Michael Saylor & The Ultimate Bitcoin Strategy

26:19The world doesn't – it doesn't rationalize overnight. If I gave you the perfect situation, it still takes a decade before 10 percent of the world discovers the perfect thing.

26:34Alex Thorn:So there's time for debt issuers, whether sovereigns or corporates to – This is going to take place over 20 years. Yeah, to adapt. Right. The world is going to gradually adapt. So you've been – you amassed this treasury of Bitcoin. coin. Now you've been issuing these digital credit instruments, Stretch, Stride, Strive. So that's the middle part of the stack to the digital money coin you're talking about. Is strategy going to take steps? Are you taking steps to issue this money coin or is it something that you envision as you've described that an asset manager or a bank might issue using your credit?

27:05The way I see the industry evolving is there's three layers. There's digital capital, There's digital credit and there's digital money. Okay. Our company strategy, we exist to create the digital credit. In essence, the whole mission of the company is to convert capital into credit. I think it's reasonable for us to strip 80 % to 90 % of the risk and 80 % to 90 % of the volatility off of the capital. Right. If you're being very simplistic, right? I mean, I start with$10 of Bitcoin. I issue$1 of credit, right? So we can step it down from a 50 vol, 50 ARR asset and turn it into a 10 vol, 10 ARR, right?

28:01A 10 % dividend yield. We can't create digital capital, right? I mean, that's the world, right? You need 700 million people in the crypto industry and you need all of the decentralized holders and the people we don't know and the people we know and all the buyers. And it goes without saying, you know, it's an asset without an issuer. We're the beneficiary. It's very clear to me, right? I can buy a billion dollars a week for the past two weeks. The price isn't paying attention to what I'm doing, right? And that's good. That's a good thing, right? It wouldn't be a stable digital capital network if anybody could influence it.

28:40And so the digital capital layer is a global phenomenon that's been running since Satoshi dropped the white paper. And it will keep running. And there will always be actors entering the space, the CFTC, the SEC, the Black Rocks, the Vanguards, the JP Morgans. I mean, they're all players in the space, the foreigners, the people you don't know. Didn't we just hear the Chinese shut down a bunch of Bitcoin miners?

29:09Alex Thorn:I saw that yet again. They banned Bitcoin mining for what, the sixth time in 12 years? It seems like every two years or three years they shut it down, but it just doesn't go away now, does it? So digital capital is a global phenomenon. We are beneficiaries and we acknowledge that. And we build our company on that. Our job is converted to digital credit. And I think that's the one thing we can do well. And if you want to create digital credit, you need to be monomaniacally focused on digital capital. And, you know, for every$10 of Bitcoin I hold on my balance sheet, I can probably create$1 of credit.

29:52You know, you might even say, if you're being concerned per year, you might say for every$10 of equity capital, I can probably create$1 a credit per year. Right. And I can do that responsibly. And so over time, you know, Bitcoin's growing. We're layering on more credit. We're feeding the digital capital ecosystem. We're building our balance sheet, et cetera. But now that third step, creating digital money, you need the crypto entrepreneurs. You need the crypto exchanges. Maybe you need the Binances. You need the Coinbases. You need – maybe you need the proof-of-stake chains. Maybe you need the crypto – you know, how many different entrepreneurs have created a stablecoin?

30:38Alex Thorn:Yeah. Right? You need them. You need fund managers, right? You need the private fund managers, the Bloomberg jockeys. Like I got hit with, you know,$150 million of redemption today. I'm going to sell down the currency equivalents. All of a sudden I'm 95 % credit, 5 % currency. Now I have to rebalance back to 80 % credit, 20 % currency. I'm trading, I'm managing, I'm hedging. And so you need the fund managers. Then you need the fund managers, either private or public managers, to actually create the digital money fund. Then you need a crypto entrepreneur to create a crypto coin. You need a public ETF manager to take your fund public.

31:29A pretty big idea is I take private funds public. You know, we forget, but the original tokenized fund was an ETF.

31:37Alex Thorn:That's right. Right? I mean, it's – and believe it or not, the world is still full of a lot of asset classes that yet to be put on an ETF. You know, go try to buy an ETF that reflects a bunch of old masters paintings. Yeah. You know, can't do it. Right. Try to buy an ETF that reflects New York City real estate and passes you through a dividend which reflects the rents. Not, I mean. I don't know of one. Yeah, but I mean, the point is there's a lot of financialization to be done on traditional ETF rails. So we shouldn't be surprised that we're not there yet on Bitcoin rails. That's the 10 years, 20 years we're talking about.

32:16Yeah, I mean, BlackRock's done, what, 1 ,000 ETFs, but they still haven't done, you know, the 10 that I want.

32:21Alex Thorn:Right, right, right. Right, I mean. And then, of course, you need the banks, right? What's the value added of a bank? Well, okay, the bank – first they got 10 ,000 salespeople. Then they have a brand. Then they get the banking regulator to approve it. Then you've got the platform, right? I mean all sorts of platforms. Then you've got the account. You strip the ball. And then you dispense daily doses of dividends. you deal with the tax compliance the legal compliance the kyc compliance some dude wants to buy 10 billion dollars of digital money and they're you know believe it or not you know if you're the first bank to offer digital money in the middle east and some guy wants to wire you 10 billion dollars to buy it you still have the aml kyc the the compliance issue and you got to jump through hoops to do it so the way i see the industry evolving is the first layer is completely decentralized.

33:27The second layer, digital credit, is going to be created by companies like Strategy or MetaPlanet or Strive, right? A treasury company that's monomaniacally focused on creating digital credit instruments. And then the third layer is really up for grabs. There's a thousand banks that could do it. There's a thousand fund managers that can do it. There's a thousand crypto investors or entrepreneurs that can do it. And the truth is they are all adding value, right? I mean, whether it's technical, right? Do you have the technique to put it on the platform? Everybody's got a platform. We'll debate what's the right platform, right?

34:09There's going to be a big debate. Is it a crypto exchange? Is it a proof of stake network? Is it Aladdin that BlackRock runs. Is it the in-house JP Morgan or Morgan Stanley or Goldman Sachs network? Is it a regulated digital exchange? There's, you know, Europe has got one currency, 27 sets of regulators, 27 different exchanges and 27 capital markets. And you're thinking you want to distribute there, Right. So I think that the exciting thing for us is what we realized is our mission is create the digital credit. But we have an incredibly compelling partnership opportunity or a partnership proposal.

