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- [00:00]
A
Welcome back to the hurdle rate episode 56. For the week of April 20, 2026, the price of Brent crude is $94. The price of bitcoin is priceless, but it's currently trading just above $76,000. I'm Tim Kotsman. I'm joined by Matt Cole, Jeff Walton and Ben Workman. We have an Iranian blockade and a U.S. blockade at the Strait of Hormuze. But in the words of Michael Saylor, it's impossible to blockade the bitcoin. On Friday afternoon, six minutes after market close, Strategy announced they are proposing to pay semi monthly dividends on stretch instead of monthly. No change to the annual dividend obligations or dividend rate. They said, quote. These proposed changes are intended to stabilize price, dampen cyclicality, drive liquidity and grow demand. And then this morning, Strategy announced it acquired 34,164 Bitcoin at $74,395 per Bitcoin and has achieved a Bitcoin yield of 9.5% year to date. Strategy now holds 815,061 Bitcoin, 3.8% of the Bitcoin supply. The purchase was 85% funded by the stretch atmosphere. Strategy has now passed BlackRock to become the third largest Bitcoin holder in the world and the largest institutional holder of bitcoin in the world. In other news, Charles Schwab had a great first week in the Bitcoin ETF market with over $100 million in inflows, making it the most successful ETF ever for Schwab. They're also out in the market putting out educational content about bitcoin in portfolios. So I'm sure we'll talk about all of that. But Jeff, I guess two starting questions out of the gate for you. One, will BlackRock ever regain the number one spot against strategy? And number two, have you told your wife that your new favorite three words are more digital credit?
- [02:09]
B
Yeah. No, she knows. She knows. What are we talking about today? We're talking about digital credit, that's for sure. That's. That is the topic du jour every single day. So. But big points there, tim. Strategy flipped BlackRock. And I think there's a 0% chance that BlackRock will ever regain or re flip strategy. I think at this point the capital flows that are coming into strc, the capital flows that are coming into MSTR are very indicative of the capital market continuing to change. And right now we're starting to see this last week strategy, the common stock equity is starting to price higher I think today it closed around $170. Just a few weeks ago it was down near, you know, 120, 100, $110. So seeing start a lot of energy come back into the ecosystem here, which is a great to see a couple of points on last week what happened. So strc, the record date was on the 15th. So if you, in order to get the dividend on STRC, it had to be holding the instrument on the 14th. There were $2.7 billion of flows into STRC over those 2 days. So massive volume, like $2.7 billion of volume over 2 days. Like that's, that's insane. We're talking, you know, the JP Morgan perpetual preferred trades, $2 million a day again, 2.7 billion in two days, $2 million a day for the JP Morgan, like the scale is insane. And they raised $2.1 billion off of that 2.7 billion of flows. So roughly 80% of, 80% of the capital that came in the door, 80% of the volume. They were able to ATM and pull that capital in the door and go and buy Bitcoin with it. So fascinating to see. And then on top of that, the common equity actually had a very good week as well. So the common equity traded $17.8 billion on Friday, a massive volume day. There was $8.6 billion of volume. It was top 10 publicly traded stock. Yet the company is still Ranked around the 250th largest publicly traded stock. So the capital that they brought in the door I think is around 360 million, 366 million relative to 17.8 billion. So the ATM on the common stock was around 2.1%. And in that period of time the stock went from what, $132 to $166. So it's, you know, massive increase. Like the price of the stock is increasing. They're able to bring the capital in the door. They've got strc, all systems are cooking. And then the announcement on Friday, which I would love to get your guys perspective on because I think it is a complete no brainer to push for more record dates and reduce the volatility. But maybe I'll kick it over to Matt or Ben to take it from there.
- [04:51]
C
Yeah, sure, I'll, I'll start with the, the semi monthly dividends, which I needed a, a vocabulary lesson this week because I think I initially called them bi weekly, semi monthly. So shout out to Brian Berkshire for the lesson there to everybody. But I'm a math nerd. Not an English major, but it's really important. And so what happens in income markets and so in traditional fixed income markets, how yield works is that into a dividend? The price of the instrument rises and we're seeing this with stretch, right? The, the almost $3 billion of demand in the last two days before the record date. And it makes sense, right? There's a, there's a, there's a payment coming and so more demand pushes into it and then a, you know, and then there's a drop off. And so by going semi monthly the, the drop off should be shallower, it should reduce volatility. This would be an efficient market assumption. I think if there were no rules and we lived in an instantaneous AI future, I could envision a future where you get paid every second, you just keep ticking up. But obviously we live on tradfi rels, we live within NASDAQ and DTCC and all the different components of paying dividends. And so it's moving towards more frequent payments. And I think that that is a, a good thing to drive down the volatility. Right. I think, I think Saylor's on record is saying if he could pay hourly, he'd pay hourly. Right. Like, and so clearly that's the direction that, that things are going. And I think it's, it's a great thing for the product. I mean you think about a corporate treasurer, if you're a corporate treasurer and you own an asset, the idea like a lot of the times they're owning like money market type assets, they don't draw down at all, they just go up every single day. Because they're a diversified portfolio of fixed income instruments. And the other interesting thing about fixed income instruments, unlike preferred equity, is that the accrued interest, so the amount of interest grows, it actually accrues into the price of the instrument automatically. So there's actually a calculation. So if you trade a bond on that's already efficiently in there. And so I think it's just part of the maturation of obviously these innovative products that, you know, will continue to grow the demand and dampen the volatility of them.
