Michael Saylor is Executive Chairman and CoFounder of MicroStrategy.
Matt Odell is CoFounder of OpenSats and Bitcoin Park, and Managing Partner at Ten31.
Recorded Live at Bitcoin Park in Nashville: https://bitcoinpark.com
website: https://citadeldispatch.com
nostr live chat: https://citadeldispatch.com/stream
nostr account: https://primal.net/odell
youtube: https://www.youtube.com/@citadeldispatch
stream sats to the show: https://www.fountain.fm/
(00:04) Introduction and Welcome
(01:04) Michael's Bitcoin Journey
(02:06) Bitcoin Adoption and Interest
(05:28) MicroStrategy's Bitcoin Strategy
(08:12) Regulatory and Accounting Challenges
(14:09) Business Models and Bitcoin
(28:00) Bitcoin as a Transactional Currency
(36:02) Politics and Bitcoin
(39:03) Nation-State Bitcoin Accumulation
(42:01) US Treasury and Bitcoin
[00:00:05]
Unknown:
What a week. Michael, thank you so much for joining us. Yeah. Thanks for inviting me. Happy to be here. This is Bitcoin Park. Welcome. Kinda crazy,
[00:00:15] Unknown:
It's a lot of birds and bees buzzing around your park.
[00:00:20] Unknown:
I apologize to Michael before we got on stage. The backstage was actually a little bit hotter than it is in here, but it's it's quite hot with all of it well, with all the heads in the room. So, our air conditioning is a work in progress. We're we're we're trying our best here. It's a a small grassroots iterating project. To those that are not aware, Bitcoin Park is supported by our members. So we have members that support us on an annual basis and that's who makes this possible. By a show of hands, who here is a member of Bitcoin Park? Thank you, guys. Would not be possible without you.
Okay. Well, Michael's time is short, so let's just get into it. First of all, Michael, it's been absolutely crazy watching your Bitcoin journey. You just go 0 to 60 and just aped right into the space in a big way. When you think about this week, I mean, what are you looking at right now? How how how are you thinking about the space? How how we gotten so far so fast? And, how do you think about that basically, I guess?
[00:01:32] Unknown:
Well, I mean, I I think we just see great signs of, Bitcoin adoption throughout the world. Bitcoin's an issue. So the fact you have governors that have interests, the fact you have a lot of senators that have interests, the fact you have a lot of congress people that have interests, the fact that you have 2 of the 3 major presidential candidates that have interests, the fact that you've got tons and tons of, Wall Streeters, you know, you've got representatives from Fidelity and BlackRock and the like. That's interesting. The fact you've got a bunch of operating companies, publicly traded companies like Marathon that are here in size. I mean, it's a big sponsor and, and and all the other public and and private Bitcoin miners. I think you you would have seen the Bitcoin miners private but you rolled the clock back 4 years, you didn't see any public operating companies, you didn't see any public investment trust, you didn't really see any politicians, I don't think they would have well, first of all, they they just wouldn't have any interest, it just would other than squash it out like a bug.
Maybe negative interest but no positive interest and, you know, and, not a lot of enthusiasm and now I think they can't help but be interested. So I think, sometimes, the message is the message and sometimes a half a success in life is just showing up, right? The fact that you're there is sending the message regardless of what comes out of your mouth. And, I know in the in the in the, you know, in the world of say public companies or or Wall Street, the worst thing is not for someone to hate you, the worst thing is for them to be indifferent to you and view you as irrelevant. And so, you know, that's a a kiss of death is you're irrelevant, I don't even think about you.
A lot of people don't like Tesla stock and a lot of people short it, but it's not a problem. Well, you know, there's probably $20,000,000,000 of short interest in MicroStrategy, but then they go long Bitcoin. And I think it's good if they just get up every day and they, like, hate on us or like on us, it doesn't matter. What matters is they're engaged. And so I think this week is all about engagement. You just see engagement across, there are celebrities, there are politicians, there are investors, and then there are Bitcoiners, and then there are the engineers, the technologists, they all come together. And this is presumably it feels like this is the richest, like, most, most energetic gathering of, Bitcoin in a long time. Maybe the one that I remember is most energetic.
