Latest / The SME Stream / Michael Saylor: Why MicroStrategy’s Bitcoin funding is NOT a glitch

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Michael Saylor: Why MicroStrategy’s Bitcoin funding is NOT a glitch · The SME Stream

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Speaker 1: The information provided in this program is of a general
0:02
Speaker 1: nature and is not intended to be personalized financial advice.
0:05
Speaker 1: We encourage you to seek appropriate advice from a qualified
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Speaker 1: professional to suit your individual circumstances. Micro Strategy is the
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Speaker 1: world's largest corporate holder of bitcoin. We're in Washington, DC
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Speaker 1: to interview its executive chairman, Michael Sailor about how his
0:20
Speaker 1: company has catapulted to be one of the most highly
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Speaker 1: valued in America.
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Speaker 2: Really, micro Strategies pioneering a new market. We're issuing securities
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Speaker 2: backed by digital capital, backed by bitcoin.
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Speaker 1: This whole conversion financial engineering type strategy is often referred
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Speaker 1: to online as the infinite money glitch.
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Speaker 2: See the misnomer there is. It's not a money glitch.
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Speaker 2: It is a digital transformation of the capital markets.
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Speaker 1: Meet Michael Sailor, the technology entrepreneur who started micro Strategy
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Speaker 1: in nineteen eighty nine and took it public on the
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Speaker 1: Nasdaq in ninety eight. What is an enterprise software company
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Speaker 1: is now better known as the world's first and largest
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Speaker 1: corporate holder of bitcoin. In August twenty twenty, Sailor converted
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Speaker 1: two hundred and fifty million US dollars of the company's
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Speaker 1: cash to bitcoin. Since then, he's spent almost ten billion
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Speaker 1: US dollars acquiring more. Its total worth is now more
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Speaker 1: than fifteen billion dollars, making micro Strategy officially a whale.
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Speaker 1: It owns more than one percent of all bitcoin available.
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Speaker 3: The strategy has transformed.
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Speaker 1: Its once languishing share price to a market capitalization of
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Speaker 1: more than forty billion US dollars at the time this
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Speaker 1: video was made. Its valuation represents a premium to its
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Speaker 1: bitcoin holdings of about two and a half times. While
1:51
Speaker 1: believers think it could shoot higher, some short sellers believe
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Speaker 1: it's only worth however much bitcoin it actually holds. Michael
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Speaker 1: Saylor is obviously more bullish. He sees his company is
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Speaker 1: at the center of the modern capital flow to digital assets.
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Speaker 1: To understand how he thinks about the company's future, we
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Speaker 1: flew seventeen hours from New Zealand to the United States
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Speaker 1: to interview him.
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Speaker 3: At his apartment in Washington, DC.
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Speaker 1: A reminder that this show never offers financial advice, but
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Speaker 1: what this interview does offer is an insight into the
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Speaker 1: mind of Michael Saylor. Mirk Sailer, thank you so much
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Speaker 1: for having us in your incredible apartment.
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Speaker 4: It's so good to be here.
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Speaker 2: Yeah, Thanks Rah, thanks for coming.
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Speaker 3: You are most welcome.
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Speaker 1: I heard in another interview that you did that you
2:34
Speaker 1: resented people who worked from home, so I felt like
2:36
Speaker 1: we had to come and I was way to do
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Speaker 1: this run in person. No, you were just telling me before,
2:41
Speaker 1: but I'd love my audience to hear this. You spent
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Speaker 1: some time in New Zealand growing up. Tell me about that.
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Speaker 2: I did. My father was in the United States Air
2:48
Speaker 2: Force and there was a station down on the South
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Speaker 2: Island in Blenham And so when I was a child.
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Speaker 2: I guess I arrived around age three and I stayed
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Speaker 2: there till age six. I remember walking to school through
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Speaker 2: a wheat field, and every day at school, the highlight
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Speaker 2: of the day was when they delivered our lunch, and
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Speaker 2: it was it was either fish and chips wrapped in
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Speaker 2: a newspaper or it was a meat pie and you
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Speaker 2: could alternate between one or the other.
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Speaker 3: Sounds about right.
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Speaker 2: It was like the culinary highlight of my childhood. When
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Speaker 2: it came back to the US, the food went downhill
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Speaker 2: from there.
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Speaker 1: That's amazing. So you actually started school in New Zealand.
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Speaker 1: So I'm going to claim you as a kiwi for
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Speaker 1: the rest of this conversation.
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Speaker 3: If you're right with that?
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Speaker 1: Okay, Now, like I want to get the figures right,
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Speaker 1: micro Strategies bitcoin holdings. Two hundred and fifty two, two
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Speaker 1: hundred and twenty is the number of bitcoin you hold?
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Speaker 3: Is that still correct? And if we put that.
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Speaker 1: At the current price around sixty six thousand US dollars,
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Speaker 1: that is the total value of about sixteen billion dollars.
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Speaker 2: Maybe closer to seventeen billion right now, but yeah, sixteen
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Speaker 2: and after seventeen billion dollars?
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Speaker 1: Now, do you mind if I personally ask how much
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Speaker 1: how many bitcoin you hold personally in its total value?
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Speaker 2: I have more than seventeen thousand, seven hundred and thirty two.
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Speaker 2: That was the amount I announced about four years ago.
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Speaker 2: Haven't sold any That's amazing. Okay.
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Speaker 1: We're going to come back to that and talk more
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Speaker 1: about the bitcoin revolution in the latest stage of this interview,
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Speaker 1: But first I want to talk about micro Strategy, the
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Speaker 1: company that you yourself started decades ago. Now, how should investors
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Speaker 1: think about the underlying software company because you still operate it, right,
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Speaker 1: You often talk about micro Strategy as a bitcoin development company,
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Speaker 1: but I can imagine the actual software company is quite
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Speaker 1: critical because its success provides the means to accumulate more bitcoin.
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Speaker 2: Well, the way to think about micro strategy is three components.
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Speaker 2: We've got a balance sheet, which is the bitcoin balance sheet.
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Speaker 2: We've got a software business, a technology business, and that
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Speaker 2: was the springboard for us to get into bitcoin. And
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Speaker 2: now we've got an emerging bitcoin securitization business where we're
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Speaker 2: a bitcoin development company and we leverage our bitcoin balance
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Speaker 2: sheet to issue security to the public market that no
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Speaker 2: one else could so easily create as us. So if
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Speaker 2: we look at the software business, well, that's a five
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Speaker 2: hundred million dollar a year revenue business and it generates
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Speaker 2: consistent cash flows and that got us to twenty twenty
5:16
Speaker 2: and that's still a very healthy business. It's a multinational
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Speaker 2: and we do business with thousands of companies all around
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Speaker 2: the world, including customers in Australia and New Zealand and
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Speaker 2: Korea and Japan and you know, you name it. But
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Speaker 2: the best way to think about micro strategy of your
5:35
Speaker 2: investor is we have we're the largest operating company that
5:43
Speaker 2: holds bitcoin. So if you have seventeen billion dollars of
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Speaker 2: capital a bitcoin that's permanent, so there's no redemption rights
5:52
Speaker 2: to that. There's ETFs like black Rock or Fidelity that
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Speaker 2: are comparable to us in size, but those are over
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Speaker 2: night deposits. So if you said, hey, I've got seventeen
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Speaker 2: billion dollars in deposits, people can take the money out
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Speaker 2: of the bank tomorrow, Well, they just basically a trustee
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Speaker 2: holding the money. They and they return it when they're
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Speaker 2: asked to return it. You can't leverage it, and you
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Speaker 2: can't build businesses on top of it. Micro Strategy has
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Speaker 2: permanent capital, so for example, we can do things like
6:26
Speaker 2: we can issue convertible bonds on top of that capital.