- [07:28]
D
Yeah, it's, everyone was really excited when they started with monthly, you know, and it's amazing how quickly it's evolving, but it shows you where the hyper focus is. I mean he wants to flatten that volatility to nothing. And so they're going to make whatever structural changes they're able to make to get it there because it just becomes such an attractive instrument at the time that they Accomplish that. Back to what you were talking about a little bit, Jeff. With the ETFs, not only did strategy pass IBIT, they passed the most successful ETF in history. So that's a pretty impressive feat on its own. And I agree that I think they're going to have a very hard time. You would have to have a huge amount of net new inflows coming into an IBIT for them to pass strategy. And I just don't see it happening because now more competition just showed up in the ETF market. They're no longer the lowest cost etf, which is likely going to alter where people put a new dollar. So I think you're going to see strategy in the number one spot and I don't think after a while it's even going to be close. So shifting over to the dividend discussion a little bit more, when tokenization started happening, I think that there was a lot of excitement around the ability to take out a significant portion of the middleman ecosystem that evolves in the tradition finance world.
- [08:52]
B
Right?
- [08:52]
D
Everything with the transfer agents and all these other intermediaries that are between the entity and the ultimate payments. And that was what I think a lot of people thought was going to bring us to that hourly ability to pay, daily ability to pay. And so there's obviously a focus on that. But I think that so far people have looked at that and thought, well, that doesn't seem to be possible. Now we're shifting to where you're starting to hear about 24 hour markets coming into the equities and when that happens over time, and I think it's inevitable that that's ultimately going to happen. You know, the model that it's trading in now with how globalized everything is becoming a little bit antiquated. Most of it's running on computerized automated rails. So I think ultimately you're going to see these 24 hour markets and I think that as that happens it's actually going to open up a lot of flexibility for the way that you can structure a lot of new products in that style of a market. I think right now they're structured so heavily around settlement terms and clearing and all this, all these other functions that they kind of hamstring the ability to get too creative in those markets. They need it to be very standardized and very predictable. But when things are running 24 hours a day, that becomes more obtainable. But what you saw was a massive, massive response on social media just to this move. If you thought getting paid monthly instead of quarterly, which was a big move in this space, was a big deal. If you were on the Internet when they made that announcement, you know, that people lit up over the ability to get these semi monthly. You know, now you're really recreating a paycheck, you know, through an instrument, which is kind of an interesting approach because that's also how people have largely been conditioned. You know, most of your jobs have conditioned you for capital inflows every, you know, two weeks or twice a month or sometimes once a month. And so that gets really ingrained in your relationship with money and your expectations for how your own accounts work. And so I think being able to align products like these to that mindset is just a massive unlock. And it takes away that desire for people to want to shift in and out of these anymore. So you do create that more stable floor. I also think over time, what you've seen with a lot of these products is when you get that initial IPO that comes out, you've got a period of time where that average cost basis for the holders has to move up the ladder from wherever that original discount was. And the more time it spends trading around par, the more volume churns, the more shares churn at that level and the higher that implied cost basis becomes. And it takes away the incentive for that arbitrage trade for people to sell off and then buy back at certain points. And that trade's actually been very profitable. You know, I've been watching that on some other securities as well, where it's averaging like a 50% annualized depending on which days you sell and which days you buy. And so there's a lot of people out there, I think right now that are looking at that arbitrage trade and playing that. But these shifts are slowly going to take the enthusiasm out of that trade. And the shorter you can make that timeframe, the less incentive there is to try to play and move in and out of those instruments. So I think this is going to be a massive structural shift for these types of products. And I think it's going to change the fundamental behavior of the investors that we see that have been allocating to them currently.
- [12:17]
B
Behavior. These instruments are going to fundamentally change how people interact with money over time. And just thinking about the construction going from one month or once a month to twice a month to semi monthly. Thank you, Matt, for the vocabulary. Going from once a month to semi monthly. The amount of additional work that it takes, like a finance team to do that is actually a very small amount of work, especially with AI tools that are available now, the infrastructure in order to make that change. Very, very small, but a massive impact on the user experience on the back end, right? Having that dividend hit more frequently, that impacts how you interact with the instrument. And just an anecdote, right? I made a video post about this on Friday. My aunt and uncle had part of their property ripped apart by a tornado and they had to figure out what to do, right? So they have credit cards, right? My aunt, uncle run a small business and they had to shut down their small business and then go take care of their property because the tornado tore it apart. And they had people, you know, coming to loot the property and all this crazy stuff was happening. So they had to run to Home Depot, grab chainsaws, board up the place, get all their stuff and it was just a complete nightmare. But at the same day the SEDA dividend hit and so they're like, oh cool, we have liquidity. Like we can use this if we need it, we can use our credit and you know, we've got the capacity there if we need it. And for somebody that's living a little bit more on a fixed income as they get older into life, like having that liquidity, it was a very clear use case of having that liquidity when you need it hit at the right time. And that will continue to evolve. Like we are not even a year into these digital credit instruments being out and they are fundamentally changing how people may interact and interface with money. And it's just so fascinating to see the way I'm kind of imagining this future. It could even potentially reduce reliance on insurance, like the insurance market. If people have large enough portfolios of these things. If there's individual isolated catastrophes that happen in any one location and people need to draw on liquidity of the market, the rest of the market may be lifting that security up while certain locations are, you know, drawing on it, depending on different situations. So we're only beginning to see how these are going to permeate throughout the rest of the market. And there's so, so many ways this will change how people interact with these things. So super exciting times. Love to see it.