[00:04:31] Unknown:
Yeah. I mean, it seems absolutely unreal to me. I remember, my my first Bitcoin conference was in 2013 in, New York, and it was just like an empty exhibitor hall. You know, there was a bunch of companies that had booths they paid for that no one was standing at. Some of them had booth babes that they overpaid for. And, most of those businesses have gone out of business. And it's just the last if you look at the last 10 years, last 11 years, it's been absolutely astounding the pace of growth of this space. And it definitely feels like it's accelerating. Even just this week feels like a decade almost, in in in terms of of progress, in terms of Bitcoin's recognition.
I mean, I agree with you. You definitely cannot argue that that Bitcoin is irrelevant. It's definitely more relevant than it's ever been. We have more haters than we've ever had. We've had more lovers than we've ever had, and it's just been crazy to watch. So Michael, you have basically made a name for yourself with turning micro strategy, turning your baby into this Bitcoin accumulation machine. And I've, you know, I've had this thesis for a long time that every single individual, every single government, every single company is going to try and accumulate as much Bitcoin as possible. That that is the ultimate goal and, most just don't realize it yet and the people that realize it first have the most to gain.
Since you've embarked on that strategy, we've seen over the last it actually kinda took a little bit longer than maybe even you expected. I definitely took longer than I expected, but we're starting to see smaller public companies around the world try and adopt a similar strategy. I'm kinda curious how you think about that like because to me, yeah I'm not gonna answer the question for you. How do you think about that these these like smaller public companies? I mean one example would be like, the meta planet that's happening in in Japan where they just said we're gonna do the micro strategy thing in a press release and the stock kinda just goes wild.
[00:06:35] Unknown:
You know, I've got a chart that I tweet and the chart shows that bonds are minus 5% ARR for the past 4 years and Bitcoin is plus 55%. So if you're an operating company, by law, you're only up until January of this year, by law you had to invest your excess capital in in treasuries and you couldn't invest it in the S and P index and you couldn't you know, an operating company can't reasonably hold their excess assets in real estate, timber rights, sports teams and Apple stock. The reason not well talked about but the reason, Berkshire Hathaway for example has so much cash is because they can't buy the S and P index and they can't buy more Apple stock because they would trip a 40% covenant or limit that's put in place by the SEC 40 act. And if the company gets more than 40% of its liquid assets, in a security, it's no longer an operating company and that means it can't take on debt, it can't issue option, it basically blows up the company, you become a investment trust.
So for a 100 years, 80 years, the law forces operating companies to hold their excess capital in an asset which is losing 5% of its, economic energy, 5% of its purchasing power per year. And when 2020 came along, you know, we were pushed in the Bitcoin space, but there are really 3 crippling, defects of, you know, 3 crippling things that keep a company from swapping out bonds for Bitcoin or or basically putting Bitcoin in and bonds out. The first thing is you need, the SEC to endorse it as an institutional or a legitimate asset class, a digital commodity and not a security.
It's it's either illegal, you know, because you can't it's illegal to own Apple stock, you know. It's and, you know, and so and it's definitely you don't wanna have an unregistered security. So we had to have digital commodity first step, and we kinda got 75% of the way there in January. It's not a perfected endorsement. It's like a it's a grudging endorsement, you know, with reservation, but we cross the event horizon, you can't turn that back. The second thing that's required is fair accounting. You can't invest in something that you only lose money in and you never make money in. Just simple, right? No one wants to invest and always lose money and never make money, but the accounting rules before January were you can only lose money in Bitcoin. And so nobody is gonna buy an asset that always gets written down and never get written up, and so that got that's optionally fixed in January, that's mandatory, fair accounting in next January. That's the second stall leg of the stall. And the 3rd leg of the stool is Google can wire a $1,000,000,000 to JPMorgan every month and say put it in T Bills and it's like 15 seconds. And if JPMorgan loses it, it's JPMorgan's problem.
