← The Peter McCormack Show
The Peter McCormack Show
The Bitcoin Bull Bull Bull with Michael Saylor - WBD269
01:43:58
Location: Squadcast Date: Thursday 8th October Company: MicroStrategy Role: CEO In August, MicroStrategy made the bold move of purchasing 21,454 Bitcoin to add to their treasury, spending $250 million. In doing so, CEO Michael Saylor stated that he...
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- [00:03]
Michael Saylor
So I think that bitcoin is the best hope that people have to make the world a better place through providing this sort of sovereign empowerment. Who is sailor Sailors of Bitcoin? Bull. Bull. Bull.
- [00:18]
Peter McCormack
Hello there from Bedford. How are you all? Welcome to the what Bitcoin did podcast which is brought to you by the Mighty Kraken. So yesterday I released part one of my interview with Michael Saylor, the Bitcoin Bull. And I said I was going to release part two on Friday. But you know what, because I love you all, you can have it today. So here it is. Here is part two of my interview with my call. But before that I am going to have a quick message from my amazing sponsors. So check them out first and then we'll jump straight into the interview. So first up today we have Casa, who are the best in bitcoin security. Now with casa, it could not be easier to protect your bitcoin from hackers, personal mistakes, in person attacks, device failure and so much more. I'm a customer, been a customer for a couple of months now and I'm loving it. I'm so glad I've got the peace of mind on not being able to make mistakes myself or have other people come and try and steal my bitcoin. Now, because Castra are such a badass company, they do have a product for every bitcoiner out there. With their gold product you get triple the security of a hardware wallet and that's for only $10 a month. With Casa Platinum you get their three or five multisig, which is the best protection for large bitcoin holders and that also comes at a great price. And with Cast of Diamond you get their full service offering including a customized personal security review, inheritance planning and of course their best in class security. There is no better time to upgrade your bitcoin security and get total peace of mind. To find out more, head over to Keys Casa, which is K E Y S Casa. Also, let's talk about sportsbet IO because they are also the best in what they do, they are the best in online gaming. And you heard recently that with the Premier League back, that not only did they go and end up sponsoring Southampton, not only did they go and put a bitcoin logo on the front of a Premier League shirt, but they also became the betting sponsor for Arsenal. Now listen, I know these guys, I've been out to Estonia, I've spent time with them. They love bitcoin, they want to do everything they can to promote bitcoin and they're now putting bitcoin in front of billions of premier league fans worldwide. And with the football back, if you want to have a wager on your team or you want to have a wager against the team you don't like, well, SportsBet IO always has a bunch of promotions for you football fans. Just head over to SportsBet I.O. promotions and SportsBet I.O. is s p O R T S B E T IO and also we welcome back recently Least Authority as a sponsor for the podcast. Now listen, this company is for you techies out there, those of you out there building and creating applications. Least Authority is a security consulting company who are pushing the limits on how to build privacy respecting solutions. They specialize in security audits, design specification reviews and security by design. And they can also help you improve the security of your wallet, application key management solution, layer 2, protocol P2P, network design, use of cryptography, and so much more. Now if you want to boost your security strategy, you can arrange a free no obligation call to find out how lease authority can help you on your next project. Just head over their website and hit the schedule a call button. That's at leastauthority.com which is L E A S T A U T H O-R-I-T-Y.com who is seller?
- [03:34]
Michael Saylor
Sellers of Bitcoin? Bull. Bull, bull.
- [03:38]
Peter McCormack
All right, I think I want to dig into some of your ideas now, thoughts around Bitcoin. Okay, so we talked about a few things the other day before we spoke before we've recorded. Sorry. Talk to me about your Bitcoin value proposition and the size of the opportunity.
- [03:55]
Michael Saylor
I think if I was talking to an investor, I would say Bitcoin is the ideal treasury reserve asset. And it's the ideal treasury reserve asset because for the first time in human history, humans have figured out how to create a digital monetary network which is conservative in nature. It conserves the energy you put into it. It's closed system. There's 21 million coins in the system. I wouldn't bother with the discussion of the halvings and the, the block subsidies going down. I just don't think it matters. There's 21 million coins that are going to be in this system. The only thing that can happen is it heats up or it cools down. If people are buying into this system at a price greater than the moving 200 day average or 200 week average, it's heating up. And if they're, if they're selling, it's cooling down. So Bitcoin is a digital gold and it achieves what gold bugs wanted to achieve. It creates a perfectly scarce asset. There is no inflation to speak of. If you took the extra 1.5 million coins that are coming divide by 100 years, you're like 0.1% inflation a year. If you want to compare it to something, in essence, there's no inflation compared to gold. Gold is going to debase 2 to 3% under the best case, which means you're going to lose 88% of your wealth in a gold system. You're going to lose none of that in a Bitcoin system. In a fiat system, you're going to lose 99% of your wealth because of at a 7% debasement rate. And if you're looking at stores of value, if you put your value into big tech, then it's a crowded trade and you're taking all the counterparty risk, the execution risk, the competitive risk, the regulatory risk that all of these large companies hold. And the likelihood that that's going to last for 100 years is pretty low. It's a crowded trade. It's a known trade. People are already in it. It's not an asymmetric risk reward trade off. It might go up, it might go down. There's not a lot of people that think that Apple Computer is going to go up by a factor of 10 from here or by a factor of 100 from from here. Ten years ago, if you wanted to get an investment idea, buying Facebook, Amazon, Apple and Google when they were unpopular but dominant was a good idea. If you're a tech investor, you buy a dominant technical network when they are dominant and by dominant means $100 billion. They crushed everybody and they're 90% of the market. But they're unpopular when the rest of Wall street doesn't quite get it. When Warren Buffett hasn't bought it, it's unpopular. That's your opportunity because you could have bought Amazon and got 20 extra money. You could have bought Amazon for 300 bucks a share in 2012, 2013, 2014. It was obvious they were already 10 years into beating everybody. There was no retailer in the world that was going to displace them by then, but they were still massively undervalued. So if you're thinking about equity as a store of value, the problem is it's a crowded trade and you're not beating everybody in the market unless you manage to pick the one, the Zoom company that's about to go through the roof. But you had to have bought Zoom in January or February or last December. I mean, once 350 million people know about them, they're trading at 100 times revenue or 200 times revenue. And then you've just kind of missed that boat. That's the problem with equity. The problem with debt is that with interest rates at 0, the only way debt goes up is interest rates have to go negative and the wheels fall off the wagon in so many ways. It's a challenge. And that leaves you gold. And the problem with gold is the counterparty risk is 95% likely to strip it all from your hands over a long term. But forgetting about that, the debasement risk is stripping 88% from your hands. And then forgetting about that, let's say you're a short term, you're only going to hold gold for 3, 4 years, 5 years, 10 years. The problem with that is that. And I thought about this, Peter. I thought about buying gold and I thought the real problem with buying 50% gold and 50% bitcoin is the same exact people that are running toward gold are going to run toward bitcoin. And when they realize that bitcoin is a thousand times better than gold, all the money that chased into a safe haven of gold is going to move and chase into bitcoin. So you're getting screwed two ways. Intelligent people are going to mine more gold when the price goes up and you're going to get hurt by that. And then intelligent investors are going to flee gold into bitcoin as the price goes up and also as they understand and get more educated. Do you really want to bet on people staying stupid and ignorant for long periods of time? If you're entrusting your life energy and I mean, the answer is no.
- [09:51]
Peter McCormack
No, of course not.
- [09:52]
Michael Saylor
By the way, that's why Warren Buffett didn't buy gold. The real problem with buying gold is you're betting against human ingenuity. You're betting that people are just too stupid and lazy to make more gold when the price goes up. And that's always an awful bet. That's why if you really believe in gold, you buy the gold miners because at least the gold miners have the ability to make more gold. And there's a competitive dynamic there. Having said it all, I think bitcoin is digital gold and it's the hardest, smartest, fastest, you know, strongest treasury asset you're going to get. That's why you should buy it. It's the ultimate long duration asset.
- [10:40]
Peter McCormack
Okay, so why is it you see bitcoin as digital gold?