- [14:55]
D
Well now take it where you know, okay, strategy is going to have a two week period now plug another product into the off weeks where they don't have it. What ultimately happens. You realize with a lot of people when you go talk to them about, you know, their relationship with money and you kind of learn how they view it, there's a lot of anxiety during that period between paychecks for a lot of people, where there's nothing coming in, right, you're kind of getting this injection of cash and you've either got to manage it for the next two weeks or the next month. Depends on what your pay cycle is. So when you start to have products that cover pretty much every week of the year and you can actually go tailor to a product to plug into the gaps in your own cash flows and start to alleviate some of that anxiety, it just takes some of that pressure off of people. I didn't realize until fairly recently when I was talking to a few of my friends how high that anxiety is. In between, the bills keep coming due. All of a sudden you forgot that you've got a car insurance payment that you had to pay that comes up every six months, you know, that you weren't planning on, and all these bills pop up. That anxiety period is immense. And being able to provide some type of a shock absorber in there, I think for a lot of people is something that's going to be incredibly desirable. And the more frequent those can become, the better it's going to be. So these are products, we say the same thing with bitcoin, we say the same thing with digital credit. These are products that you're going to find when you need to find them. The beautiful thing about, you know, high yielding, frequently paying products is everybody needs them and so they're going to find them. And you're starting to see that. You're seeing the demand, you're seeing the volumes ramp up, you're seeing the new capital flooding into the market. People want them, they need them, and now they're starting to find them. So we're just getting started on the, on the ramp here.
- [16:41]
C
Yeah, you think about the analogy to the iPhone and you have iPhone1, iPhone2, iPhone3, iPhone4. And stretch and SATA have both continually improved. They already started out as a true iPhone innovation, massive idea. And you look at Stretch, I mean, Stretch has now been around for around nine months. And you think about it, well, strategies introduced a cash reserve. Well, that's a volatility dampening instrument within them because they have cash to offset the volatile periods and not have to touch their bitcoin. So that, that helps answer an anxiety. You also have the fact that it's gone. We've gone through a bear market, or we're in a bear market and things are looking pretty good right now. But you know, that's a major question. How will these things do in a bear market? Okay, bitcoin goes down 50%, it's still at 100 and by the way, growing very quickly. Answers another question now. More frequent dividend payments. Okay, well that's another thing to reduce anxiety, reduce volatility, increase liquidity. All these different concerns and we're not even a year into it. These, they started out as already a massive idea. And to your point, Ben, I mean a monthly dividend was a groundbreaking innovation and we're already going further pressing the bounds of what is possible in the traditional finance roles. And I think that as people get more and more comfort with them, they're going to think about them more as if they are money themselves. If the volatility is near zero, if the dividend payment frequency is, is, is very frequent and they can get in and out of them with deep liquidity, then, you know, you think about this idea of, of a, of a bank that pays the 8% like Saylor talks about. Well, why would you not just want to have your debit card and make a bunch of money? I mean, I think it just makes all the sense in the world that, that a lot of people are going to prefer that to having a bank account or a checking account at Chase or Wells Fargo or whoever that you pay nothing on. I mean it's just so superior that you see why you had to go and people are like, well it's a preferred equity, it's blah, blah, blah. Name your criticism. Well, this is the way that it had to be done to make this happen and to make it accessible to retail. I mean most of the time all these income, interesting building products and sometimes they're interesting, sometimes they're risky in the sense of private credit that, but like they're often not even available to the everyday investor. And so what I think is so cool about this is that not only is a great product, it's available to everyone. And when you see the flows into Stretch and you see, I think I can't remember what the exact number is, but it's, you know, well north of 50% retail for stretch, right? That, that just like bitcoin in Bitcoin retail front ran the institutions. Well here you have a massive new innovation and you have the big money that says we need three year track records, we need to see how this plays out. And then you have retail just like it works. Give it to me. Right? And so because it's available in a, in a, in a, in a way that they can, that they can buy it again, they're going to front run the institutions. But, but the amount of different pools of capital that this will be interesting too, I think is just endless. And I think the continued innovation on top of it, opportunities are also endless. And so it just gets into, you see the volume here of how big this idea is. This is in my view just a clear multi trillion dollar idea. You think about private credit, multi trillion dollar idea in almost every single dimension. This is a better product than private credit. It's going to be bigger.