34:50If you're if you're the most digital forward bank in Australia, you want to create digital money in Australia. I have a deal for you. Interesting. Right. If you're the most ambitious bank in the Middle East and you want to create digital money, well, the first bank that does it is going to attract a trillion dollars of capital. Do you want to be that bank? Do you want to be that city-state? Right? Some people, some city-states will miss it. You've got nations that are more concerned about losing control. They would rather shut down the technology because they're afraid it might be too useful. So you have some that won't move.

35:30You have some that don't even get it, right? They don't even notice it's happening. You know, what is the digital asset thing anyway? What is this good for? And they're like digital beanie babies, right? And then you have some people that get it. It's like, oh, money moving at the speed of light, economic immortality, and maybe we can program it to think a billion times a second, right? And I think that the ones that get it, now it's going to be a competition. There's going to be a question of who wins. And it's team sport. You need the bank. You need the bank regulator. You need the fund manager.

36:06You need the partnerships.

36:08Alex Thorn:Right. Right. And then you need to coordinate, you know, all of those. And then there's a technical component. And there's a question of are you willing to take a risk and can you market it? and uh you know and the likelihood that is that most people will be followers but there's always going to be a leader you know or a couple of leaders and this is a battle for the future of money and we're talking about you know easily 200 trillion dollars up for grabs there but it's going to be 400 trillion dollars in 10 years and whoever actually creates digital money is going to grab 10, 20 percent of it for sure.

36:48You won't convince everybody. There's going to be a world of people are going to think, well, I just don't trust that. That's too good to be true. But, you know, roll the clock back when people talked about Bitcoin. Like, yeah, well, it won't work. Oh, well, if it works, it's too good to be true. And the government will take away from you.

37:03Alex Thorn:I mean, eventually the horse-drawn carriage pilot still buys a car one day. But imagine a world where 10 percent of that money flows into digital funds and digital banks and digital bank accounts. And that's a profoundly disruptive world. And we will create the Switzerland of the 21st century. It'll be the world banking capital. And I'm hopeful it's in the U.S. I think, I don't know why it wouldn't be in the U.S., but if it's not in the U.S., I wouldn't be surprised if it doesn't pop up in the Middle East. Because if you appreciate technology and you understand digital assets and you appreciate banking and you like money, The most profound idea I have for you, it's why don't you just attract all of the capital in the world into your bank, into your state?

37:56Because Lord knows right now, the traditional 20th century banking establishment has a proposal, which is give us your money and we'll give you nothing. Yeah. We're going to offer you return free risk for all of your assets. You're taking duration and credit risk that does not offset with yield that does not offset the duration risk and the credit risk. So pretty much you have hundreds of trillions of dollars, which is returning, you know, inflation adjusted nothing. Yeah.

38:30Alex Thorn:Well, we have below real inflation. I want to ask you a question, Michael. You said that your strategy is monomaniacally focused on this digital credit creation. Is that a reason why you wouldn't maybe use some of your Bitcoin to buy a Bitcoin business that could generate more Bitcoin? Is it not pristine enough to be the credit issuer if you also have other operating businesses inside strategy? Put simply, we expect Bitcoin to appreciate 30 % a year for the next 20 years. That is our risk-free rate. That is literally the hurdle rate. I can acquire Bitcoin at one times revenue. It's a monopoly on digital capital.

39:15I can acquire the world's reserve capital network at one times revenue growing 30 % a year for the next 20 years risk-free, integration-free overnight. No questions asked. What could be better than that? Right. Nothing could be better than that for us. Right. Once you've actually established, you know, yourself on the Bitcoin standard. And once you've rotated your shareholder base. Right. The important point is not that it's not that everybody agrees with me. The important point is that all my equity investors agree with me. You see, our company exists to acquire Bitcoin. So if you bought me another option, you said, well, Mike, I've got this great startup and it's going to grow 40 % a year for the next 20 years and emerges a monopoly in the world.

40:06And I'm like, OK, that's great, Alex, but it doesn't sound as good as the deal I already have going. Like, what are the odds that you just found the next monopoly on money in the world growing 40 % a year for the next 20 years? And by the way, let's say that you're a genius and you found it. What are the odds I can convince all my equity shareholders that it's better than Bitcoin?

40:31Alex Thorn:Unlikely. And by the way, why would you want to? Right. I mean, if you already have a risk free rate of 30 percent, if you can buy it at one times revenue and if you can integrate it overnight, why would you do anything else? So I think, for example, let's say there's 100 companies out there that are trading at a discount to NAV. Yeah. OK. Well, the world's full of private equity funds that have a mandate to invest in 20 non-correlated investments, and their hurdle rate is 10 or 15 percent. And they're actually suited up to deal with all the social issues and the headaches. Right? They sit on boards.

41:16Yeah. You know? They hire and fire entrepreneurs. They integrate people. They lay off people. They fight with lawsuits, right? So it makes perfect sense for a private equity fund or a public company with a roll-up strategy to buy a bunch of businesses. If you believe in diversification, right? We don't, right?

41:39Alex Thorn:Right. We don't believe in – yeah. You said – what was that great quote you had? What do you have, one screen? You only have one screen? You have one chair? I got one chair. You're sitting on one chair right now. I got one chair. I don't believe in diversifying the fuel source that flows into your jet engine. I believe in kerosene. I don't believe in diversifying the metals that make up the airplane wing. I believe in aluminum. I don't believe in diversifying the composition of your semiconductor chip. It's like you ever seen an NVIDIA data center? How diversified is the chip set in the NVIDIA data center?

42:15Alex Thorn:Yeah. Right? I actually believe that when you find the solution, then you pursue it. But my point really is the world is full of people that have large pools of capital and their mission is to make diversified investments and their hurdle rate is 10 percent. And if they actually clocked 12 percent a year after lots of effort, they would declare victory and their limited partners would say that was a great year, right? Yeah. But here for us, that's not us. And here's the problem. So my hurdle rate is 30 percent integration free, risk free. I've done the same deal 90 times in a row. And the product of the company, digital credit, what we're offering is STRC.

43:02We're offering you a product that's going to pay you a 10 percent dividend yield with a very tax efficient return of capital dividend. Right. And so if I'm offering you something that pays you 10 % dividends in a credit universe that offers you 4%, give me one reason why you wouldn't buy that. Why is it that the entire world wouldn't sell their$100 trillion of garbage credit that yields you one-third of what we're offering after tax? Why wouldn't you just sell it all and buy stretch? Give me the one reason.