- [10:46]
Michael Saylor
I think it's important for People to realize that bitcoin is a virtual manifestation of gold. So what do people want in gold? They want it to be hard. And bitcoin is harder than gold because you can't mine more of it. You can't mine 2% a year. You can mine 0.1% a year. And so it's totally capped. And that's what makes it harder. But there's another way that it's harder because bitcoin is a living creature. The miners are changing, the nodes are changing, the software is changing, they're all upgrading over time. And the ecosystem has exchanges on the front end or servers on the back and clients on the front end. So as all of that software upgrades, that makes it harder. It's antifragile in that way, because bitcoin will react to threats and adapt and fight back. And so when we think about gold, we think, well, it's been hard and the same for a million years, but bitcoin is virtual gold. And it's not going to be the same for the next hundred years. It's going to literally get harder, more secure in many ways as the software and the hardware gets better. That's an anti fragile component. I think that one of the key themes with all technology networks and the reason for the success of Apple, Google and Facebook and Amazon and the like, is when you dematerialize a product or a service into software, you can make it smarter, you can make it faster, you can make it stronger. The camera on Apple's iPhone is smarter, stronger, faster than the best camera produced before Apple came along. And we all have lots of examples of the way that it's smarter, faster and stronger. And YouTube is smarter, faster and stronger video than any video network that came along before. And there are lots of examples. And people get this intuitively when you dematerialize something. So when you dematerialize gold, you don't just make it harder, you make it smarter, faster and stronger. And the smarter is I put a million dollars of gold in bitcoin and then I write some software and the software does a million things while I'm sleeping with that asset that I wouldn't have done and couldn't have done. If it's Exchange writes an application that lets 10 million people post that they want to borrow against their bitcoin and they post the price, and then 10,000 people post they want a loan against bitcoin as collateral, and they post the price. The market clears and you created like an ebay crypto bank and that will run all the time, that's never going to happen with gold. You can't do it with gold. And yet, not only can you do it with bitcoin, it's going to get better every year forever when you do it with bitcoin. And that's, that's why it's smarter. I mean, a bar of gold never crawled out from under your bed to go and earn interest for you while you're sleeping and then crawl back in bed with you. It's just not going to happen. And if you think about it being faster when you took the, you take the mass out of something, it can move at the speed of light. In this particular case, you want to move $100 million of gold from New York to Tokyo, it's going to cost you $250,000. It's a 3,000 pound block of gold. You'd have to charter a Global Express, pay $10,000 an hour, put a bunch of God guns on a thing. Quarter of a million dollars. When you move $100 million of Bitcoin, it's five bucks. And I'm always amused, right? All these guys in the crypto community, they, they complain about transaction fees. And what they completely miss is the transaction fee to move gold is $250,000 and the transaction fee to move the bitcoin is $5. And they're thinking about a world where transaction means buy pizza and buy coffee, and that's thinking small. What they ought to be doing is thinking about a world where I wanted to move 100 million or billion dollars at a time. And once they thought about that world, they would realize the transaction cost and speed. Bitcoin, in essence, is infinitely fast, infinitely cheap to move. Like ridiculously cheap and fast to move. You're just moving the wrong quantity of it. And that has consequences to the business in a way, and that's why it's faster. What does that mean? That means that I could actually move it to Turkey, loan $10 million of it to somebody for four days and move it back. And the cost to move it is $5 this way and that way, and it moves the speed of light. And it's even faster than, you know, people say it's 10 minutes or 30 minutes to get the confirmations. The point is it's a bare instrument. And I can prove that I have it and you can prove that you have it. And so the software can operate in 100 milliseconds. And so we're not talking about 10 times faster than gold. We're talking about 10 million times faster than gold. And that takes me to strong. And the strong element is you're getting a full audit every 10 minutes of the entire supply everywhere in the world, transparently. And there's no security and there is no asset on the planet where you have a full audit every 10 minutes and you've got a bid on it every second of the day, 24, 7, 365 in every currency, which means that you could actually mark to market someone's 3,800 bitcoin every second in every currency in real time. And that's God's gift to a banker, because what you want is perfectly transparent collateral and you can mark the market. If I can do those two things, then that means we're really reaching. We're bordering on a world where money never sleeps. Truly, we're going to achieve the cliche of money never sleeps. And if you want to see it in full view, all you do is pull up a crypto exchange on a Saturday night or a Sunday morning and just watch the ticker scroll. And literally it's the only thing in the world that you've got a bid on. Nothing else. So you put those three together and you say, I created a bar of gold. I virtualized it. It moves at the speed of light a million times a second. And I've got computers that think a billion times faster than I think, talking to other computers that are thinking a billion times faster than I think. And then you try to value that. And is that worth 10% more than a gold bar? No, it's worth what's the value of Rand McNally when they printed a physical map? And I wrote about this in the mobile wave. It's like the entire map company was worth 50 million, $100 million. What's the value of Google Maps? 50 billion, $100 billion. You had a map company worth some millions and you had an intelligent Smarter, faster, stronger, by the way, how Smarter, faster, stronger. Google creates a map that tells you how to drive, how to get there, lets you duck the traffic, shows you the restaurant, tells you it's open, and then tells you don't bother going, because everybody hates this restaurant. That's a smart, fast, strong map. And you create $100 billion businesses on those things when a billion people start to rely on them. That's the part of digital gold I think investors people don't get. And if they got that, there's no way you would say to me, I guess I'll put 50% in gold. 50% in gold and 50% in Bitcoin is like saying in the year 2010 I'm going to put 50% of my money in Canon and Kodak and the other 50% in Apple. And it's like a laughable thing. It's like, yeah, that was really smart of you. It reminds me, Peter, of all the Wall street hedge fund guys back in 2011, 2012. And I used to talk to them because I wrote this book called the Mobile Wave and I was a big bull on Apple. And I said, well they said to me, why do you like Apple? And I said, well, Apple is going to dematerialize everything you can hold in your hand. Every book, every camera, every recorder, a wallet, you know, a television, every device is going to dematerialize on the Apple network. And every wealthy person that I know has one of these, which means that 90% of the wealth on the planet is going to be getting everything they can hold off of Apple and they're going to have a big trillion dollar mobile network. Okay? And they said this is classic. Well this is well and good, but if you invest your money with us, we provide you a service and whenever Apple stock goes up, we'll sell it and diversify it into all the other computer companies so that you don't have too much exposure to Apple because it's kind of risky to have all your money in one stock. And I said, well you're going to buy all the desktop computer companies that are going to zero when Apple eats them all. And they said we don't see it that way. And I said well technology is dematerializing all these products and services. It doesn't make any sense to me. And they said well when your technology portfolio gets too high, our service to you is we're going to sell your tech stocks like Amazon and Google and Apple and Facebook and we're going to buy cyclical non tech stocks to diversify your portfolio to protect you and hedge you. And I said well isn't it the case that technology is going to eat everybody? And there's not going to be any non technology companies. Eventually they'll all be gone. Every newspaper, every television station, everybody is going to be dematerialized and eaten. And they said we don't see it that way. And I, and I would say as a hist, as a student of history and especially science and you want to, you want an interesting read? Go read the history of John D. Rockefeller and then read the history of Andrew Carnegie and then read the history of Henry Ford and then read the history of Hershey and then go to the craft factories. And what you'll conclude is every successful business in modern history was a technology company. There was no General Electric. Electricity was technology. Automobiles was technology. The idea that investors don't buy technology is a silly notion. And once you understand that, you realize that the only issue is, is the technology at the beginning of the S curve or is it toward the end of the S curve? And the beginning of the S curve is when it, when it works. And everybody can see it's going to work, but most of the old school still doesn't understand it. And the end of the S curve is when it works and everybody sees it. And all of the old school understands that they're not going to vanquish it, and they all rely on it. And then the politicians start to regulate it at the point that people decide it's a human right. Everyone has a right to the utilitarian right. And then they start to put price controls on it, or they start to mandate universal access to it or regulate it. It's utility. And one last point on this. The richest person in the world shouldn't be a Jeff Bezos. It ought to be the person that delivers your electricity to you. Because if I really wanted to wreck your life, I would just turn off the power, right? There are a lot of things that people rely upon that are more important than Facebook, Google, Amazon and Apple. I mean, they're important, but electricity is more important. You would kill a million people in New York City if turned up the electricity. And then after that, water. If I turned off the water, we'd all be dead in three days, maybe two days. And yet, name me a water billionaire and name me electrical billionaire. We had them. We had them when everybody disagreed with the need for it, right? And then as soon as everybody agreed we need water and electricity, it's not so good an investment anymore. And that really changes your dynamic here. So that's why I think bitcoin as digital gold is so compelling. And that's why I think that once people understand it, they're not going to buy, they're not going to want to buy 1% of it. They're not going to because they're holding 99% stuff that's like getting hammered to death by it. And the question is, how hammered?
- [24:11]
Peter McCormack
But so explain to me how these. Explain to me how people think, wealthy people think. It's not a world I live in, right? So multi millionaire people worth hundreds of millions, billions. Like, how do they tend to invest? And especially at A time like now, well, we're mid pandemic. The Fed is printing unlimited amounts of money. How do people tend to invest? And what are the hurdles you think some of these bigger investors are having or the hurdles that are in their way to adopting Bitcoin?