- [20:49]
B
Yeah, it's a big statement. It's a big statement. One thing I've been thinking about too is it kind of renders a lot of the tokenized ecosystem completely useless. I mean we all like most bitcoiners, think the tokenized ecosystem is completely useless already. But when you start to see these instruments get more liquid, more stable in an equity wrapper, in a brokerage account and the brokerage accounts are more modern and the, the brokerage accounts now have credit cards attached to them and you've got like Robin Hood. It's like, what's the point? Like I, I don't need to, I don't need to grab, you know, a hundredth meme coin or xyz. Like the risk return just isn't worth it. I can just live my life, keep doing this, participate in digital credit and the modern financial ecosystem. Yeah, there's, it's going to disrupt so many fields of finance. It's not just the credit market. Right. It's like it's the entire equity market. It's dividend paying stocks, it's crypto tokens that pay yield, it's pension funds, it's insurance companies, it's like everywhere. This instrument can be plugged into every single component of the financial world. That's huge. That's a huge idea.
- [22:08]
D
Yeah. I think when you look at the broader ecosystem here, there's something to be said for how low the friction is to managing this over time. A product that you can buy through a normal channel that you're used to buying it through, which would be your traditional brokerage account. And then you can just kind of let that keep rolling. And if you want to buy more, you know exactly where to go. The tokenized plays, I still think those are going to be interesting because we look through a lot of this with the lens of the US markets and I agree, in the US markets, you know, that's, that's a much tougher sell because a lot of the innovation's already happening here. And so it does, you know, take away a lot of that value proposition. But I think being able to take some of These, you know, US equities and bring that benefit global. I think that the first rails that happens on is likely through tokenization and other coins. So I think you're still going to see that be a pretty big part of the expansion of these products out there. But I've got this thing and I've noticed it in my own life a lot over the years where minor amounts of friction would stop me from doing something right. If it became annoying over time, you wouldn't want to do it. And so having to jump through a lot of hoops to get to a product like this turns people off. They don't want to go searching for it, they want it to be easy. And so being able to go into your brokerage account, punch in a ticker, hit buy and then you're done and you've got those dividends and some of the brokerages where they allow for the reinvestment, you can just keep that money compounding and those dividends compounding, that's a home run. It takes friction out of that process. And as this continues to evolve and you'll get to places where you can have deposits that go directly in and they're auto invested into these types of things, people will start using them more like a replacement for any other account that they would add that's yielding effectively nothing at this point. And so I think these are tremendously interesting. We're just still on the front edge of that learning curve, but we're going to get there, right? Because again with everybody out there who's managing any level of money, who's been underserved by the financial institutions where they're not getting the advantage of the yield and they've just got to take what's been given to them. You're getting an option now. You have to be a little creative, you have to be a little open minded, right. To be able to be willing to go search for these things. Because there's still a tremendous amount of people out there that, you know, basically have a checking account and that's it. So you've got to be willing to explore. But the barriers are being taken down and the value proposition has continued to improve month over month as these structural changes start to get introduced to these products, as the rates became very attractive, as the volatility started to come out of the instrument, they just keep getting better. And so you're running out of reasons not to entertain these products for most people.
- [25:00]
C
Yeah, I mean I can literally punch into AI and come up with a hundred business ideas to build on top of digital credit right now, as, as you were, as the two of you were talking in Jeff, when you were talking about, you know, kind of rendering the need or the desire to invest in meme coins and stuff like that, I was like, yeah, but like also I've always kind of viewed meme coins as meme coins as gambling. And I think that prediction markets are a superior form of gambling than meme coins, especially now. But then as, as Ben was talking, I started thinking about, well, there's a lot of prediction markets that are almost uninvestable. Like things where it's like it doesn't expire for two years and it's like a 95% chance. It's like you can make more money investing in US Treasuries even though the bet itself is like a sure thing. But what if prediction markets were built with the contracts holding digital credit so you're actually the, the winner is actually getting paid a double digit yield while the capital sits there. Well now any prediction market is invested.
- [26:06]
B
Profitable. Yeah. Is profitable.
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D
Right.
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C
Like, like Even if it's 99% because your money is actually like actually functional. Right. And, and so like why would that not happen? Why wouldn't a prediction market be built on top of digital credit instead of sitting on cash? Better product. Someone should go do it.
- [26:26]
B
To anyone listening, go build it.
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D
It is pretty amazing and it's getting the scale I think it needs to where those types of innovations start to be explored with any of these new products, you have that ramp where it needs to become large enough. We used to hyper focus on that with the Bitcoin ecosystem and you were waiting for that moment where it crossed over and it was a trillion dollar asset class.
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B
Right.
