Bitcoin to pay our dividends. And we would do that if we had to. Above that, we would sell bitcoin derivatives to pay our dividends. And above that we have our equity. But we wanted to create a cushion. So that negative sentiment and the negative dialogue, the narrative goes away. So those are reasons we did it. And we had great advice from some of our board members and some of our shareholders. And I'm happy we did it. And it was the right thing, but it certainly required a lot of strategic thinking.
- [24:34]
Natalie
I feel like at one point it would have been surprising to hear that strategy was willing to sell any bitcoin at all. So is this an evolution or is this something where, you know, this seems like worst case scenario planning kind of thing, like if we had to, we would.
- [24:49]
Fong Li
I think if we ever were in a situation where we would have to either choose between defaulting on our credit, not paying our dividends and not doing what's right for our shareholders, we sell our bitcoin. Ultimately our responsibilities to our shareholders, that's our free share responsibility one and then a responsibility to bitcoin community, but that's number two. Number one is a responsibility to our shareholders. And all classes of shareholders are common, are preferred and are convertibles. And so that's our primary responsibility. Now you can satisfy both, which is why we issued the US dollar dividend, which is putting ourselves in a situation where we can 1 cover 21 months of dividends 2 cover 72 years of dividends with our Bitcoin which takes us to 2100 right? And if Bitcoin goes down in half, it takes us to 2065. Right? And so stating that we're willing to sell our Bitcoin is respectful to our shareholders. It's the right thing to state. Stating that we don't think we'll ever have to sell them is also respectful to our shareholders in the Bitcoin community. And so you can have two truths. One is we'll sell our Bitcoin if we need to. Two we do not expect to ever have to sell our Bitcoin. That's how we'll run our business.
- [26:17]
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- [26:31]
Natalie
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- [26:33]
Fong Li
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- [26:38]
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- [28:00]
Natalie
In Bitcoin I mean, truly the impression that I get is that you are ready to adapt. I mean, market sentiment can change. New things develop. You issued these instruments, so now you have these dividends to pay out to the tune of several hundred million. Right. And sometimes you have to pivot. I mean, is that the way that the market should read it, that you're very highly adaptable? Essentially, yeah.
- [28:21]
Fong Li
We're a bitcoin treasury company. We're an operating company. It's not too different than a technology company. Like, you wouldn't want a technology company say, I created this product 10 years ago. I'll go five years ago. I created this product five years ago. And no matter what happens in the outside world with competition, with the price of the underlying inputs, with changes in the channel, I'm just gonna not change at all. We are a innovative bitcoin treasury company and a technology company, and you have to adapt. Adapt or die, right? Like a human being has to adapt over time. I love when Larry Fink said, hey, you know what? I thought bitcoin was bad. Now I think it's good. And if I was so stuck in my ways that I never adapted, then BlackRock wouldn't be as successful as it is. You have to adapt. It's okay to say one thing five years ago and say something different five years later. In fact, I think that's the strength, that's a sign of strength in leadership is your willingness to admit that you have to adapt and change over time.
- [29:28]
Natalie
I'm glad you said that because that's how I saw it really, too. And we've seen companies not take that direction and not be able to steer the ship in a new way. You know, I think there are a lot of people. There's fodder out there, of course, but I think a lot of people saw it as a positive. Let's talk about msci, because they came out with this memo. I think it also had some ripple effects in the price. We had those huge liquidation events on October 10th, and some even connected the MSCI memo to that. I don't know if that's true or not or if that's just a narrative, but tell me how big of a deal it was that they put out this memo and this decision that they're considering removing denominator asset treasuries from index inclusion.