- [24:45]
Michael Saylor
Yeah, let's just take through the list of things that keep people from buying Bitcoin. Number one, reputation. The mainstream media characterizes it as casino gambling. Money for hackers, money for criminals. Scary. Using it to evade currency control or something. So the narrative of it's for contrarians and the like will scare away an insurance company or a big bank. It's going to scare away institutional investors. So flipping that narrative is important. I think the next narrative is this is unregulated cyber Vegas. That doesn't help. Right. I think all of the unregulated cyber Vegas, although it appeals to someone who is a libertarian cyberpunk genius hacker, they might like that, but it's not going to appeal to someone that has lots of money that they've got in T bills and NASDAQ stocks. They're going to think they don't want to go to Vegas and gamble. They definitely don't anywhere regulatory off ground. What they want is to put their money in the world's safest vault. If the narrative was it's a vault of encrypted energy, it's a crypto vault, or it's the world's safest savings and loan. The savings and loan at the end of the universe, as marketed by Douglas Adams. The world's safest, most technically advanced savings and loan, protected by the strongest wall of encrypted energy. And it's impossible for anybody to get through it. Your money is safe here. Safer than Fort Knox, safer than any bank. You know, it can't be destroyed by a bank, it can't be stolen by a criminal, it can't be destroyed by a government. Right, that's, that's an appealing narrative. I think that the crypto industry, it, it repeats some tropes that are, that are counterproductive, that don't help it. For example, people always apologize for, for Bitcoin being volatile. Oh, it's, as you know, it's volatile. Don't put more than the amount you can lose in it. Okay, well, if you look at it over the past four months, it has been no more volatile than any of the big tech companies. I mean, when I check it, it's Apple computers more volatile than Bitcoin. For the past four months. Apple Computer is the, is the, is on the Dow, it's a, it's the bluest of blue chip stocks owned by an octogenarian, Warren Buffett. And it's more volatile than bitcoin, and it's 10 times bigger than bitcoin. And it's an establishment stock. So why apologize? People in bitcoin ought to say, it used to be volatile. It's a lot less volatile now. And in fact, of late, the other day, I looked and it was a bad day in the market. The 30 year treasury was more volatile than Bitcoin. The, the 10 year treasury is more volatile than bitcoin. Every big tech company was more volatile than bitcoin. The NASDAQ was more volatile than bitcoin. Silver and gold were more volatile than Bitcoin. And I scratched my head and I was like, why is it bitcoiners keep telling everybody they're volatile? Why don't they just say there's stuff that's volatile? Our volatility used to be legendary, but it's a lot less volatile now.
- [28:20]
Peter McCormack
I think, well, maybe, maybe, you know, what if people like square keep putting money and we could, we could go through another one of these crazy bull runs where it does look volatile again.
- [28:29]
Michael Saylor
I guess it'd be nice if it was volatile to the upside. But when you're apologizing for volatility and you're warning people that this might be too volatile for you, you're sending the message that this is a crazy, unregulated casino where you could make fortunes or lose fortunes. That's not what people want. I think if you just said you can put your bitcoin in and it's highly unlikely you'll lose it, I think that's enough. There's a lot of people that would be happy just not to lose their stuff. And so a lot of people in the crypto community feel a need to reach for yield and they feel a need to apologize for past volatility. If they simply said, here's a stable treasury asset, it should have a positive real yield over time because we're not printing more of it, then they could stop. There's another narrative which hurts, which is everybody's number one pushback, if they think about it, is after they get past the, is this for criminals and casino gamblers? After get that, then the next pushback is, well, it's not really scarce because I can copy the code and create my own coin. And the proper answer to that, and by the way, somebody forked it, you know, and bitcoin, there'll be Another fork and another fork and another fork. The proper answer to that is bitcoin is the winner of the crypto wars and has risen above the thousands of other crypto networks to be the one and only true winning dominant crypto. And if you stack the other crypto networks that are designed to be asset networks, a crypto asset network to store your value, Bitcoin's 94% of it, and the next one is 50 times smaller, called bitcoin cash, and the next one is 60 times smaller. And then we can't remember the number four. And so you're buying the category killer of the crypto asset network. And it has been attacked a thousand times and they have all failed. And yes, you could make your own, but you're not going to get the $200 billion worth of fanatic maximalist who will fight to the death to defend this one. And so why would you create one which is identical to this one, which is 10 years behind and $200 billion behind? Bitcoin is the Facebook of monetary networks. And you could duplicate Facebook too, but you won't, because none of your friends are going to switch over to the yo yo book. And I think everybody understands that once they've used. It's why you're not going to switch from Twitter or YouTube or Facebook or Apple, because there's a massive barrier to switching. The network is dominant. And so if the crypto people just said if they segment in the market and said bitcoin is the dominant crypto asset network, done, you might carve a channel and pull tens of trillions of dollars of money into the crypto space. Right. When I look at crypto, I say it's a 300 billion dollar pond on a beach next to a $300 trillion ocean of asset crypto or bitcoin crypto. The crypto. I'm going to get to the point. The crypto pond is $300 billion and Bitcoin is 200 billion of it. And now the entire crypto community spends a lot of time talking about altcoins versus Bitcoin and bickering between those two. But what they ought to be doing is talking about alt assets versus Bitcoin and they ought to be saying bitcoin's volatility compared to silver or gold is trending down, or bitcoin's volatility compared to Apple stock is trending down. I can actually find metrics of bitcoin's volatility versus Tron, but that's. It's kind of a joke. Because the $300 trillion is not choosing between Tron and, and Bitcoin. The $300 trillion, by the way, which is 99.9 of all the wealth and power in the world. So all the money, all the power is not in the pond. If you want to make this business, this entire industry successful, even if you believe, even if you're an Ethereum person, if you're a Tron, Ethereum, EOS, chain link tether, it doesn't matter, you know, ripple, whatever you are, every one of them has a vested interest and carving a channel between the crypto pond and the, the asset ocean and then getting $10 trillion to flow into that pond. And if that, and the, the gateway to that is going to be Bitcoin, the only way someone's going to move money from gold, silver, equity indexes, bonds, real estate into crypto is first through Bitcoin. And then once it's in Bitcoin, then you can, you can go at this issue of can I generate yield on it? Can I wrap it? Can I do other stuff? The other part of the crypto market is going to be crypto applications, crypto currencies, crypto. Other types of crypto assets could thrive. I conceptualize them, but none of them, I think, have a chance of thriving unless Bitcoin emerges to be the digital gold of the 21st century. That's what I think people miss in their narrative. And one last point. They've got a very pernicious number. It's an awful number. The number is dominance. They should not be saying Bitcoin is 59% dominance and then listing 25 other cryptos on, you know, on their exchange pages. What they should be doing, like any good venture capitalist or any good executive, is they should segment the market and divide and conquer. They should say a currency, a cryptocurrency is a stablecoin running on a decentralized network that holds a stable value against the euro or the dollar. That's a currency. And then an application is a world computer that will run a complicated smart contract or some application, an exchange or what have you. And Ethereum is, is targeted to be that. And Ethereum is 60% of the applications market. I, if I was Ethereum, I'd lot rather be 70% of the crypto application market than be 20% of the crypto market. Right. Why would you pick a fight with somebody you can't beat with every disadvantage when you could be 70% of the market where maybe you have a chance? And then you would say Crypto assets, that's people that want to be digital gold. And, and that's, that's bitcoin. Now what happens next? What happens next is somebody with a billion dollars and they've got their money here and there's, they've got like half an hour and they say, what is this thing? And you say, well, they're applications, assets and currencies. And they're like, oh, okay, so this is digital gold. Okay, well it's not going to get copied. Well, no, it's 94% of the market and a thousand things have failed. They're like, okay, that's, that's the Apple Computer of digital gold, right? Yeah, I could buy that. That's the Facebook of digital gold. I could buy that. Okay, give me 50 million of that. And then you go, the next thing they say, well, the next thing is crypto applications. What's this? Ethereum. What are they doing? Decentralized exchanges. And. Well, that's competing against this and that. Well, is that risky? Not risky. Maybe our venture capital funnel put 10 million into that. We got venture capital for that. It's a bit riskier. What's this next thing? Currency. Okay, what's that, what's that going to yield me? Well, that's, you know, that's just stable coin. Not that much. But I, they're like, well, I got, I got some money market something. Okay, just park 3 million in that, just in case. Give people simple metaphors and let them put their buckets of money into those things. And don't try to co. Mingle a casino, you know, with a gray market with a savings and loan, because that doesn't help anybody. And when, when the guys, Ethereum are ripping down Bitcoin, it just reminds me of, it reminds me a bunch of crabs in a pot and you're, you're cooking the crabs and one crab tries to crawl out and the other crab's just dragging it back in. Yeah, you're just like all the crabs. You guys are in a point 1% of the market. You ought to cooperate with each other. Point.
- [37:40]
Peter McCormack
You think, you think so? That says to me you're not. Are you maximalist or do you have an interest in other networks? Where are you at with that?
