← Digital Social Hour
Digital Social Hour
Michael Saylor On Why Bitcoin Will Explode in 12 Months | DSH #2017
00:57:22
| DSH #2017 What if Bitcoin is not just an investment, but the next layer of global capital? In this Digital Social Hour Episode, Sean Kelly sits down with Michael Saylor at the Bitcoin Conference to talk about Bitcoin, digital capital, STRC, digital credit, AI, stablecoins, inflation, the dollar, and why he believes Bitcoin could continue growing for decades. Michael explains why he views Bitcoin as scarce digital capital, why its fixed supply makes it different from traditional assets, and how Strategy is using Bitcoin-backed financial products to create new credit instruments like STRC. The conversation also covers tax-deferred dividends, liquidity, risk-adjusted returns, Sharpe ratios, AI-designed financial products, stablecoins, tokenized assets, Bitcoin mining, stranded energy, inflation, gold, real estate, the U.S. dollar, and why Saylor believes Bitcoin represents the strongest property rights in human history. Michael also explains why he believes the traditional Bitc...
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- [00:00]
Host
Yeah, I saw you. I think it was on Natalie Brunel's show saying bitcoin, you believe to $20 million eventually a coin.
- [00:06]
Michael Saylor
I think bitcoin's going to just continue to grow. I expect 30% a year on average over the next 20 years. The ideological bitcoiners, the people at this conference, they would say bitcoin represents the apex property rights of the human race. It's for the first time in the history of humanity you have property rights that are yours that no one can take away from you. If you think bitcoin is going up 10 or 11% a year, then when we saw $3 billion of credit, we made 3 billion DOL dollars of net income for the company.
- [00:41]
Host
Okay, guys, here at bitcoin conference we got Michael Sailor just gave an amazing keynote yesterday. Thanks for coming on, man. I love to talk about Stretch. A lot of my audience might not know about it, but I just learned about it for the first time yesterday. Very impressive stuff. Could you explain what that is and how it's going?
- [00:54]
Michael Saylor
Yeah. Well, we start with bitcoin. What? Bitcoin is digital capital. So bitcoin has been appreciating about 40% a year for the past five years. And that's the good part is like it's outperforming the S and P by a factor of two or three or more. It's over the last 15 years is the best performing asset in the world. That is a Bitcoiner would say that scarce desirable capital or scarce desirable real estate. In cyberspace, there will never be more than 21 million Bitcoin. So if you start with this base of 21 million Bitcoin, and you think everybody in the world wants some property that they can take with them if they need. If I need to move from Europe to Africa to Asia to UAE to the US you can't take your building with you. You know, it's going to be hard to haul bar of gold through an airport, you know, so. So if I want to hold wealth in my family for a hundred years, what am I going to buy that ought to have value in 100 years no matter where I am? If I don't trust a bank, if I don't trust a government, if I don't want to run a business for 100 years? Yeah. And so bitcoin becomes that store of economic wealth, right? It's pure capital. Now the good thing about bitcoin is because it's scarce and it's digital, it's very liquid, it's very Useful. You can sell a billion dollars of bitcoin in one minute on a Saturday morning, or you can buy it back and it makes it very volatile. The bad thing about bitcoin is it's a very volatile capital asset. So that means that if you're going to buy it, you need to think, I'm going to hold it for four to 10 years, ideally. 10 years, long time. So can you go for 10 years without needing any money? Right. I'm going to give you something that will make you rich in a decade, but you're going to have to hold your breath and live on scraps for 10 years. So we looked at that and we, you know, there's a whole set of investors that can't afford to go 10 years with that kind of volatility. 3 year olds, 20 somethings a company and we thought, let's create something more like a bank account that pays you 10 or 11% and back it with bitcoin. So, so Stretch STRC is a digital credit instrument. And the way it works is we sell this preferred stock into the public market. We IPO'd it. You can get it from Robinhood, you can find it on Charles Schwab, any, any broker dealer that deals with NASDAQ listed preferred stocks. The stock pays a monthly dividend. It pays a monthly dividend, that's variable. Right now that dividend rate's 11.5%. So you have a hundred dollars, you buy one share of STRC, you get paid $11.50 in 12 monthly installments. Right now we take the $100 and we buy $100 of Bitcoin with it. So the company strategy is in the business of holding the bitcoin, taking the ups and downs, we'll take the volatility and then we strip the risk off it. So for example, if you bought stretch on October 6th of last year at the top of the bitcoin market, you buy it for 100. Bitcoin was 125,000. Well, Bitcoin's fallen about 40%. It's a 76,000 or something strc still 100. So we're preserving the principle and then we're giving you a constant stream of dividends. Now to be clear, it's not as good as holding the bitcoin for a decade. It's better than holding it for six months through a bear market.
- [04:32]
Host
Right.
- [04:33]
Michael Saylor
And so Stretch really is an example of us stripping the risk and the volatility off of the bitcoin and giving you a fraction of the bitcoin return, but in a predictable monthly fashion as cash flow.
- [04:50]
Host
That's incredible. And I saw in your speech you mentioned 20 billion in revenue or something in the first year.
- [04:55]
Michael Saylor
Yeah. So when we stretch was the biggest IPO of 2025, when we brought it out in July, it went from. It was a two and a half billion dollar ipo. And then what we've done is attached a shelf registration on it. So when the price of stretch is at $100 or higher, $100 or $100 on a penny, and there's too much demand for it, the company sells it and we sell additional stretch. And when the price of STRC is below $100, we don't sell it at all. It's the open market. It's Stretch. People that want to buy Stretch, buying from existing holders that want to get liquidity. So from that point we've progressively sold more stretch and the AUM or the outstanding supply has gone from 2.5 billion to 3 billion to 4 billion. We, we sold about 1 1/2 billion dollars in March and expand it went from 3 1/2 billion to 5 billion.
- [05:51]
Host
Wow.
- [05:51]
Michael Saylor
And then in April it, we sold about 3 1/2 billion dollars or 3.2 billion. So that's incredible. It went from, you know, 5 billion to 8 1/2 billion. So it's about a 350% annualized growth rate. Wow. So it's like it's unturtled. It's probably one of the fastest growing products in the world and certainly one of the fastest growing financial products.