43:45Alex Thorn:right i'm not going to come up with one on the spot i don't think okay well so i'm going to give you two reasons okay let's hear them you haven't heard of it you don't understand it yep and the second reason is you think that the issuer has a credit risk so yeah when we're going off you know we we you bring me 10 good deals and i buy 10 companies and i get distracted by that i'm so distracted by that. I'm on CNBC talking about all those other things. I'm not talking about stretch, STRC. And then you're a credit investor. And, you know, when the message is, yeah, I have like$5 of capital for every dollar of this instrument.

44:25It's like, I get it. But then you're like, but tell me about this other thing you just did. And I heard they're getting sued or that's going to take a year.

44:33Alex Thorn:It distracts you. It creates credit risk for you. You're creating If you're creating opacity and you're creating a dilutive distraction, you actually get a diversification discount. Like the person buying this instrument simply wants to hear you have the money to back the instrument. Right. Right? It's almost like a collateral mix that gets more complicated. They don't want – they want the digital capital under there. They don't want this business doing this weird thing and that other business that may or may not do well this quarter all under there. If I just spent five years, every day of my life for five years, to explain and convince you that Bitcoin is digital capital and I have a lot of it.

45:12Alex Thorn:Yeah. You think I want to show up in the sixth year and explain that I also started buying these other 16 undervalued companies and we're really good at doing takeovers and integrating them and it's. Yeah, that would seem strange for you to do. I get that. Again, it's a distraction for us. We've got, in my opinion, we have the world's greatest product. Yeah. But what about buying other, like, distressed Bitcoin treasury companies that are trading below that? The point is it's a distraction. Yeah. Just the process of doing it. How long do you think it takes to close the deal? Yeah. A year? Yeah.

45:44It takes a year to close the deal. Do you know all of the liabilities that are embedded in the balance sheet? No.

45:52Alex Thorn:Right. When do you find that out? In six months? Yeah, some point during the process, I guess. Yeah. The point is, why would I buy Bitcoin with all of the – the whole message for five years is Bitcoin doesn't have employees. It doesn't have management teams. It doesn't have counterparty risk. It doesn't have supply chains. It doesn't have leases to break. It doesn't have nexus. It doesn't have all of the 30 pages of liabilities that companies have. So why would I want to go and buy 30 pages of liabilities? It'd be like Bitcoin wrapped in a giant cluster. Yeah, and here's the point, right? I can build a digital building in one day with no risk.

46:38Why? You know, you're like, okay, well, I can do this in one day at one times revenue. You've done it 90 times in a row. And then some dude comes along and says, well, you know, I have a building this summer that'll take a year to close the deal. And I think it's like a 20 % discount, but I'm going to need you to sign up to unlimited liability for the next year. And I need your investors to sign up to unlimited bottomless. Maybe the deal won't close. Maybe you'll get sued for$18 billion of intellectual property rights, shareholder litigation or something. Why? It's like Pennywise and Pound Foolish.

47:11Why would you absorb unlimited bottomless liability and distraction when, you know, it's like don't look a gift horse in the mouth. You get the chance to buy Bitcoin with zero risk, zero integration headache, and you put it out on the wire next Monday. And everybody understands whether the risk profile. You understand, like, if I buy a billion dollars of Bitcoin, you're the investor. you can see immediately whether the risk profile of the company increased or decreased that minute. If I enter into a billion dollars of corporate acquisitions, you will not know for one. You might not know for 10 years, Alex.

47:55Alex Thorn:That's right. You understand? Like when I, if you buy a company, you could have embedded liabilities in the company that you don't know about for 10 years. That's right. It destroyed HP. Yeah. You remember the HP acquisition when they bought Autonomy and they paid$10 billion for a company that was worth$1 billion and took a$9 or$10 billion write-off? Yeah. Yeah. You know, these – let me say it a different way if I'm not enthusiastic enough in my answer. It's good. It's a good answer. I get it. I watched 100 companies in my industry go bankrupt over 30 years. Yeah. So I go out of business. 100 companies.

48:36You know how they all failed? dilutive acquisitions. If I had to trace the number one source of a failure of a publicly traded company, it's the CEO starts doing roll-ups and buying other companies that they think are helpful. Every single competitor of mine, they did these acquisitions and you end up just buying a company, overpaying, then you buy another company, you think you've got a good deal and it blows up in your face and you buy a third company and then all your good employees quit because they hate the fact you bought the third company. You buy the fourth company, your shareholders quit, you buy the fifth company.

49:10And eventually around the sixth company, you know, your financials collapse, your stock collapses, you sell yourself. And you get amalgamated into the great beast of some mega software conglomerate. And you can't remember their names, probably. That's where you go to die. And so, you know, I think you buy things when you run out of ways to grow. OK, but here's my idea of how I'm going to grow. I'm going to sell a digital credit instrument that's going to give you a 10 percent dividend with 80 to 90 percent of the volatility of Bitcoin stripped off it. And I'm going to sell it to 5 percent of the credit market.

49:53And that's 15 trillion dollars by my calculation. Right now,$30 trillion in 10 years. So I have an idea for$30 trillion.

50:03Alex Thorn:That's a pretty big idea. And you're telling me I should come up with a second idea? And the only thing that's – the number one way to destroy or undermine your first idea for the$30 trillion is to come up with a second idea and get distracted. Take on other credit risk, right? Take on other distractions. And so let me make one more point, Alex. Like, I mean, the other day, we have like$60 billion of capital. Yeah. You understand? We could buy anything. Right. Right. You understand? Like investment bankers, like we could buy half, you know, half of the Russell 2000. Yeah. Right. We could buy half of the publicly traded companies or merge with them.

50:47We could probably merge with or buy 37 ,000 public companies and 37 million private companies, and we could invest in every idea you could possibly imagine. We could also raise a billion dollars from any credit investor in a week, maybe overnight if we wanted, right? When you start with$60 billion, it's not hard to find someone that will lend you a billion dollars.