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D
Because now things like pensions could finally start looking at it. And so you get these benchmarks and I think there being scale in this market and there being liquidity, as that continues to grow in this market, it is going to make it incredibly attractive for a lot of these entrepreneurs and innovators out there to find ways to integrate it, even if it's unfelt by the end users because they might just be integrating it to the point you just made, Matt. Like that's a profitability improver for the prediction markets. Right. So where it's getting held is not something that the end user's feeling, but it's material to that business. And I think there's a ton of businesses that are working like that where they're kind of these intermediate holders of capital in the near term while you're Waiting for transactions to settle. Now, the other thing I look at and I realize how ridiculous this is every time I look at it, but I've never made a change is you look at things like credit card points, right? You've got all these credit card points that you're racking up over all these years, and you're always saving them for that one special trip you're going to use them for, for some reason, and then they just sit there devaluing over time like crazy. You don't get anything more for them today, but you're still just holding onto them for no real reason. Right? You're way better off taking that and deploying it into something that actually earns you something over time. The returns would be astronomically better. So I started looking at my own behaviors, going, this is so crazy. Like, I got to change this. And it just takes away the value from some of those things that people have coveted in the past, right? It was like this side secret bank account people are holding on to. So there's just a lot of things that changes when the yields are this attractive, right? I think if it was, you know, a 6 or 7% yield right now, I think it'd be tough to start, you know, getting your mind going about all those, you know, innovations that you could build on top of this, because it doesn't provide the same level of benefit that it does right now. Right now, it's providing a tremendous amount of benefit, and I think it's going to continue to outpace anything you're going to see out there in the markets, and particularly if we start to see rates come down. So the opportunity is there for people to integrate these into their everyday lives, into their businesses, into their new entrepreneurial endeavors, finding better ways to build something. I think we're just scratching the surface, but it's so exciting because you've also now got the tools at your disposal to kick the tires on these constantly. I mean, Jeff, I get pinged from Jeff all the time on the weekend. I don't think that guy ever steps away from his AI tools because he's always thinking about something new or looking at it from a different perspective and rebuilding himself in an AI form or whatever is going on over there.
- [29:23]
C
I mean, you've got the tools or there was some big ideas discussed this weekend.
- [29:29]
D
There were. Yes, definitely. But people have the tools now, and I think that's going to enable entrepreneurs, because for a lot of them, where they used to run into walls, right? It might be that I just didn't have the know how to get through the regulatory process for an idea. I didn't know what type of licenses I was going to need to go after. I couldn't through creatively how to structure something where I had an outcome that was going to be beneficial to me. That's going away. So now really what you need is motivation. If you're a motivated individual that likes to build, you're getting so many tools at your disposal, and now you're getting better tools on the money in the capital side. And so when you start marrying those together, I mean, the sky's the limit because nobody's really even scratched the surface on this yet. So the opportunities are wide open and someone's going to take them.
- [30:15]
B
Massive dislocation in the market. Just enormous. And it's like earth shattering, right? Just you, Ben, thinking about your credit card points. We're at the forefront of this, so we're probably the first ones that are going to think about, you know, revamping our entire portfolios. And it's only going to spread as far as we can talk and as far as the people that listen to us can talk. And. And then that just takes time to permeate, you know, and change. Change the entire market. But yeah, I mean, these. I kind of have to talk about these AI tools because they're totally incredible. Reshaping the way, I mean, I think typically when I have an idea that comes to my head, a lot of times I'll be like, out on a walk with my dog or something, an idea will hit me, and then I'm just kind of stuck with it. I can't really do anything about it. And now I could deploy like a research analyst on my phone to go, you know, find out the answer. And halfway through my walk, I've got an answer and I'm like, okay, that thought process can continue, or I could take to the next step and I can have five of those types of projects running at the same time. I'm like, oh, my God. The speed at which I can think is just accelerating so fast. I never even thought it was humanly possible. It was like, you've got a thinking calculator that can help blast through some of those really challenging and difficult problems like you mentioned, and find out the next step. And that has accelerated my thinking. I mentioned this last week to a lot of people. It's like, I feel like every day I wake up and I've taken a time machine six months ahead from how fast I used to be able to think prior to these Tools, and they're getting so good. Oh, my gosh, it's incredible.
- [31:53]
D
Roadblocks are almost no longer a thing.
- [31:56]
B
Yeah.
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D
Because you've got access to all the information out there. So as long as you can work it into the right questions, there's almost no such thing as a roadblock anymore. You know, you can work through those problems. You can work through those structures. And instead of having to go and hire a ton of people to go look at this, right. It used to constantly be you'd have to go spend, you know, tens of thousands of dollars on legal fees and things to go get a specific problem researched or consultants to come up with an idea like that used to be the way you did it. Now, to your point, Jeff, you'll hardly lose 10 minutes. You just keep pushing. You just keep pushing, and it'll break through those barriers that used to stop you in your tracks and might delay your progress for a while. You try to figure it out, and that's just so incredibly powerful. And it's powerful in businesses like ours, too. You know, like, we're. We're not hammering these things for fun, right? We're hammering them for ways to try to make our own business better all the time. And the leaps and bounds that you see, you know, week to week is incredible and speeding up, because now more and more people are becoming, you know, well versed in these tools and able to deploy them. And you got all these people off on these different think tracks all the time. And as an organization, it just speeds you up years into the future from where you'd normally be.
- [33:12]
B
Okay. Nope. Not too much secret sauce.
