Why MicroStrategy Bought $40 Billion Worth of Bitcoin — ft. Michael Saylor

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27:22Welcome back. Here's our conversation with Michael Saylor, the founder and executive chairman of MicroStrategy. Michael, thank you so much for joining us on ProfG Markets. Yeah, happy to be here. You've been everywhere recently. I mean, you're all over my news feed. And I just want to give sort of the Michael Saylor story in 2024 very quickly. So you're the founder and chairman of MicroStrategy, which was originally a business intelligence firm. But over the past few years, you've shifted it into this Bitcoin treasury company. So MicroStrategy now owns nearly$40 billion worth of Bitcoin. that's roughly 2 % of the total global Bitcoin supply.

28:06And it also makes MicroStrategy the largest corporate holder of Bitcoin in the world. And in the past year, as Bitcoin's price has risen, so too has MicroStrategy. So MicroStrategy stock is up 600 % over the past year. It's just remarkable. So I'll start with this and we'll get into it. But what has drawn you to Bitcoin, Michael? and what was sort of the impetus for this very radical pivot at MicroStrategy towards Bitcoin? I think in the middle of 2000, in the summer of 2000, what drew us to Bitcoin was desperation and frustration. So initially we had 500 million in cash. It was worthless, like it was generating 0 % interest.

28:51The company wasn't growing. We were under lockdowns competing against Microsoft. so you know the only thing that we had in our world that was a bright spot was we had 500 million in cash and we thought maybe it was worth something but when jerome powell said it's worthless for the next four years we lost that you know so we had to do something our initial you know foray into bitcoin was defensive or it's just a frustration defense it's either that or sell the company so if you if you're not going to sell the company you can die slowly you can die quickly or you can do a transformational acquisition.

29:28You can take a risk and that was our transformational acquisition. What if you could buy a$500 million company growing 60 % a year, which looks like its own digital monopoly, and you could bolt it on to a company that's growing not, you know, zero to 5 % a year that's not a monopoly. So we did that. Then Bitcoin surged and we could opportunistically raise money via the convertible bond market. And we raised 650 million at 75 basis points. And then we raised a billion paying 0 % coupon. And that point, I would say that stage is opportunistic. Like someone wants to give you billions of dollars of free money to actually invest in your business.

30:11Why wouldn't you? We got on the roller coaster and went up and down. It surged, it crashed, it surged, it crashed. and I think by the beginning of 2024, it became strategic and we realized like, hey, we're just doing this because we've got an operating company and we can do it and between 2021 and 2024, we raised about$10 billion of capital. So we started with 500 million, we raised another nine and a half to 10 billion more and now the question is, well, what's gonna happen with crypto and what's going to happen with Bitcoin. You got the ETFs approved in January. I mean, 2024 is like year zero of institutional adoption.

30:56So the ETFs are approved in January. Everybody wrote us off and said, well, MicroStrategy is unnecessary now. What they didn't realize is the ETFs are like overnight deposits. Like you put money into BlackRock, but you can take it out of BlackRock the next day. MicroStrategy, that 40 billion, that's our money. That's permanent. You can't take it out. We have$40 billion of permanent capital. And so what we realize is our real great strategic franchise here is we can securitize Bitcoin. So I can issue fixed income instruments, bonds, especially bonds and fixed income preferred stocks or high volatility equity.

31:41And those are all products the capital market wants. They want Bitcoin-backed securities. They either want 3x to trade or they want one-third of the risk and one-third of the volatility to hold in a portfolio. So we announced October 30th that we were going to basically raise$21 billion of equity and debt. And that was well received by our shareholders. We just kind of said, we're going to be the leader in the industry. If you want to invest in a company like ours, we're the company. And then a week later, we just had a red sweep. And November 5th was pro-crypto Congress, pro-crypto Senate, pro-crypto White House.

32:25Bitcoin surged, our stock surged. And I guess I boil it down to, it took us four years to get 10 billion. By the way, it took me 30 years to get 500 million. It took me four years to get the next 10 billion. It took us four weeks to raise 13 billion more. And that's because the product you're selling is capital. I mean, you're selling a security. If a rich person looks at the iPhone, how many do you want? One. You want one Tesla, one iPhone. But if I offer you a security that gives you twice the performance of the S &P, how many of them do you want? Like all, until you hit your risk rail. So now I would say we're a Bitcoin treasury company, right?