51:14Alex Thorn:Right. That's right. Every one of those ideas would be dilutive, distraction. And the number of bad ideas that people throw at you goes up exponentially the more money you have. How many bad ideas do you hear? It's like – Is it endless? We could be an insurance company. We could do reinsurance. We could underwrite this risk. We could become a bank. We could become a commodities trading exchange. We could – like never ending. I could literally list you 1 ,000 in an hour and then I could tell you the 100 reasons why each of the 1 ,000 doesn't make sense. And after I gave you 100 ,000 reasons for not to expand, I would reduce it down to the simple maxim that Marcus Aurelius gave us 2 ,000 years ago.

52:05just because you can do a thing doesn't mean you should do a thing, right? And I think humility dictates, if you have a good idea, right? The most important days of your life, the day you're born and the day you figure out why, okay? The arrogant guy thinks he was put on earth to solve a hundred problems. The humble person, if they're fortunate enough to think they're put on earth with a mission to solve one problem, you just got given a gift, right? And so what we figured out is we can create digital credit and it's better than$300 trillion of other credit. And whether or not it solves 1 % of the market's problem or 5 % or 10 % or 20 % or 0.1%, doesn't really matter.

53:04It's a life's work to create good digital credit. If you're fortunate enough to be given the opportunity to do something, you should laser-like focus on that thing. Because you want to look at the history of failure. It's alpha males that solved one thing and think that that's solved and done. And they come up with 10 more things to solve.

53:29Alex Thorn:Yeah. Right? It's the Napoleon complex. It's like I now have to spread the French language and the French way of life to the frozen steppes and the tundra of Russia in the winter. And somehow, have you ever gathered 10 ,000 of your favorite friends and tried to walk across Europe like 1 ,000 miles? It's not a good idea in the 21st century. But somehow Napoleon got the idea that he might march 600 ,000 people from Paris to Moscow. in three months, conquer the nation, declare victory, and come back unscathed. It was never a good idea. And it was the 14th bad idea he'd had in 14 years. But, you know, hope springs eternal.

54:18People come up with these outrageous, ridiculous ideas. And it's like, you know, maybe you might want to have just noted that the odds of a Corsican actually rising to rule France were like one in a hundred million and stopped there.

54:35Alex Thorn:And just let it ride. Instead of the, we got to conquer Egypt and we got to conquer Germany and we got to conquer Spain and we got to conquer UK and we got to conquer Russia and we got to conquer Poland, et cetera, et cetera, et cetera. But it happens, it continues to happen. And I will get never ending number of pitches for one more thing that we could do. And I would say you come back to Steve Jobs, right? And he just reminded people we say no to a lot more things at Apple than yes. I think this is a good answer. Right? Focus. I can't imagine how many people are asking you that question. Well, surely you're meant to do something with your Bitcoin.

55:17Alex Thorn:And, of course, you are doing this credit creation. But what about the other Bitcoin? The most profound idea, right, is put it in cold storage and sell a dollar of credit every year. That's a profound idea. It's just not their idea. Yeah. Right? So the point is, like, it's not their idea and they're not getting paid money on it. So people are going to pitch you their idea and they're going to either belittle, ignore, or ridicule your idea. Right. Because it's not their idea and everybody kind of feel. And there's another thing, which is a lot of times people feel like they need another idea, like, you know, after they had the last idea and they underestimate the amount of maintenance and investment to actually nurture one good idea.

56:03Alex Thorn:You have nurtured it, too. This has been a significant evolution, too. Would you ever thought in the summer of 2020 – I think Matt Walsh from Castle Island Ventures was the first person to see your filing in summer 2020 that you were buying Bitcoin within MicroStrategy. Could you – because this is an evolution since we've known each other. What would your 2020 self think about where you are now in 20 – going into 26? Well, you know my – Because this is – you built a juggernaut out of this idea. My philosophy and you could see it – when I wrote The Mobile Wave, I just said technology is acid and it dematerializes products and services and it transforms.

56:42And if you have enough imagination and talent, you can create something magical that changes the world for the better. So my ethos, right, is the ethos of an engineer. Look at technology and figure out how to create something which is good for the world, right? Engineer a better world, you know, and I tried a lot of things, right? I mean, and I tried a dozen things that did not fly. Usher and Emma and Alert and Alarm and Wisdom and Angel. So many things. And in 2020, right, you know, in a time of frustration and desperation, we discovered Bitcoin and we grasp on it as a way to benefit our shareholders and our employees and our customers.

57:29And it was first an exercise in frustration and desperation. It really was a, you know, was a do this, you know, or suffer a painful death.

57:39Alex Thorn:Yeah. Right. And then it became, you know, an exercise in transition and adventure. It's like now that we've done it, what are we going to do next? OK, someone will loan me a billion dollars for free. Well, you know, a year ago, I was looking at winding up the company and now I have a chance to actually buy a billion dollars of Bitcoin for free. and uh you know then it was uh it was adventure and opportunity and challenge and response it's like and it was a journey and it's a journey of discovery because we went from being a software company to uh to to being a financial a structured finance company right it's like first we did senior credit or senior debt and that was a weight around our neck and then we did asset-backed And that didn't work well.

58:32And then we did OTC, over-the-counter financing, and we learned the limitations of that. And we did convertible debt. We learned the limitations of that. And as we move through each iteration, we realized that there were some extraordinary technologies. And we're engineers. You know, we put together about six components, right? One was a preferred equity, right? And most people had never used preferred equity to create credit. And the second was a public offering. We did one public offering in 1998 for like$48 million or something, 40-something million dollars. And then we did a$500 million, a$600 million, a billion, and a$2.5 billion, and a$700 million IPO this year.

59:21Alex Thorn:Basically this year, yeah. Bam, bam, bam, bam, bam. $5 billion type public offerings. OK, so we we harnessed the IPO and then we tacked on the at the at the market shelf registration. So we tacked another thing onto it and then we borrowed everything we learned about the ETFs. You know, we studied ETFs and we watched the success of BlackRock. And we said, how do we create a credit instrument that has all the strengths of an ETF, that has the power of an ATM, that has the power of a publicly traded security, that has the flexibility of a preferred equity, that has the volatility and the performance of digital capital.

1:00:03We put all those together and then we plug that into digital rails. Like, you know, we use this phrase, do you want to do an OTC deal or do you want to do a public deal? Okay. The investment bankers will pitch it like those are equal.