- [30:10]
Fong Li
I'll start with that. I think the sentiment is much worse than the reality. And this market sentiment is always hard to measure. But I remember I was in Australia when the news came out from JP Morgan and we'd known about this weeks in advance and didn't think it was a big deal. And I had people coming up to me and saying, fong, I heard you're getting delisted. And I'm like, what do you mean? I heard you're getting delisted from the Nasdaq. We're not going to be able to buy and sell your stock anymore. I'm like, well, delisted from the msci, first of all, delisted, probably the wrong term and no longer qualifying for certain indices in the MSCI would be the right term is a lot different than getting delisted from the Nasdaq, which is an existential issue. There was a lot of lack of understanding of what it meant. Another piece of lack of understanding, I think JP Morgan said that we have about $2.8 billion in MSCI related indices. My understanding, and our research says the number is closer to 1.5, maybe $2 billion. So I think it's overstated. But let's say it was $2.5 billion. That is half of our trading volume on a daily basis. Okay, it's not that much. And I get two and a half billion dollars. Sounds like a lot, but we're a 60 billion dollar market cap company that trades 5 billion dollars a day. This is not an existential issue to us. To me, put us aside, will address the issue. We'll move on, we'll survive. The issue is how it is taking a fairly uneducated and antagonistic view versus an early innovative asset class. And this really hasn't been done in the past. And we've drawn the analogies to whether it be holding oil on your balance sheet. Chevron holds something like 67% of their balance sheet in oil. The timber industry, you look at the gold industry, you look at the cellular industry, the mobile industry, the Internet. AI REITs like Simon Property Groups is right next door. They have 80% of their assets and real estate. Why single out digital assets? And it's still not clear to me why you would single out digital assets when it's such an early time for innovation in the industry. This is not the time to slow it down. This is not time to choke it. I hear people calling it Operation Chokepoint 3.0. Right? And what is the role of an index provider? They actually just build the index. I didn't really learn this until more recently. They build an index, they sell the analytics and the capabilities of the index to a BlackRock or to a Vanguard who then actually assemble the equities the securities in that index and then they sell it. So here you are sort of behind closed doors. I respect msci. They're a public company and they seem to fairly well run but in a very opaque manner are taking an antagonistic position on a particular asset class. Five years a digital asset treasury company is five years into the first one ever being created. Really one year into a landslide of now about 200 companies, I call them digital asset treasury companies. I don't know what's behind why somebody like that would take such an antagonistic view against an asset class so early in its inception. And the good thing is the discussion is coming to the forefront. You've seen all these thousands of people come in support of digital assets, bitcoin, other companies that are related to this and then they go and attack like bitcoin miners, Mara, calling them a fund, not an operating company. We're clearly an operating company, not a fund. Right. And maybe they don't understand the software business, they don't understand what we do, asset backed securities that we're providing. But you take a bitcoin mining company, Mara, where you go to Texas and you see these huge data centers and part of it they're renting out to high performance compute. Are you telling me that is not an operating company or are you telling me that what they're doing you can take an environmental point of view, maybe that bitcoin miners are worse than oil miners. Maybe. But how can you say that they don't, you know, that American citizens when they're investing in an MSCI index shouldn't have exposure to bitcoin mining companies or to strategy. I'm optimistic this will play out positively and I'm glad the conversation is out there because once we solve the MSCI issue, I think other indices, the bigger ones like the s and P500 realize they will become educated on what we do and getting access to the trillions of dollars that go into the S and P indices, I think that will then start to open up because now everyone's frozen because of this discussion.
- [35:24]
Natalie
Well, I think there is a lack of education and fundamental understanding that led to this. So I mean maybe, maybe someone from MSCI is watching this or listening to it or maybe, you know, they're just in the public and they agree that, huh, they look at these, you know, bitcoin treasuries emerging. They don't understand the core businesses. It seems like they're just, you know, accumulating a ton of bitcoin and that's the core business now they're just holding a bunch of bitcoin. What do you say to them to, to explain that there is a functioning operating company behind it and it's not a fund. How do you explain that?
- [35:55]
Fong Li
I think there is the, I'll call it legal and corporate argument, which is no matter how you look at our company, we are an operating company, not a close ended fund, not an etf. Put that aside for a minute. The more important thing for me is we are very early with digital asset treasury companies and to come in this early and make a statement that they should not be included in indices is picking winners and losers. Just let this thing play out for five years and after five years we come back and look at it. That's the time for someone to say where passive money should be invested. Right. Like it would be similar to right now saying, hey, we're not going to let any companies that are capitalized on AI data centers to be included in our indices. Way too early, way too early to make that statement. I don't think anyone ever make that statement 20 years from now, let alone now. But what's great about innovation in America is people can invest in early technologies and passive money can go into early technologies through these indices so that they can grow the industries and then let the market play itself out. Right? The market will play itself out. People who are directly investing. If I'm going to buy MSTR or if I'm going to buy Mara or if I'm going to buy NVDA or whatever it is, goog, that's a decision that an individual can make. But when it comes to passive investments into major indices and funds, what people want is for it to be representative of American companies or worldwide companies. And I like to think that we're representative of, of American industry.