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Speaker 2: So if you have you know we have sixteen to
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Speaker 2: seventeen billion in bitcoin exposure, we have four point two
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Speaker 2: billion and convertible bonds. The bonds we can issue fairly
6:40
Speaker 2: cheaply because we have a stock. The stock reflects the
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Speaker 2: permanent capital the bitcoin, but that's not redeemable either. That
6:49
Speaker 2: means that it can generate a premium to the bitcoin.
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Speaker 2: So as people trade the stock and they trade the
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Speaker 2: options on the stock, the stock trades that are premium
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Speaker 2: to the acid value, and when the stock trades at
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Speaker 2: a premium to the asset value, the company issues either
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Speaker 2: equity or convertible bonds at a premium to the underlying assets.
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Speaker 2: When we do that, we don't just put the money
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Speaker 2: in the bank or in t bills. We actually invest
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Speaker 2: the money in bitcoin. So you can imagine when the
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Speaker 2: company issues, if we were to sell a billion dollars
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Speaker 2: of equity in the market and it's back by five
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Speaker 2: hundred million in bitcoin at one hundred percent premium, then
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Speaker 2: we buy the bitcoin in three days later, we've generated
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Speaker 2: a five hundred million dollar gain for our shareholders in bitcoin.
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Speaker 2: So that's very interesting. That generates what we call a
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Speaker 2: BTC yield. Now, if we do the same thing with
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Speaker 2: a bond, a billion dollar convertible bond, we don't do
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Speaker 2: it a one hundred percent premium. It might be a
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Speaker 2: two hundred percent premium because the bond comes at a
7:50
Speaker 2: premium to the stock. So when you go up forty
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Speaker 2: percent over a stock which is one hundred percent, now
7:55
Speaker 2: you're looking at something looks like more than one hundred
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Speaker 2: and eighty percent. So now a billion dollar bond sold
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Speaker 2: into the markets backed by three hundred and fifty million
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Speaker 2: dollars a bitcoin we buy backed the billion of bitcoin,
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Speaker 2: we capture the six hundred fifty million dollar gain. Another
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Speaker 2: BTC yield. So the real operating business of the company
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Speaker 2: isn't the software business anymore. I mean that's that's still there.
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Speaker 2: It generates seventy five million in cash flow, but one
8:23
Speaker 2: of those bonds would generate ten years worth of earnings
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Speaker 2: in five days. And so really micro strategies pioneering a
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Speaker 2: new market. We're issuing securities backed by digital capital, got
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Speaker 2: backed by bitcoin, and then we're buying the bitcoin back.
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Speaker 2: So what that means is I could issue the bond
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Speaker 2: in one week, buy the bitcoin, capture the three four
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Speaker 2: five hundred million dollar gain, announce it to the market.
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Speaker 2: The stock would trade up. I could do another bond
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Speaker 2: the next week. So instead of a tradition, you know
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Speaker 2: a model where I raise a billion dollars, I go
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Speaker 2: find real estate in Auckland, I invest in the real estate,
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Speaker 2: I leverage it up, and in five years you determine
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Speaker 2: whether I was smart or stupid.
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Speaker 1: History of our property market, you'd be pretty smart.
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Speaker 2: It's a five year investment cycle. And if I was smart,
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Speaker 2: after five years, I come back to the capital market
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Speaker 2: and I say I'd like to raise another billion. Now
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Speaker 2: I have to find another set of real estate in Auckland,
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Speaker 2: or Blenham or Sydney or Melbourne, and it takes another
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Speaker 2: five years to figure out whether it worked. So what
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Speaker 2: you have there is heterogeneous credit, and you have a
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Speaker 2: slow investment cycle. Micro strategy has homogeneous credit. We're going
9:44
Speaker 2: to raise a billion by bitcoin. Show you that we
9:46
Speaker 2: bought bitcoin, that ac created bitcoin per share. The investors
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Speaker 2: look at it. It's an immediate gain. We just lived
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Speaker 2: through five years in five days. And then once we've
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Speaker 2: done that fast rapid investment cycle, what's your next idea.
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Speaker 2: I'm going to do the same thing again. I'm going
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Speaker 2: to buy another billion of bitcoin. And so if you
10:07
Speaker 2: look at that against the backdrop of this year. In
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Speaker 2: the first quarter, we did an eight hundred million dollar
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Speaker 2: convertible bond, We bought bitcoin. The market liked it. The
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Speaker 2: very next week, we went back to the market, did
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Speaker 2: a six hundred million dollar convertible bond, bought more bitcoin.
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Speaker 2: It was a creative the market liked it. So what
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Speaker 2: we do. We went back to the next quarter. We
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Speaker 2: did another eight hundred million dollar bond, we bought bitcoin,
10:26
Speaker 2: the market liked it. In the middle we sold hundreds
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Speaker 2: of millions of dollars of equity and the next quarter,
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Speaker 2: we sold more equity. We sold one point one billion
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Speaker 2: of equity in Q three. We basically did that at
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Speaker 2: a massive premium, so we captured a large BTC yield.
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Speaker 2: We announced that the market liked it, and then very
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Speaker 2: next week we did a convertible bond and that became
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Speaker 2: a billion dollar convertible bond. And so what you see
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Speaker 2: is we're running a very rapid investment cycle. We're developing
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Speaker 2: a city in cyber we call that city Bitcoin. It's
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Speaker 2: like if we were the first public company to show
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Speaker 2: up in Manhattan and we started selling debt or public
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Speaker 2: equity instruments in order to raise money to develop Manhattan,
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Speaker 2: and everybody else was using cash or going at a
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Speaker 2: slow rate. And if we found that the two innovations
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Speaker 2: are one, we issue public securities to develop Manhattan, and
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Speaker 2: the second is we can build the building in five days. Right.
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Speaker 2: So you can't do that in real space. It takes
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Speaker 2: five years to build a building, right, and you can't
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Speaker 2: hit the public markets for capital. But in cyberspace, I
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Speaker 2: can raise the capital every month. I can build the
11:42
Speaker 2: building in five days. Our investors are bitcoiners, right, So
11:48
Speaker 2: if you're a bitcoiner, what do you think you think
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Speaker 2: bitcoin's going to go up forever with some volatility. So
11:52
Speaker 2: what do you want? You want more bitcoin per share.
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Speaker 2: So how do you know whether the company is succeeding
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Speaker 2: that's giving you bitcoin per share. Well, we do the deal,
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Speaker 2: we announce BTCLD. This is how your bitcoin per share
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Speaker 2: are creeded. How long does it take? Takes a few days.
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Speaker 2: So the real micro strategy business is to be the
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Speaker 2: leading public issuer of securities in order to acquire bitcoin.
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Speaker 2: And as we acquire the bitcoin, we're driving up the
12:22
Speaker 2: scarcity of the bitcoin. We've now bought more than one
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Speaker 2: percent of the bitcoin. Now there's only four hundre and
12:28
Speaker 2: fifty bitcoin available for sale from every day by natural sellers,
12:32
Speaker 2: the miners, you know. So four hundred and fifty times
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Speaker 2: sixty seven thousand a bitcoin, it works out the twenty
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Speaker 2: twenty million in change. So you can see what happens
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Speaker 2: is if we're raising capital via tapping into the public
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Speaker 2: equity markets and the public fixed income markets, and we're
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Speaker 2: bringing that capital back and we're structuring our balance sheet
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Speaker 2: and we're buying the bitcoin, then that's good for bitcoin.