1:00:18Alex Thorn:Yeah. You know, and actually the bankers will tell you the OTC deal is easier. Let me tell you the difference. An OTC deal is one bank calls 37 of their friends into an alley and we trade baseball cards. Right. And a public deal is, okay, we create a security that 200 million people can buy and sell every minute of the day everywhere in the world. And you tell me, you think they're both equal ways to raise capital? Right. I'm going to sell you a credit instrument. Do you want to trade it, you know, in the back alley with like 12 possible buyers? Right. Or would you like to actually be able to post it and sell it to 200 million people in the world every second of the day?

1:01:01It's like they're not equal, right? One of them is better than the other one. And so this was a journey of discovery. And at the end of the day, we had to understand credit instruments, you know. And by the way, bank deposits are the worst. Margin debt is pretty bad.

1:01:17Alex Thorn:Right. You know, junk bonds are pretty bad. Convertible bonds, unsecured, less bad. Over-the-counter, not great. Preferred equity that's perpetual, better. Public preferred equity, better. Public preferred equity with the shelf registration, best. You know, with a Q-SIP, no. You want a five-letter ticker? No. Four-letter ticker, word you can pronounce, IPO'd. By the way, in Europe, not quite as good. You know, like, you know, we took we took stream public in Europe. We're still trying to get it to trade properly for the retail a month later. Right. You know, you take it public and we get it. We get these things strike, strike, strike, strike on the Nasdaq within five days.

1:02:01Right. Right. Not all capital markets are equal. Guess what? The U.S. capital market is better. How much better? A lot better. So as we actually move down this, journey of discovery. We went from adventurous and opportunistic and strategic to eventually transformational, you know, and then we realized that we had actually created a better credit product. And I would say those first four years, the equity was the product. We, you know, the credit was a tactic, right? We sell the bond to actually create performance in the equity.

1:02:42Alex Thorn:Yeah, as an alternative to - And that was fine for those four years because there was no other equity product. And I meet people in UK today, they're like, hey, I bought your equity because I couldn't buy anything else with Bitcoin exposure and my retirement account, right? Right. So the equity is a product. And then in 2025, we discovered digital credit. And that culminated in STRC, where we realized, what's the ideal product? I stripped the delta. I stripped the vol. I stripped the duration. I just hand people the yield. And if I hand people the yield in a tax-deferred dividend, you know, how many different layers of innovation have I stacked on top of the credit world, right?

1:03:27appreciating collateral, publicly tradable. By the way, it's illegal for a retail investor to buy an OTC instrument. Now, we talk about being debanked and being blocked, right? And the entire digital assets revolution is about an egalitarian, utilitarian movement to empower the masses. And while we're empowering the masses, maybe empower the computer, right? Like what if we had digital assets that AIs could trade a million times a second everywhere in the world without asking permission before they actually made the trade?

1:04:04Alex Thorn:Yeah. Right? And we kind of stepped through that and we had to kind of get a PhD in capital markets and credit markets and securities markets and then digital assets and digital capital. And that was a five-year journey. But I would say at the end of the day, the philosophy underlying all this is, can you actually take all of these components that have been lying around for 30 years? ETFs have been around for 30 years. The most successful ETF plugged Bitcoin into it. Michael Milken, I'll tell you, he invented the ATM offering. We're the most successful issuer of equity via an ATM. and he invented the convertible bond market.

1:04:54We're in the most successful issue of convertible bonds. So we took all these ideas, you know, plugged in digital capital, plugged in a public company in the U.S. capital markets with a bit of ambition. And then the truth of the matter is even this last step, digital credit, it it's not happening alice alex unless we had digital intelligence right because what happened in 2025 was the ais got smart and people like oh yeah they're just kind of idiots and they they pare it back to you well let me tell you when you when you actually take the idiot and you pare it back and you do it a billion times and you loop it back on itself 10 000 times you let it spend for 10 minutes is pretty smart.

1:05:42Alex Thorn:Yeah. Right? And so – You talked about that a few months ago in New York at the Treasury Company Conference about how you and strategy have used AI to help design this new credit complex that you've created. Yeah. You know, no one ever – no one in this entire digital asset space and probably just a handful of companies ever put an at-the-market shelf registration on a preferred equity. Right. Nobody ever created a variable rate preferred equity. Like, can I create a monthly dividend that trades stable around par and adjust the dividend every month? Ask every lawyer and every banker. It's never been done.

1:06:20We don't know how to do it. Ask the AI. Yeah, sure. You can totally do it.

1:06:24Alex Thorn:Yeah. Okay. Why? They have no pride of authorship. They don't – you know, no company ever went to Europe and sold a perpetual preferred equity. Well, we just don't do that in Europe. Why not? Why don't you do that? Well, because all the other issuers didn't have digital capital. And so you had to have the right combination of circumstances. You needed a block of digital capital and you needed digital intelligence. You need to have the will to create digital credit so you create digital money. And they all had to click. And then once you have that clean sheet of paper, and Elon Musk talks about it all the time, right?

1:07:09It's like, you know, he's like, take a clean sheet of paper. The biggest mistake engineers make is optimizing a part that shouldn't exist, right?

1:07:19Alex Thorn:Yeah. It's like, you know. Talk about how deleting code is better than writing code a lot of the time. And my book, The Mobile Wave, I lay out, you know, the critical component technologies in the iPhone. If you don't have the right battery, the lithium battery, you don't have the right, you know, touchscreen LED, there's no iPhone. And it's like, what did they do? Well, they left out the keyboard, you know, and everybody else is like, there's no keyboard. Where's the keyboard? It's like, well, that's a moving part, a lot of moving parts that should not be there. and after a while you look and you're like well wait a minute you get rid of the keyboard and all of a sudden you have infinite keyboards and you just talk to the phone and why do i need like like why do i even type in the first place right right like you know it's like uh okay the world is full of people trying to optimize a very inefficient process that should not exist and And I would say 2025 was a very special year and is a special year because what you have is digital intelligence colliding with digital capital, colliding with digital assets, colliding with digital markets.

1:08:30And a lot of people saying, why is it that I can't move everything 24-7, 365 at the speed of light a million times an hour while I'm sleeping because my AI was doing it for me? And the answer is any 16-year-old kid would get the fact that that's a better world. It's only the 65-year-olds that got rich in a different world, you know, full of constraint that don't get that.