- [37:52]
Michael Saylor
My view on this is the idea of a crypto network is I'm going to form a decentralized set of nodes. They use a consensus mechanism, ideally with a very difficult, a very stable mechanism, like proof of work. So it's very difficult for someone to hijack it. I'm sold on proof of work. And I'm sold on that idea. And then from there I'm going to provide someone with immortal sovereignty on something. So why would I go to the trouble of a proof of work network? Because I wanted it to transcend any company or country. I need to get over the counterparty risk. So what's important enough to want to do that? Well, like all my life force, like money is energy. All the money in the world is all the energy in the world. So all of my life force from now to eternity, that's probably worth protecting. So protecting my money, that's a useful application. Now are there other applications that you could run on that network? Like the idea of a smart contract tied into the bitcoin network. Interesting to me. I don't think it's been proven to be commercially viable. But, but there are other things that I might want immortal sovereignty for or long duration. Like for example, let's take a trust. I want to leave money to my children's children's children. Okay, well, people use human constructs to implement a trust. Right now it's a foundation of people, and I'm trusting the people. If I could create some application that would run for 30 or 40 or 50 years, that would give my granddaughter an amount of money to get through college or get a house or something, then maybe I would actually do that on a crypto network. Maybe I would jack it in. I'd probably power it up with bitcoin. But I wouldn't say to a bitcoin core developer, can you please add a bunch of complicated code to deliver flowers to my granddaughter on her 21st birthday? I just don't think it's worth the trouble. I wouldn't risk the core network for complications. They break. But I think that maybe you want to publish your last will and testament in an immutable fashion that will last for 100 years so no one can mess with it. Is there a place to publish something forever? Or to, to, to. How about to transfer title or keys or rights or license, or, or to prove provenance. All these things might be interesting on a long duration crypto network. They're not proven right, they're not proven, but they're interesting. On decentralized networks, the number one use of a decentralized exchange is like regulatory arbitrage. And the number two, you know, so the number two use maybe is innovation, cross domain innovation. And by that I mean if I'm being slowed down by the lowest common denominator of 100 jurisdictions, I do business in such That I, I can't do this because there's one place out of 100 places that would shut me down. If that's the case and innovation is crippled, then a decentralized solution might actually allow innovation to accelerate. I could imagine a legal ethical basis for a decentralized application network. I can also imagine a lot of non compliant uses. If I'm using an application network to evade currency controls, eventually it's going to get shut down in the country where it operates. And, and so those are short duration projects. If all you're doing is getting around like running an exchange without KYC operating, eventually you're going to get shut down. Right. Like we see that happen.
- [42:03]
Peter McCormack
Yeah.
- [42:05]
Michael Saylor
So it's no good for that. And I think that maximalists have a reasonable argument in saying that nobody's proven that this is going to work for anything other than money and Bitcoin is the money. So you. Yeah, now. But I think theoretically it's possible to imagine an application on a decentralized network other than Bitcoin that would have value to someone. And I think that people should try those things and we'll see what happens. And all of them, I think that the most magical things that'll happen will likely be combinations of Bitcoin coin as a decentralized monetary power network powering centralized and digital applications in the future. Like for example, if I want to give flowers to my daughter every year for 50 years after I'm dead, I kind of want to plug Amazon into Bitcoin. Right? And then maybe 35 years from now when Amazon stops delivering flowers, I want one human being to be able to plug in flowers on into my Bitcoin account and my Bitcoin account will pay for the flowers to get delivered. And I'm not really concerned about the fact that Amazon will stop the flower business or maybe a country will fail because I got the money, I've got the power jacked in on decentralized network and I'm going to Will I actually use a decentralized flower delivery app versus a centralized flower delivery app? I think that it's just not going to be important enough to develop a crypto to deliver flowers. But I won't say that there's nothing that I could imagine that would be important enough to develop a purposeful crypto network for. And then we get in this area of hybrid networks where maybe they develop it, but they're jacking into Bitcoin security and Bitcoin rights or keys in order to provide the security to run the other thing and that's interesting to me.
- [44:20]
Peter McCormack
But you're not going to use it for the flower thing, really? Because that's turning bitcoin then into a small, low ticket purchase medium of exchange, which you kind of against. Really? You don't think that's a real use case for bitcoin?
- [44:35]
Michael Saylor
Yeah, what, what I'm going to do is I'm going to leave my bitcoin in my will to my nonprofit foundation in order to power the foundation for 100 years to pursue its interest. Right. For example, one of my interest is make education free for everybody forever. And I have a website, sailor.org and it does that. It gives away free education. We have 500,000 students. And when I'm dead, I have, you know, I have no errors. And so my money will flow into that foundation and someone's got to pay the bill. So will it actually pay the bills via transactions every hour? No, it'll probably deposit X dollars worth of bitcoin converted into fiat currency every quarter or every year and do that forever or until the money runs out. Right. Maybe the money will never run out. I mean, how John D. Rockefeller did this. 100 years ago, you a lot of money. You formed the Rockefeller Foundation. You appoint a board of directors of five or 10 wise people. When one retires in 20 years, there's another board. The foundation takes all the money they invested in a portfolio of stocks or real estate or other assets and hopefully that keeps up with the inflation rate. And then every year they make grants. And that's the traditional 20th century way of endowing a foundation to see out your life's work, whatever that might be.
- [46:12]
Peter McCormack
Would you therefore say that in some ways the crypto industry, as an industry which haven't has bitcoin in it, is quite misleading to people because outside of the fact of, yes, these other networks use a blockchain and yes, they talk about decentralization, really, then they're not very similar at all. Bitcoin is money and they are just application doing other things. And is that unfairly confusing to potential investors? And the reason I ask is like Stefan Avera, you were on his show, he, he often says bitcoin, not crypto. He's very much of the idea that we should separate bitcoin for the rest of crypto. Do you kind of feel the same?
- [46:54]
Michael Saylor
Yeah, I do. If I'm bitcoin, I would say bitcoin is digital gold based on cryptographic technology and blockchain and a bunch of other things. I think that's one that's One narrative, it's if you are a bitcoiner, you just point out bitcoin is digital gold and you should buy it because it's better than gold. And there's $100 trillion worth of assets that are considering gold. All the big banks in April were saying that you should put 25% of all your assets in gold. I have my stockbroker calling me saying, move 25% of your assets in gold. That's the call of 50,000 private wealth advisors. And I said, well, I like bitcoin. They said, we can't sell that to you. So the conventional view is bitcoin is digital gold. If you're considering putting your portfolio into something that's going to be an inflation hedge and a store of value, this is the most precious virtual metal invented in the history of the world. And the way you communicate that is you show the dominance of bitcoin and you compare bitcoin and you show the market cap of bitcoin and you lay to rest people concerns about the forks of bitcoin and you point out that there's an army of fanatic maximalists that will defend the bitcoin network. And bitcoin is not going to go away any more than Facebook or Twitter or Apple or Google are going to go away. It's on the firmament, it's done. And they. And then if they hear about volatility, say, here's the chart of volatility of bitcoin versus silver, gold, Apple stock, Amazon stock, T bills alike. See, it's not that bad. And by you don't show them volatility for the last decade. And you don't say, well, you know, it could go down by 10, by a factor of 10, because it did back in 2013. It's not 2013. You would say, this is what it's doing this year. A lot of people are discovering bitcoin this year, especially since March. This is how it compares to all your other assets. If you want to buy the Facebook of digital gold, here it is. And you stop. And if you want to scare them away, then you start talking about every altcoin and you start talking about Ethereum and you start shitting all over bitcoin and talking about how transactions are expensive, it is not scalable. These are all the things that the rest of the crypto community does. The crypto crabs, right? And they think that the world is 0.1% and that they want to just get bitcoins amount of it. And it's a foolish notion because the world is a thousand times bigger than the crypto pond. And if they're smart, what they would do is say what the lightning network is doing. We're going to, we're going to make Bitcoin better. You know where or if I'm going to build a smart contract anchored into a bitcoin security model. Build your stuff linked into it, harmonious with it. And, and if you're going to do your, you know, the ideal thing is you want to actually tap into the world's most secure blockchain network, which clearly is the Bitcoin Shot256 network. That's really what you want. If you could just. The key, for example, if you just had the keys. You ever see like a lockbox on a house and a big house and there's this little lockbox and the keys are in the lockbox and you go up and you go and you take out the keys and you get in the house. If the bitcoin network just was the lockbox and it held the keys to activate 100 other applications, they could be centralized or decentralized. It doesn't matter. I think, I think the religion of decentralization, it only makes sense for something that requires immortal sovereignty. And Bitcoin does. The immortal life is worth it. I get it. But for other things, I think people are missing the point. Like for example, Bitcoin cash. You don't need a high speed transaction network to buy a cup of coffee. Because no crypto network with a proof of work or proof of stake or any decentralization is ever going to be competitive with Apple pay. It's not going to be competitive with Apple pay for two reasons. One reason, because Apple has a monopoly on the damn phone and they own a billion devices and they're going to be able to get between the customer and the wallet one step closer than you. You will never get that close. And that's a pretty compelling reason. They can build it into the chip, they can build it into touch id, they can build it into face id, they can build it into speech response. You're not going to get that close to a consumer transaction. The second reason is because it's a billion times more computationally expensive to use a proof of work network to do it. It's always going to be a billion times more expensive and it's always going to be one step or two step removed from Google, Apple, Facebook, Amazon. They own the customer. So that it makes no sense to do that. What makes sense is you store 95% of your wealth or your power in the crypto network. And, and then you take 4% and you move it into your mobile account and then you use the existing standard digital network which runs a billion times faster, a billion times better, and you risk 1% of your assets while you use it. And the entire universe is quite comfortable risking 1% of their assets to use an Apple iPhone. If they weren't, no one would have an iPhone and they would all be living in shacks with rocks in the middle of the wilderness and they would not rely upon modern electricity or modern corporate comforts and they would never get in a car and trust an auto company to build a car for them. It just calls civilization. People don't have a problem trusting 5% of their wealth or 1%. And so a lot of experiments in crypto, they're chasing after digital applications where the problem's been solved by Square or Apple or Amazon or by the way, Square is a heroic achievement. The fact that Square can be a payment wallet while they're competing with Google and Apple is amazing. Right, Because Google owns Android and Apple owns iOS. And so you've got Square which is competing against the two 800 pound gorillas. And Apple has more money than God and Google has more money than God. And one of them has a billion and a half loyal users, the other has 5 billion loyal users. And Jack Dorsey is actually making headway against them with Square. It's hard. He's got 80, $100 billion in capital. So you think the crypto industry is going to out Square Square and out square Android or outpayment Apple and beat PayPal. It's a silly notion to pursue and it's. Well, it's.