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Speaker 2: And of course that beverage that we get via issuing
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Speaker 2: the debt that's four point two billion dollars of debt
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Speaker 2: at eighty basis points. So we pay, you know, we
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Speaker 2: pay less than one percent interest for the four point
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Speaker 2: two billion, which creates the leverage on the equity. And
13:17
Speaker 2: because there's leverage on the equity, that creates more performance.
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Speaker 2: It also creates more volatility. Now, who wants volatility? The
13:26
Speaker 2: option traders want volatility. So in the options market, we've
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Speaker 2: gone from a three million dollar open interest in micro
13:36
Speaker 2: strategy options to some day's forty billion, right, So the
13:41
Speaker 2: options traders are trading high volatility. You can think of
13:45
Speaker 2: them as the options traders want ten x leverage on Bitcoin,
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Speaker 2: ten to twenty x leverage, and maybe they want it long,
13:53
Speaker 2: they want calls, or maybe they want to short it
13:55
Speaker 2: ten x. They just you know, the haters want to
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Speaker 2: short it. The numbers what a log it, right, But
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Speaker 2: then micro strategy is like one point five x bitcoin.
14:06
Speaker 2: And then if you build a derivative on micro strategy
14:08
Speaker 2: like MSTU or mst X, they're like two x micro strategy.
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Speaker 2: So that's like three x bitcoin. And so how well
14:19
Speaker 2: have they done in like two weeks? They raise like
14:21
Speaker 2: seven hundred million dollars in two weeks no marketing. So
14:26
Speaker 2: on top of this stack, if you're looking at spot
14:29
Speaker 2: bitcoin et spot bitcoin, you either buy bitcoin or you
14:32
Speaker 2: buy ibit or FBTC. They're offering you standard bitcoin returns
14:39
Speaker 2: fifty ar R with fifty vol fifty volatility and fifty
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Speaker 2: R and one hundred percent upside one hundred percent downside.
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Speaker 2: That is the digital commodity micro strategy. The stock is
14:53
Speaker 2: one point five x, and the way we get to
14:55
Speaker 2: one point five x is we issue these bonds which
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Speaker 2: give you half the upside of bitcoin little downside. What
15:03
Speaker 2: if I want half the upside five percent of the downside, right, Well,
15:07
Speaker 2: that's you buy a convertible bond, a senior in the
15:09
Speaker 2: capital structure of a company that's four x over collateralized. Right.
15:15
Speaker 2: So people that are risk averse they can actually buy
15:19
Speaker 2: the bond. They get half the benefit. People that are
15:23
Speaker 2: bitcoin maximalists can buy the equity and get one point
15:25
Speaker 2: five percent benefit. The degenerates, the traders, they can get
15:31
Speaker 2: three to ten x. And then the haters can short
15:35
Speaker 2: the common stock or short or short with puts. And
15:38
Speaker 2: we have sometimes fifteen billion dollars or twenty billion dollars
15:43
Speaker 2: of open put interest. You know, when I was a
15:46
Speaker 2: younger man, when we first came public, you know, I
15:49
Speaker 2: was in my early thirties, and if people shortened my stock,
15:52
Speaker 2: I'd be like, they're short of my stock. I don't
15:55
Speaker 2: like them.
15:55
Speaker 3: But you still called them to generates today.
15:58
Speaker 2: You know, that's that's a term where am I I
16:00
Speaker 2: would reserve to people that are traded with so much leverage.
16:03
Speaker 2: They might get wiped out on the weekend, but they
16:05
Speaker 2: do it for the thrills in lieu of going to Vegas. No,
16:09
Speaker 2: but when I was a younger man, you know, I
16:11
Speaker 2: would have been concerned about people short in my stock.
16:14
Speaker 2: But now I'm not because micro strategy is really just
16:18
Speaker 2: providing a set of institutional instruments. Then institutional investors can
16:28
Speaker 2: use to tailor a portfolio that's long short hedged. They
16:34
Speaker 2: can sell the volatility, they can arbitrage the volatility, they
16:37
Speaker 2: can arbitrage any instrument against any other instrument. They can
16:41
Speaker 2: generate yield, they can buy insurance. Some of those people
16:45
Speaker 2: that are short, they'll short a billion dollars of micro
16:48
Speaker 2: strategy and they'll buy a billion dollars a bitcoin. And
16:51
Speaker 2: so if we didn't exist, then billions and billions of
16:55
Speaker 2: dollars of capital from the traditional finance markets wouldn't be
16:59
Speaker 2: invested in bitcoin because they can't buy or hold the
17:02
Speaker 2: underlying crypto asset. They can only buy securities or bonds
17:08
Speaker 2: or options or other instruments. So we become an institutional
17:13
Speaker 2: gateway for crypto exposure by all types of investors. And
17:21
Speaker 2: you know, my real aspiration now is if you really
17:24
Speaker 2: hate bitcoin, I want you to love us like we're
17:28
Speaker 2: the perfect instrument to short right of you, because I
17:31
Speaker 2: promise you I won't sell it right. We're going to
17:34
Speaker 2: be levered long bitcoin. And if you're if you don't
17:38
Speaker 2: like it, or if you just want to hedge it,
17:40
Speaker 2: you get to sell our stock or sell or sell
17:43
Speaker 2: puts or byputs right and uh. And the worst thing
17:47
Speaker 2: I could do is to take your side of the
17:50
Speaker 2: trade or to interfere with what you're doing. So so
17:53
Speaker 2: I think part of micro strategies rise to prominence in
17:57
Speaker 2: the space is we have been laser like focused. We're
18:01
Speaker 2: very consistent, we're very transparent. We're going to buy bitcoin,
18:06
Speaker 2: never sell bitcoin. We're going to borrow money intelligently. If
18:10
Speaker 2: you like Manhattan and if a company said I'm going
18:14
Speaker 2: to borrow five billion dollars at one percent interest, and
18:19
Speaker 2: I'm going to develop real estate in Manhattan. You might
18:22
Speaker 2: think that that's kind of company you would like to
18:25
Speaker 2: invest in. But if you hate Manhattan and we're one
18:29
Speaker 2: hundred and fifty percent exposed in Manhattan, you get this
18:31
Speaker 2: investment teach you're like, that's the company I want to short.
18:35
Speaker 2: And the most important point in the marketplace is you
18:39
Speaker 2: just have to be very pure, true to your focus,
18:43
Speaker 2: have integrity and consistency and transparency because it's it's not
18:49
Speaker 2: my job to trade hedge arbitrage or construct that portfolio.
18:55
Speaker 2: There are guys with hundreds of millions or billions of
18:57
Speaker 2: dollars in a Bloomberg and that's what they do every day.
19:00
Speaker 2: So my contract with them is we're going to do
19:05
Speaker 2: what you can't do. We're going to buy bitcoin, whole bitcoin,
19:09
Speaker 2: and we're going to issue equity and we're going to
19:11
Speaker 2: issue debt instruments and you can't do that. We're a
19:15
Speaker 2: public company and on the you know the Nasdaq Stock
19:18
Speaker 2: Exchange in America with the nearly thirty year track record,
19:22
Speaker 2: and we have sixteen billion of permanent capital that's bitcoin, right,
19:30
Speaker 2: so I can create an equity with eighty or ninety
19:32
Speaker 2: vol I can have permanent capital. We can stand massive
19:37
Speaker 2: swings because of our capital structure. That's what we can do.
19:42
Speaker 2: What you can do is decide if you want to
19:45
Speaker 2: buy it, sell it, hedge it, or short it. Short it.
19:48
Speaker 3: So let's talk about micro strategies.
19:50
Speaker 1: Rise there.