1:08:58Alex Thorn:Do you think AI and the overlap with Bitcoin? I mean, I didn't think that the intersection of AI and Bitcoin would be helping to design digital credit, which is fascinating that it has been. What will be the longer term impact on digital capital and Bitcoin of AI? Will the robots use Bitcoin? Look, it seems pretty clear. we're moving toward a world where a billion robots do all the work and cars drive themselves and there's a billion AIs in cyberspace doing all the thinking for us. And you sit down and you're a professor and you're like, I never could solve this coal fusion thing. And, you know, if you wanted to solve coal fusion or create another nuclear reactor, there'd be like, you know, 97 dudes that spent their life on it and they'd all tell you the reason it's not doable.

1:09:53you know and it's just like me asking i got an army of lawyers you know i got an army of bankers i ask every art you know the lawyers and the bankers is it possible to do this like we'll get back to you in a month and after a month they get back to you and say well you know you know we're not quite sure but it's never been done before you know it's like and so you're like i'm aware of you're willing to wait a year you know a year will go by and you won't get an answer but You go to the AI and you say, well, I have this opinion. I want to do this and this and this this way. And can you figure out if that's possible?

1:10:25You put it in a deep research mode and you grind it three or four times. It's like, yeah, we ought to do this and this and this and this. Yeah. And what you've done is – and it's very important, right? You've taken the lawyer that's read everything that's ever been filed in securities law without any pride of authorship, without an economic motive, without, you know, any prejudice or bias or any baggage, you know, that doesn't mind if you call it stupid or you tell it that it's not working hard enough. And you've used that to get the first thousand man years of research done. And I'm, you know, I'm of the opinion, now you think about the definition of a PhD, it's like someone capable of making a seminal contribution to the body of human knowledge.

1:11:16And there's 10 million of them and you can't get a PhD without having written that dissertation. But the problem is by the time you get to that point, you've got so much baggage. So, you know, you've got so, so much built up belief system because human beings, we use heuristics and rules of thumb and bromides and, you know, conventional wisdom. in order to accelerate the human brain because you just can't consider, you can't be the alpha zero, right? You can't consider the full state space of options, and you can't go and read 100 ,000 books every time someone asks you one question. So you have to kind of just fall back on, you know, these simple bromides or simple conventional rules.

1:12:06And so you're taking shortcuts because of the limitations of one human brain. the ai doesn't have to take the shortcut the ai can say well actually i did read the hundred thousand books and i actually found an example and so i think we're moving to a new world and the new world is you know a billion people do the work of a phd and a billion people solve a billion problems and they have the equivalent of 10 ,000 hyper PhDs that think a million times faster that work 24-7, 365. And what happens when you actually tell the AIs to grind the AIs and you unleash a million AIs to tell a million AIs to do it?

1:12:53And, you know, the real evil genius guys are like, well, I create like five AIs in a committee. I make them fight with each other And I make them take the opposite points of it until, you know, they've ground through the thing. And I'm like, oh, that's really wicked what you're doing there. And so I think we're in a whole brave new world. And there's, you know, there's two types of thinkers, two types of systems, two types of corporations. There's the person that says, oh, digital assets and digital intelligence. I can do everything a million times better, a million times faster, a million times stronger, and the world is going to be a million times better.

1:13:35And then there's the – and I'm going to do it with intelligence, digital assets and digital intelligence. And then there's the other side. They're like, we don't want the AI to give you the answer. We don't like the answer. We don't – please don't use it. It might be a security leak. I've literally met people where they're like, my legal department won't let me use the AI to answer this question. Just like those teachers are like, we don't want the students using the AI.

1:13:57Alex Thorn:Are you kidding me? They haven't figured out how to let them use it yet. We're bragging. Well, you know, the kids use the AI, and the problem was the AI gave them an answer. So we had to train the AI to not give the kids the answer. It's like, oh, yeah, well, you know, the kid got a jackhammer, and jackhammered through the mountain. But that was a problem because we really wanted them to bang away on a rubber mallet like we did. Like there's literally people that are afraid the technology might work too well, and we just have to dumb it down, right? Make it woke. Make it stupid. What if the 12-year-old actually got the answer?

1:14:34Well, we really want them to take the shovel and dig the hole because that's how we used to dig holes with shovels. The kid figured out how to hijack a million robots to build a new city, and we live happily ever after. And then the kid cured cancer and 3 ,700 other diseases. but that's cheating because we really wanted them to like work slower. You know, it's like, yeah, there are going to be governments that want to slow it down. It's like, you see it right now in authoritarian cultures. You know, we don't want people to move money too fast.

1:15:08Alex Thorn:Yeah. We don't. Right. We don't want someone to accomplish things on Saturday afternoon yet. You know, when the Puritans showed up in Boston, if they caught you working on Sunday, they whipped you. Yeah. It's like it's a religious thing sometimes or it's a political thing. So interesting. But just like the Japanese didn't want explosives to corrupt their military system. And the Chinese – you had a centralized emperor in China and he actually kept modern munitions technology out of China. That worked until the British warships showed up and sailed up the river and then that didn't work anymore.

1:15:49If you read about the opium wars, at the end of the day, you can slow down the advance of technology only for so long. And you put your head in the sand and at some point someone that doesn't happen to share your fear of the technology uses it to send a robot-driven swarm army to topple your particular political system. And then people are like, oh, yeah, well, I guess airplanes work. You know, when they start dropping bombs on our head, it's like, oh, well, they're not using horses on us anymore. They used, yeah, because machine guns and tanks actually seem like a better idea. And, you know, it's like the general subtext of that is paradigm shifts come when the old guard dies or when there's a war.

1:16:38And science advances one funeral at a time. Right. And that's how this stuff is going to advance. And maybe the death will be the death of the bank. Maybe it will be the death of the corporation. Maybe it will be the death of the city-state. The banking capital of the 20th century won't be the banking centers of the 21st century because the money will move.

1:16:59Alex Thorn:Very interesting. Before we wrap, I got a couple other quicker questions. What about quantum computing? There's a big – people must ask you this. They've been asking me for five-plus years. Will a cryptographically relevant quantum computer pose a threat to Bitcoin? And if so, how should the Bitcoin world be thinking about mitigating or defending against that threat? It's a reminder that a pessimist imagines a problem and thinks the world is doomed. And they kind of feed on their pessimism and gloat over it. And the optimist imagines the problem and sees us solving the problem and how the world will be a better place.