- [54:31]
Peter McCormack
What about, what about, what about, Let me throw something in here for you. What about that's for convenience? Day to day convenience. In a coffee shop, down the pub, in a restaurant, doing my shopping, whatever. Yeah, I've moved. I was reluctant to use Apple pay for a long time and I was like, hold on, this is just so much easier than getting out my debit card. Just double click done. So I get the convenience thing, but what about those people where convenience isn't the number one requirement? They want to buy something illicit or something our government wouldn't look too kindly upon or they just want general privacy. Yeah. And that's not just in places like the U.K. or the U.S. you know, maybe in people living in authoritarian regimes. What about that scenario? We still need to think about those people. Right.
- [55:23]
Michael Saylor
If you're a refugee fleeing a war zone, then $10,000 in Bitcoin might save your life. It'll be a one time transaction and you're not going to care whether it takes 22 minutes and whether it costs $5 in transaction fees. So if it really is a life changing transaction across jurisdictions, then it can go in 30 minutes and you can pay three bucks. You don't need to change Bitcoin and bitcoin cash or some other lightning fast thing isn't going to be relevant. It doesn't matter. On the other hand, if somebody wants privacy and they really feel strongly about it, then there's a place to build some kind of application. Ideally, the thing that's probably going to work is going to be like a lightning wallet with privacy tapped into. Bitcoin where you move money into a small wallet and all your transactions on that wallet or private. And you can probably do it with a second chain or off chain solution which might be centralized and might be decentralized and maybe you need a Monero, you need something like that. And if so, the market will determine that. Let me tell you what I think. I think that there's a $50 trillion requirement to store your money in a way that you don't lose it all. And I think that there is a much smaller requirement to store money in a privacy wallet for like, I'm not going to judge people on how they spend their money, but what I'm going to say is if Bitcoin diverted all of their energy to make itself private and became known as a network of complete and utter privacy, it probably is counterproductive to its own interest. Because you don't really want, you don't want the United States government to say Bitcoin is completely private because now it becomes the perfect tool for a money laundering. Now it becomes the enemy. Now they're going to shut it down. So to actually have other off chain solutions that solve that problem, there's no way you're going to get $100 trillion to flow into Bitcoin if its use case is directly against the interest of a government that is within. Right. So you don't want to be that good. I think most politicians and most reasonable people will say, oh, you wanted to create a better version of gold because gold is heavy and ancient and, and bleeding energy.3% a year. I get it, okay. I think they're okay with that. I think that when you go beyond that, you're, you're getting into another regime. And now I'll make a point which is I like there are people that are really, they're really passionate about Bitcoin is to bank the unbanked. Okay, well, if banked the unbanked means let someone flee their country and save their life with a life changing transaction, then yeah, good. But if bank the bank means some dude in the sedan needs to do 37 bitcoin transactions a day to buy coffee at a dollar a transaction, it's silly.
- [58:45]
Peter McCormack
Good luck.
- [58:45]
Michael Saylor
That's not what that guy needs. And by the way, the problem with that would be if you wreck the network, if we all abandon bitcoin to go to bitcoin cash so that it does transactions a little bit faster for the dude on the bicycle in Sudan who wants to buy a cup of coffee, then what about the dude that wants to actually send $100 million from New York to Tokyo and not lose it? What about that? You just gave up 50x security. I mean, that guy's not going to sacrifice 50x security because he wants to save three bucks. So there are different ideas. I think that the reason Apple won and not Android and the reason everybody else got crushed was because although Apple didn't have 80% of the market share, Apple had 80% of the wealth share. If you look at the money in the world and if you lined up 100 wealthy people in a room, 90 of them would have an iPhone or an iPad. And at the point that you saw that, you knew that Apple's revenues on their application store and their profits were going to be insane. At one point, I think they said Apple had 150% of all of the profits in, in the mobile phone business, which mean that everybody else was losing money to compete with them. Why? Because they had the wealthy customers. Now that was important to sell luxury devices. It's 1000x as important if you're selling financial services. For example, like the biggest bank in the world is not the bank with a billion customers, because the first 10 million customers have 80% of the money in the world. Right. I could build a bank with 1 million customers that would be a thousand times as big as a bank with a billion customers. Because they don't. All the value and use of the financial product scales with the amount of money you put it into it, not the number of heads. So if you're creating a crypto network to move a dollar around, and if all you can imagine is people with $37 that are irritated that they couldn't buy coffee with their crypto, right, then you're building a bank for people with no money. This is a snarky Observation. But it's amusing. You're building a bank for people with no money. You know, there's another bank building a bank for Warren Buffett. And Warren Buffett, one decision, right, will put more money in your bank than the bottom 5 billion people on the planet that are happy with the product. So you have to be thinking, what am I trying to build here? And by the way, I get the fact that it's a humanitarian thing, right? I mean, I care about the, the human empowerment and human rights here. But I think this is an example where the way to help them is to make Bitcoin a successful monetary network as opposed to make it a trivial transaction network. So on the day that Warren Buffett buys $10 billion worth of Bitcoin, every single person in Africa and Asia and every disadvantaged economic refugee everywhere in the world is going to be benefited. He will have done more for them than any amount of tinkering with the code to make it quicker and easier to do your transaction.
- [62:39]
Peter McCormack
How, how so, though? How would that transaction?
- [62:43]
Michael Saylor
Well, for first of all, because if you own one Bitcoin, when he does it, it's going to drive the price of Bitcoin to the sky. And you're all of a sudden going to be the economic beneficiary because the network's going. The price is going through the roof. And that's a direct benefit. The second benefit is that if all of the institutional wealth in the world starts to see Bitcoin as a safe place, as a digital gold and as a Treasury asset, they're going to use all of their communication skills and political skills in order to legitimize it and protect it. And you're going to have people protecting the crypto rails and the functionality of it in the corridors of power in London and Paris and New York and D.C. and Moscow, because Beijing, because that matters. What's different right now? Wealthy, powerful people use Apple stock as a store of value. That's what's going on. And Amazon, they basically using big tech for a while. They use bonds, but now they're using big tech and they're tinkering with gold. But let's think this through. Somebody in Africa can't buy $1,000 worth of Apple stock. Maybe they can't buy it at all. Right? Full stock. If they did buy it, there's no way they can wire it to their sister across borders to get her home safely. There's no way they can hold it from seizure from a hostile government. And so if Apple stock or big Tech or Nasdaq stocks are store of value. And if all of the wealth and power, power on earth is supporting them, that's not going to trickle to the other billion people that are in the countries where the currencies are collapsing. It doesn't help them at all. They don't. People talk about, they talk about the inability to get dollars, right? If you're, if you're one of the, the quote, unquote unbanked, you can't get dollars, you certainly can't get stock, you can't get gold. If you got gold, someone will club you over the head and take your gold, right? So what can you get? You can get a mobile phone. And I wrote about this in the mobile way where Africa leapfrogged the US and everybody just went directly to mobile networks. They never bothered with the LAN networks. If I can get a mobile phone and running Android or iOS, then I could carry around $10,000 worth of Bitcoin on it and that would be a fortune for someone. In some countries, that would be enough to start a life. It could be 1000, it could be 100. It doesn't really matter what it is. The point is, I have a bank now. I need it to work and I need the political patronage. I think that the political patronage comes when you have the institutions buying into this as a store of value. There's nothing you can do to help people more than to defend them in the court of public opinion and the court of political opinion, Right. One way or the other. Who is Saylor? Saylor is a bitcoin bull. Bull, bull.
- [66:07]
Peter McCormack
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- [68:18]
Michael Saylor
Bull, bull, bull.