- [33:17]
C
Not too much secret sauce. But I will say, I think our industry, the industry being a bitcoin treasury company, a structured finance company, is one of the perfect industries to just go crazy with AI because one of the things that when we talk with our lawyers, it's like every single thing we bring them, it's like, this is novel. It's never been done before. And so you're just like compounding novel idea on top of novel idea in an industry that's a new industry. And so how do you even operate with the framework on that? Well, one, you got to have a bunch of people that have high agency that are really smart, and obviously, I think we excel at that as a team. But you have to be able to ask the right questions to AI you have to put a framework on it, and then you have a whole team of people. You think about this. It's like we have less than 30 people at our company. And I went on record predicting that we'll be in the S&P 500 in the future. And so I asked AI, what's the, would we be the company with the least employees in the S&P 500 or if we were to do that with 30 employees and there's like one other company that has right around 30 employees and then it's like a hundred plus and so we potentially be number one. But you think about that. It's like if you didn't have AI, like how many more missteps or non novel ideas would you be forced down? Like, like first off, Stretch wouldn't exist. Saylor himself said he was hammering the AI, you know, pound pounding the keys with the AI and it helped him kind of break through that innovation that, you know, everyone thought he, like the lawyers thought it was crazy. Everyone thought it wasn't going to work.
- [35:16]
D
Right.
- [35:16]
C
But, but it was, it was a innovator, a great mind working with AI. And the power of those two things are just exponential. And I think it's obviously only going to increase from here. Right. The AI agents are the least powerful that they'll ever be right now. And you're already able to do this. And so you start to see this is, I don't even know, it's like 100x multiplier of productivity for the people that have the best minds to do this. Right. And I do think that the bitcoin community generally and, and people that are, that are math nerds, like all of us, kind of going deep like, like this is the subset of people, if there is a group of people that are like most positioned to take advantage of this in the country. Right. And, and I don't think it's, and we talked about a little bit, it's, it's probably going to be something that increases the income disparity in the country because it's going to make the smartest minds so much more powerful and ability to execute ideas. It likely will take jobs, it likely will push more income to those people that take the reins and innovate. And I think it's interesting that you see people like Elon Musk tweeting that about universal high income right now. Right. Which is basically universal basic income, but at a high level. Right. And Elon is one of the people that was less than a year ago running Doge to try to cut waste, fraud and abuse at the federal level. But when you think about his framework, well, how could you be on one hand for cutting hundreds of billions of dollars, trillions of dollars from the federal budget, reducing waste, fraud and abuse, and on the other hand, saying our country needs to pay universal high income. I think the only way that you can tie those two things is if you're so deep in AI that you see the future and you see where it's going and you say we need to cut every single bit of spending that's non essential because we're going to need to fill a massive income gap for a lot of this country. And I think that, to me, that's pretty clearly what Elon's seen and he clearly sees the future better than anyone else. I think it was about 10 years ago that he said the most interesting thing he's seeing was AI, probably before any of us even understood what AI might even be. And look where we are now. And now he's calling for this. And he's probably right. Which is, in a sense, the growing tensions in the country is probably not surprising in a fourth turning, but it likely means that the wealth disparity will increase. Probably very bullish for Bitcoin, but something to be mindful of and if you have the capabilities to take advantage of while you can.
- [38:05]
D
I've noticed it's making its way into other social media as well. We were talking about this a little bit before we got rolling here, but LinkedIn as their version of YouTube shorts that roll up every once in a while.
- [38:16]
C
Oh my gosh.
- [38:17]
D
And I'm not convinced that it's not just entirely dominated by job recruiters and resume creators, but this job recruiter that I was looking on was saying exactly that, that, you know, the job market can change a lot over the next 18 months and people aren't necessarily tooling themselves for it. Because when they go out and they poll the executives of these companies about, you know, what their forecast is for hiring over the next 12, 18, 24 months, every single one of them is now responding that they're looking for ways to integrate AI and automation into their workforce to reduce the reliance on headcount. And that is just a common theme. And how could it not be right? These tools are so powerful that there's a way to integrate it into nearly every part of your business now. And so of course they're going to start looking at it, because if you don't, your competitors will. And so being willing to tool yourself is going to be a massive advantage here in being able to make sure that you've got the skills to be able to thrive in this next generation. But it does open up Very interesting questions. To your point that Elon Musk is pushing really hard on this and has actually been for quite some time.
- [39:26]
B
Time.
- [39:28]
D
And there's a reason for that. Right. These are the people that are behind the scenes that know where the models are today. We don't know where the models are today. We think they're growing by leaps and bounds right now with what we see. But you see these rumblings of these new models that are behind the scenes that they view as too dangerous to release to the public because it's too good at finding exploits, I think was one of the latest ones. Right. So behind the scenes, they're probably at least a year ahead of where we're seeing. So when you hear it coming from a guy like Musk, you do pay attention, because this is a guy that knows, because he's one of the core people that's building in this space. So it's something that's going to be a theme here for quite a while, I think.