- [37:43]
Natalie
Talk to us a little bit about strategies focus. Because you do have this business intelligence arm and then you have the bitcoin side. Like what percentage is what? I mean you're obviously more focused, I'm assuming on the bitcoin side. Or maybe it's no, you're actually, you're on top of all of it. So you're probably involved in both sides. But what do you say to people who think that hey, eventually you guys will be maybe a bitcoin bank. You'll be offering primarily bitcoin services. Do you even need the business intelligence software side?
- [38:11]
Fong Li
Yeah, I'll start with our software business has been in place since 1989. It too was founded by Michael Saylor and we serve half of the S&P 500, roughly. We have about 4,000 customers around the world. We exist in 27 countries. It's about $470 million in revenue. It's growing about 3% a year. And we innovate in the business intelligence business. We invented the space as you know it, analytics on mobile devices and the web. We invented all of that. This has been an amazing 36 year business and we continue to build new things. We have some of the best software engineers in the world. We have centers in Warsaw, in Chennai and Hangzhou. It's, it's this great, robust, lively business. It just happens to be worth two or three billion dollars in a $60 billion company. That doesn't make the two to three billion dollar business any less worthwhile. Because if you had a two or three billion dollars business attached to nothing, it doesn't mean that that is worth more than a $2 to $3 billion business attached to a $60 billion business. And so I love our software business. I love spending time with customers and seeing how a lot of the household names around here are customers. You go into a Hilton hotel and behind the desk they're using strategy analytics software as an example. Just because they're down the road. Freddie Mac's another one of our customers down the road in the D.C. area. They're all using our software. It's lovely, it's robust, it's lively. It allows us to be in this beautiful building which is 200,000 square feet, allows us to have this great studio here. We're able to film this podcast, we've got a gym, we have a nice, we have great people in finance, we have amazing technologists building websites, we have brilliant legal minds. And those are the people that are also working on the bitcoin side. And it's a lot easier to build a bitcoin treasury company off of an existing operating company because we didn't have to hire a bunch of staff from scratch. We're using the brilliant minds of the software business. And I think that's the big benefit that we get out of attaching this super innovative Bitcoin treasury company to a software business. And I think it's been great for both parts of our organization. And I would argue that we wouldn't have been able to do what we've done in bitcoin as quickly and as innovatively if it wasn't for the software business.
- [41:01]
Natalie
Well, it always helps to have a strong cash flowing business at the core that you can build the treasury with. When you look out at the other bitcoin treasury companies, what do you think? Because I feel like the space has changed. There are some that are not performing very well. There are some worries in the market. What do you say? What does it take to be a strong bitcoin treasury company, knowing that they will not be able to catch up to a strategy at this point, I.
- [41:27]
Fong Li
Think it's the same as any industry. If you look at AI today or if you look at electric cars, or if you look at media, streaming video, like entering a business where there is an incumbent is hard. We're the incumbent in the US Digital asset Treasury company. Other people are trying to enter. And if you think about venture companies that are trying to enter a space that's innovative and growing, what do you look for in a venture capital company? You want to make sure it's well capitalized. You want to make sure that it has a good business plan. What is its competitive differentiation? And ultimately a lot of people choose venture capital company on the management team, experience of the leadership, are they able to move fast, are they dedicated? And then what is their competitive advantage? If you go around the world, the competitive advantage of a lot of digital asset treasury companies, think about Metaplanet in Japan, Smarterweb in the uk, Orange in Brazil is they are located in those countries. There are public companies in those countries and they have regulatory approval to sell securities in those countries. That's a competitive advantage. Now you go to the US based ones, you have to ask what's the competitive advantage? How are they innovating? And do you like the management team? And that's the same assessment you have for any startup, for any new company, just because they decided to enter the space of AI or they entered the space of electric cars, or they enter the space of streaming MIDI, or they enter the space of digital assets, doesn't by definition make them available company.
- [43:05]
Natalie
I agree with that. I agree with that. It's really interesting that you point to these evaluation metrics because we hear about things like M Navs now, Bitcoin yield per share. But there are things that are deeper that you really have to evaluate. What is the business? Who is the management team and where are they serving? What are the advantages of maybe the jurisdiction they're in? Because to your point, we're seeing some pop up in these different countries where there are real advantages in those capital markets, whether it be because of tax reasons or whatnot. But you're starting to venture into some of those international markets. Can you tell me the reasoning behind that? And it seems like you're going to be some competition for some treasury companies that are outside of the U.S. yeah.