19:50
Speaker 4: In the past few days, it hit forty three billion
19:52
Speaker 4: dollars of fifty two week high.
19:54
Speaker 1: All of those functions that you've spoken about, the reasons
19:57
Speaker 1: why you think that your stock can currently command a
20:00
Speaker 1: premium to its net asset value forty three billion at
20:02
Speaker 1: it's high versus that sixteen billion and its near asset
20:06
Speaker 1: value being the bitcoin holdings, give me the rationale beyond
20:09
Speaker 1: what you've mentioned about those functions for you think that
20:12
Speaker 1: you think it may be able to continue to expand
20:15
Speaker 1: to perhaps one trillion.
20:18
Speaker 2: Yes, because I mean, if you wanted to make it.
20:22
Speaker 2: Put it simply, we're the only company that can issue
20:25
Speaker 2: bitcoin back bonds. So anybody can buy bitcoin and have
20:31
Speaker 2: all the downside and all the upside and all the volatility.
20:35
Speaker 2: But what if I want half the upside but no downside. Well,
20:40
Speaker 2: there's a lot of people if you look at the
20:42
Speaker 2: at the fixed income market, Look at the corporate debt market,
20:46
Speaker 2: look at the preferred stock market, look at the convertible
20:49
Speaker 2: bond market. People in the convertible bond market, they have
20:52
Speaker 2: to buy a convertible bond. I can buy. I can
20:55
Speaker 2: sell a billion dollars of bonds in one day to
20:58
Speaker 2: people that have to buy the bond. They can't buy bitcoin,
21:02
Speaker 2: they can't buy the equity. So who in the market
21:06
Speaker 2: is the leading issue of convertible bonds. Well, we are
21:09
Speaker 2: micro Strategy. We've issued like five billion dollars worth of
21:12
Speaker 2: convertible bonds, and so we've got that credibility. And what's
21:17
Speaker 2: going to back the bonds Bitcoin? Well, what if I
21:21
Speaker 2: had fifty billion dollars of cash and treasuries and I
21:24
Speaker 2: wanted to issue bitcoin bonds. It wouldn't work. Why Because
21:29
Speaker 2: the volatility of a T bill is five, the volatility
21:32
Speaker 2: of bitcoin is fifty. The volatility of micro Strategy equity
21:36
Speaker 2: is eighty. If you want to buy a convertible bond,
21:40
Speaker 2: you want to buy a bond from an issuer that
21:43
Speaker 2: has volatility more than forty five. You want high volatility,
21:48
Speaker 2: you want high liquidity, and of course you also like
21:51
Speaker 2: the bitcoin upside. If bitcoin if it doubles. The convertible
21:56
Speaker 2: bond will provide you a bitcoin return only if it's
22:00
Speaker 2: sold to you by a company that's all all bitcoin.
22:04
Speaker 2: So micro Strategies this bitcoin securities company. And if if
22:11
Speaker 2: I want highvoll high performance bitcoin equity, well you have
22:16
Speaker 2: to have a company is one hundred and fifty percent bitcoin.
22:19
Speaker 2: If you want high volatility, high performing bitcoin converts, you
22:24
Speaker 2: need a company that's backed by bitcoin. If you want
22:27
Speaker 2: to buy, you know, a bond that pays one hundred
22:31
Speaker 2: two hundred basis points more than conventional things, you need
22:35
Speaker 2: a company that can sell you that bond that has
22:37
Speaker 2: a way to generate better than that. So there's an
22:41
Speaker 2: entire swap market out there where a lot of people
22:45
Speaker 2: would love to get paid seven percent interest. Fixed income retirees.
22:50
Speaker 2: Let people literally have one hundred billion dollar funds and
22:53
Speaker 2: they have to buy bonds that generate fixed income. That's
22:58
Speaker 2: the name of the fund, fixed income. They can't buy bitcoin,
23:03
Speaker 2: they can't buy the equity, They might not even buy
23:06
Speaker 2: the convertible bond. So MicroStrategy can we can generate that bond.
23:12
Speaker 2: And of course bitcoin's been going up fifty percent a year,
23:15
Speaker 2: so we have crude capital digital capital. On one side,
23:19
Speaker 2: this is fifty percent with massive volatility. There's a lot
23:23
Speaker 2: of people that would love ten percent fixed income with
23:27
Speaker 2: ten volatility. So how do you turn you know, high
23:32
Speaker 2: voltage capital into low voltage fixed income. You need a transformer, Okay,
23:39
Speaker 2: So what's the perfect transformer? A company with ten twenty
23:43
Speaker 2: thirty billion dollars of bitcoin and then I sell a
23:47
Speaker 2: billion dollar bond here that gives you this percentage and
23:50
Speaker 2: this low volatility, and I invest the money into this
23:54
Speaker 2: which is high performance, high volatility. And so what Micro
24:00
Speaker 2: does is we're scraping or stepping down the volatility, and
24:04
Speaker 2: we're stepping down the performance. Now you would think, why
24:09
Speaker 2: would you want ten percent instead of fifty percent? I mean,
24:13
Speaker 2: like why would you want that? Well, micro strategy has
24:15
Speaker 2: gotten fifty percent every year for the past four years,
24:18
Speaker 2: but we took fifty percent vole. Right. The world's full
24:21
Speaker 2: of people that would rather have five percent and five
24:25
Speaker 2: vol or ten percent and ten vol or fifteen percent
24:28
Speaker 2: and fifteen vol. So, in essence, micro strategies opportunity is
24:35
Speaker 2: to be that leading public company in securitizing this asset
24:41
Speaker 2: class and then providing the derivatives you know, fixed income,
24:47
Speaker 2: high yield convertible high performance equity, And you can't really
24:55
Speaker 2: do that if you don't have a public company with
24:57
Speaker 2: permanent capital, you can't do it with it SEC forty
25:01
Speaker 2: and ETA for a trust. See they've got overnight deposits.
25:05
Speaker 2: They can't generate five years duration leverage on some kind
25:11
Speaker 2: of preferred or bond like instrument. So I guess the
25:15
Speaker 2: last metaphor I give you is, you know, standard oil
25:19
Speaker 2: created the oil business. So I give you a petrochemical
25:22
Speaker 2: refinery and think about what goes in one side. It's
25:25
Speaker 2: crude oil. What comes out the other side? Gasoline? Why
25:30
Speaker 2: do you put gasoline in the cart because that's the
25:32
Speaker 2: only thing that works. Kerosene, what do you put that
25:35
Speaker 2: in jets? That's jet fuel? Right? Propylene?
25:40
Speaker 1: You know the two men who goes in paint.
25:42
Speaker 2: All of those petrochemical products come out this side. The
25:47
Speaker 2: refinery does a lot of work and incomes crude oil.
25:53
Speaker 2: So think of micro strategy as we take in crude capital.
25:57
Speaker 2: There's no doubt it's the best performing acid years. It's
26:00
Speaker 2: theoretically the best digital. Best form of capital is digital capital.
26:06
Speaker 2: It's just scary to a lot of people. It's too volatile,
26:10
Speaker 2: it's too difficult to manage. So they want someone that
26:14
Speaker 2: can you know, domesticate it, step it down, package it
26:18
Speaker 2: in safe components, and then connect it into the fixed
26:24
Speaker 2: income market, the high yield market, the you know, the
26:28
Speaker 2: convert market, and the public equity markets and micro strategy.
26:32
Speaker 2: You know, we inadvertently, we just inadvertently backed into that
26:37
Speaker 2: because to do what you do what we did, you
26:39
Speaker 2: have to start with a very small company, a billion
26:42
Speaker 2: dollar company, and then we become a forty billion dollar
26:45
Speaker 2: company and now we're one hundred and fifty percent bitcoin.