The status quo right now is Google would have to wire a $1,000,000,000 a month to Coinbase while the SEC is trying to put Coinbase out of business and they'd have to cross with Cross River Bank, like a bank you've never heard of, that's the only bank that will actually take the wire. So the CFO of Google is not gonna be so interested in wiring 1,000,000,000 and tens of 1,000,000,000 of dollars to a crypto exchange as a custodian. They want State Street, they want Citigroup. Citibank is the predi the successor to National Citibank. National Citibank was run by the brother of John D. Rockefeller, it was the Rockefeller Bank. So if you want a sense of how long these relationships run, 30 years is a short period of time. So the 3rd piece we need is we need banks to be able to custody Bitcoin and then then they can buy it for you, sell it for you, loan money against it, and then in that world you will be able to get a margin loan at SOFR plus 50 basis points against your Bitcoin, you will probably get 5% interest, you'll probably get the same interest rate on Bitcoin as you get on a money market fund. And if you had those two things then a corporate charge, like, a $100,000,000,000 of Bitcoin going up 20% a year yielding 5% with no risk and a bank too big to fail is doing the headache for me. You can imagine Apple might say put $50,000,000,000 in Bitcoin. So we don't have that third thing. We're kind of in year 1.
You could say we're year 0 because year 1 is when you get the third thing and you get the endorsement without prejudice, you know? But I would say that's we're 6 months in, now you got 50,000 publicly traded companies. They're all capitalized on toxic credit which is collapsing. You know, one of the points of my speech is if you if you build your company on a capital asset with a 10 year useful life, your company's gonna last 10 years. And so all these companies have a 10 to 20 year life because they're sitting on a defective capital asset. The driver for them to switch from bonds to Bitcoin is Bitcoin's got a useful life of 10000 years.
If you self custody it your maintenance cost is, you know, one basis point or something. So the useful life of Bitcoin is 1,000 of years, the useful life of a bond is a dozen years or 20 years. The regulatory impediment keeps mainstream companies and institutions from doing it because it's too much trouble and 2024 is that 1st year. So the reason that they're kinda creeping into it right now is finally you can sorta do it. It's a lot of effort to figure out who you're gonna custody with and how you're gonna buy it right now and you can buy it for 65,000 because you're doing the effort.
When JPMorgan and Goldman Sachs do this, it'll be easy and it will cost $500,000 So you get 85% discount if you do the work and you take a little bit of risk. If you'd done it in 2020, you know, you would have got a 98% discount. If you came in in 2013, you got a 99 point 8% discount but that was a lot more risk and a lot more work. And, you know, a lot of these institutions they're just like, if I can make a phone call in 30 seconds and say buy $10,000,000,000 of Bitcoin, they'll do it. But if they have to work harder, they'll study it for 3 years and then they won't do it because why should they take that risk? And so we're in that transition.
[00:13:37] Unknown:
But I guess that makes sense to me. I mean, risk reward. I I have a friend who always says the the best way to measure how long someone's been in Bitcoin is not how much Bitcoin they own, but how much Bitcoin they've lost, just because it was incredibly risky. And, also, it's very easy, to not stay humble and and to lose lose your coin, on various schemes. I guess where I'm going with it is, and this is something that I'm intimately focused on because of my work at 10:31. So at at 10:31, we're a venture firm, that specializes in the Bitcoin space. We have a portfolio of 36 Bitcoin startups.
You know, they're all trying to accumulate as much Bitcoin as possible. That is their goal. And I'm trying to separate in my head, where at some point, it can't it I I think there's some companies out there that are just kind of riding on almost like cheap cheap trick, strategy. It's like we say Bitcoin. We accumulate some Bitcoin. They don't actually have a business model. They they they don't have a competitive advantage to outperform the hardest asset of all time. And at some point, that evaporates. And and we we kind of haven't hit that yet. But at the core, what I look at is low low low expenses. Keep your expenses as low as possible. Keep your cash flow as high as possible, and just try and accumulate as much Bitcoin on the balance sheet while growing in a responsible way. Do you do you would you agree with me on that on that front that there's a lot of kind of just say Bitcoin or say AI. Right? And as a result, your stock pumps, and I'm obviously not accusing micro strategy of that. I mean, I think you've proven that the stock is accretive, and as you hold the stock you you you gain more Bitcoin over time.