- [06:15]
Host
Yeah. You're outperforming a lot of stocks that are exploding right now.
- [06:18]
Michael Saylor
What's it, you know, the reason it's growing fast is it's, it's obvious. You're getting three and a half percent from your money market and you're paying tax on it. So you get 2% after tax. And STRC has two advantages. It pays you 11 and a half percent instead of three and a half. And also it's tax deferred. It's called a, it's a dividend. It's a return of capital dividend, which means that when you collect the $11, you reduce the basis in security by 11 bucks. So you buy it at 100, you reduce your basis to 89, you collect another $11. The next year, you reduce the basis to 78. And so you don't pay tax on the dividends until you've collected dividends equal to the $100 interest. So you would buy, buy a share for $100, collect $100 of dividends over like nine years. And then in the 10th year you would start to have long term capital gains tax on your dividends if you were collecting them. But it's, it's a great thing because if you're living in a high tax jurisdiction, if you're in California or, or New York, you know, you get paid three and a half percent by the money market and you have one and a half, 1.7%.
- [07:30]
Host
Right.
- [07:31]
Michael Saylor
Tax. And so do you want 1.7% or do you want 11 and a half percent?
- [07:35]
Host
1.7. Yeah, all day. That's why I hate selling bitcoin, because the tax implications of it, because it goes up so much and then.
- [07:43]
Michael Saylor
Well, you, you put your finger on an important idea which is with capital investors and equity, normally you get to buy the equity and you hold it and it compounds tax deferred. So like you buy the S and P index and you never sell it. And you, and you might have a big capital gain in it, but it's unrealized capital gain. Right. So you get tax deferred compounding with equity, you get tax deferred compounding with bitcoin, with credit, you don't. When you buy a corporate bond, there is no tax deferred compounding. When you buy a normal dividend bearing preferred stock, there's no tax deferred compounding. You have to pay the tax on every dividend when you receive the dividend. STRC is unique because there, there's three types of tax treatment. The first is ordinary income for corporate bonds. That's bad. The second is qualified dividend distributions for preferred stocks. That's half bad. The, the third is return of capital dividends. That's great. So return of capital dividends have been around for 100 years. But, but it's very rare for a company or a bank to issue a dividend bearing credit instrument as return of capital. We pioneered creating that type of instrument using digital capital. So as long if we sell a bunch of STRC and then we buy a bunch of bitcoin and then the bitcoin compounds over time and it's a big unrealized capital gain for us. We monetize that unrealized capital gain and then we do that normally by selling our stock, our company, but we could also sell the bitcoin to monetize the capital gain. We monetize that unrealized capital gain and then we pass it through as a dividend. So it becomes a tax deferred dividend.
- [09:31]
Host
Brilliant.
- [09:32]
Michael Saylor
So it's good financial engineering and it just makes rational economic sense. If you don't need the money for a decade and you can afford to make a long investment and you don't want to be beholden to anybody or trust anybody, I say buy Bitcoin. Bitcoin is like global digital capital. No counterpart. You can take it with you anywhere. Right. If on the other hand, you need the money in 12 months or 6 months or 24 months and you can't stand the risk of, oh, it might trade down 20%, then you want to buy the credit instrument because all of the efforts of the company are to keep that pegged around $100. Right. And then you're just picking up the 11% and that's three or four times better than your money market. Everything in the middle, like other types of credit, corporate credit, junk bonds, you don't get paid for the risk you take. You get 80 basis points more than the government rate to buy an investment grade bond.
- [10:30]
Host
Really?
- [10:30]
Michael Saylor
You get 200 basis points more than the risk free rate from the government to buy the junk bond or 250.
- [10:38]
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- [10:43]
Host
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- [10:44]
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- [11:04]
Host
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- [11:06]
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- [11:16]
Host
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- [11:17]
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- [11:20]
Host
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- [11:24]
Michael Saylor
And so what's the point of that? You're taking massive credit risk from those companies to get paid a little bit and then you're getting taxed, you know, at the ordinary income rate.
- [11:32]
Host
Yeah.
- [11:33]
Michael Saylor
And so bonds are not that interesting. Digital credit is designed to have the benefits of equity, double digit returns, deferred tax treatment and the benefits of credit, low volatility, principle protection, stability.
- [11:49]
Host
Yeah, and it's more liquid. Right. You could sell the stock and get money same day.
- [11:53]
Michael Saylor
It is the most liquid preferred stock in the world. Right. Right now it's about 350, $400 million, $380 million of liquidity a day. So you can trade in and out of it whenever you want, which is a nice thing. Sometimes people offer you a really good structured deal, but you have to lock up your money for three months.
- [12:13]
Host
Exactly.
- [12:13]
Michael Saylor
Or lock it up for a private fund and you lock it up for one to five years. Like private credit. Right. I mean, or private equity. That's okay. But the best idea is something that outperforms that. And if you change your mind next Tuesday, you can take your capital.
- [12:30]
Host
But I feel like liquidity is so important these days with all the uncertainty. Right. You want to be able to access your capital as quick as possible.
- [12:36]
Michael Saylor
I mean, the other thing we've done with Stretch, which is very useful, is there's a concept, risk adjusted return, and it's captured by the Sharpe ratio. It's a metric that financial engineers use. It's what is the return of the investment minus the risk free rate. The risk free rate is SOFR. The standard overnight funds rate is 370 basis points is what the government pays you on their T bills. So if you take the return, subtract the risk free rate, divide by the volatility, you get a Sharpe ratio. And, and the Sharpe ratio of the S and P is like 0.85.
- [13:11]
Host
That's it.
- [13:12]
Michael Saylor
Yeah. You, you don't. You have a higher volatility than the annual return. The Sharpe ratio of bitcoin is around the same. The Sharpe ratio of most credit instruments is 0.2 to 0.4. And the Sharpe ratio of money markets is negative.
- [13:26]
Host
Wow.
- [13:27]
Michael Saylor
The sharpe ratio of strc is 2.8.
- [13:29]
Host
Whoa.