26:48
Speaker 2: So if you take another billion dollar company and do
26:51
Speaker 2: what we're doing, you can't catch us, because at this
26:54
Speaker 2: point we can we can grow five ten billion dollars
26:57
Speaker 2: a year in capital or faster. Can't catch us if
27:01
Speaker 2: you start with the same thing. But if you take
27:03
Speaker 2: a big company like Google or Meta or Microsoft or
27:06
Speaker 2: Apple and they took fifty billion and they bought fifty
27:10
Speaker 2: billion a bitcoin, well that would be good for Bitcoin,
27:12
Speaker 2: and that would be good for their shareholders. And if
27:14
Speaker 2: Apple did it a lot, they might add a trillion
27:16
Speaker 2: dollar to their market cap, but it would be a
27:20
Speaker 2: trillion on top of three trillion. So at the end
27:23
Speaker 2: of the day, Apple would be an enterprise twenty five
27:26
Speaker 2: percent bitcoin, seventy five percent Apple micro strategy is an
27:30
Speaker 2: enterprise one hundred and fifty percent bitcoin. So how do
27:35
Speaker 2: you create a company which is one hundred and fifty
27:38
Speaker 2: percent bitcoin that can sell billions of dollars of fixed
27:42
Speaker 2: income instruments or billions of equity into the market with
27:47
Speaker 2: a permanent capital base that's going to oscillate, It's going
27:51
Speaker 2: to vibrate with the frequency of bitcoin, right that that
27:55
Speaker 2: is I'd love to say we had the idea four
27:58
Speaker 2: years ago and that's what we were trying to do. No,
28:01
Speaker 2: we just kind of stumbled onto just a really great business.
28:05
Speaker 1: I do want to get to Apple and how you
28:07
Speaker 1: perhaps plan to convince companies like that to follow your
28:10
Speaker 1: Bitcoin adoption strategy playbook.
28:13
Speaker 3: But this whole conversion.
28:14
Speaker 1: Financial engineering type strategy is often referred to online as
28:18
Speaker 1: the infinite money glitch. But I wonder if it is
28:22
Speaker 1: infinite or not. And if it's not, do you perhaps
28:26
Speaker 1: see it running into.
28:27
Speaker 4: More of a supply issue first or a demand issue first,
28:30
Speaker 4: demand being perhaps there might not be potential buyers of
28:33
Speaker 4: all of those other options like bonds or supply that
28:36
Speaker 4: if you create too many shoes and can make too
28:38
Speaker 4: many conversions from your stock, that investors existing investors will
28:42
Speaker 4: be diluted too much that you'd then run into a.
28:44
Speaker 3: Sort of cap with that, or can this just keep
28:46
Speaker 3: going forever?
28:47
Speaker 2: Michael, see the misnomer there is. It's not a money glitch.
28:52
Speaker 2: It is a digital transformation of the capital markets. When
28:58
Speaker 2: you have a system that moves from a higher energy state,
29:03
Speaker 2: a more disordered state, to a lower energy state, lots
29:07
Speaker 2: of energy gets given off. Think of steam becoming water, like,
29:12
Speaker 2: is it a money glitch? It's just steam becoming water
29:15
Speaker 2: and it condenses what heps when water becomes ice. It's
29:19
Speaker 2: not a heat glitch. But heat what you and what
29:22
Speaker 2: happens when you add heat, the ice becomes water, the
29:25
Speaker 2: water becomes steam. So if you look at the capital markets,
29:28
Speaker 2: you've got eight hundred nine hundred trillion dollars of wealth
29:33
Speaker 2: in the capital market. And you've got this wealth, You've
29:37
Speaker 2: got people invested in all these heterogeneous assets. Why to
29:43
Speaker 2: ninety eight percent of the companies in the S and
29:44
Speaker 2: P five hundred not perform? Right? How come one percent
29:48
Speaker 2: of all the returns come from like seven companies? Right?
29:52
Speaker 2: What I talked about with if you study the convertible
29:56
Speaker 2: bond market, someone issues a convertible bond, it takes them
29:59
Speaker 2: five years for the investors to figure out whether it worked,
30:02
Speaker 2: and then when they come up with a new convertible bond.
30:05
Speaker 2: Is a different credit proposition. It's very inefficient, right if
30:09
Speaker 2: you think about preferred stocks very inefficient, junk bonds very inefficient,
30:12
Speaker 2: private credit very inefficient. You know, fixed income people get
30:18
Speaker 2: very low yields. What if I you know, I'm getting
30:21
Speaker 2: this yield and I'm taking all this credit risk and
30:23
Speaker 2: counterparty risk. So of the nine hundred trillion in capital
30:28
Speaker 2: in the global capital markets, half of it is just
30:30
Speaker 2: long term, well store of value, long term capital. You know,
30:35
Speaker 2: that is pure capital. People with money just want to
30:38
Speaker 2: keep their money rich, just want to stay rich. I
30:41
Speaker 2: give you an organization of billion dollars in the endowment,
30:44
Speaker 2: you just want to not lose the billion dollars precisely right.
30:47
Speaker 2: So that four hundred and fifty trillion is invested in
30:51
Speaker 2: buildings that are rusting, it's invested in cars, it's invested
30:56
Speaker 2: in fleets, it's invested in things that suffer from twenty
31:00
Speaker 2: century risk factors, credit default, war, tariff, Tornado, text tech.
31:07
Speaker 2: You know, like you had a good business at Kodak
31:09
Speaker 2: and your family had all their money in Kodak, and
31:11
Speaker 2: then what happened. Or you owned Xerox and what happened.
31:13
Speaker 2: Then you own the best business in Ukraine, and then
31:16
Speaker 2: as a war that happened. Right, I could give you
31:18
Speaker 2: ten thousand examples of risk factors that destroy wealth. So
31:24
Speaker 2: you've got that four hundred and fifty trillion on one side,
31:26
Speaker 2: and then you've got one trillion digital capital. It's like, well,
31:31
Speaker 2: I had a building, I get rid of all the
31:33
Speaker 2: things that make the building a problem, and I make
31:35
Speaker 2: it an invisible, immortal, indestructible, teleportable, digital building. That'd it
31:40
Speaker 2: be cool? Okay? Well that's what bitcoin is. So this
31:44
Speaker 2: thing that people think of as a gwitch, it's not that.
31:47
Speaker 2: It's it's energy flowing from a from a steam state,
31:52
Speaker 2: from highly disordered, inefficient bouncing into each other into a
31:57
Speaker 2: more ordered state. Right, it's moving from a year in Africa.
32:03
Speaker 2: I give you a billion dollars, I say go invest
32:06
Speaker 2: in any real estate in Africa and anything you want
32:08
Speaker 2: any country, hold it for thirty years. There's not a
32:12
Speaker 2: single thing you know that you would want to invest in.
32:16
Speaker 2: And I say, well, you know, would you rather own
32:18
Speaker 2: a billion dollars of real estate in Africa or a
32:20
Speaker 2: billion dollars of real estate in New York City. Well,
32:23
Speaker 2: you can see you'd rather swap the New York City
32:26
Speaker 2: risk for the for the Nigerian risk. And then I say, well,
32:29
Speaker 2: would you rather own a billion dollars of real estate
32:31
Speaker 2: in New York City or a billion dollars of bitcoin?