33:10Our operation is we take crude crypto capital, Bitcoin, that's a commodity. And then we sell you an equity, which is like 2X Bitcoin. coin. And then we get to 2x by actually selling bonds and selling fixed income instruments that are half x or half of what we're doing. And we strip the performance and the risk off the bottom of the capital structure. We put it onto the top. And that way, all the degenerate traders get what they want. And all of the risk adverse investors get what they want. And we're just the institutional gateway sitting in the middle. It sounds like the way that you're describing this stock now, I mean, MicroStrategy was a software company.

33:57The way you have described it, it sounds like MicroStrategy is a financial product. And the way that you describe that you are securitizing Bitcoin, which I would assume you see as maybe a commodity, but it sounds like the business that MicroStrategy is in now is it is selling a financial product. We're a treasury company. We're not a retail bank. We don't have retail deposits. What we do is we issue securities. We borrow billions of dollars from the bond market at 0 % interest, and we lend it to the crypto economy at 60 % interest. You see, I raise money, I raise billions by issuing equity to the equity capital markets, and I invest it in Bitcoin.

34:52And the difference between them is a spread. You know, if I issue a billion dollars of equity, I'm capturing a 65 % spread. We make$650 million on the arbitrage in one day, in one day. And then when I do the bond market, it's an 80 % spread. So what we're doing is we're taking cheap capital from the traditional capital markets, of which there's 300 trillion of it, right? There's a lot of money in the capital markets. We're funneling that capital into the crypto economy, into the decentralized economy. It's like I'm lending it to the nation of Bitcoin, but there's no counterparty, right? Because there's no company, there's no individual, but I'm getting back 60 % return each year.

35:40and so as long as i can borrow the money for less if you can borrow money for less than the s &p return and if you can loan it out for more than the s &p return you can rinse and repeat that trade at infinitum because there's infinite money that's getting less than the s &p that wants more a lot of that is predicated on the fact that you are borrowing money at zero percent interest which is very unusual um could you take us through for our listeners how that is possible Okay, here's the big idea. The S &P volatility is the VIX. It's about 15. The return of the S &P for the past four years is about 15 % annually.

36:21So think of the cost of capital for every traditional investor is 15-15, 15 vol, 15 ARR. Bitcoin is 60 ARR, 60 vol, four times the VIX, four times the S &P. It's been that way for a decade. It's been that way for the past four years. Okay, if you're a convertible arbitrager, there is an entire convertible bond market. What they do is they buy your bond and they sell your equity and they extract the premium. There's a$340 billion market that does that. For that trade to work, they need your vol to be 45 or more. So you need to be 3 or 4x the S &P. And of course, MicroStrategy's got a vol of 100 to 150.

37:12And that's because we lever Bitcoin, which is a vol of 60. So if I take 60 and I double it, I'm 120. So we have extremely high volatility. What else do you need? Liquidity. What else do you need? Durability, right? Game stops interesting, but it's not durable. You see, sometimes there are meme stocks that are very liquid and volatile, but only for a week. What if I could—volatility is like fire. I'm starting a fire. I'm burning the fire for a long time. So the way we borrow money for zero is we're selling a convertible bond, and the imputed interest rate of the bond, of course, is not zero. The arbitragers are getting 20%, 30%, 40 % risk-free yield.

37:57They're betting nothing and getting, I mean, they might buy a$50 million bond, make$10 million in a few minutes risk-free. Why wouldn't you? So we're tapping that market because we have a volatile liquid stock that's transparent. But it doesn't require zero coupon for this to work. We borrowed money at 6%. If you borrow money at 6 % and invested it at 60%, you're still scraping 90 % of the game. I'm still making 54 % yield on whatever I borrowed. So it works at 6%. It works at 12%. It works at 15%. It just happens that a very easy pool of capital is convertible bond capital where you can borrow the money at zero and you can do it in size.