- [68:20]
Peter McCormack
Do you see any situation where if the companies come in too quickly that it pushes the price? Like a lot of people will miss out on the opportunity. And I know it can always go. And people say, oh, we say that every cycle. But in some ways I kind of want my friends in before I want the companies in. I want them to ride the benefit of that massive wave.
- [68:44]
Michael Saylor
Well, Peter, that's why, that's why I was buying it before I was talking about it.
- [68:50]
Peter McCormack
Yeah, I know, man.
- [68:52]
Michael Saylor
Reasonable person, person would buy it first, but I don't know what the price will do. I mean like that's, you know, who was the president that said, if you see 10 problems driving down the road at you, nine of them will probably drive themselves into a ditch. Before they get you. It may never be a problem. It's not. It would be a good problem to have if you are successful. If you're inconveniently successful, I would prefer that to the other problem, which is not being successful. But I don't think that'll happen. I think that as this evolves, the ecosystem will grow and more opportunity will spread to everyone in the world via mobile networks to the palm of your hand. And I think there's zero chance that people buying gold is going to cause mobile phones in Africa to help anybody because you can't program it. And I don't think there's much chance the people buying sovereign debt or equities on regulated stock exchanges from prime brokerage is going to spread to the billion people on the planet. Because if it was going to, it would have. Right. I don't know. Will Robinhood be out there gallivanting around? I just, I don't think it's going to happen. So. So I think that Bitcoin is the best hope that people have to make the world a better place through providing this sort of sovereign empowerment or monitoring.
- [70:26]
Peter McCormack
What about the people and the companies who are focused on. I think I know what you're going to say about this, but on the bitcoin circular economy where they're talking about, they've got companies who only use Bitcoin as a currency and sorry, not only these, Bitcoin as a currency for buying and selling and they also use Bitcoin as their balance sheet. They try and run entirely bitcoin businesses.
- [70:50]
Michael Saylor
So it's a good point. A lot of people in the community are really enthusiastic about like BTC pay and we want to sell stuff in bitcoin and we want to pay our employees in bitcoin and the like. With all due respect, I, I think it's the wrong model. I think a much, a much better model would be Bitcoin is a crypto asset and you put it on your treasury, on your balance sheet and you hold it and when you need money, you take it out and convert it to fiat. And when you have excess fiat, you convert it back into Bitcoin. Right. That it's. I think that's the right model and I think there ought to be something else, call it cryptocurrency. And the cryptocurrency is tether or dai, a stable coin. And that ought to be a stable coin in the sovereign currency in the domain where you do business. And I think those two things can thrive. But I don't think bitcoin can be a currency. And I don't think that other cryptos should be an asset. And I'll tell you why. I mean, a very simple reason.
- [71:58]
Peter McCormack
I think you'll get challenged on this a bit, hopefully.
- [72:02]
Michael Saylor
But let me tell you why I think it just, it makes sense. The IRS tax code in the United States, it characterizes Bitcoin as an asset. When you buy it and you hold it for a decade, there's no tax on it, no tax to hold on it. And by the way, the irs, the tax code has extraordinary impact on the valuation of assets. Assets, for example.
- [72:30]
Peter McCormack
That's a huddle code. It's like an incentive to huddle.
- [72:33]
Michael Saylor
Well, more than an incentive. It beats you to death if you don't. And I'll get to that. If you buy a million dollars worth of real estate in Florida as an individual, you pay 2% property tax per year forever. So that means you're going to pay $20,000 in tax every year. And in fact, and in 50 years, if the real estate is not reappraised, you're going to lose your house or it's even worse than that, right? You're going to have to come up with $1 million in cash and $1 million in, in money to buy the house. So the only way to hold real estate in Florida is to have twice as much money as the cost of the real estate. That's an impact. If I buy bitcoin, a million dollars worth, and I hold it for 50 years in Florida, there is no property tax on bitcoin in Florida. There is no property tax on it at the, at the US Level, I will still have the same bitcoin, and it'll be worth one bitcoin times the price at the time. On the other hand, if a company like mine buys a million dollars worth of bitcoin and, and then we pay you, and I pay you 100,000 a year, and the price of bitcoin doubles, then I actually have to pay you 130,000 a year because I convert the bitcoin to cash, pay you 100,000 in cash, and then I owe the IRS $30,000 because I have to realize the capital gain on the bitcoin. And by the way, I can't escape this. If you say pay me in bitcoin, I give you a million dollars or I give you 100,000 worth of Bitcoin, I still have to calculate the price in dollars when I transfer it to you and account for it as if I had sold it and now I owe the IRS $30,000. So you can see from my point of view, if I were to put 500 million into Bitcoin and then I were to pay $500 million worth of bills with it, and if the price doubled, I would bankrupt myself. I bankrupt like I'm bankrupted. What you're doing is you're accelerating the tax forward 30 years. And one of the cardinal rules of an investor in life is you always want to roll over your investments. Tax deferred, you never want to pay the tax. What do you think would happen to your Bitcoin coin if the UK government passed a law saying you have to pay unrealized capital gains tax on the, on the bitcoin at the end of the year if the price goes up versus where you bought it from?
- [75:20]
Peter McCormack
Well, there's a number of consequences of that. I mean, firstly, I would leave the country.
- [75:25]
Michael Saylor
Okay.
- [75:26]
Peter McCormack
But secondly, it puts a selling demand, it puts sell pressure as well.
- [75:33]
Michael Saylor
Would you say that's a hostile tax code?
- [75:35]
Peter McCormack
Of course, yeah.
- [75:36]
Michael Saylor
Okay, so what I'm saying is the existing tax code is hostile to using Bitcoin as a currency.
- [75:45]
Peter McCormack
Right?
- [75:45]
Michael Saylor
It's a hostile tax code. That's. That's what, that's why what you want is a stable coin. The definition of a currency is that thing that you can buy and sell with, for. For which the government is not hostile to you. And so there's talk about Israel having a law that deems Bitcoin a currency, and that means that you wouldn't get taxed on the capital gain and you wouldn't recognize the capital gain or the loss when you transferred it. That's a friendly tax code. But the point of course is unless you're a criminal and you don't pay taxes, that's a. If you don't pay taxes, yeah, sure, you're a criminal. But they all get busted for, you know, Al Capone and the like. They all get. McAfee just got busted for not paying taxes. They'll get you on paying taxes long before they'll get you on the other stuff you did. So taxes, a bright line. So if you're not a criminal and you intend to file your tax returns as a law abiding citizen, then you have to pay taxes. And now what you see is there's two crippling problems with using Bitcoin as a, as a currency to buy anything or sell anything. The first crippling problem is I sell 100,000 things a year and the price is different every time I sell it, I have 100,000 different accounting entries when I sold it. And then I pay 100,000 things a year and I have to calculate the price of bitcoin when I paid it. And then the question is, which bitcoin did you, did you transfer or did you sell when you sold it? Because there's a different combination. And so I have to come up with all of these combinations and it's an accounting nightmare.
- [77:43]
Peter McCormack
Well, the software does it for you now. I mean, I still think it's an accounting nightmare even with the software, but at least there's software that does that for you now. You know, recommends which coins, etc.
- [77:53]
Michael Saylor
Let me go on to the next point. It took me a decade to install the software that I run my company on. It takes 10 years. And I'm running that software in Japan, Korea, Australia, everywhere in Europe, Rio. It's in a different currency. It's 27 countries. 27. Well, not 27 currencies, but 15 currencies every single place. We're selling in local fiat, we're buying in local fiat, we're paying taxes in local fiat, we're transacting, we're keeping a ledger in local fiat. Then we're converting into USD. Then we're calculating corporate taxes, then we're sweeping into treasury. Now we're not a big company. I mean, 500 million is a mid sized company. A lot of companies are bigger than us. It would take us three years to rebuild our accounting system to do what you've described and we wanted to do in bitcoin. And then at the end of the three years and 30 people to do it, the reward that I would get is probably about $30 million a year in excess taxes. So why AM I, why and point 1% of the people in the world have bitcoin, so why in the world would I incur. By the way, if I generate 50 million in operating income, it's pretty good year. Why would I give two thirds of my operating income in taxes to the federal government for the privilege of bragging that I'm doing business in bitcoin? By the way, half my finance support would probably quit, right? And, and the software would break. And if I went to my software, if I went to my provider, you know how long I've been using the same, the same software to do my accounting? Peter, you know when I installed it.
- [79:45]
Peter McCormack
You'Re gonna tell me like 20 years or something, aren't you?
- [79:47]
Michael Saylor
1996, 24 years ago.
- [79:52]
Peter McCormack
Jesus. I was still at school, dude.
- [79:54]
Michael Saylor
Okay? And you know what would happen if you came in my office and you suggested to me that I rip it out and replace it with something different?
- [80:02]
Peter McCormack
Everything will collapse.