32:34
Speaker 2: Or billion dollars in cyber Manhattan. There's no mayor in
32:38
Speaker 2: cyber Manhattan. There's no property tax in cyber Manhattan. There's
32:41
Speaker 2: no storms, there's no weather in cyber Manhattan. Everybody lives
32:45
Speaker 2: forever in cyber Manhattan. You can you know, you can
32:48
Speaker 2: teleport cyber Manhattan sixty times a second. You can program
32:52
Speaker 2: it as an AI. It's like, so what you see
32:55
Speaker 2: is it's not it's not a glitch. It's simply capital
33:00
Speaker 2: flowing from a disordered economy. In Argentina and Nigeria, they
33:05
Speaker 2: have hyperinflation. Okay, So if I happen to be there
33:09
Speaker 2: and I'm selling pesos and buying dollars, and you know,
33:13
Speaker 2: the peso used to be one peso to the dollar,
33:16
Speaker 2: and today it's like fourteen hundred or twelve hundred pasos
33:19
Speaker 2: to the dollar. Was that a glitch? Like was or
33:23
Speaker 2: was that? That's basically the free market. It's capital flows
33:28
Speaker 2: to where it's treated the best. And so if I
33:30
Speaker 2: have capital, you know in Argentina, I would put it
33:34
Speaker 2: in the US. And if I have capital and the dollar,
33:37
Speaker 2: let's take the dollar. One hundred years ago in Miami Beach,
33:41
Speaker 2: an acre of land in the waterfront cost ten thousand
33:43
Speaker 2: dollars today ten million dollars. The dollar lost ninety nine
33:49
Speaker 2: point nine percent of its value against real estate waterfront
33:55
Speaker 2: property in Florida. Okay? Is that a glitch? Right in?
33:59
Speaker 2: The peso lost ninety nine point nine percent of its
34:03
Speaker 2: value against the dollar in twenty years. Is that a glitch?
34:06
Speaker 2: That's really just capital flowing from a weak asset to
34:11
Speaker 2: a middling asset to a stronger asset. And Bitcoin's advance
34:16
Speaker 2: is capital flowing from twentieth century analog assets, financial and
34:22
Speaker 2: physical assets to the twenty first century digital economy. And
34:29
Speaker 2: it's going to go fast. Early on, it went really
34:31
Speaker 2: fast the first decade. Has been going fifty percent a
34:34
Speaker 2: year ar for the past four years. But as the
34:37
Speaker 2: one trillion equalizes with the four hundred trillion, and this
34:41
Speaker 2: becomes two hundred. When this becomes four, probably this four
34:45
Speaker 2: hundred and fifty trillion will become seven hundred trillion, but
34:48
Speaker 2: this one trillion will become one hundred trillion, and so
34:51
Speaker 2: as this becomes a fraction of the twentieth century economy.
34:57
Speaker 2: The difference between the cost of capital in the bitcoin universe,
35:01
Speaker 2: which is fifty percent right now, and the cost of
35:04
Speaker 2: capital in the dollar universe, which is about twelve to
35:08
Speaker 2: fourteen percent. Look at basically, that's the return of the
35:11
Speaker 2: S and P. So the S and P sets the
35:14
Speaker 2: cost of capital for traditional conventional assets, and bitcoin is
35:19
Speaker 2: the opposite. And so bitcoin is like three and a
35:22
Speaker 2: half times the S and P. And it's also three
35:26
Speaker 2: and a half times of volatility. Look at dvol Bitcoin
35:30
Speaker 2: volatility fifty five versus the VIX. And so if you
35:33
Speaker 2: look at the two, it's not a complicated thing. It's
35:36
Speaker 2: a thermodynamic idea that any physicists will tell you. This
35:40
Speaker 2: is a hot fluid, this is a cold fluid. I
35:44
Speaker 2: pull up the gate and I mix the fluids. And
35:46
Speaker 2: how hot is the bathtub? It's somewhere in between, right
35:50
Speaker 2: the temperature is going it's going to be in between
35:53
Speaker 2: scalding hot and freezing cold and in the middle. If
35:57
Speaker 2: there are some ice cubes in this one and I
35:59
Speaker 2: have least scalding hot water, ear some of the ice
36:02
Speaker 2: cubes are gonna melt, but you're gonna end up with
36:04
Speaker 2: a warm bath. With the exception that there's always going
36:08
Speaker 2: to be you know, if you look out, if you
36:10
Speaker 2: look out ten years instead of fifty versus fifty voll
36:14
Speaker 2: versus fifteen ball, maybe it'll be forty five to forty
36:18
Speaker 2: to thirty eight to thirty six to thirty two to
36:21
Speaker 2: twenty eight. This volatile is coming in. This arr is
36:25
Speaker 2: coming in. Now. This comes up because what happens when
36:30
Speaker 2: when like when Apple and Google and Microsoft and Facebook
36:34
Speaker 2: or whatever, when they buy bitcoin. What happens when you
36:37
Speaker 2: could take the bottom ninety eight percent of the S
36:40
Speaker 2: and P five hundred if they bought bitcoin, their performance
36:43
Speaker 2: would start to approach the big tech and so the
36:48
Speaker 2: performance of the S and P index will move toward bitcoin.
36:52
Speaker 2: As they put bitcoin on the balance sheet, Bitcoin performance
36:56
Speaker 2: will move toward the S and P. As we move
37:00
Speaker 2: move from you know, a one hundred to one ratio
37:03
Speaker 2: to a ten to one ratio to a five to
37:05
Speaker 2: one ratio, and these things equalized. But you know, if
37:09
Speaker 2: you understand it is thermodynamics and collapsing into a more
37:14
Speaker 2: efficient energy state. Like, how is it not more efficient
37:17
Speaker 2: to be able to teleport a building sixty times a
37:19
Speaker 2: second between New York and London? Like that's efficient versus
37:23
Speaker 2: your family made an investment in London thirty forty years
37:26
Speaker 2: ago and they changed the law last month, and now
37:28
Speaker 2: you're going to lose all your wealth. That's inefficient. Right.
37:32
Speaker 2: So bitcoin is the digital transformation to capital. MicroStrategy is
37:39
Speaker 2: just a business taking advantage of the digital transformation. But
37:46
Speaker 2: if I was talking to Apple, I would say, don't
37:49
Speaker 2: buy back one hundred billion of your stock. Buy one
37:51
Speaker 2: hundred billion of bitcoin. It will go to five hundred billion.
37:55
Speaker 2: You'll have a five hundred million dollar business growing twenty
37:57
Speaker 2: percent a year. You'll make one hundred billion investment games
38:00
Speaker 2: a year. Your investors will look at it and they'll
38:03
Speaker 2: add a trillion or two trillion dollars to your market cap.
38:06
Speaker 2: And now the company will be valued sixty percent based
38:09
Speaker 2: upon the operating business, forty percent based on the balance sheet, right,
38:16
Speaker 2: and the risk will shift because the risk in a
38:20
Speaker 2: conventional company is the balance sheet's worthless and the company's
38:25
Speaker 2: value based upon the P and L. And so if
38:28
Speaker 2: you make a billion dollars a quarter, I basically value
38:31
Speaker 2: it at twenty P to E. So I take the
38:33
Speaker 2: quarterly result, I'm multiply by eighty and I say, oh,
38:37
Speaker 2: you're worth eighty billion dollars because I took one billion.
38:40
Speaker 2: I'm multiplyed by eighty and the balance sheet's worthless. But
38:43
Speaker 2: the next quarter, I say, well, my billion went to zero.
38:48
Speaker 2: Well that's eighty times a billion dollar change. You've got
38:51
Speaker 2: a massive whip saw. That's why these companies stocks crash.