38:46Can I make one more point, which are bonds are the most lucrative bonds sold in the last decade, right? I mean, the bonds all doubled and tripled. No one ever triples their money on a bond normally. But the other point is, if a conventional company borrows a billion dollars in the convertible bond market, and they go and buy a bill and they build a building or they invest in a product or they fund an operation, it's a five-year investment cycle. and it's not clear how it will turn out. So after five years of developing a billion dollars in Chicago real estate, you go back to the capital market, borrow another billion and you got to do it in San Francisco.

39:24Another five years goes by. But what we're doing is building a digital building. I borrow a billion dollars. I buy Bitcoin. I announce it two days later. It's immediately profitable because I'm generating a yield to my common stock shareholders. So imagine I could borrow a billion, and build a digital building in five days, announce that I made money on it and borrow another billion. I can do that every week. And that's exactly what's happening in this market. We're basically accelerating the investment cycle from five years to one week. Bitcoin is the unique radical actor here because Bitcoin is the first product that's a commodity.

40:09That's a legal definition, an asset without an issuer. And it's economically a scarcity. That is a common sense definition. It's a commodity that you can only make 21 million of for the next billion years. So there is no legal commodity that's also a scarcity other than Bitcoin. And if you don't have a commodity that's a scarcity, you can't do this with 100 % of your capital in a public company. You can't do this with a security. I couldn't do this trade with NVIDIA stock. even though it's a great company, NVIDIA stock is a security. So I could never own 100 % of my liquid capital or have it invested in NVIDIA.

40:50So if you wanted to do this before Bitcoin, you had to do it with gold, soybeans, oil, or real estate. And they all underperform the S &P and they all have less vol than the S &P. So if your hurdle rate is 15-15 and you're showing me real estate, which is 10-10, the trade doesn't work. And so what we're doing is totally rational and simple. It's the simplest thing imaginable. If you accept the premise that Bitcoin is a real asset, that it is a commodity, and then it's 21 million, right? And once you get that idea, everything else follows naturally. And until you get that idea, you just think it's crazy magic.

41:36So, Michael, it's always good to see you. And I should point out the first time we had you on the pod, you off mic said, Scott, just put some of your assets in this. Trust me on this. And I think Bitcoin was like at$8 ,000. And I'm like, I'm going to wait until it goes down to$4 ,000. So if I understand this correctly, it's sort of this incredibly deft capital markets arbitrage where you're able to issue zero coupon bonds where no cash flow leaves your balance sheet. You don't have to pay interest on this. So you get to borrow money not for free, but cash flow free. No cash flow comes off your balance sheet.

42:13And because of Bitcoin's acceleration and the vol you talked about, you're able to issue the price that the bonds convert out at a fairly high price. So you essentially are engaging in this kind of arbitrage where people think your company has the credibility in the space. You have the ability to borrow against this. But there has to be underlying cash flows to support the claim that those bondholders might have should Bitcoin go decline substantially in price. So is that security built on just a pure belief in Bitcoin or are the underlying cash flows from your core business important to that?

42:54The performance of the underlying asset is such that the bonds never get paid back other than they just get they get equitized. And if you look at my situation right now, I have about 40 billion dollars of Bitcoin. I have about seven billion dollars of bonds. 4.2 of them are already equity. I mean, they're already effectively equity because they're trading not just above the strike price, they're trading above the call price, which is 130 % of the strike price. So we could, you know, generally sometime in the future, just call them all for equity and equitize them all. So there's about$3 billion of a convertible bond on a$40 billion structure, which is zero coupon, which there is some theoretical risk that there might be more dilutive than the minimum strike.

43:45But the other point to make is these are no recourse unsecured notes. There's no lien. There's no claim. There's no EBITDA covenants. I think we pay like 30 million, 30 to 35 million in interest on 7 billion in debt, Scott, a year. but I don't even have to generate the cashflow for the 30 million. I could actually sell equity in order to pay the 30 million. And we have, we have raised 10.5. We've been generating a billion dollars of equity a week. I mean, a billion dollars of income and equity a week. So the real magic of this is you need an asset, which is going to outperform the S &P. That's also going to stay more volatile than the S &P.

44:29And then you need a company, a public company that's 100 percent Bitcoin. And when you sell securities back by Bitcoin, you need to buy the Bitcoin with it. And because you're actually feeding back the capital back into the system, it's like a triple amplifier because it's driving up your assets. It's driving up your volatility and it's driving up the price of Bitcoin. My understanding is there's no such thing as risk-free return. And I'm just trying to paint out a doomsday or a downside scenario here. Bitcoin, as you referenced, is highly volatile. A year ago, it was 70 % lower than it is now.