- [40:09]
B
Digital intelligence, these are intelligence tools, intelligence calculators, and they're becoming integrated with everybody. It's like my intelligence stack, and I'm constantly pushing my intelligence stack, and I think they're going to be coming ingrained with a subset of a society, but there's also going to be a subset of society that's going to hate them. Some people haven't even downloaded these things because they're like, oh, I hate AI. That's a bold stance to take when it's, you know, intelligence has never been more accessible. It's just never been more accessible. Like, I can write a detailed financial research report and do all of the analysis, and I could do it in three or four hours. Something that would have taken me an entire year spending 100% of my time working on, and I could do it in three or four hours. That's the democratization of intelligence. That should excite everybody, not necessarily turn them off. I mean, I know people are scared, but, man, it's just. It's so cool to have these. These things at your fingertips that you can start to utilize and lean on. But I, I'm also pro intelligence and pro, you know, the ability to access these things.
- [41:26]
C
One of the things that excites me most about what you were just saying, Jeff, is that it actually increases the equality of opportunity where you have someone that lives somewhere like in the middle of nowhere or, or, or, you know, with a family, with no money or, or doesn't have access to quality education. Everything is at that individual's fingertips now, for Free, like it's wild, right? Like, like the, the an education that's better than you could get at any school, at, at any, any college is just right there for someone that's intellectually curious. And so while I don't think that it's going to spread evenly to everyone, I think there's going to be an increase in income disparity. I do think you could see an increase in success coming from places where you would least expect it. And that is something that I think everybody should be excited about.
- [42:27]
B
Can you imagine schools being completely revamped with artificial intelligence? I feel like they should. You've got kids that are growing up and certain people, the problem with school is they teach at one pace and all the kids advance at different paces, right? Somebody's maybe slow here, somebody's long here, you know. Now if you've got artificial intelligence, like all of these people can grow at their pace and they can continue to kind of push the envelope at their pace. I think one, one of the things that becomes most important is just like reading and reading comprehension, the ability to read and understand what you read and to be able to communicate, communicate it back. Like those are three very important skills to continue to learn. But it could reshape everything. All of society could be completely reshaped because of these.
- [43:16]
D
It's likely going to put a focus back to remote work as well. We kind of gone in these waves, right? During COVID there was a big push for remote work and then it was a big push for pulling people back into the office. But some of the most effective people in the world are probably, to Matt's point, going to be in these remote areas. And you don't need to be in a cubicle if you're effective with these, you've got high agency, you know, you're one of these self motivated people. And so I think that for the people that really do take the time to learn how to harness this, you know, it's going to be a massive, massive advantage. And it means people are going to start looking for wherever the best talent is that they can get, not just who they can fill in a cubicle in their office anymore.
- [43:55]
C
Well, now that you can be more selective with talent, right that, that you have this force multiplier behind AI that when you're dealing with thousand plus people, workforces, remote's hard because it's hard to find a thousand people on a team with high agency that are going to be leaning into these things. But you can find 30, right. And so it does open up the ability for remote work in a pretty big way. Um, probably don't need to go too deep here, but I do think it also opens up, like, more of, like, gig work versus, like, career work for, for a lot of people to be able to just be an expert in something and knock something out for a company very quickly. I think that's a, A, a thing that I've seen a few people do with AI where they're just like, hey, like, I can revamp your website in like, two days. You know, give me a thousand bucks. And before it would be like a year and a hundred thousand dollars and, you know, your business would change. And now someone could just go like, one shot this for people and, and, you know, make a little. Make decent money.
- [45:03]
B
Oh, my God. I was, I was looking at a project in my, in my backyard that changed my awning on, on my house, and my contractor showed up and I showed him a picture of AI. I was like, hey, can you do this? He's like, oh, my God, you should be a designer. I was like, no, I did this in 10 minutes. And I was like, you should do this. Like, you can literally do this. You could send this to, like, everybody in the neighborhoods. Like, here's your backyard reimagined. Like, go get a Google screen screenshot and like, boom. And like, the amount of business that you'd be able to get from that. And like, what's it cost? Like, I don't know, 10, $5 for, for doing, like an entire neighborhood's worth of images. And then, you know, how much business can you get off that? Like, everything gets rethought. It's crazy.
- [45:42]
D
Someone's gonna have that built by Tuesday afternoon.
- [45:46]
B
Probably we're just, like, handing out business ideas like, take it, please. Like, there's too many on my brain. Please take them.