- [13:30]
Michael Saylor
It's 10x better than other credit instruments. And if you were running a hedge fund and you could say, look, the volatility of my portfolio was 10, but my return was 20, that'd be a Sharpe ratio of 2. You could raise infinite money. I mean, every. But people would give you money all day long because they're like, you're a financial genius. We've created something with a sharp ratio of close to 3 and we've created 380 million of liquidity. And so the real, the real engineering feat is how do I create hundreds of millions or billions of dollars of daily liquidity with a sharp ratio north of 1 or north of 2 or 3 or 4. If you do both right, you've created, you know, a super liquid hedge fund better than a hedge fund that charges no fees.
- [14:20]
Host
Wow.
- [14:21]
Michael Saylor
With no lockup.
- [14:22]
Host
Very impressive. Does the Sharpe ratio change if the bitcoin price goes up?
- [14:26]
Michael Saylor
The Sharpe stretch isn't really correlated to the bitcoin price. If the bitcoin price goes up, the credit gets better and probably the volatility falls. So it could be indirectly correlated basically as the volatility of STRC falls, if it goes from 2 and a half to 1 and a half, the Sharpe ratio goes up. Okay, right. And the volatility is affected by a number of things. You know, it's a. If the bitcoin price falls dramatically, got cut in half, the volatility would increase.
- [14:57]
Host
Got it.
- [14:58]
Michael Saylor
And the bitcoin rallies, then the credit looks like it's super over collateralized and the volatility probably falls. So the Sharpe ratio probably is going to be impacted positively or negatively by the bitcoin price.
- [15:13]
Host
Got it. Yeah, I saw you, I think it was on Natalie Brunel's show saying bitcoin you believe to $20 million eventually a coin.
- [15:19]
Michael Saylor
Yeah. Well, I think bitcoin's gonna just continue to grow. I expect 30% a year on average over the next 20 years.
- [15:26]
Host
Wow.
- [15:26]
Michael Saylor
Right now it's growing close to 40% but it will decelerate down to 20%. I think the big idea is bitcoin is digital capital and the S and P index is equity capital. If you expect the equity capital to appreciate 10 to 12% a year, digital capital will be better by 50%. It'll. If you were expecting 12% from the S&P, you probably get 18% from Bitcoin 20 years out. When it's mature, when it's $100 trillion plus right now it's a small asset and so it's going to grow faster. And the reason it's going to outperform equity capital is because it's global. I mean the S and P is mainly US based. I mean, and because it's digital, you can buy and sell bitcoin a hundred times an hour on a weekend, but you cannot buy and sell the S and P stocks at all. So it's actually more useful. You can lever it, you can short sell bitcoin 20 to 1 levered in Singapore on Saturday morning. You're not doing that with the S and P index and you're not doing it with like New York City real estate either. So there are a lot of capital assets. You know, old masters, paintings, good real estate, beachfront property, good companies, equity. But bitcoin is the advantage of you can't make any more of it. Everybody in the world, the Chinese recognize it, the Russians recognize it, your enemies like it, your friends like it, the Europeans like it, the Americans like it. It is truly global. Everywhere in the world, you'll find people that would take it from you, buy it from you, or trade it with you. And it's commodity. And a commodity is very important because a commodity means an asset without an issuer. And that means that anybody can trade it. You can. There are a thousand exchanges that trade Bitcoin. Whereas if it was designated as security, like Apple stock or Nvidia as a security, you have to be a registered broker, dealer or a registered exchange. And there are rules, when can it trade? There are a ton of rules about disclosure. And so no one is ever going to meet a random dude and trade some Apple stock for a Jeep in Africa on a Saturday afternoon. But you could definitely do that with Bitcoin, right? So it's just more useful because there's no government that dictates to you, for example, what you can do with your firewood or what you can do with your oil, their commodities or your soybeans or your Bitcoin. Right. If it's a commodity, it's beyond securities regulation and that makes it useful. And that means entrepreneurs can create a mobile app on an iPhone or an AI app. And you're like, I'm just going to go ahead and trade it or vibrate it a million times a second. And I've got this idea to do something with it. And so when a billion AIs come up with a billion trading ideas with a billion other AIs and they're doing it while you're sleeping, that's happening with a digital commercial commodity that's very, you know, might be illegal with a security like for sure you can't do it. So you have a good idea, but you can't implement it because of regulatory constraints.
- [18:44]
Host
And speaking of AI, are you incorporating that with any of your companies at the moment?
- [18:47]
Michael Saylor
We are. We are business intelligence software business. That was our, our first product and we injected AI into it and that's made the product 10 times better. But the most valuable use of AI is we used AI to design STRC. So when we create our digital credit instruments, we take digital intelligence, which is what AI is, and then we say we've got some digital capital, which is what Bitcoin is, and then we want to carve a credit instrument out of the capital. We didn't just create stretch. Stretch wasn't the first thing we did. We actually created a product STRK strike, which was a convertible preferred stock. And then we created Strife, which was a fixed preferred stock that made a 10% dividend forever. And then we created Stride, which was a junior fixed dividend stock and stretch was the fourth thing we created. And you could think about digital capital like a block of plastic or Lexan or something. And then I've got a computer generated milling machine and I want to mill a picture of a beautiful woman or a jet airplane or a pineapple. I just put the design into the computer. The, you know, the 3D printer or the milling machine spits it out of a block of, you know, just pure, you know.
- [20:07]
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- [20:50]
Host
Let's go acrylic.
- [20:51]
Michael Saylor
Yeah, well, Bitcoin is like that. You can carve out any amount of volatility, any amount of yield. If I wanted to create something that was yielded 6% a year in yen, I can carve that from bitcoin, right? And so the, the trick is you need digital intelligence to design the security. So we actually took AI digital intelligence, we created strc and the idea is let's create something that is like a money market, like a very stable instrument. And we had to like, you know, we had to have a shelf registration paired with a variable monthly dividend paired with a flexible ATM program. We put a call option above it, right? And what pops out is the security itself, which then we take public on nasdaq. What I would tell you is it never would have come to life if we didn't have AI because no one in the history of the world ever did this.
- [21:53]
Host
Wow.