- [80:04]
Michael Saylor
I mean, that would go nowhere. I mean, maybe you can probably chuckle. And the bigger players are people like SAP and people spend $300 million to install this software and they take three years to five years and then they don't change it for 30 years. So the first problem is accounting. Even if I wanted to, it's rewiring the DNA of these multinationals. Not going to happen. The second problem is tax. You would have to be a moron to want to pay hundreds of millions of dollars as a tax on the volatility of the asset you're holding electively for no reason whatsoever. Right. Why would anybody want to accelerate taxes forward 30 years and pay them today with money they don't have? What would happen, by the way, is that Bitcoin would become a volatility engine. Like if you had to pay tax on Bitcoin based upon the closing price each month and you had to pay it to the UK government, your Bitcoin would shrink to nothing because you'd have to keep selling your Bitcoin to pay the taxes.
- [81:17]
Peter McCormack
Yeah, right.
- [81:19]
Michael Saylor
Because if the tax, you can't get the refund.
- [81:22]
Peter McCormack
You know, like, yeah, you don't get the refund when it does, goes the other way.
- [81:25]
Michael Saylor
So the problem really is the tax code defines what the asset can be. You can buy it and hold it for 20 years. And by the way, the last point is, if you really want to be successful as an investor and a Treasury, your plan is to buy something you can hold forever, never sell it. And if you ever need cash, you're going to borrow against it, pledging it as collateral. Right. People pledge their real estate as collateral. People pledge their stock as collateral. For example, Peter, if you have $10 million worth of Apple stock, do you know what the lending rate is for Apple stock? Is, you know, you can do with that?
- [82:13]
Peter McCormack
No idea. Tell me.
- [82:14]
Michael Saylor
Just for short sellers, you can walk into a bank, you can pick up the phone, call, call your bank, and you can borrow $5 million, maybe $8 million against the 10 million in Apple stock at Libor, plus 50 basis points, which means 62% interest right now. Okay. And do you know what the tax treatment is on that? Like, what's your tax bill?
- [82:40]
Peter McCormack
Tell me.
- [82:41]
Michael Saylor
There is no tax bill. So, for example, if you had a million dollars worth of stock and if you needed $100,000 to live, if you sell 100,000 worth of stock, then you pay 25, 30, 35, 40% taxes, up to 50% taxes. So you would sell 100,000, but have 50,000. So you have to sell 175,000. And now you've only got 800,000 worth of stock left. And you do that five years in a row, and you have no stock left. So if you're selling your asset, you have no assets, and by year six, you're poor. Okay, so what do you do? You have a million dollars worth of stock. You borrow $100,000 against the stock, and you pay 1% interest. And so you had to borrow $101,000 against the stock, and there's no tax on it. You had no income, you had no capital gains. How long can you do that, Peter? You can do that forever if the asset goes up 10% a year. So, for example, if I have a million dollars worth of the stock and it's going to go up 10% a year, and I borrow, let's say I borrow 80,000 a year against it. Yeah, I can borrow against it forever. Okay, where does that happen with real estate in New York City? I own a city block. It goes up by 8% a year. My family never sells it. We gift it to each other. I need some money. 82 years after my grandfather bought the real estate, what do I do? I go to the bank and I. You ever heard the phrase refinance?
- [84:24]
Peter McCormack
Yeah, of course.
- [84:25]
Michael Saylor
I refinance the real estate, which means when my grandfather bought it, it was worth 10 million, but today it's worth 187 million. And we've got 120 million in debt on it. So we change it to 140 million in debt, and I take $20 million of debt against an asset, and I don't have a capital gain because I didn't sell anything. And I have no income because I've got an asset. I've got a liability to offset my asset. I'm living.
- [84:54]
Peter McCormack
Hold on. Is it. Is this. Is this what. Is this what Donald Trump's been doing?
- [84:57]
Michael Saylor
This is what every real estate investor has been doing for 100 years. And. And he is included. Yeah. That would explain it, for example, like, what could be sweeter than this, Peter? I find $1 billion building or a billion dollars worth of real estate. I have $100 million. I pledge 100 million in equity. I borrow 900 or I borrow 900 million. And so I've got 900 million in debt, I got a little bit of equity, and then the Fed prints some money and all assets inflate by 20%. And now my building is worth 1.2 billion. And I have 900 million in debt on it, 100 million in equity, but I have 200 million in unrealized capital gain. You wouldn't sell the building because you'd have to pay tax on the 200 million. You would refinance the building and you would take another 200 million out of the building. And now you. And then you pay off the equity. Maybe I borrowed the equity from somebody else, my cousin. I pay them off and I've got 100 million free and clear. And I hope that someone prints some more money so the building goes up by 8% next year. And if it goes up by 7% a year for four years running, I'll have a $2 billion building and I'll have 900 million in debt against it, and I'll refinance it again and I'll take out $500 million and I'll pay 0% tax on it, and I'll go buy another building and I'll go borrow money against that. So I'll leverage that up. And pretty soon you have lots of things that have debt on them. And you never made any money your entire life, and you never paid any tax your entire life. And what do you need? You need two things. You need low interest rate loans, you need bankers, you need good banking relationships. You need to get along with the bankers. And then you need for the monetary supply to expand so that asset prices expand. And if you have those three things, you use leverage to acquire assets. And then you borrowed against your assets and bile. This is my, my point really is you don't really want to be generating income, right? This is what Kiyosaki says, right? You don't want to generate income and pay tax. You want to own something which appreciates without being taxed with the ideal holding period of forever, right? Warren Buffett says it, you just want to hold it forever. And that's why.
- [87:30]
Peter McCormack
That's bitcoin.
- [87:31]
Michael Saylor
That's my answer to, like all the people in the bitcoin community that are desperately trying to actually get it to be a, you know, a way to pay employees or sell things. It's a really difficult, heroic task, but it's, it's too hard. A much better idea is to buy. And if you want the benefits of crypto, buy and sell it in a cryptocurrency like tether or dai. If you really want cheap, fast transactions, run a stable coin on a fast network, either centralized or Decentralized and then convert your bitcoin into stable and then move that back and forth because there's no tax bill and the accounting is simple.
- [88:12]
Peter McCormack
Okay. Okay. I'm just conscious of time. We've done three hours. But I do have. I mean, there's a bunch. We could have done another three hours. There is one other thing that I specifically would be interested in your view on. In that you mentioned towards the start, you've become to understand essentially the different sex factions within bitcoin. You know, we have the Austrian economics economists and the libertarians, but actually that's a. It's a very strong group of bitcoiners who want to see an end of the Fed. Yeah, they want to see. Many want to see the end of the government. They want to defund the government and. And hopefully bitcoin can do that. And where are you with all that side of things?
- [88:57]
Michael Saylor
I think I'll live with the government.
- [89:00]
Peter McCormack
Okay.
- [89:03]
Michael Saylor
I think that to the extent that bitcoin gets affiliated with hostility toward local governments, that's not going to be good for Bitcoin. Right. For obvious reasons. I'm not a complete anarchist. So, for example, I do. I do acknowledge that there's a. That a place for government. So. So there's two phrases that pop up. You know, inflation is theft and taxation is theft. I agree with the first. I don't agree with the second. I agree that inflation is theft. That when you print money, you're stealing money from. You're stealing energy and purchasing power and wealth from disadvantaged people. People. I agree with that. I think that taxation is not theft. I think taxation is. It can be inconvenient and sometimes it can be oppressive.
- [89:54]
Peter McCormack
Right.
- [89:55]
Michael Saylor
Like too much on the other end. There's a place for highways and there's a. I don't have a problem with the government providing security and clean water and hygiene and schools and public utilities. And the libertarians debate back and forth over the role of government. And there are arguments that these things can all be accomplished by private entities. And I'm not so sure. But I would say clearly I'm in favor of the camp of less government. I like Ronald Reagan. I like the guy that said less, less government is better and let's see what we need to do. I don't think it's very practical to go to zero government instantly. Right. That. That creates another set of problems. And I don't think that.
- [90:50]
Peter McCormack
No, I know. I agree with that. Like, the big red button would just lead to chaos because people are institutionalized with Government, but I've brought up so many times. But I did an interview with Eric Vaughan Voorhees, who you obviously mentioned his debate with Peter Schiff. And I, I kind of asked him about that because I was like, I just don't see it working. He said, I look, I don't want that right now. Let's not start at that point. Let's just start with 1% less government or 5%, you know, 5%. A smaller budget each year. Let's just try and reduce government. And I've kind of always liked that idea of almost like, I mean, you've got a software company, so you, you will know about a B testing. Right? I almost see we need to wean ourselves off the government and a B test. What works and what doesn't, you know, or what can go first or what do we need? I know security and border protection are one of the things that are like a very important. And you know, in the uk the NHS is seen as very important and the highways are seen as important, but what are the, what are the stupid bits we could definitely get rid of? And if you were for. If the government was forced to stick to a budget, where would, where would it cut itself first?