1:17:37So let's take quantum computer. Okay. There's going to be a point when the world will form a consensus that there's a quantum threat. We're not there now. But you won't miss it because the United States government will direct all of the defense contractors to upgrade their encryption algorithms to be quantum resistant. And Microsoft and Apple and Google will ship a quantum upgrade. And your bank, let's say you've got your money at J.P. Morgan, they will ship an upgrade and they will say, you know, there's a need for us to upgrade our encryption algorithms. So please install the new client software and re-authenticate yourself.

1:18:22Alex Thorn:And you've got X days, 90 days, 30 days, whatever number of days to do this. And if you don't, we're going to freeze your funds for your own good. OK, it's not that complicated. Every single system on Earth, every iPhone, every Android phone, every. Can you imagine you walk into the office and your boss says, your IT guy goes, we need to upgrade our software to be quantum resistant now. And you're like, well, I just decided I don't want to. OK, well, that's a condition of employment. How many people are going to say, I just decided I didn't want to upgrade the software. You're not going to have a job.

1:19:04You're going to come back from the border and they're going to say, you know, you need the quantum resistant border software. You're like, well, I just would rather come back to the country without it. You're not getting in, right? And so at the point where we have global consensus, it's like Y2K, it's like anything else. There's not going to be a debate. The Bitcoin network just runs on software. There's going to be a quantum upgrade. It's going to have quantum-resistant encryption libraries. I wouldn't be surprised if they're not the same libraries that are in the iPhone and the Android phone and the Microsoft network.

1:19:41It's going to be a global standard and people are going to debate it. We're going to roll out the system and then everyone is going to upgrade to the software. We're going to re-encrypt all the Bitcoin and all the wallets and anything that is susceptible to quantum threat. It's going to get re-encrypted if the holders of the private keys are alive and if they like money. If they're dead, they're not going to re-encrypt. And if they've lost the keys, they're not going to re-encrypt. This is going to be a massive upgrade to network security. And it's going to be a massive deflationary event. And we're going to get the answer to the age old question, how much Bitcoin has been lost?

1:20:28And if the number is 5 million, we're going to see that the supply of Bitcoin is going to go from 21 million to 16 million. And the price of Bitcoin is going to go up.

1:20:39Alex Thorn:Interesting. Right. And ultimately, the quantum leap, call it the Bitcoin quantum leap, is going to be the best thing to ever happen to the Bitcoin network. Right. And the only difference between the way that a bank handles it and the way the Bitcoin community handles it is because we're global and more decentralized. We're probably going to do this not over the course of 30 days or 90 days. It'll probably take two years or one year or some amount of time. But, you know, you're going to argue to me that some dude that's got a billion dollars of Bitcoin is going to decide they just don't want to upgrade?

1:21:17I don't think so. Yeah. Right. And in this particular case, you could say, you know, the haters, the skeptics like, well, you know, you're not going to get consensus. Really? Like all the smart people with money in the world that thought it was smart to put their money on the crypto network. You think they're the people too stupid to want to upgrade. I don't I think you're going to get consensus like, well, it'll be too decentralized. You know how decentralized the United States government is. Right. You realize how many defense contractors there are. like the Walmart supply chain. If you actually look at the supply chains in the world, there's 100 ,000 companies that are all going to have to upgrade.

1:21:59They're going to figure it out, right? And so in this particular case, there's going to be an upgrade. The network security is going to upgrade. The wallet addresses that don't upgrade are getting frozen. And no one's going to complain because the only people that don't upgrade will be dead people. Got it. Right. And the dead are not going to complain about it. And those that lost their wallet, they lost their private keys. It's not going to matter. It's going to be a good thing. And this is just a natural challenge and response. You know, the network is going to be strengthened and hardened by this because intelligent people normally respond to challenges.

1:22:44in an intelligent way, the only people that think the community won't are people just hate Bitcoin.

1:22:50Alex Thorn:Yeah. They hate the Bitcoiners. They hate the Bitcoin community or they have a personal agenda of spreading fear and uncertainty and doubt for some evil nefarious purpose, generally because they want to sell you something. They want to they want to nag you and they want to make you insecure. So you'll give them your money so they can control you or manipulate you some way. And I think it's very important to transcend that fear and cynicism and skepticism and get on with your life because otherwise you'll never accomplish anything. I think it's a very optimistic and inspiring answer. Another Bitcoin community question.

1:23:27Alex Thorn:I know you're aware of this debate that's been happening. I would say mostly online though. I mean I don't see it much in my day-to-day in the Bitcoin world. But about non-monetary arbitrary data transactions, some call spam, right? It could be JPEGs or other sort of junk that is put on the blockchain. But in some cases, it could be proofs for a layer two or zero knowledge type stuff. But a portion of the Bitcoin community thinks these should not exist and has put forth an idea to fork Bitcoin or another one to confiscate low value Bitcoin to reduce the UTXO set. Do you have a view on this debate, you know, which was sort of catalyzed by the release of Bitcoin Core V30?

1:24:04My view is we should be hyper, hyper conservative about changing the protocol.

1:24:09Alex Thorn:Any change? Very conservative. And we should make sure that we have global consensus. When 8 billion people in the world have global consensus that quantum computers are a threat, I believe we should upgrade the software. Got it. But when half the community believes it's a bad idea and the other half the community believes it, I think you should slow down, right, these changes. I think we should be very conservative about the default settings. We should be very conservative about the protocol. I've said before many times that if you wanted to undermine the network, the way you do it is by infinite funding of highly qualified developers and tell them to improve it.

1:24:53And I think at its base, Bitcoin is a monetary protocol. And the lack of rapid mutation is the feature, not the bug. And so I think I'm not in the camp of people enthusiastically adding features to it. And I think that the way that you wreck a good thing is you speculate that it will fail unless you add a boatload of features to it.

1:25:30Alex Thorn:But they would argue some of the fork proposers would argue that features were added to it and they want to remove them. You know, is that – but it would be a controversial fork. Yeah. They're sort of saying go back to an even more conservative view of Bitcoin. So in a way, I feel like it kind of goes with – I'm very conservative and I think if you're introducing a change which is so controversial, you might want to slow it down. OK. That's helpful. You might want to slow it down. Yep. And you want to think a little bit. And I always think there's unintended consequences, second order, third order, fourth order.

1:26:07You know, and so, you know, I think it's a healthy debate. I empathize with the people that just don't like someone effing with the network. Don't F with the network.