- [21:54]
Michael Saylor
This is the first variable monthly rate preferred stock in the world. No one ever had a variable credit spread on a preferred stock. So we were doing something no one had done before. When you go to a banker and say I want to do it, they're like, well, no one does that you go to a lawyer. I want to do this. Well, no, that's never been done before. Well, do you think I could do it? Well, I'm not sure. I've never done it before. I would get back to you in a month. Maybe it'd be better if we don't do it. So when you approach bankers and lawyers or people who are in the business for 30 years with a brand new idea, especially if it's a financial idea, everybody's very risk averse, right?
- [22:32]
Host
Especially.
- [22:32]
Michael Saylor
So their response is, well, I don't know, it'd be much safer if we just didn't do it. Yeah, yeah, yeah. But if we didn't do it, we wouldn't create billions and billions of dollars of value for the shareholders. Right? And so with strc, we did something that had never been done before. But you asked the AI, you're like, well, can I do it? Yeah. No one's done it. But yes, totally legal. It's totally, you know, there's no pro. Will the NASDAQ object? No. Will the SEC object? No, they should be fine with it. But my lawyer says, blah, blah, blah. Well, just tell your lawyer this. So I actually first use the AI to design the security. Then I use the AI to figure out how to explain it to the lawyers. Then I use it to explain it to the bankers. Then we use the AI to explain it to the investors. So it's all about legal analysis, financial analysis, communication. And what's the payoff? The payoff is, is a two and a half billion dollar ipo. And then the payoff is all of a sudden we're selling $3 billion a month. You created a product. And by the way, when we sell $3 billion of STRC, we're basically entering into a perpetual swap with the counterparty. So what happens is we're agreeing to pay sofr, the standard overnight funds rate, with a credit spread monthly, forever. We're never repaying the principal. And then we're getting back the performance of bitcoin forever. So we think bitcoin is going up 30% or, or even 10%. We're getting that and we're agreeing to pay SOFR plus the credit spread.
- [24:03]
Host
Right.
- [24:03]
Michael Saylor
Now here's the punchline. If you think bitcoin is going up 10 or 11% a year, then when we saw $3 billion of credit, we made $3 billion of net income for the company.
- [24:14]
Host
Whoa.
- [24:15]
Michael Saylor
In a few days, oh my gosh. Right. You might be. We've sold a billion a day. You're making $1 billion in six hours in net income. If you think that bitcoin is going up 22% a year, you made a billion up front and another billion on the back end. Wow. And so, of course, this bewilders people, drives them insane. Because if you're a bitcoin hater, you're like, bitcoin is going to go to zero. That was stupid to do that. But if you're a bitcoin maxi, or if you believe in bitcoin, then when you sell eight and a half billion dollars of credit, you made eight and a half billion dollars of net income.
- [24:51]
Host
That's insane.
- [24:52]
Michael Saylor
We can't call it that because it's not a GAAP term. It's analogous to. We would call it BTC gain, a bitcoin gain on the trade. And we've had, I don't know, $5 billion of those gains in the first four months. That's right. And so you wouldn't understand it without AI. What I'm describing is you want to create a lot of money in a hurry. A good thing to do is pair digital intelligence with digital capital with digital assets, you know, sold on a digital distribution channel, marketed with digital communications. Right. Just pure digital. When. When somebody buys $100 million worth of. Of digital credit from us in a day, we create $100 million of collateral. The same. We buy a hundred million of bitcoin the same day.
- [25:48]
Host
It's one to one.
- [25:49]
Michael Saylor
So if someone's buying $100 million an hour, we're buying a hundred million of bitcoin an hour. Now imagine if you were doing this with real estate. Someone gives you a billion dollars, and you have to go build a billion dollars with buildings.
- [26:00]
Host
It would take years, decades maybe, we're creating.
- [26:03]
Michael Saylor
So when we sell a billion dollars a day, we're creating a billion dollars of a digital building the same day.
- [26:07]
Host
Right.
- [26:08]
Michael Saylor
So the capital cycle, the cycle is insanely fast. Right. Because it's pure digital. That's what makes this work so well. You know, if you. If you want US to create $10 billion of digital credit, we can create $10 billion of credit with $10 billion of collateral. And we've got a bitcoin market that trades 50 billion a day.
- [26:30]
Host
Wow.
- [26:30]
Michael Saylor
That we can work in. So sometimes we're buying a hundred million dollars of bitcoin an hour.
- [26:35]
Host
Geez.
- [26:36]
Michael Saylor
And we're creating $100 million credit an hour, and that's making us $100 million of net income an hour.
- [26:43]
Host
Yeah.
- [26:44]
Michael Saylor
$100 million of BTC gain an hour. Right. And you know, if you're a BTC hater, you don't want any of this, right?
- [26:51]
Host
Yeah, it's those, those guys are still around. I feel like they're far and few these days.
- [26:55]
Michael Saylor
Fewer and fewer people are starting to. Bitcoin is now being embraced generally as global capital, as digital capital. And the consensus is flipped that it's capital. And, you know, if you look at the senior regulators, the head of the sec, the head of the cftc, the head of Treasury, Warsh, who's the incoming head of the Fed, they're all pro digital, pro innovation, pro digital assets. They believe this is going to empower the people, enrich the nation and part a benefit to the world. Yeah, so we, we, you know, as, as does the President of the United States, who wants to be. Wants us to be the crypto capital of the world is the bitcoin president. So Donald Trump's a believer. The people in the administration are believers. We've got the most pro digital assets and pro bitcoin administration that we've ever had in the history of the industry. And everybody else in the world copies us. It's not just in the uae, but Europe, the uae, South America and even China and Russia, even our enemies copy us. You know, when, when we're doing these things right, they might want to do it with their twist. But the real point is we, we've crossed the event horizon or the inflection point. The, the last five years or four years was the industry struggling for legitimacy. The next four years is really hypergrowth, I agree. For the entire digital assets industry.
- [28:24]
Host
Do you see any other major hurdles to bitcoin at the moment, or do you think it's just smooth sailing from here?
- [28:29]
Michael Saylor
No, I actually think bitcoin's biggest problem is it doesn't have any hurdles. Oh, yeah, like it's overcome all of the concerns. There was energy fud. It uses too much energy. And that went away. And then there was. There was a. It doesn't have a block space. And that went away. And then there's a, well, will the government embrace it? That went away. What about the banks? The banks are embracing it. Will Wall street embrace it?
- [28:56]
Host
You know, not the ETFs now.