- [43:46]
Fong Li
Look, if you think about the world and we want to access capital to buy Bitcoin and we want to provide our products and services in countries where those don't exist and territories where those doesn't exist at some point in time. Just like with our software business, like many other companies, you decide to move internationally. We think we have something that's quite unique in some of the products, like creating some of the preferred products we created. They're unique, they require a certain level of understanding. They require a certain level of scale too. Right. If we built that product in the US and we think it's attractive to US buyers, we've raised $7 billion so far this year, then that product should be attractive all around the world. If you think about pools of capital, you think about the euro, you think about the Japanese yen, you think about the Canadian dollar, the Australian dollar, you think about going to the Middle East. And each of them have their own regulatory challenges for sure. Because we have the finance team, the legal team, and we have the experience doing it. We're working through all those countries. They're definitely not as easy as the US People who primarily spend their time in the US have access to our capital markets, don't quite realize how amazing our capital markets here are. Number one, we're at the forefront in innovation, but we're also in the forefront in terms of just regulatory clarity. And I think that's not the same. And I would say governmental support, and that's not the same around the world. But we're going to work through that. We're going to break down the barriers just like we have here.
- [45:32]
Natalie
So you have five preferreds and I'm guessing 20, 26. We'll see more.
- [45:36]
Fong Li
Yeah, so we have our five, really there are four core strike, which is our convertible preferred strike, Strife, which I'll call it our long duration senior preferred, Stride, which is our long duration junior preferred, and Stretch, which is our stable money market, like Preferred. And so if you have those four, what we said is, well, there's two really killer ones. There's two that are probably most representative, which is Strife, Long duration, Senior and Stretch. Could we launch a variety of Strife and Stretch in major markets? What we launched in Europe was Stream, which is Strife in Europe Stream, and then maybe we'll launch a Stretch in Europe. Stretch in Europe. Stretch is much more innovative, will take longer to launch in Europe. So if we could take those two, Stryfe and Stretch and put a version In Canada, put a version in Japan, put a version in Europe, put a version in the Middle East. That would be what you might think about. I think the four in the US are probably sufficient at this point in time. All that said, going international is one opportunity. Seasoning the US back to what we were talking about earlier, making Everybody in the U.S. aware that stretch gives people hope, gives people access to bitcoin with stable price. Right. Zero volume, hopefully over time and 10 and 3/4% return. That's what we want to do. And we're going to do that through the traditional banking system, with digital credit and then digital money. That's our goal.
- [47:16]
Natalie
You mentioned regulatory clarity. And right now we have a very favorable administration when it comes to this industry. What if that changes? Because there are some, you know, there's volatility on the political side, there's a lot of populism coming up and people that are frustrated and feeling like they're not able to afford the cost of living and they're looking out. It seems like we're just repeating the same pattern. Fong right? Red. No, this isn't working. Blue. No, this isn't working. Red. No, this isn't working. Blue. We're just going back and forth and back and forth. And you can understand some of the frustration that's been built up. And it's all we know. The core is the fiat system, this inflationary system that's punishing savers and making it so hard for people to be able to preserve their purchasing power, much less grow it. So do you worry about what if we do get a regime that's a little bit more hostile to bitcoin? And how are you planning for the next couple of years?
- [48:09]
Fong Li
There are core tenets under which this country was founded that are agreeable between Democrats, Republicans, the rich, the poor. Freedom is one of them. Them, freedom of speech, freedom of religion, and ultimately the freedom and a cult of equality and the ability to have equal opportunity. And if you start with some of these base tenants that there's no debate, this is a nonpartisan debate. You realize that Bitcoin addresses those freedoms, right? Like equal opportunity doesn't mean equal outcomes. It means equal opportunity. And so everybody, no matter how rich or poor you are, should be able to self custody the money that you earned. And everybody, no matter how rich or poor or whether you're Democrat or Republican, should have a good return for the money that they save. Right? Good is not zero percent. Good is not the rate of inflation. Good is above the rate of inflation. So if it's 10 and 3/4 percent, so be it. Right. Like everybody should have access to that. This is not a partisan discussion. I don't know what for the most. Like, just because the Republicans feel realize that the rich and poor both like bitcoin, it doesn't make it a Republican thing. And so I think what we're realizing over the course of this four year administration, and I think people are realizing it is bitcoin is not partisan. Bitcoin is for everybody. Your words, not mine. Bitcoin is freedom. Bitcoin is hope. And so my hope is that during this four year period, everybody figures this out and everybody will enough people that no matter who is in control of the government, that they realize access to bitcoin is such a core tenant that it has nothing to do with who's in power.