45:10Five years ago, it was 90 % or 95 % lower. volatility means it goes way up, it goes way down. Bitcoin goes to$5 ,000. And the underlying value of your Bitcoin holdings no longer represents the claim or the assets it once did. Your stock goes way down. It is way below the strike. You have to issue massive amounts of dilutive share price, the stock crashes, and you're not able to issue more debt. Isn't that the downside scenario? There may be more upside here, but there is a doomsday, right? Well, the best way to say it is the risk that you're accepting is Bitcoin extinction risk. Like if Bitcoin goes to zero tomorrow, the entire business is a Bitcoin extinction risk.

46:00So if you think there's a X percent chance of Bitcoin extinction, then probably you don't put 100 percent of your portfolio into my stock or into my bond, right? But what if it's 10 ,000? What if it goes to 10 ,000? What happens? I'm sure your bankers have modeled this out. The answer is Bitcoin goes to 10 ,000. The bonds are going to pay off at par. You might not get three extra money on the bonds, but you're going to get your money back because the company has enough assets and enough equity that will just equitize the bonds and it'll be diluted to the common stock. Just press pause there. The business intelligence side of the business creates enough cash flow to support the bonds even if Bitcoin declines dramatically.

46:43No, the point is you don't need cash. The bonds are free. I mean, you don't need cash flow to pay the interest. If you're talking about the principle, the principle of the bonds converts to equity, right? You're basically paying out equity. So the risk, if you assume Bitcoin goes down 90%, is to the equity. It's the MSTR, right? They're the ones that are taking the risk. The bonds are going to pay off. And so, look, Scott, the point is, if you put 100 % of all your wealth into our bonds or into our equity and a Bitcoin goes to zero, then you will lose money. And you're not suggesting anyone does that.

47:27Yeah. And then if you ask the question, well, how does microstrategy look at it? My answer is I'm selling the volatility. So for example, if I sell a billion dollar bond, I'm capturing an 80 % spread up front. So I'm making$800 million in Bitcoin. If Bitcoin crashes by 80%, then I was neutral, right? So if Bitcoin went to 20 ,000 tomorrow, you could say, ha, you know, you didn't make any money on that. But if Bitcoin doesn't crash 80%, I made 800 million. Now, if Bitcoin goes down 20 or 30 or 40%, Bitcoin's volatile. My stock is twice as volatile. I'm going to refinance it and sell the volatility.

48:15And the theoretical value of having a billion dollars of volatile asset is like 100 million a year. Like, for example, all I have to do is hold the billion dollars and then sell the vol. And we probably make another 500 million to a billion dollars even if Bitcoin doesn't go up. even if it goes down. So it's a no-brainer for us as a corporation because we're getting the float and we're getting the volatility and then we can equitize or refinance the volatility between now and when it comes due. If you want me to say, what's the doomsday scenario? Well, it's the same scenario you have, Scott, which is if you walk out your door and you get hit by a truck or a meteor, you're dead.

49:02So it is possible you could get hit by a meteorite and then you're dead. And it is possible for an extinction level event to happen to Bitcoin, a meteor. And if it does, everything is definitely levered to that. But if it happens, it needs to happen quickly, immediately. Like, for example, if Bitcoin goes to zero tomorrow forever, incontrovertibly, that's not good for our business. But if Bitcoin simply trades down and stays volatile, if Bitcoin was cut in half and stayed as volatile, well, there's a lot of people that will want to buy micro-strategy stock and micro-strategy bonds, and they'll want to buy.

49:45If Bitcoin was$50 ,000, there would be a massive demand for people for a convertible bond struck at$50 ,000 for people to ride the upside and avoid the downside of that. And we would sell that one, you see. So our business kind of works no matter what happens as long as Bitcoin continues to be interesting, volatile, et cetera.

50:12Stay with us.