- [28:58]
Michael Saylor
So the truth is bitcoin is reached. We've reached global consensus that bitcoin is the digital capital network. You know, the joke, of course, is because there really is no risk, people have spun up quantum fud. It's like, oh, yeah, well, there's no issue. But like, in a decade, if there is A quantum computer and everybody doesn't do anything about it then is that a risk? Yeah, but it's really down to the point of it's working really well right now. And digital credit is exploding, as we pointed out. Right. A zero to $10 billion business in less than 12 months. And I think that the real interesting developments are going to be digital currency, stablecoins, tokenized securities, digital securities, digital tokens, digital exchanges, digital wallets, you know, digital derivatives, all of these things. And, and that's, that's evolving in a lot of different directions in a hurry, everywhere in the world. And there's, there's a bit more regulatory question there, right. Like what kind of securities can I tokenize in the US and you can trade them and can I custody them
- [30:09]
Host
and yeah, I know with real estate grant Cardone and there's some people trying to do that with physical assets, right?
- [30:14]
Michael Saylor
Yeah. Well, I think if you're looking for where is the, where is the safe haven? You know, Bitcoin as digital capital is clear, understood and accepted. Things like STRC as digital credit, it's all basically subject to 100 year old securities law, 100 year old tax law, trading on the NASDAQ, 50 year old exchanges. It's all very well understood.
- [30:36]
Host
Yeah, it's hard to beat that with real estate. There's just so many hurdles and tax implications. It's not my favorite thing to invest in at the moment.
- [30:43]
Michael Saylor
It's complicated, it's heterogeneous, it can be opaque, it can be a liquid.
- [30:48]
Host
Yeah, all sorts of fees and taxes too.
- [30:51]
Michael Saylor
The other challenge, you know, the beauty of Bitcoin is Bitcoin is like cyber Manhattan. And what would you like about that? 21 million blocks in cyber Manhattan. No mayor, no mayor, no governor, no zoning board. No one can zone, you know, your property, you know, rural, agricultural. No one can put a property tax on it. Yeah, no one, no one can rent control it. And when you decide to take your property with it, you can teleport it anywhere else in the world. With real estate, if you're investing in a city or a state, you're trusting the mayor, the governor, the neighborhood, the weather. What if the climate changes? What if they don't have Jazz Fest here next year? What if they reroute the road? There's just a lot of uncertainty that creates stress in the physical world and the political world. If you just had a digital building in cyberspace and there was no bad weather and you didn't have to worry about traffic and rent control and mayors and you could take it with you. The greatest joke in money, right, is that people say you can't take it with you. Well, bitcoin's the first thing you can take with you. You can take it with you to the grave. You can take it with you any other place. You can zap it off into the hemisphere. Right. It can live on beyond you. And you can't say that about any other physical asset. You can't say it about a company, you can't say it about a building. You can't. The pharaohs tried to take their gold with them. They couldn't. They're grave diggers that'll break into your pyramid, right? So, so the, the, the ideological bitcoiners, the people at this conference, they would say Bitcoin represents the apex property rights of the human race. It's for the first time in the history of humanity, you have property rights that are yours, that no one can take away from you. If you memorize those seed phrases and your money is in your head, I can kill you, but I cannot take the money with everything else. You're a rich man. I kill you. I take your stuff. The incentive is the violence. I can take your gold, I can take your building, I can take your company, I can take your securities, I can take your bank account, I can take your Picassos. But with bitcoin, if you know what you're doing. Right. I'm not getting it. Yeah. And that's incredibly empowering because since I can't get it through violence, I have an incentive to negotiate with you. There's an incentive for me to get along with you. Right. Because you have power. You have economic power. And so it is the great digital economic empowerment of 8 billion people. And that is the base layer. And if you want to create an empowered, rational, fair digital economy, you got to start with this base layer that represents integrity and empowerment and trust. And that's why I refer to it as digital capital.
- [33:44]
Host
Yeah. It might be the first ever currency to never fail. Because when you study history, every single currency has failed, right?
- [33:50]
Michael Saylor
Yeah. Every currency generally has been issued by a government and they're all like credit based currencies. So I mean the Babylonian currency, the Lydian currency, the Greek currencies, the Roman currencies, the, you know, the European currencies, the Russian currencies. If you read the history, the History of Civilization by Will Durant, it's like 13, 14,000 pages.
- [34:15]
Host
Wow.
- [34:15]
Michael Saylor
He's got 152, 300 stories of currencies failing and he's Got one funny line, you know, in the book, he's talking about, like 16th century Russia under the czar. And he's talking about how the czar overprinted the currency to fight a war and it went to zero. And he said, the last thing, you know, you want to. You want to save your wealth with is with money. Yeah, well, the last thing you want to save is money. You know, it's like. And that's really just, you know, government currency that the. The best currency traditionally was gold, which was the hardest currency, the soundest money. And gold has traditionally a 2% inflation rate a year. So it's losing 2% of its value a year because the gold supply is not fixed.
- [35:02]
Host
Oh, I thought it was.
- [35:03]
Michael Saylor
It's not a finite amount if you couldn't mine gold.
- [35:07]
Host
Oh, yeah, they're still mining it.
- [35:09]
Michael Saylor
For example, we had hyperinflation of gold when Caesar came back from the Gallic Wars. He stole so much gold that he dumped gold on the market. And they had hyperinflation in Rome when he came back. And we had hyperinflation in gold after the California Gold rush, you know, the 49ers, that created inflation and that created hyperinflation. The European currencies that are gold backed. And it was good for the Americans. We pretty much bought a bunch of stuff from the Europeans because we debased their currency by creating too much gold. And when the Spaniards invaded, you know, invaded South America and Central America, right after 1492, they stole so much gold right from the Incas, the Aztecs, the Mayans, they brought that gold back and Europe was on a gold standard. They created hyperinflation, right? And so prices in Europe over that century increased by like 500%. And it actually was a source of problem for the Spanish Empire because they basically were just living off all of the stolen gold and they destroyed all their own industries and they couldn't make anything.
- [36:19]
Host
Wow. It stole so much, it actually hurt them.