- [91:55]
Michael Saylor
Yeah, I think, I think the political conversation is ongoing and there are lots of different views on it. I think it's. I don't think it's very constructive and I think it's even counterproductive to allow that to dominate the narrative in the Bitcoin community. It would be an example of the perfect being being the enemy of the good. Like, even if you believed that, even if you had a very strong view on government, I believe that it's counterproductive to the interest of bitcoin. A much more constructive thing to do would be to incrementally improve the world. And I think that if all you did was keep people losing their money by getting taken advantage of by gold merchants, the world's a better place. And if we gave people a simple savings and loan that, that yielded 5% interest where they weren't going to get ripped off, I think you could be proud of that. I mean, there's. How many billion people on the planet don't have any safe place to put their money? Right? Now you don't have to topple every government to make Bitcoin a safe place to put your money, right? So if you gave seven and a half billion people a safe place to put their money, the planet would be a better place. And then if you gave them a little bit of individual sovereignty or a little bit of control, it'd be even better. And so I think make the world a better place is a logical place to start. There aren't that many people that are going to say, I disagree with you about that making the world a better place thing. I mean, a lot of people can come together on that. But on the other hand, if we get down into prescriptive actions about what the government should or should not do, I think you're going to have huge amounts of information pushback and bonafide debates. And of course it distracts from the matter at hand. Because what is more important than anything is that we go from 20 million people that use bitcoin to a billion people that use bitcoin. And we go from a narrative where people are afraid of it, don't trust it, or are worried that there's some negative connotation to a world where they say, oh, bitcoin, it's just like Facebook for gold, It's Facebook for digital gold, or it's Apple for digital gold. And by the way, when Apple and Facebook and Twitter and Google got big enough that they're all like trillion dollar companies, politicians started worrying about them a bit. And there's a debate about Twitter and Facebook and Apple and what they should or shouldn't do. Why don't we just leave that debate for about another decade about whether people are worried that Google works too well or the Twitter works too well, or that Apple works too well. Why don't we wait until Bitcoin is 100 times bigger than it is and then people are worrying that it works too, too well and then we can engage in politics. Because right now this is a much simpler discussion. All you got to do is say, we reinvented gold and made a digital gold. It's 100 times better than gold. And then you've got 100,000 stockbrokers stampeding millions of people into gold and you could just say, hey, we're that but better. And then everything else that everybody wants, whatever their hopes or aspirations are, are 100x more likely to be realized if bitcoin is successful as a digital gold. And there's no reason to fight these other battles now, whatever they might be.
- [95:41]
Peter McCormack
I mean, I don't disagree. Other people will naturally, I don't disagree. I certainly don't certainly think there is a secondary benefit though, to more people having the ability to store money in bitcoin and have it seizure, seizure resistant, censorship resistant, in that it does reduce the, you get to a kind of tipping point where it will reduce the effectiveness of the government. They maybe have to consider their budgets. But that said, we've seen plenty of states fail, currencies fail. And it's not like we've always seen like a positive revolution that's come out after it. Venezuela, Zimbabwe, like, we're not even seeing much progress in Lebanon right now. So I'm nervous about a collapse of the state. I understand the utopian goal. I'm just nervous about it. Civilization has progressed over hundreds of years. Are we really in that bad estate that we want to tear it all down and start again? I don't honestly know the answer, but yeah. Oh, man, we've done a long time. You feeling all right?
- [96:50]
Michael Saylor
Yeah, I probably got another 20 minutes of me, but. Or we could take a break right now. What?
- [96:56]
Peter McCormack
Well, you know what? That's a, That's a record length interview. Now we've hit a good point. I think we should. I've got a couple of things I want to close out on because there's a couple other rabbit holes could go. Go down. We could do those another time.
- [97:10]
Michael Saylor
So.
- [97:11]
Peter McCormack
So listen, look, you're. You've made your big bet. You're in, you're in, you're in. You're in the world of bitcoin. But there's other people who are still on the sidelines, you know, and you've given some great, articulate and eloquent answers. But I really want your elevator pitch now for bitcoin, like all these people thinking about, should I be in, Whether it's company treasuries, whether it's personal wealth, what would you say to them?
- [97:36]
Michael Saylor
I would say in our current macroeconomic environment implies that we're going to see 10 to 15% expansion of the monetary supply every year for the next three to five years. Assets are going to inflate. Bitcoin is digital gold. It's going to have the highest real yield because you can't make any more of it. All the other investments are crowded trades. Bonds are well understood. Stocks are well under understood. Gold is well understood. They all have. They have the same upside as downside at this point. And there's no way for you get an edge. Bitcoin has an asymmetric proposition. You can get an edge here because it has a history which has scared some people away. And so it hasn't been embraced by the institutional community. If you are the first, then you'll have an edge. It's been traditionally difficult to buy and a lot of people, they can't pick up the phone and buy it. And so if you go to the trouble to figure out how to acquire it, that will give you an edge. And it has all of the technology upside of Apple, Google, Facebook and Amazon from a decade ago. And you saw what data did over the past decade. Bitcoin is the first successful digital monetary network. And so if you come into it right now, you're coming into it with a $200 billion market cap. And it's gotten to this point without the institutional interest that it's currently gleaning. So it makes sense to be early to this trend. As the price goes up, the value of the offering goes up, because the liquidity is the value proposition. So this is an example of something where the higher the price goes, the more value that bullet gets, the more people want to have it and the more robust it gets. That's not true with a stock. If the price of a stock goes up, it delaminates from its cash flows and its PDE goes from 20 to 30 to 40 to 50 to 80 to 100. And so with many things, as the price goes up, the risk gets higher. But with bitcoin, the price goes up, the risk probably gets lower. And it's such a simple thing. It doesn't have all the execution risk and regulatory risk and competitive risk that so many other things have, because it is so very simple. It's just 21 million gold, gold coins, and cyberspace buy one, and as people adopt the network, the value proposition increases. As technology gets better, the value proposition increases. As the economy works, people are productive, they'll buy the network, they'll sweep more cash flows into it. The value proposition increases. And as the central bankers print more money, the value proposition will increase. Priest, that's my pitch.
- [100:47]
Peter McCormack
Listen to that. Amazing, right? Well, look, if people want to follow any of your work, so there's a couple of things I think you should point them towards. Point them towards the. Your own personal kind of Twitter. Also the. You talked about the education resource. And then anything else, Anything else you want to point people.
- [101:08]
Michael Saylor
Three things. Go check out, check, check. Check me out on Twitter michaelsaylor after Michael. And then also you can go to microstrategy.com and we actually have a bunch of stuff on our own business. And also we have a bitcoin section, and it's a curated bitcoin section with videos, articles, books, and regulatory filings. So it'll be interesting to someone. And then if you're interested in free education or, you know, anybody that wants a free college degree, go to saylor.org we're trying to give it away. It's not easy to give stuff away. But if you want to, if you want to promote free education for everybody, just go to sailor.org anybody can get an account. Everything is free. It's all Creative Commons, open source license. And the idea is anybody in the world can get a computer science degree and make a living. And so you want to check that out, Feel free.
- [101:59]
Peter McCormack
Amazing. Well, listen, look, amazing work. Congratulations on, on everything you've achieved so far. You've come through bitcoin like a steam train this last couple of months or few weeks and it's been fascinating to watch. It's great to get to know you, great to talk to you a couple of times, I expect, well, I hope, and then if it's possible, expect we'll do this every maybe six months to a year. We'll have a catch up. We'll do another one of these, hopefully in person at some point we'll actually sit down and do this in person and maybe go and grab some food. But anyway, anything you ever need from me, you know, you can reach out to me. You got my number and everything now. And look, I wish you the best. Obviously hope your investment is super successful because that'll be great for me as well. So all the best and take care.
- [102:41]
Michael Saylor
Thanks for having me on your show, Peter. I've learned a lot and I always, I always enjoy our conversations. Who is sailor Sailors of bitcoin? Bull, Bull, bull.
- [102:51]
Peter McCormack
All right, how good was that? I know it split it over two. Two parts. It's, you know what, sometimes some people say, oh, they're too long. So here you go, you have the choice now you can listen to them in two separate sessions. But I hope you enjoyed it. It is my longest interview ever so far. So sorry. Matt O'Dell, your crown has been taken, but I'm sure we can, we can get that crown back to you at some point. We talked a lot before the interview and I knew it was going to be a banger. Michael's such a great speaker and even after we hit the three hour mark, I had so many more questions for him. Could have gone for. Honestly, this could have been like five, six hours. I'm definitely going to get Michael back on the show again and hopefully the price of bitcoin will be a lot higher. Hopefully his investment would have worked out pretty, pretty well for him and hopefully a bunch more companies would have followed suit. Appreciate Michael's time. I really enjoyed this one. It's really great to have him as part of the community. Now, if you do have any questions, you can reach out to me. My email address is. Hello? What Bitcoin did Calm Outside of that, have a great week and I'll see you all on Friday.
- [103:48]
Michael Saylor
Who is Sailor Sellers of Bitcoin bulb?