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51:58We're back with Prof. G Markets. Mike, I just want to rewind to something you said earlier. you said, you know, it's great for us if the price of Bitcoin goes up. But the thing that more importantly you said is that this all hinges on Bitcoin remaining interesting. The idea that people are interested by this asset and want to be exposed to it in some way. And I think that is the statement that I understand your position on. But I don't, I'm not fully bought in because I think that that statement is quite a speculative statement to say, you know, with the level of conviction that you have, that this asset will remain interesting and then to build this giant trade off of that premise.

52:50And I think that that's what some people would have, would take issue is like, well, why is this thing going to remain interesting? You know, we can talk about the volatility. We can talk about the financial dynamics and the technicals of Bitcoin. But why do I care about Bitcoin? What's actually interesting about it other than the price going up? It's a good question. But I actually think that if you want to spend a few hours studying it or researching it, you'll find that it is the most interesting thing in the world. I mean, I don't even think it's debatable. I don't think there is a second most interesting thing.

53:28The most interesting financial asset, the most interesting asset in the world by far is Bitcoin. So why is it so interesting to you personally? From a personal level, when you learned about Bitcoin and started studying it - Wasn't the more important question, why is it interesting to everybody else on the earth? Sure. Right? There's 650 million crypto people. It's the center of 650 million crypto people. There's 1 ,500 crypto exchanges you can trade it on. Any company on earth can trade with any other company with Bitcoin. On Saturday afternoon, if you wanted a billion dollars of credit, it's the only place to get a billion dollars of credit.

54:09If you wanted to panic sell or take a billion dollars short position because of an Israeli missile crisis, it's the only thing you can sell a billion dollars of. And on Sunday morning, if you want to reverse the trade, it's the only way to reverse the trade. Right. NVIDIA is not trading on Saturday. I mean, think about the by the way, Bitcoin is the seventh biggest asset in the world by market cap. It's two trillion. But think about the ones above it. Microsoft, Apple. Right. NVIDIA. These are these are not these are not useful or interesting to most of the world. no Chinese company is going to capitalize on NVIDIA stock.

54:52Gold's at the top. You can't move$10 billion of gold from New York to Tokyo or short it or go long. So literally, what I do is turn it around to you and say, if you don't think it's the most interesting, tell me what asset in the world is more interesting right now to more people. Because I don't think you can name one. Well, I think it's interesting because of all of the conversations that it sparked and the way that it's become very political. And it really brings out the emotions of everyone involved, either positive or negative. But the things that you mentioned there about why it's interesting, like, again, a lot of it has to do— I mean, you mentioned the fact that it trades on weekends, which other assets don't.

55:37But the idea that it is— Okay, Ed, Ed, come on. First of all, the number one performing stock in the S &P 500, mine. We're up 30x. That's three times more than NVIDIA. That's interesting. How about the number one options market in the S &P 500? Mine. We have the most intense options, like 130 % of market cap. The most profitable convertible bond, the number one convertible bonds in the marketplace, micro strategies, right? It's interesting because people are making money off of it. Everybody in the world. $2 trillion of market cap or of wealth has been created in 48 months for hundreds of millions of people.

56:23It's changing every minute of the day. But in that sense, isn't what's interesting that the price is going up? Because you said, you know, it's nice when the price goes up. But what I'm also hearing is the interesting part is the price going up. the fact that it has become such a valuable asset class. And I guess my point would be, if there comes a time when the price starts going down, suddenly it's not so interesting anymore. And then I feel that it could all, all of that fire that you described can sort of poof a lot more quickly. By the way, it was pretty interesting when it went down too.

56:59I give you the crypto winner. It's interesting because it's useful. it's useful because it's the hardest money in the history of the human race right it's interesting and useful because it represents property rights and monetary security or economic security for eight billion people that's it's interesting in the same way the electricity and clean water and steel and airplanes and fire and nuclear power are interesting because it's the single biggest way to improve your quality of life, right? And otherwise, it's interesting because it is a global, real-time. It's changing all the time, every second.

57:48It's literally changing. Now, think about all the other financial assets. Conventional wisdom says, I create diversified portfolios of bundles of 20th century things like 187 real estate apartments or a bundle of preferred stocks or a bundle of corporate bonds. They have no volatility because they're engineered literally to be uninteresting. They're literally engineered so that on Saturday afternoon, there is nothing that could happen that would change their value to you. So you see, the fact that Bitcoin is engineered so that it does change value, someone is doing something. That's actually what creates all the volatility.