- [36:22]
Michael Saylor
The point that I want to make is gold generally is always losing 2% of its value because gold miners create 2% more supply of gold every year. But in certain occasions, it loses a lot more because there's a surge of gold. The thing you want to think about with currency is the rule of 72. It's like, if you have 2% inflation, that means that you have a half life of 36 years. You divide 2 into 72, your money is losing half of its value every 36 years in gold. If you have 7% inflation, you're losing half your wealth in dollars at 7% inflation every 10 years. Oh, my gosh. You see, that's crazy. And you're like, okay, so that means that if you had a million dollars a hundred years ago, you get cut in half ten times. Okay, what does that mean? I'll tell you what that means. The land that my house is on in Miami beach is waterfront property that cost $10,000 in 1930. It cost $10 million.
- [37:26]
Host
Wow.
- [37:27]
Michael Saylor
It's a thousand x inflation. So the thing you want to be keeping in mind is fiat currencies. The best one is going to lose 7% of its value a year forever. The best one, that's the US dollar, has lost 7% of its value against scarce desirable assets against a fair yardstick. It's not going to lose 7% of its value against manufactured cereal, because we create box cereal much more efficiently today than we did a hundred years ago. If a robot can make it, it's not going to lose its value against listening to Beethoven's Ninth Symphony, because everybody can listen to Beethoven's Ninth Symphony for free. Used to be rich people could listen to it, you see. So it will lose its value against beachfront property or against Picasso or against something that's truly rare. So that's the best. The mid tier Currencies will lose 14% of their value, and the weak currencies will lose 20% of their value a year, and they will just hyperinflate and collapse. Like in Argentina, where every, you know, at that rate, your currency's gonna collapse in 10 to 20 years.
- [38:32]
Host
Wow.
- [38:33]
Michael Saylor
And you see it and.
- [38:34]
Host
Yeah, Bolivia's going through it right now.
- [38:36]
Michael Saylor
Yeah. What Bitcoin is special, though, is because it's digital gold. But how do you make gold better? If I made it illegal to mine any more gold, and I capped the gold supply at 21 million gold coins, and then if I made gold weightless, and then I gave everybody in the world the power to teleport their gold here and there, and then I let you store the gold in cyberspace forever, for free. Gold will be a better currency. It would be a better store of value or a better capital asset than it is right now. And that's bitcoin. I just described it right. It's just the perfection of the idea of hard money by an engineer using technologies that we didn't have 50 years ago in the history of the world. We never had the technology to create Bitcoin. Perfect digital money or perfect money.
- [39:29]
Host
Yeah.
- [39:30]
Michael Saylor
And so every economist that ever wrote on the topic, their Idea of perfection was gold coins, maybe, or gold bullion. Right. And you can't blame them for not. Not imagining. Bitcoin is kind of like a guy in 1800 or 1600 not imagining electricity. What if I gave you odorless, colorless, invisible, infinitely powerful energy? You know what they call that? They call that magic. A hundred years ago.
- [39:57]
Host
Right.
- [39:57]
Michael Saylor
Wi fi. That's magic stuff that we have today. So most economic theory, most political theory, it's based upon a world where people didn't have bitcoin, they didn't have digital capital. So I would say bitcoin kind of marks this period where economics goes from being an artist to a science.
- [40:19]
Host
Yeah.
- [40:20]
Michael Saylor
You know, we go from superstition to engineering. It's like, well, I just think we should do that well, because there's no better. And now there's actually a right way. With electricity, there's a right way. You know, with steel, there's a right way to do things. And with bitcoin, there's a right way and there's a wrong way. Most of the world still doesn't get it. You can't blame them. 10,000 years of not knowing it, and all of a sudden it pops up 15, you know, into 2009, not many years ago. And the next four or five years, we'll introduce digital assets and digital capital and. And the benefits of digital credit and digital money to the world. That's exciting, and that's good. Yeah. We're lucky to have the opportunity.
- [41:03]
Host
Yeah. I'm excited. I can't wait to get more involved in it. Where do you see the dollar going? I know the company has $40 trillion in debt right now. Do you think it could get to that mid tier, that 14 range ever, or do you think it'll stay around 7%?
- [41:14]
Michael Saylor
I think the dollar has emerged as the world reserve currency. It's becoming the world reserve digital currency. If you go to Europe, the Europeans don't want the euro. They want the dollar. If you talk to the people that create stablecoins, you say, what's the demand for the digital euro versus the digital dollar in Germany? In Europe, in France, they'll say that the band is 100 to 1 in favor of the dollar over the euro. So here's what I think's going on. Macroeconomically, the US Dollar is the world reserve currency. Everything's pegged to that. And, yeah, it's maybe debasing. It's inflating like 7% a year generally. Plus some years, like during COVID it inflated more faster and Other years it'll inflate slower, but it will gradually just expand at about that 7% a year. And that kind of works out. If you kept all of your wealth for 30 years in the dollar, you would notice you got poor. But most people don't have a 30 year attention span and they won't notice. And so everything kind of just works along that. People are going to sell their cny, their Chinese currency, their Russian currency, their Ukrainian currency, the European currency, all the African currencies, all the South American currencies when they have an opportunity for the dollar. So the dollar will probably hold that strong position for quite a while because the other currencies are just much where, like where are you going to go?
- [42:44]
Host
Right?
- [42:44]
Michael Saylor
Where are you going to run to? It's not that the, it's not that the U.S. is perfect. It's, it's just that everybody else is much more imperfect. And, and so I, you know, I, I have confidence in the nation to manage that. And the, the, you know, if you're an optimist, you would say we're going to harness digital intelligence and digital assets and, and technology and science and we're going to create, you know, a robot in every home that cost you 100 bucks, that does all your work. Every car is going to drive itself. We're going to create unlimited energy by, you know, doing modular nuclear reactors and we're going to make them 100x more efficiently than we've made them, you know, and, and we're going to, you know, reduce the cost of legal research by a factor of a million. Now Everybody can have 10,000 lawyers working for them for 10 bucks a month.
- [43:41]
Host
Yep.