[00:15:25] Unknown:
I think that every business has got a p and l and has got a balance sheet. And the P and L is the operation, it's what you do and the balance sheet is how you save what you do. And so the people that have it very easy, the people that can make lots of money right now are just people that started with the money. Right? If you've already got the money and you just couldn't move it from a bond to Bitcoin then you moved it from minus 5% a year to plus 50% a year and that's not hard. Right? It's very hard to compete with Microsoft, like it's very hard to compete with Amazon, it's very hard to compete with Google, it's very hard to compete with Apple. All of those companies are examples where they wiped out 20,000 competent, healthy, hardworking companies. Like, if you ever been in the retail business, every single retailer except Walmart got wiped out by Amazon. There's nothing wrong with those people.
They're good people, they work hard, they work themselves to death but at the end of the day it's, you know, same with Microsoft. They have a monopoly on every, on 80,000,000 businesses and they sell them their software for 3 years and so so I think that if you're asking me is it easy to create a business in the modern world? My answer is it's not easy. You can do it. I mean, mister beast can you know, it happens. Right? Random stuff happen but it's it's hard and it's and if you ask me for advice in entertainment versus medicine versus law versus software versus whatever, I would say I'm not an expert in any of those things, I would say probably you ought to look at AI because it's probably gonna, you know, disrupt and obliterate anything that's labor intensive is getting obliterated, the distribution is getting disrupted, and, so that's hard.
On the other side, the the Bitcoin, the balance sheet strategy it's actually quite easy. Right? The reason I talk about Bitcoin is your choice is lose 5% of your money with bonds or make, you know, if it's 50% right now, right, my my forecast is on average the ARR is gonna be 25, 30% over the next 20 years. So if it if it goes to the worst case for me is it's gotta go up faster and perform better than the S and P index And if the S and P is 10 to 12 then Bitcoin is 20 to 22. So I basically, talk about that which I know, I don't give advice to people on that which I don't know. And and the sad fact is if I were to tell you there's a 99 percent chance the startup will fail, I might be overstating your chances of success.
99% of the S and P 500 is failing right now. Yep. I mean, there's 5 companies in the S and P 5 everybody's saying how do I compete with NVIDIA and that includes Apple and Tesla are saying I don't know if we can. Right? What you will see is a rise of $1,000,000,000,000 corporations because someone's gonna give all the medical advice to a 1000000000 people with AI doctors without an employee. And whoever figures that out is gonna make a lot of money and it's gonna make medical care cheaper, It's gonna put a lot of people in the middle out of business and there'll be disruption. So I don't think that Bitcoin is a competes with Microsoft compete better. Right? It's not gonna make you, it's not gonna help you build better cars than Tesla.
The dude that creates the humanoid robot that's as smart as a 1000000 PhDs, you know, that actually you can buy for a $100 a month, they're probably gonna sell a lot of them. And the dude that creates the 2nd best humanoid robot, nobody will wanna buy it. Nobody wants the 2nd best of anything, right? They just want the 1 they want the best one and they're gonna sell a 1,000,000,000. So, you know, I think the summary of that is sometimes people think that by doing something with Bitcoin it will generate a p and l for them. It's like, okay. I'm gonna launch a Bitcoin exchange and I'm gonna compete with my with Fidelity or with Morgan Stanley or with Vanguard. It's like just because you sell and buy in custody Bitcoin doesn't mean it's easy to displace fidelity.
And so I think you gotta have humility there. And like in in our journey, for example, we got into Bitcoin, you know, we now have $15,000,000,000 of Bitcoin but I'm not selling the Bitcoin to hire engineers to compete with Microsoft. See, it would it would be like throwing good money after bad, right? I mean, so what is a good idea? Well, I mean our ideas securitize the Bitcoin. There are a lot of people, they want the upside of Bitcoin but no downside. Right? Have you ever met people they'd like to make a lot of money but with no volatility and no risk? Many such cases. Okay. So how do you buy Bitcoin at the all time high and not lose money, and then make money if it goes up? Well, you buy a convertible bond. If I sell you a convertible bond with 70% upside that's 5x over collateralized on the downside and you and if MicroStrategy guarantees you to give back your principal, it's like I'm guaranteeing you'll get your money back in 6 years, but if Bitcoin goes up you'll also get the warrant and so you're getting half the upside, none of the downs or 5% of the downside, half the upside, and that's a security.