58:37But let me make one more point. Do you know the call rate? if you hold a dollar or hold a million dollars and you're wanting to hold it for 30 days, you're getting SOFR, the 30-day SOFR. Are you getting about 4.8 % interest? If you actually hold a million dollars of the S &P index and you sell the call 30 days out at the market, you're getting like 15 % interest. If you're holding a million dollars of Bitcoin, iBit, and you sell the 30-day call, you're getting 100 % interest. And when you're holding a million of micro strategy and you sell the call, you're getting 220 % interest. So when I say interesting, I'm using the classic sense.

59:27People are financially invested in it. And therefore, when it changes, there's hundreds of millions of people that all of a sudden feel it up or down. I'm also pointing out, you can literally generate more interest on this thing and there are more ways to actually make money on it. And that's why the ticker is on CNBC. CNBC is not showing you things that aren't interesting. They're not showing you the soybean price every day. They're not going to show you the price of a diversified portfolio of real estate assets that are maturely and scientifically constructed because the construction of the portfolio was to make it boring.

1:00:12And Bitcoin is, and when you make it boring, you strip the performance out of it. And so the point is, let's come back to fire. Volatility is fire. If you're a normie, you run away from fire. If you're Henry Ford, you put the fire into an engine, you put it in a horseless carriage, and you create an automobile, and now people can go. And then you put it into a plane and a train. That's good. So engineers are putting volatile, you know, you're a nuclear reactor in the spaceship. It's scary in the submarine. But Bitcoin is like the financial fuel. These things are crypto reactors. It's a technically better way to do this.

1:01:01And it's the volatility that's actually the motor that's driving the portfolio or the treasury forward. word. If you were advising the administration, as far as I know you are, there's a tension between, so Trump's threatening the brick nation saying, if you de-dollarize and the dollar's no longer the default currency, I'm going to raise tariffs because there's an advantage to being the reserve currency. We control 58 % of reserves are in the dollar. We get to see flows. We get to have more teeth in our sanctions. And if Bitcoin goes to a million dollars,$21 trillion asset class, it's hard for me to see how it wouldn't at least bring reserve currency percentage from the dollar way down.

1:01:43How would you be advising the government to think about the advantages of dollar as a reserve currency versus Bitcoin increasing in value and subsequently playing a larger role in perhaps replacing the dollar as a reserve currency? There's some simple, straightforward things that are good for the United States and probably good for the world, too. First of all, just to observe that money decomposes into currency and capital. Currency is the medium of exchange that we use to price everything in the world. The U.S. dollar is definitely the reserve currency. The U.S. dollar is also used as reserve capital, but in the form of treasury bills.

1:02:27Bitcoin is capital. Bitcoin is not currency. Gold has been used as capital. It's not currency anymore. The very simple thing that the U.S. ought to do is they ought to sell the gold and buy Bitcoin with it and buy 20 % of the Bitcoin network. It's very simple. Just swap the gold for Bitcoin. If anybody actually swaps out their treasury bills for Bitcoin, then the U.S. is going to own it all. It's kind of like just getting Alaska or the Louisiana purchase for free. They could pretty much have 20 % of the network for free overnight just with a swap. They could even print the money, you know. I mean, they could buy it for next to nothing.

1:03:08The only alternative to the treasury bill for anybody is Bitcoin. And so just buy, do that, and Bitcoin becomes the world reserve capital network. And the U.S. will own both sides of the equation. They'll own the currency and the capital. But the second observation is the U.S. ought to just standardize stablecoin legislation and let people issue digital currency backed by U.S. treasuries, like Tether, like Circle. If the United States created a digital assets framework and they just let corporations and banks issue digital currency, and you just say, if you want to issue digital currency, you have to back it with U.S.

1:03:53dollar equivalents, which means T-bills, right, and a U.S. custodian. If they did that, the digital currency market would grow from$150 billion to$10 trillion. And that would create$10 trillion worth of demand for U.S. Treasury assets. What will happen is we'll collapse every other currency in the world, Scott. We'll collapse the ruble, the CNY, everything in South America, everything in Africa, even the euro. 99 % of the demand for stablecoin in Europe is the dollar, not the euro. So if the U.S. really wants to make sure that the dollar remains the reserve currency, the real crippling defect right now is it's not easy to send digital dollars at the speed of light on a mobile phone.