- [43:42]
Michael Saylor
Right. So there's a lot of ways to generate prosperity and abundance. I think that technology will allow us to create a lot of things in abundance. And I think we will, we will grow the economy at a rate fast enough to negate the worst impacts of, of monetary expansion. And that's another way of saying, I don't have confidence we'll get to 0% inflation or debasement. I have confidence that, that the negative will be currency money printing, but the positive will be inventions by Nvidia and Tesla and you know, makes sense. All of the entrepreneurs and, and at the end of the day, you grow yourself into the future. Right. If you look at the impact of say, Standard Oil on the world, the human condition was so much improved when we had gasoline and diesel and kerosene like used to be. People spent an hour a day carrying water back and forth from the well, wow. Yeah. So imagine yourself, you know, carrying water up, fight five flights of stairs or walking 50 miles on foot to get from here to there. Right. You know, and then we replaced that with like cars from Henry Ford and gasoline and imagine rowing across the Atlantic. Or you get it, you get in a boat, you put out sails, you know, and now we fly via a jet. You know, so there are certain obvious technology developments that industrialize the world and, and right now we're getting unlimited human intelligence. And there'll be a wave of white collar automation and then there'll be a wave of blue collar automation. And, and it will be disruptive and it will be scary and anxiety inducing, but no one's starving to death. There's just going to be a political debate and a social dialogue about how to distribute all that wealth. Universal basic, universal education, universal healthcare, universal basic income, universal, you know, heck, you've already got universal entertainment. Right. You have like infinite free everything, YouTube university. Right. And like it used to be people paid money for that.
- [45:53]
Host
Yeah.
- [45:53]
Michael Saylor
And when I was, I was a kid, rich guys tried to impress women by showing off their record collection. But only rich guys because the rest of us couldn't afford a record collection. So the world's going to change, but I think it'll change for the better. And I'm an optimist.
- [46:08]
Host
Yeah, I'm excited about it. I know a lot of people are worried about AI right now, but in the long run I think it'll be good, right?
- [46:14]
Michael Saylor
I think so.
- [46:15]
Host
There's a lot of jobs being replaced or not. Companies aren't hiring right now because there are a lot of law firms right now, especially paralegals are not being hired at the moment because AI can pretty much do what they do.
- [46:26]
Michael Saylor
Change is coming. Look, a lot of people are afraid of fire. You know, we've got a word in the English language. You got burned. A lot of people are afraid of electricity. Another word. You got shocked. Right. And at the end of the day, there are fires and people do get shocked. But the world's a better place and we figure out how to deal with it. Yeah, you know, it used to be a lot of people were gainfully employed in the agriculture business. But if you asked the average person in America today, do you want to actually pull a tractor or pull a plow in a farm, the answer is no. No, the job went away and nobody misses it. You know, there are plenty of jobs that are just difficult jobs. And I think everybody would like to live. They'd like to live happily ever After. And so we know we need income, maybe we want a job that we enjoy. Right. The world's gonna have to change in order to give people more of everything. And, you know, I think that, that if we have good leaders and they act with grace, they'll find a way to make that the most graceful kind change they can. Absolutely.
- [47:31]
Host
Start looking into bitcoin, guys. If you haven't, your PIN tweet for your cycle is dead. I wanted to talk about that. So you believe that?
- [47:38]
Michael Saylor
Yeah. The reason I believe that is because every four years, the amount of bitcoin produced by miners gets cut in half. And right now they produce 450 Bitcoin a day. In two more years, it'll be reduced to 225 Bitcoin a day. If you take the price of bitcoin and do the math real Quickly, it's like 32, 33 million dollars of Bitcoin a day available for sale by all the miners in the world. That means in two years, there'll be $15 million of supply taken out of the system. The bitcoin spot market trades 20 billion a day. 20 billion.
- [48:12]
Host
Wow.
- [48:12]
Michael Saylor
We're going to take 20 million out of the market. Right. It trades 20 billion a day. Right now, the derivatives market is 50 billion a day. Our company has created $10 billion of digital credit. In a year, there's only $10 billion of Bitcoin available for sale by every miner in the world. So if the digital credit business grows by a factor of two or three or four, right now we're buying two bitcoin for like every bitcoin mined.
- [48:41]
Host
Wow.
- [48:42]
Michael Saylor
Just our company. So my point of the tweet is that if digital credit explodes, digital credit will buy $50 billion of Bitcoin a day. And there's only 10 billion, sorry, $50 billion of Bitcoin a year. And there's only $10 billion of Bitcoin a year available for sale. And if bank credit forms, if the banks start giving you loans against bitcoin, that's another 50 or $100 billion. So the formation of the credit networks are going to be orders of magnitude more important to the price of bitcoin than the constriction of the supply coming from the miners. That wasn't always the case. In the first four years of bitcoin, half of the bitcoin was mined. Half. And the next four years, 25% of all the bitcoin in the world was mined. So it used to be it was a supply side dynamic driving the price. Now it's really a demand side, and the thing to look for is the amount of capital that flows into the ETFs, the amount of capital or credit that's created by the banks, and the amount of digital credit that's created by companies like mstr. Yeah.
- [49:50]
Host
I always wondered, because there's a bunch of mining companies here, but with the cost of electricity, is it even a viable business model anymore?
- [49:56]
Michael Saylor
It's a more challenging business now than ever before.
- [49:58]
Host
Yeah. Because electricity is so high. Especially with these AI data centers now, too.
- [50:02]
Michael Saylor
The people that, that will always mine bitcoin are those with stranded energy and stranded capital. Right. For example, a third, a third of the energy, a third of the electricity, oftentimes it's stranded where there's not an economic buyer for it. If you have a volcano in the middle of Africa, it's spitting off huge amounts of energy. Really? There's no buyer for it. Oh, it's stranded. What if you have, like, you know, geothermal, you know, geysers in Iceland or in, you know, the Arctic zone there. There is energy in the world, there's no buyer. So, like, another example is the Three Gorges Dam in China. I think they produce like 22 gigawatts of energy, but they only had demand for half of it.
- [50:49]
Host
Hmm.
- [50:50]
Michael Saylor
What do you do if you end up with an extra gigawatt watt of energy? And the answer is you mine bitcoin with it and you monetize it. So there's always going to be a use for it. It's just, it'll migrate to the edge of the grid. Another example is you. If you have intermittent energy, like on the ERCOT grid in Texas, they have too much energy during the day when the wind's blowing, and they might not have much energy when it's quiet at night and the sun sets.