1:26:18Alex Thorn:Yeah. Right. It's like the path of travel, the most likely outcome right now is Bitcoin emerges to be a$200 trillion world reserve capital network. and uh and everything you think is a is a bug is probably the feature that's probably the reason it's succeeding yeah and when you try to fix the things that you think are the bugs you might not and uh and that's why even even if you take the elephant in the room like the quantum threat i you know i'm not in favor of rushing it yeah it's like i i think that rushing you know to solve global warming. For a while, people thought aerosol spray was going to destroy the ozone and kill us all.

1:27:05It's like there's always something. And then they thought nuclear energy was going to kill us all. And then they thought, blah, blah, blah. If we don't go to solar power, it's going to kill us all. And then they thought the ocean was going to rise and flood Miami Beach and it's going to kill us all. And all of these things are normally alarmist. And what follows next is a law that taxes everybody or restraint of trade or therefore I'm seizing control of the government to prevent you from blank. So I just think that generally we ought to be very conservative about protocol bloat. We should be conservative with the clients.

1:27:43I think it's healthy. It's healthy to have more clients. I think it's healthy to have people working on alternate versions of Bitcoin. And I think it's healthy to have the debate. And I think we just ought to be very, very careful with the protocol.

1:27:59Alex Thorn:I think that's a good answer. Last question, Michael. I would say you're the most influential person in the world about Bitcoin today. How do you think about that role? Does it weigh on you? Do you feel like you've got a burden to bear on Bitcoin's behalf, millions of people? I'm grateful to be on the journey with hundreds of millions of other people. I feel blessed to be given a mission that is meaningful to civilization. I feel like I got lucky to be granted this opportunity at a late stage in my career. You know, I was 55 years old and I was ready to retire, you know, quietly into the good night.

1:28:42And that was the end of it. And then all of a sudden this came along and I started seeing that there is just a profound amount of good that we could do for billions of people. If we spread, you know, digital assets, digital capital, digital credit, you know, and we know eventually digital freedom, digital property rights. For the first time in the history of the human race, I think Bitcoin represents the ability to tightly bind economic energy to the individual. That's the most profoundly disruptive transformational change, you know, in the economic history of humanity. You know, it's got a protocol to bind economic energy to a person, a mathematical protocol, like, you know, and a communication protocol.

1:29:33It's like language and math and economic protocol. It's pretty profound. So I feel responsible for doing my best to preach that gospel, to spread that word. Also, to try to communicate to groups that don't see it that way, right? Go communicate to the bankers. Make sure that you de-escalate inflammatory responses. Bitcoin represents a profoundly humanitarian, egalitarian, utilitarian, you know, revolution for humanity. That means, you know, no government should fear it. No bank should fear it. No corporation should fear it. No mayor should fear it. No institution should fear it. No family should fear it.

1:30:23Nobody should fear it. They shouldn't fear it any more than you should fear fire, math, English, electricity. Right. I'd like to see it embraced as as it's a profound breakthrough and maybe the biggest the biggest engineering breakthrough in the history of economics. Right. It's like it's the point at which economics goes from being, you know, an art. to an engineering discipline or a true science. You know, a lot of superstition, you know, a lot of religion and politics and economics. And there isn't so much religion and politics in rocket science, right? The way that the Russians, the Chinese, and the Americans build rocket, they don't vary dramatically.

1:31:15There's no one saying, I think Baltimore should be used to build the rocket. Because you build a rocket, you do it wrong, it burns up on reentry. There's really, you know, maybe on blast off, there's not really a debate, but there's massive debates in economics. And so I think it's pretty profound. I feel very grateful to have the opportunity and I find it very motivational to have the mission. You know, and so I do think it's energizing. and there's probably no better feeling than going anywhere in the world, walking down a beach in South America or walking through a parking lot or on a runway in Europe or Asia.

1:32:02And the guy that's taxing the aircraft or refueling the aircraft or the guy that's parking the cars. I go to Mar-a-Lago, the guys that valet parked the car, they're like, okay, thank you. Like, we're with you. Or the guy that's the bar back, right, at the bar. Or like there's a lot of people from all walks of life who have derived inspiration and they feel like there's hope. And fundamentally, you know, like you have days where, you know, the market's crashing and all the short sellers are gloating and they're like gleefully celebrating, you know, can they liquidate you? And that's the negative part of the business, all of the toxicity and the hate and the controversy and the ignorance.

1:32:51But the part that motivates you that you always got to stay grounded on is the traditional finance world is not offering hope to 8 billion people, right? The conventional banking offer is we'll take you money and give you nothing and we'll actually keep 5 percent of it a year and hope you don't notice, right? And the credit market is, yeah, we're going to take everything you invest and we're going to just keep 300 basis points of it and hope you don't notice. Right? And your vision and your hope, if you're a taxi cab driver in Africa, well, it's like you have like zero hope whatsoever until the digital assets world came along.

1:33:34Right? And so we're actually giving people a path forward, a hopeful future. Right? A future you can get excited about for yourself, for your family, for your corporation. Create a business and put it on the global grid and do it with 20th century finance rails in any nation in Africa or South America or Asia. I challenge you. It's impossible. It's literally hopeless. And so what motivates me is, you know, now we've got hope. We've got economic empowerment and we've got hope. And there's a million people debating, you know, what's the right way to do it. But the point really is there is zero debate.

1:34:18You know, your economic life expectancy is short and it's going to be brutal and ugly and it's going to be a painful end if you don't have this technology. And it couldn't be clearer right now, right, that we've got modern economics that we're preaching. And there's no reason why you shouldn't actually be conveying that message to every politician, every academic, every entrepreneur, every investor, every individual, everywhere on earth. Because regardless of our political and religious differences, there's no doubt that humanity will be elevated by digital assets, digital capital, digital technology.

1:35:03And it's a struggle worth taking on in the modern world.

1:35:10Alex Thorn:There you have it. Owner, unsurprisingly, Michael Saylor, owner of Hope.com. And that was a very inspirational way to end. And Michael, chairman and founder of Strategy, as just, I forget what you said, maybe the hundredth idea you guys tried, but this one has hit its stride. Not to use a joke there. Michael, thank you so much for coming back on Galaxy Brains. Yeah, thanks for having me.

1:35:41Alex Thorn:Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of firmwide research at Galaxy. Follow me on X at IntangibleCoins. Follow Galaxy Research on X at GLXYResearch. Read our written reports at Galaxy.com slash research. And don't forget, if you like Galaxy Brands, to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts, and more. We'll see you next time.