1:04:46And people want to do it. So they ought to actually normalize that. And if they want to make sure that the United States owns the capital of the world, they just ought to buy 20 % or 30 % of Bitcoin. They'll have it all. And then when the Chinese and the Russians dump all their real estate and all their gold, and if they dump their treasury bills or whatever they dump, they'll buy Bitcoin. The price of Bitcoin will go through the roof. The U.S. will make$80 trillion. So just as we wrap up here, Michael, I want to pivot to something a little bit more existential or personal. I've known you for the better part of 20 years.

1:05:23We're about the exact same age. What's left for you? You're obviously economically secure. You've obviously built a company that's performed, as you said, best performing stock in the S &P. in five years or 10 years from now, you look back and think, okay, that's a box I wanted to check that I hadn't checked. What's left for you? What are you hoping to accomplish over the next decade? Well, you know, Scott, in 2020, I was very frustrated and a bit depressed. I don't think I was alone. A lot of people were frustrated and depressed during that time period. And I was, you know, my company was worth$600 million enterprise value, and I'd worked 30 years, and I could not break through against the Microsoft juggernaut.

1:06:11And I couldn't figure out how to grow it. And after 10 years of trying, I figured maybe I should just retire and go gracefully off and call it a day. And I think, as I said, I discovered Bitcoin out of frustration and desperation. And first, it was just something to do. And then I realized it was a good technology. I went from I'll buy it because I don't have a choice to do anything else to I'm an investor. And I started thinking Bitcoin is like Facebook for money or it's like it's like a dominant digital monetary network. And I started becoming a tech believer in it. But then I emerged as a maximalist, Scott, which is, you know, you wrote your book about the four.

1:06:57And at the end of the book, you know, you basically are a little bit jaded. You're like, these guys got too much power and they abused their power and the world's not a better place for that. That's because they're companies. And if Bitcoin was a company, if it was a big digital banking network, it probably also gets corrupted. What I realized is Bitcoin is a decentralized protocol. It's a commodity. It's ethically superior to a company. It's ethically superior to these big tech companies because it represents a protocol of economic empowerment for 8 billion people and everybody on earth, regardless of your views.

1:07:33And so I basically went from opportunist to investor to maximalist. And now I'm of the opinion that the human race moves forward through clean energy, clean food, clean money. and human misery was our water was dirty, our food was dirty, we didn't have energy, we had dirty clothes, we had doctors with dirty hands and dirty instruments and the like, and we had dirty money. And for the last 500 ,000 years, all of our economics have been broken and their human misery has taken place because copper tokens and giant stone coins and glass beads and silver coins and gold. None of these things were perfect capital assets.

1:08:26They were never a settlement network and they were never a non-deflationary asset. Bitcoin represents clean money. It represents economic energy and economic empowerment. So my mission at this point is I would just like to spread it to 8 billion people. I actually think you can, Bitcoin is hope. I think you can fix a company, fix a country, fix a family. It won't solve the other problems. It doesn't cure cancer and it doesn't make you a good basketball player. And it doesn't, it doesn't, you know, resolve political differences and religious differences. I'm not, I get that. What it does is it gives people a working economic fluid that doesn't drain 10 % of their economic energy per year out, you know, out the back door.

1:09:21And so I'm a big advocate for digital capital in the same way that 150 years ago, maybe I could get really excited about spreading electricity to the world. But I'm, you know, if you found fire, you would want people to know about fire. And, you know, Henry Ford, as I said, he put the fire in an engine and he gave us wings he let us fly and and so the world's a better place with the automobile or the plane or aluminum or steel or computers or ai or whatever it is i just think the world's a better place with digital capital or or clean store of value money you could say it it's a um a fair and equitable way for us to settle our differences and and there's something nice about that.

1:10:13Michael Saylor is the founder and executive chairman of MicroStrategy, a publicly traded business intelligence firm and holder of Bitcoin. He's also the founder of Alarm.com, named investor on 48 plus patents and author of the book The Mobile Way. He founded the Saylor Academy, a nonprofit that has provided free education to more than 2 million students. He holds dual degrees from MIT in aerospace engineering and history of science. I've known you for 20 years, Michael. One of the things I think this space has unfortunately suffered from is a lack of, I don't know, thoughtful, nice people. And whether people disagree with you or not on this specific asset class, I've known you for 20 years.