38:56
Speaker 2: If the company had forty billion dollars of tangible assets
39:00
Speaker 2: on the balance sheet and it was that puts a
39:03
Speaker 2: floor right on the equity. And really what you want
39:06
Speaker 2: is you want a well balanced company where it's like
39:11
Speaker 2: Harvard University or Yale. They're not valued based upon the
39:14
Speaker 2: earnings of this semester of freshmen entering Harvard. They're valued
39:19
Speaker 2: because they have eighteen billion in the endowment. You know,
39:22
Speaker 2: and if they close, the university is still rich. They
39:25
Speaker 2: have eighteen billion in the endowment. So micro strategy is
39:29
Speaker 2: just pioneering. It's kind of common sense. Your family wouldn't
39:34
Speaker 2: give away all your money and just say we're going
39:35
Speaker 2: to work harder, And a university wouldn't give away all
39:39
Speaker 2: its money and say we're going to raise tuition, cram
39:41
Speaker 2: the classes, cut the teacher's salary, and work harder. But
39:46
Speaker 2: conventional wisdom and finance is your company ought to diving
39:49
Speaker 2: it out its capital, It ought to buy back its stock.
39:52
Speaker 2: It shouldn't actually hold any capital in the balance sheet,
39:56
Speaker 2: and it should just raise its prices and tell its
39:58
Speaker 2: employees to work harder and cut its cost. And that,
40:02
Speaker 2: in a nutshell, is why ninety nine percent of the
40:06
Speaker 2: companies in the world underperform the Magnificent seven and why
40:10
Speaker 2: they all could benefit by just adopting bitcoin. Is there
40:14
Speaker 2: a Treasury reserve standard?
40:15
Speaker 1: That was an interesting point you made about analyzing and
40:18
Speaker 1: coming to the valuation in terms of analyzing the performance
40:22
Speaker 1: of a company. Right, investors historically, as you mentioned, just
40:24
Speaker 1: look at a price to earnings forward looking ratio or
40:27
Speaker 1: look at the profit and loss. How should investors analyze
40:31
Speaker 1: micro strategy because if you mentioned that, to give you
40:34
Speaker 1: a metaphor, micro strategy is the tap to that capital flow.
40:37
Speaker 1: As you mentioned, there's nothing else like that, like are
40:40
Speaker 1: you a bitcoin bank? Do we value you similar to
40:43
Speaker 1: do we analyze you similar to a bank or do
40:46
Speaker 1: I've seen a simplification perhaps as analyzing micro strategy like
40:50
Speaker 1: a reate like a real estate investment trust, But that
40:53
Speaker 1: feels too simple.
40:54
Speaker 3: I mean, is there anything we can compare it to micro?
40:56
Speaker 2: I think I think you've got to look at the
40:58
Speaker 2: balance sheet and say, okay, that's one component. They've got
41:01
Speaker 2: this much bitcoin, and then you got to look at
41:03
Speaker 2: the P and L and say, well, how much investment
41:04
Speaker 2: income can they generate? So if the company gets to
41:07
Speaker 2: fifty billion dollars a bitcoin, and if bitcoin goes up
41:10
Speaker 2: twenty percent a year, the company generates ten billion dollars
41:13
Speaker 2: a year of investment income and that compounds twenty percent
41:16
Speaker 2: a year. So if I said to you, hey, here's
41:19
Speaker 2: a big tech company that makes ten billion a year
41:21
Speaker 2: and they're growing that twenty percent a year, how would
41:24
Speaker 2: you value that?
41:25
Speaker 3: I mean through the roughot it.
41:27
Speaker 2: There you go. So it's not very complicated. The thing
41:30
Speaker 2: that's helped people back is we've used in definite and
41:33
Speaker 2: tangible accounting for the last four years and it's not
41:36
Speaker 2: until twenty twenty five that you actually start to do
41:39
Speaker 2: fair value accounting. You and when you start to do
41:43
Speaker 2: fair value accounting, you can actually see investment income and
41:46
Speaker 2: you can see the income potential. And so it's not
41:50
Speaker 2: complicated to figure out what the balance sheet is. Everybody knows,
41:53
Speaker 2: you know, two hundred and fifty two thousand bitcoin. The
41:57
Speaker 2: complicated thing is to grasp the idea of a company
42:01
Speaker 2: that's securitized, that issues securities back by bitcoin, and the
42:06
Speaker 2: real franchise the micro strategy has is we're the leading
42:11
Speaker 2: issuer of bitcoin back securities. So the question is how
42:16
Speaker 2: much capital can we raise, how much permanent capital we have?
42:20
Speaker 2: And the second question is how much leverage will we
42:23
Speaker 2: use and how intelligent will it be? And the third
42:26
Speaker 2: question is what's your forecast for bitcoin? Right? I mean?
42:31
Speaker 2: And so there's three variables there. If we barrow ten
42:34
Speaker 2: billion dollars at seven percent and we invest in bitcoin
42:37
Speaker 2: and bitcoin returns twenty one percent, then we scrape fourteen
42:40
Speaker 2: percent arbitrage on ten billion, we make one point four
42:43
Speaker 2: billion a year in the swap, We roll that into
42:46
Speaker 2: the business, and then ten years out you've got fifty
42:49
Speaker 2: billion dollar business. Fifty billion in capital and you're generating
42:54
Speaker 2: ten billion dollars your investment income just off of that
42:57
Speaker 2: one piece, right, But it all comes down on to
43:01
Speaker 2: you know, what's the nature of the capital, how much
43:03
Speaker 2: can we get and raise and then how will we
43:06
Speaker 2: invest it and will be responsible? You know? And you
43:10
Speaker 2: know the haters, right, the haters think, well, Bitcoin's just
43:14
Speaker 2: going to go up zero percent a year, right, So
43:16
Speaker 2: of course from their point of view, the balance sheet's
43:18
Speaker 2: going nowhere. And if bitcoin goes zero percent a year,
43:22
Speaker 2: you can't raise any capital. Right, So if that's your forecast,
43:25
Speaker 2: you're not that interested. You know. My view is Bitcoin's
43:29
Speaker 2: going to appreciate twenty nine percent a year arr for
43:31
Speaker 2: the next twenty one years, right, that's what it takes
43:34
Speaker 2: it too.
43:35
Speaker 4: Well, was the dollar cigirl on that thirteen million pi bitcoin?
43:38
Speaker 2: Yeah? Okay, And so what do you think my shareholders think? Well,
43:44
Speaker 2: my shareholders are pretty bullish on bitcoin, right. There's no
43:46
Speaker 2: one buying Micro's strategy that hates bitcoin. No, they're shorting in. Yeah.
43:51
Speaker 2: So at the end of the day, I mean, the
43:55
Speaker 2: methodology would be figure out what's your forecast for bitcoin?
44:00
Speaker 2: By the way, you can go to Google type bitcoin
44:03
Speaker 2: twenty four, and you'll find the Bitcoin twenty four open
44:06
Speaker 2: source model. It's a twenty one year model. You can
44:08
Speaker 2: download it. It's a spreadsheet you can put in your
44:11
Speaker 2: forecast for innovation rate, inflation rates, all the asset class, monetizations, demonetizations,
44:18
Speaker 2: bitcoin assumptions, supply. Well, yeah, you can put that all
44:21
Speaker 2: in and you can run your model and you can
44:23
Speaker 2: get your own answer. Right, So do that, and then
44:27
Speaker 2: you just got to consider, well, how much capital do
44:30
Speaker 2: you think the micro strategy will raise via securities offerings?
44:34
Speaker 2: And after you do that, you decide are we responsible
44:38
Speaker 2: custodians And then you create a five or ten year
44:41
Speaker 2: model for our investment income and you figure out how
44:44
Speaker 2: much income can we generate and how fast can we grow?