- [50:20]
Natalie
Yeah, fundamental human right. All of that's so well said. Well, we have something in common. We're both immigrants, we have immigrant backgrounds. And you are really a true symbol of what the American dream can represent. So can you talk a little bit about your background? Because I think my audience would love to hear just what your family went through for you to be able to become the CEO of the company that owns the most bitcoin on the planet.
- [50:46]
Fong Li
First of all, thank you for asking. And immigrants, we get the job done.
- [50:51]
Natalie
Yeah, that's right.
- [50:53]
Fong Li
So the story and when I talk about bitcoin is one of those things where when you discover it, you look back at the last 45 years of your life and everything becomes clear. The analogy I've given to others is I really like M. Night Shyamalan movies. And the Sixth Sense I thought was an amazing movie. And I remember it's like I see dead people and at the end, Haley Joel Osment realizes Bruce Willis was dead and they replay the movie in a small clip. It's like, ah, everything made sense. I feel like that's what bitcoin did for me is when I discovered it, I went back and said, oh, well, this all makes sense now.
- [51:33]
Natalie
Exactly.
- [51:34]
Fong Li
And part of that was. So my immigrant story was I was born in Saigon in 1976, a year after the fall of Saigon. My parents were middle class, fairly middle class in South Vietnam. They and their family had businesses. My dad in agriculture, my mom in clothing and apparel. And so like many people in Vietnam and around the world, your wealth is through your businesses and your money. And so when the North Vietnamese took over South Vietnam, like when many regimes take over another, the first thing they do is they nationalize the Currency of the country they take over, and they deem it worthless, which meant any money that was in a South Vietnamese bank was written to zero. And any cash you had, South Vietnamese dong, you had to bring into the bank. And in return for no matter how much you had, they gave you back 200 North Vietnamese dong, which is equivalent to $10. Didn't matter if you had $10,000, $100,000, a million dollars, everybody got 10 bucks. And on top of that, if you had gold, gold was no longer legal to home, right? So turn all your gold in now. Most people would sew it in their clothes, put it in their mattresses. You had gold. So basically, all of the wealth that you and your generations of family had earned over time went to $10, right. And your property, of course, your businesses also ceased. Not yours. And this happens extraordinarily quite often even to this day, around the world. Right? And there's many examples of that, whether, like, why do you not want to hold Russian rubles? Why wouldn't you want. Why do you not want to hold Argentinian pesos? And the list goes on and on. So my parents said, you know, I was two, my sister was four. Well, this sucks. What are we going to do? And they decided that, you know, this is so bad, let's just go out into the South China Sea and let's sail out and go find a different place. And so this is the story of the Vietnamese boat people. And in hindsight, there are about a million people that decide to escape Vietnam the same way out to the water. And about half anywhere between. Don't know for sure, but 25 to 50% of the folks died at sea. We were lucky enough, we made it out. And three days later, we're picked up by a shipping boat going from Germany to Singapore. And so we were taken down there. Myself, my sister, my parents put in a refugee camp, and we won the lottery. We were taken in by a Catholic church in Syracuse, New York.
- [54:21]
Natalie
Sorry to interrupt you, but do you remember being in that boat? Do you remember all of this?
- [54:24]
Fong Li
I don't, but enough, you know, when you hear enough stories, you feel like you were there. My first memory, actually, was when I was 2 in Syracuse, New York. And we lived quite a bit of poverty. And when we were there, the first thing that I remember happening. This story is not related to Bitcoin, but it's just a funny story. My first memory was we were robbed. Like, somebody came into our house. I was two and a half. And the first thing I thought to myself, Was, we are so poor. The person who robbed us, they made the worst decision of anybody robbed. But anyways, that's the side thing. That was my first memory. But it makes you realize if bitcoin had existed, this never would have happened. But I never would have ended up likely where I am because I would have grown up in South Vietnam, which now Vietnam in general is a vibrant economy and doing very well. It's becoming more and more capitalistic. But coming to the US early on, we didn't have a lot of money. Obviously. The second sort of monetary story that I look back upon was my parents went through vocational school, worked my dad, worked three jobs a day. They didn't make a lot of money, about a thousand bucks a month post taxes. And from time to time they would want to send money back to Vietnam. And back then, the relationships between the countries weren't very strong. Clinton ultimately opened up the relationships. Commercial relationship. Nine, two. But in the 80s, if you want to send money to a family member who didn't know you didn't exactly know how to do, you would go to these gold shops and they were run by Vietnamese and they would take about 30% of your money. Wow. So we're not making a lot of money, we're sending money back. And somebody somewhere, remember, hard earned money is taking 30% of it. And bitcoin solves that too.