1:10:52You've never not been willing to meet with me, provide me advice. People don't know this about you. You are a nice, generous person. And that's good for the asset class because I think it's lacked that. Really appreciate your time and congrats on all your success. Thanks, Michael. Yeah. Thanks for having me. Always a delight to talk.

1:11:20So Ed, what do you think? What do you think?

1:11:26I think you got worried a little that we're getting a bit too combative at the end there. No? Maybe, just because I appreciate you wanting to keep it real in the pushback. I have a bias towards Michael because I know him personally and I like him. He's generally a good, decent man. And the thing I like about what he's bringing to this conversation, you know, he's definitely a cheerleader. There's definitely a lot of rah-rah there. But at the same time, he will also say, he's not going to tell anyone to put all their money in this. He doesn't tell them to do that. He tells them to be a little bit more measured.

1:12:01He's told people to mortgage their houses and use the money to buy Bitcoin. Oh, there's that. I like him for a lot of reasons. To me, that's not one of them. Well, let me go to the optimistic tone then. If you compare him against the other figures in this asset class, one, he's not in jail. and two he doesn't go on twitter and start insulting and attacking people who don't support his narrative and early in my business career not early early in my reinvention of my business career i would go down to his place and i would outline my business and he would like like a fucking ai before ai go these are the three problems of your business this is what you should focus on do you want to have lunch now you know he just he would summarize my business in about 30 seconds and tell me what I should be doing.

1:12:54Look, I really enjoyed that conversation with him. I do respect him. I don't think that he gave me a great answer to the value of Bitcoin and what makes it interesting beyond the fact that the price goes up. I share a lot of your skepticism about the asset class. It's always made me, quite frankly, it's just always made me uncomfortable. I've never been able to wrap my head around it. I think there's a lot of negative externalities to a currency that doesn't, I mean, there's positive externalities about no government oversight or a lot about not being able to track its flows and bad actors that might be able to transact.

1:13:32I mean, I guess. Yeah. If the U.S. lost its ability to do that, we'd be so fucked in so many ways we can imagine. So I'm like you. I share some of that skepticism. The reason I really respect Michael is that if the institutional market had said, this guy's fucking crazy and fled the stock and the stock crashed and he'd been fired, he would have gone down as like this cautionary CEO tale, right? What happens when your CEO loses their shit, literally? And 499, I think, of the S &P 500 CEOs, maybe 498 if you include Musk, would take that kind of risk reputationally. And he took it. Yeah, he certainly has balls of steel.

1:14:17And he certainly, as you mentioned, he loves risk and he loves volatility. I mean, we spent the first 20 minutes talking about how the most volatile asset class in the world is Bitcoin. And that's what makes it so great. I mean, he loves it. It's fire. You can either run from it or put it in a car. That was good. That was good. I'm going to use that. It's great. That was good. I just, I can see, you know, he's a maverick and he's addicted to that. And he, as you said, he said he was depressed and didn't know what to do when his company was stuck at a valuation of$600 million. I mean. Stuck. Stuck at$600 million.

1:15:00What do I do now? I have to do something. I have to run into the fire. Here I am in this sad room where it gets dark at 4.30 talking to you. But he was stuck. That's right. So he ran into the entire eternal fire that is Bitcoin. Do you have any ending advice for us, Scott, after all that? I'm a big believer in diversification. And I can see this going to a million. I can also see this going to a thousand. I think it's probably more likely it goes to a million than a thousand. But it's definitely a legitimate asset class now. I would just say, if you're under the age of 30, don't put more than, in my view, 20 or 25 % of your net worth in any one asset.

1:15:42And if you're over the age of 40 or 45, don't put more than 10%. And a lot of people who are very wealthy will tell me that that's being lame and that Bill Ackman says that diversification is a lack of conviction. My attitude is get rich slowly. And when you get there, it's going to be very rewarding. and along the way, it's fun and it has less heartburn and anxiety. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Jessica Lange is our research associate. Drew Burrows is our technical director.

1:16:19And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

1:16:38you help me in kind reunion as the world turns and the dark lies in love

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