- [45:52]
D
And you buy invoices, you buy digital credit, you get a good yielding profit product. Yeah, the, the other thing that was, that popped up today that was pretty interesting was the, The Schwab education they were putting out. That was big. Yeah, because it shows that they're going on the offensive about the way that bitcoin should fit into traditional portfolio modeling and how to think about that. And I thought it was really interesting. And I was on a, on a podcast the other day with Matt Hogan from Bitwise, and he made a comment that was very interesting and aligned to this as well, where he was looking at it and goes, well, if you assume that you've got $100 trillion of equities out There. If you just wanted to have a proportionate allocation, then I guess you start at 1.5%. With Bitcoin, if you just wanted to be totally neutral to what's out there in the market, you'd put 1.5% in there. And then I saw this video come out from Schwab and they were looking at it in the 60:40 lens, which is very interesting because it's one of the talking points we've been focusing on. And then they were looking at someone with a higher risk tolerance that was like a 9010 type of portfolio. And showing they were looking at it through a risk lens of if you wanted bitcoin to make up X percentage of the risk in the portfolio, here's how you would allocate. I think that the ultimate band that they put out in there, I'm not going to remember the exact numbers, but I think it was like 2.8% to 6 or 7%. Somewhere in there was kind of the range if you had a 60, 40 portfolio versus if you had a 9010 portfolio. And it was done in a way where it's meant to appeal to people that are traditional finance minded, that are used to the portfolio construction that's been so popular for the last 40 years. And I think that's a really big moment. And obviously they've got bitcoin trading coming online, so they're launching services around this, so it's not surprising that they're starting to make this push. But the framing of it, right, they're taking it out of the lens of being this fringe asset that's out there, this crypto asset that's out there. And they're speaking about it in just plain terms around how to think about portfolio composition. And that's really going to resonate with a lot of people because it's talking through that lens of risk and how you're allocating that portfolio, how much risk, how much exposure do you want in these different areas, what does it mean for that overall portfolio? And that's what I think is going to really accelerate because with Morgan Stanley opening up their ETF and now all their advisors are a salesforce out there for that etf, they have to think about that as well. Right? How do I frame this to my customers who I've been talking about portfolio composition with for so many years now, right. The world's changing. The portfolio composition has to change around that. How do I message it? And this is the framing I think we're going to start seeing come up more and more so that was really interesting to see that come out. And I think it's not the last of those types of videos or educational content coming out of these mega firms that we're going to see.
- [48:54]
C
You want to know what's interesting about that? So I've done a lot of work on asset allocation around bitcoin in a holistic portfolio. And you can actually construct a portfolio with equities, bonds and bitcoin with an allocation up to about 20% in Bitcoin without increasing the volatility of the overall portfolio and increasing the expected return. The problem is that when you get 20% of your portfolio in bitcoin from a behavioral perspective for someone that's not a bitcoin believer or doesn't understand it, the single asset drawing down 15% will cause a material loss of an asset on their statement and actually is part of the behavioral concerns for people that aren't convicted in bitcoin. And so before Strive became Bitcoin treasury company, we had a wealth management division. And it was, I think at the time, which is like crazy to say, but the first wealth management firm that was serving customers nationally that recommended a core allocation to bitcoin, which is crazy because this is literally like about a year and a half ago. So just to tell you how far we've gone, how quickly as an industry, but we ended up in that. And so we had some advisors, and these advisors liked bitcoin. They had never allocated bitcoin. They had clients. And where we came down on was a 3 to 5% recommendation. And the reason was not that that was the optimal for the holistic portfolio from a risk return perspective, but that it was the max allocation for someone that doesn't understand bitcoin to have a holding that where that one holding won't cause them anxiety, where they'll, you know, fire the advisor or freak out when they experience bitcoin's volatility. And so when I see all of these different tradfi firms coming out with like 2 to 6% or some version of that type of thing, that's what's happened. They're actually concerned with the single asset volatility and freaking people out. And so where do you ultimately go to that digital credit? Right. The constraint is not actually how much bitcoin should be in the portfolio, but the volatility itself of that single asset. And so, and I think we're obviously still early with this with tradfi, but we're probably not with some independent financial advisors, right, that don't have these policy constraints that could be innovative, that can go out there with a unique pitch to clients to say, hey, we'll put some Bitcoin in there, but here's some digital credit. Now the now the volatility on the single asset layer is not something that would increase and it also increases the portfolio's expected risk adjusted returns. But still great to see Schwab, you know, take the first step of, of a core allocation recommendation for bitcoin.
- [51:57]
D
Yeah, they've still got a little work to do because they kept interchanging risk and volatility is the same thing. So there's a little bit of educational work to do over there. But these are big first steps and they're reaching a new audience that, you know, it's going to be tougher for people in our positions right now to reach until we get wider distribution.
- [52:14]
B
So yeah, thinking about commodity risk versus equity risk, the traditional framework is everything is fiat dollar denominated and this is a new ruler. It's going to take so much time to like even try to communicate, wrapping your head around like a separate new commodity. But to your point, Ben, I think that you made is if the base allocation, if you just want to match the rest of the market is one and a half percent. If you, if you have less than one and a half percent allocation, you're short, you're short the instrument, you are short the exposure. If you have zero, you are short the instrument. It's now greater than, let's just say 1 1/2% of the market. You should probably have 1 1/2% of the Market exposure to match the rest of the market.
- [53:01]
D
Big week out there.
- [53:02]
B
Big week. Every week's a big week. It's just like every week keeps going, man. It just doesn't stop. It just keeps, you know, humming in there.
- [53:11]
D
Until, until the idea to talk about the semi monthly payments on stretch went in the chat, I'd kind of, you know, moved past that. It already happened. It was, you know, several days past that announcement now, you know.
- [53:25]
B
Yeah, that was Friday, man.
- [53:26]
D
That was Friday. That was, that was in the last week.
- [53:30]
A
Well, thanks everyone for watching episode 56, the user experience. For Ben Workman, Jeff Walton and Matt Cole, I'm Tim Kotsman. We'll see you here next week on the hurdle rate.