- [56:18]
Natalie
Yes.
- [56:19]
Fong Li
So it solves all these things. And so these are the. I like digital capital, I like digital money. I like all these things. I like giving people 10, 3/4%. I like running the largest bitcoin treasury company in the world being worth $60 billion. These are all fantastic first world things. There are third world things that bitcoin solves. And so when we talk about, well, what if the Democrats take over and they win, are they going to get rid of bitcoin? Bitcoin? One, they can't. Two, they shouldn't, because these are Democratic values just like they're Republican values.
- [56:57]
Natalie
Your story's truly incredible. And I've met so many fellow immigrants where I think a lot of the grit and the determination and motivation comes from these humble beginnings where it was kind of like you had to make it, you had to survive. And you wanted to justify all the sacrifices that your parents, that your family made for you to be able to have this incredible, incredible opportunity to be here, to actually make something of your life in this country. And so how did you get from that Catholic or church that was helping you guys to running this public company? What steps did you take?
- [57:33]
Fong Li
What did I do? Like any good Asian immigrant kid, I worked hard. I got into math, I got into science, and I went to school and took out a lot of student debt, but mostly got school scholarships because we didn't have a lot of money. I did my undergrad at Johns Hopkins in biomedical and chemical engineering, of course. Why did I do that? Because it has the best medical school in the country and I was going to be a doctor.
- [57:59]
Natalie
I was just like, Andrew.
- [58:00]
Fong Li
Yeah, whose Asian parents don't want them to be a doctor. Right. And so partway through school, I found out my skill sets were more in finance and systems. And it was something that I was much more passionate about. So I graduated. It became worked for Deloitte as essentially a software engineer, systems analyst, built analytics software, started using MicroStrategy in 2000, got to know the company really well, went to business school at mit, learned finance, learned economics, thought I learned finance and economics at mit. And then I came back, I became a finance guy. And throughout the career I ended up at MicroStrategy in 2015 as the CFO. And a lot of that was hard work. And your point, Natalie, is it absolutely is the American dream. It absolutely is. And my big worry today, and you hear people talk about it a lot, is the value system has changed as to what the new generation of parents and kids care about. And there's debates around why are people not learning stem, why are they learning whatever it is, history, sociology, not that I have anything against that, why is there not hope anymore? And a lot of times it comes down to a big blame on culture. And I don't think the culture of the country has changed in such an insidious fashion that now people don't care about advancement in the American dream. I think it's money. And you've talked about this, it's not the underlying culture. It's not like 60 years or 40 years later, all of a sudden people are being born like less hard working or caring less about stem, you know, science and technology and math. I actually think the issue is the monetary system has given people less hope and less desire to work hard for the American dream. Because if you live in a world where inflation is running rampant and money printing is running rampant, and you realize that if you don't do anything, if you just run to standstill, the government will take care of you through printing more money, and that's easier than working hard, then you're just going to not work hard. And that's where we need to get back to a monetary system where if you save your money, it actually grows and it increases your earning potential. And I think people will then wake up and say, well, government's not going to just keep printing more money. If I save money or if I invest money, it's going to be worth more. Over time, I'm going to get back to working hard. I'm going to have my kids learn science and technology, and we can get back to the American dream. That was the reality of what you and I face 20, 30, 40 years ago. And so it's not a cultural thing. It's not a. The kids aren't all right, because what they're. Social media is not great. Right. But I think it's the base of if I work hard and I save money, I will improve the outcomes for the future. And I think bitcoin and the principles behind bitcoin will help improve.