44:47
Speaker 2: And of course all those things are very integrated. And
44:51
Speaker 2: you know, if the more you know about the capital markets,
44:54
Speaker 2: the more enthusiastic you get. Because we look and we say,
44:58
Speaker 2: the convertible markets are in a efficient, the preferred stock
45:02
Speaker 2: markets inefficient, the high yield markets inefficient, the corporate debt
45:06
Speaker 2: markets inefficient. You know, the real estate market is and efficient.
45:11
Speaker 2: So you know, we our view is we kind of
45:14
Speaker 2: want to be the Amazon of fixed income. We want
45:18
Speaker 2: to we want to build a better product direct to
45:21
Speaker 2: a new distribution channel. And uh, you know, I don't
45:25
Speaker 2: blame people for not necessarily understanding that because sometimes you
45:29
Speaker 2: have to see it. And in the in the absence
45:32
Speaker 2: of you know, fair value accounting and the like and
45:35
Speaker 2: three or forecasts and those you know don't exist. It's
45:39
Speaker 2: it's a lot for people to grasp right now.
45:42
Speaker 1: Well, you've even had to come up at micro strategy
45:44
Speaker 1: with your own measurement to measure the success of the strategy.
45:48
Speaker 1: You already mentioned it earlier on in this chat. The
45:50
Speaker 1: BTC yield Currently you're to date, that's around twelve point
45:54
Speaker 1: two percent that yield. But over the next three years,
45:56
Speaker 1: according to your most recent quarterly report, you're targeting something
46:00
Speaker 1: I think four to eight percent.
46:01
Speaker 3: Does that correct that? So that then implies a diminish,
46:04
Speaker 3: a diminishing in that yield.
46:06
Speaker 4: So once it decreases or compresses that yield, what happens then?
46:11
Speaker 4: Do you need to come up with another means.
46:13
Speaker 2: To well in the capital. Let's just focus on BTCo
46:17
Speaker 2: for a second. What is it? It's the rate of
46:19
Speaker 2: increase in bitcoin per share. So if I think we're
46:25
Speaker 2: getting close to almost an eighteen percent, like seventeen percent
46:29
Speaker 2: BTC yield for the year so far, and that means
46:32
Speaker 2: that between January first and today you've you've gotten more
46:36
Speaker 2: than seventeen percent more BTC per share. If I gave
46:42
Speaker 2: you a company and I said it's going to dive
46:43
Speaker 2: in and yield to seventeen percent, and I give you
46:46
Speaker 2: another company, say it's got to be a dividend yield
46:48
Speaker 2: of zero, you know, it's like, well, you would value
46:51
Speaker 2: the second one based upon the underlying asset, but you're
46:56
Speaker 2: not going to any more. But the first one. You
46:58
Speaker 2: would actually take the underlying ass and then you would
47:01
Speaker 2: take the yield, and then the question is how long
47:03
Speaker 2: will they generate that yield? Right, and what's the average
47:08
Speaker 2: yield over the lifetime of my holding period. So in
47:11
Speaker 2: that case, I mean you could say, if I expect
47:13
Speaker 2: four to eight percent yield, you could put a ten, twenty,
47:16
Speaker 2: or thirty pde on that. Sometimes people will know it's
47:19
Speaker 2: basically your earnings per share in a way, but you know,
47:23
Speaker 2: we can't really call it that because it's it's a
47:26
Speaker 2: non gap measure, and it's a it's a bitcoin per
47:30
Speaker 2: share type measure for that's valuable to people that love bitcoin.
47:34
Speaker 2: But when you think about it that way, right, this
47:38
Speaker 2: simple model there is is the company should have a
47:42
Speaker 2: premium equal to the multiple of the yield. Right. If
47:45
Speaker 2: you think the multiple should be twenty, and if you
47:48
Speaker 2: think the yield will be eight percent, then you could
47:50
Speaker 2: say the companies are traded one hundred and sixty percent
47:52
Speaker 2: premium to the underlying asset. Right, So so the ability
47:57
Speaker 2: to generate that yield will justify that premium. And it's
48:02
Speaker 2: a simple model, but it's not the whole model. The
48:05
Speaker 2: real issue is how you generating the yield. And the
48:07
Speaker 2: way you're generating the yield is through issuing securities to
48:11
Speaker 2: the public market. You know that come to generate that yield.
48:15
Speaker 2: And one way to do it is by issuing equity
48:17
Speaker 2: at a premium. That's a simple way, the most simple
48:20
Speaker 2: way imaginable. Right. Another way to do it is to
48:24
Speaker 2: issue convertible bonds at a premium to the equity, which
48:28
Speaker 2: may or may not be at a premium to the asset.
48:30
Speaker 2: That's slightly less simple, but still kind of straightforward way
48:33
Speaker 2: to do it. A third way to do it is
48:36
Speaker 2: I just issue a fixed income instrument that pays seven
48:40
Speaker 2: percent and I buy bitcoin with it that yields more
48:43
Speaker 2: than seven percent, which is what you're done right Well, well,
48:46
Speaker 2: technically that's not exactly what I'm doing right now. What
48:49
Speaker 2: we're doing right now is you've issued equity at a premium,
48:52
Speaker 2: and we've issued convertible bonds at a premium. You know,
48:55
Speaker 2: if the company and the future were to issue preferred
48:58
Speaker 2: stock that had a fit thing, or issue bonds corporate
49:02
Speaker 2: debt or or something that had a fixed coupon, then
49:07
Speaker 2: you would be swapping the fixed for the you know,
49:10
Speaker 2: for the bitcoin return. And of course in that case, look,
49:13
Speaker 2: if you're if your forecast or bitcoin is to go
49:15
Speaker 2: up seven percent a year and your and the company's
49:18
Speaker 2: paying seven percent for their capital, there's no yield, you see, right,
49:22
Speaker 2: If your forecast is to go up twenty one percent
49:24
Speaker 2: a year and the company pay seven percent, there's a
49:26
Speaker 2: big yield, right, And so so if you use BTC yield,
49:33
Speaker 2: then you just think about what's the company going to
49:35
Speaker 2: do to get to it. And we've just got lots
49:37
Speaker 2: of different tools to get to it. We can there's
49:40
Speaker 2: other things. There's a thousand things you could do, right,
49:43
Speaker 2: I just I'll keep it for the sake of our
49:45
Speaker 2: interview to just those few because they're simple to discuss,
49:50
Speaker 2: and you know our guidance. You know, our target is
49:53
Speaker 2: four to eight percent. We've done more than double eight
49:56
Speaker 2: percent this year.
49:57
Speaker 3: So it feels pretty conservative.
49:59
Speaker 2: Then I think we try to be conservative in our
50:01
Speaker 2: guidance because we don't want to disappoint our shareholders. But
50:06
Speaker 2: clearly you know we will. We will pursue our objective,
50:11
Speaker 2: you know, as rapidly as we can in a prudent fashion.
50:16
Speaker 1: Should we talk about the bitcoin revolution, Yeah.
50:20
Speaker 2: You are.
50:22
Speaker 1: It's all bitcoin and part two of this interview with
50:25
Speaker 1: Michael Sailer, he explains what could be Bitcoin's next big moment.
50:29
Speaker 2: Banking is just the next logical step and is.
50:32
Speaker 3: That not exactly what bitcoin is? Don't want to happen.
50:36
Speaker 2: Right Like, at the end of the day, you have
50:38
Speaker 2: an og crypto community is very hardcore about it. But
50:42
Speaker 2: if you look at where all the money is, ninety
50:44
Speaker 2: nine point nine percent of the money is actually in
50:48
Speaker 2: the traditional economy and in the war for the future
50:52
Speaker 2: of money. The war's going to be won with money.