- [51:16]
Host
Got it.
- [51:16]
Michael Saylor
And so if they have too much energy, they have to curtail it. They, they, they're going to burn out the grid unless they use it.
- [51:22]
Host
Oh, wow.
- [51:23]
Michael Saylor
So you need a shock absorber to absorb the energy. And. And batteries aren't very. Batteries are too expensive, don't work well.
- [51:29]
Host
Yeah.
- [51:30]
Michael Saylor
So. So a bitcoin miner makes a really good shock absorber when paired with an intermittent energy source or stranded energy source. And so that's why bitcoin hash rate keeps going up. It doesn't matter whether the price. If price goes up, it goes up, the price goes down, it goes up. It's always going to grind up because you're always going to have that stranded energy and the cost to mine, the semiconductor cost keeps decreasing and we just keep getting more efficient with semiconductors than ASIC chips.
- [51:59]
Host
Yeah. I'm sure you looked into it over the years, but your, your model now, you could buy way more bitcoin than mining like you said. Right.
- [52:05]
Michael Saylor
I, I think the more lucrative thing to do is buy the bitcoin or you know, I would always say, you know, buy digital capital or create digital credit.
- [52:13]
Host
Right.
- [52:14]
Michael Saylor
Or you know, or create digital money. Right now there's a great opportunity to create a zero volume, 8% stablecoin type instrument, a stable digital token. It's powered by STRC, which is powered by bitcoin.
- [52:30]
Host
Yeah. Is that the next phase that you want to get into, the stablecoin?
- [52:33]
Michael Saylor
Actually all of our downstream partners, a lot of partners are doing it. Companies like Apex and Saturn are doing it and their businesses are growing like wildfire really. From a stablecoin, if you're a crypto entrepreneur, there's the mythical bitcoin backed stablecoin that pays 8%. I mean most stablecoins pay 0 or 3 or 2. So how do you create something that pays 8? The answer is digital credit. So that is actually taking the entire defi crypto economy by storm right now. I think there's probably a dozen, I've seen a dozen different, you know, organizations and protocols doing something stablecoin. It'll probably be 100 shortly. Yeah, I mean I think that'll be a multi billion dollar business within a matter of months.
- [53:17]
Host
I mean it makes sense. People don't want to carry dollars anymore, you know, because the inflation like you're saying 7% a year. Yeah. And that's, people think it's lower, they think it's two to three.
- [53:25]
Michael Saylor
But you see the magic number is if the number seven, then when you, if you're holding a savings account or a stable coin that pays you 8, you're outstripping inflation.
- [53:35]
Host
Right.
- [53:36]
Michael Saylor
So then you've got perfect money, you've got a medium exchange, a unit account, a store of value, all without taking any risk. Absolutely right. So that, that's the mythical thing that people have been shooting for. We didn't really crack that code until we created digital credit. Because you can't take a 40 Vol asset like Bitcoin and immediately step it down to a zero volume stablecoin.
- [53:59]
Host
Yeah.
- [54:00]
Michael Saylor
If you try to just take that leap, right. And people start levering it, it's just too much fragility, it blows up. You need that intermediate step. And in our case we were fortunate enough to have about $65 billion of equity type capital. So if you have a lot of capital, a lot of equity, then you can create that credit and then you can absorb that volatility and be the transformer between the bitcoin market and the currency.
- [54:27]
Host
Yes, I know Elon was holding it with Tesla for a bit. Did you talk to him after he sold? Like, did you find out what happened there?
- [54:33]
Michael Saylor
I talked to him from time to time, yeah.
- [54:35]
Host
Did you find out like why Tesla sold most of their bitcoin or.
- [54:39]
Michael Saylor
I think there, I mean he's laser focused on other things. If you want to, if you're in the bitcoin world, you need to be laser focused on bitcoin. Like we obsess over 3000 hours a year and if you're laser focused then you can deal with all of the volatility. But if you look at successful businesses in other areas, their view is, you know, my focus needs to be on making the greatest car or making the rocket or making optimus robots. Yeah, Optimus or something like he will live or die based upon whether Optimus works. Right. Or whether the Tesla self driving car works. Whereas in our case. Right. We live or die based upon whether digital credit, whether bitcoin works and whether our, our equity works. So, so I think it's very difficult for human beings to be 100% committed to lots of different things in different fields.
- [55:34]
Host
Agreed. That's fine.
- [55:36]
Michael Saylor
Elon's. The truth is he's a, a rarity that he's been successful with SpaceX, with Starlink, with Tesla.
- [55:42]
Host
Yeah.
- [55:43]
Michael Saylor
You know, and with X it's very rare that happens. But, but it's not human. What's more reasonable to think is you figure out what you're going to do and you devote yourself heart and soul to that thing and you focus upon that thing and otherwise if you're not really focused on that thing, you're probably better off with someone else taking the risk. Like for example, I'd rather him make the self driving car and I buy it. He's probably better if he buys STRC and gets and collects 11% and we take the risk. Right. That's a good economy. Right. I trust Apple to do the next iPhone And I trust SpaceX to make the Starlink thing work.
- [56:24]
Host
Yeah.
- [56:25]
Michael Saylor
But on the other hand, you know, that's because they're willing to invest, the AI guys all invest $50 billion in their next model. We're willing to invest $50 billion in digital credit. Right. So, so it's a, this is an example of you got to be ready to invest everything you have if you want to create the best thing in the world.
- [56:44]
Host
Go all in. Yeah. Well Michael, it's a pleasure having you on, man. How could people watching this get involved and support for you?
- [56:49]
Michael Saylor
Yeah, well we say bitcoin is hope. So if you want to know about bitcoin go to hope.com HPE we got a lot of data there. My personal website's michael.com and if you want to follow my thoughts on X my last name sailor at S a y L o r. Awesome. We've got a common continual stream of information across those channels.
- [57:10]
Host
Check out the links guys. Thanks for watching. See you.
- [57:12]
Sponsor/Promoter
If you learned anything from this episode or got any value at all, please share this episode with a friend.
- [57:17]
Host
Friend.
- [57:17]
Sponsor/Promoter
It helps us grow the channel, it helps us grow the podcast and it means a lot to us. Thank you so much.