- [61:24]
Natalie
I love that you just said that because I wrote exactly about this in the book. And we call it the American dream, but it's really a universal one. That's what brought so many people here. But people need to feel like their work is paying off. And that's where I feel like the incentives have become so broken. Because if you see yourself working hard and you followed all the rules and you went to the right school and you filled out all the checklists and you're still not able to. To even just tread water, you can't buy the house, you can't start the company, you can't achieve the dream. I feel like a lot of people are getting in their own way all of a sudden, saying, well, then I give up, I can't do it anymore.
- [62:02]
CoinStories Host/Announcer
Or someone please hand it out to me.
- [62:04]
Natalie
And there's been really almost a demonization of like, capital capitalism, the wealthy, there's a resentment toward it. I mean, do you want to comment on that at all? Because, you know, you've built your way all the way up where you are. You are in that class of the wealthy, the successful. And there are a lot of people looking up at you going, that's not fair. You need to share with me. I want some of that. It's not fair that I'm not able to afford a house or any of the things that I want when a generation ago my family could. What do you say to that attitude that we see that is really anti capitalism now and wants to tax the rich?
- [62:40]
Fong Li
Yeah. I heard my dad tell stories about Vietnam versus here, and he will always unequivocally say, living in Vietnam was easier. It was easier. I didn't have to work as hard, and the living was easy. And then he comes here and he says, I had to work three jobs. He started businesses. But we're not like just, just, just to further the stereotype, they opened a subway, they opened a nail salon and a liquor store. Barely broke even on any of these enterprises. And he's like, he did not create wealth for himself. He created wealth for the next generation, which is me, right? And so. But he worked his butt off throughout the way, and that created generational wealth and allowed me to create generational wealth. And that came from daring innovation and hard work. You compare that to a communistic country where. Or communist country where you don't have to work hard, but you have no way to create true wealth, right? And so which do you want if you want to demonize the rich? Realize for the most part, we worked hard. We took our created opportunity for ourselves or saw opportunity, we seized it, and now we're creating wealth for the next generation. You can have the alternative. You can live in a socialist, communist country where the opportunities are less, but the living is easy, right? And my dad will say he chose this path. He would never choose any other path because he created the opportunity for his children. And this is where your time horizon, your time preference matters. The hard work. The capitalism is not just for you. It's for your children, and it's for the next hundred years, and it's the next thousand years. And I think, if anything, the last 250 years have proven capitalism works. It works as a system, but you have to buy into it well.
- [64:57]
Natalie
And you also have to have better capital, right? If you have this crazy inflationary capital where everyone's running and chasing yield and, you know, the hurdle rates, essentially this basket of companies, The S&P 500, that also skews things a lot. Maybe you can't really have true capitalism the way you could on something like a bitcoin standard. I feel like our families actually have a lot in common, even though they were a world apart. My family growing up in Poland, it was a lot of the same thing. People hiding the money that they could get their hands on. There were actually, I talk about this in. Bitcoin is for everyone. There was a police force, the sb, that would come around to see if you had dollars or, or a form of money that you shouldn't have. And I share a story in the book that one of our family friends, my grandma, would tell this story. She put it in the diaper of her baby. The cash that her husband was sending back and she was rocking the baby, praying that the police doesn't look into the diaper, of all things, because they ransacked the house looking for it because a neighbor tattled. I mean, who wants that world, right? But we're all equal in it, right? So it's just so fascinating to hear your story. Fong, you are so inspiring. Thank you so much for all the time. Anything else you want to share or leave our audience with.
- [66:07]
Fong Li
I think this is fantastic, Natalie, and thank you for everything you've done for this space and the book and for educating the world on bitcoin.
- [66:16]
CoinStories Host/Announcer
Well, thank you so much.
- [66:17]
Natalie
We can't wait to see what's in store in 2026. Hopefully Bitcoin's price will cooperate a little bit, but we're on this journey together and you guys have done an incredible job. I'm so proud to know all of you, so thank you so much.
- [66:30]
Fong Li
Fong, thank you too.
- [66:31]
CoinStories Host/Announcer
Thank you so much for checking out this episode of Coin Stories. Make sure you're subscribed to the show so you don't miss any new episodes. And if you can, turn on those notifications and leave us a positive review, they really help the show grow organically with new listeners. We have a free weekly newsletter. You can sign up@thenewsblock.substack.com this show is for educational and entertainment purposes only. Nothing should constitute as official investment advice, and you should always do your own research. I'm always open to feedback and guest suggestions, so please feel free to reach out@infoalkingbitcoin.com I'll see you next time.