And so if you think about that, we're just stripping the volatility or we're stripping the, risk off the bottom. And there are a lot of people for which for example, if you go up to a typical investor and you said, what would you like 20% return, no volatility, no, you know, and little risk, or 50% return, lots of volatility. Most will tell you 20% even though that's the wrong answer. Right? It's the wrong I mean, you're gonna take 20 instead of 55. Well, I just I don't want the volatility. So what we do is we simply strip away the volatility and the risk and give them what they want. But other companies in the Bitcoin space, if your idea is you're going to create a mobile app that lets you buy and sell Bitcoin, you're competing against Cash App and Cash App is, you know, holding their own but they're gonna have to compete against Apple and Google and and Robinhood.
And look there are Robinhoods, I mean there are successful businesses but at the end of the day I if there's a theme to this business is hard, like launching a business and growing a business is hard. Investing is hard. When you look at every public company you try to guess if their stock is overvalued or undervalued versus their their cash flow forecast, that's hard. It's not hard to say it's good company, it's hard to say whether the stock price is a good entry point. Right? Investing is hard. Saving was hard under the Fiat standard, but under the Bitcoin standard if your goal is I have some money I'm gonna hold it for 4 years, that's easy.
I buy Bitcoin. If I'm gonna hold it for 4 years, it doesn't matter what the volatility is. And, from there, you know, business is hard, man. Businesses, you know, there there's something happening in the world which is, like, how does anybody sell software to a corporation? If Microsoft look what they did with, Slack. Look what they did with Zoom. They will just take your Slack and make it Teams and put it into their 3 year enterprise deal and you have to buy it. And they will take Zoom and put it in Teams and put it in a 3 year deals and you have to buy it. And it would be easier for a company to leave the US than to leave Microsoft.
Just like Apple, not that different. Right? I mean, how many people wanna throw away their Apple phone and switch to a new ecosystem? They've got
[00:23:34] Unknown:
your stuff. So business And if they do switch, they switch to Google. Right? In both your examples. Like Microsoft you leave Microsoft Teams, you go to Google Suite. And what's the 3rd choice? Yeah. Like so so business is hard
[00:23:46] Unknown:
and it's and it's not that you can't create new opportunities, but Bitcoin what Bitcoin offers is you can either use it to to escape the bond conundrum or if you're a private company that can raise money or if you're a public company that can raise money, you can securitize Bitcoin because there are large pools of capital that people have where they have to buy a security. For example, a venture capitalist, they have to buy a security, a participating a preferred stock in a private company that might go public. They have a $1,000,000,000, they can't buy Bitcoin, they can't buy the ETF, they can't buy land, they can't buy art, they can't buy a public operating company, they just can't. It doesn't matter whether it's gonna go up by a factor of a1000000, they can't buy it. Their charter says spend the $1,000,000,000 on private equity.
So, you you know, they can't buy Bitcoin but you can actually create a company with Bitcoin on the balance sheet and go sell them a participating preferred stock with half of the return of Bitcoin, none of the volatility, they don't have to market to market, they don't say, oh, I'm risking all your money on Bitcoin. They're like, oh, I made an interesting investment in a Bitcoin based company. They make 22%. If they get a 20% return and the S and P returns 12, they'll go back to their investors and raise 10,000,000,000 more dollars and the Fireman's Pension Fund will say, oh, you beat the S and P, how much money do you want?
So they need to do that. The guys that buy my converts, when I sell a convertible bond I have a 1 hour phone call, I'm like, Okay, this is the bond, this is what we're gonna do. Okay. They buy 800,000,000 of it at the end of the day. Okay. Why? It's like they have the money, they have to buy a convertible bond, they can't they're like, why don't they buy Bitcoin? They can't. Why don't they buy your equity? They can't. They need to buy there's a phrase in Wall Street, if the ducks are quacking, feed the ducks. They want that. There's another group of people, they want equity in a public company, they can't buy the spot ETF, they can't. It's it's against their charter, they get fired, they just can't. Why don't they?
Well like you're questioning the world, right? I mean at the end of the day the world is made up of huge pools of capital and it might have taken 20 years to raise the money, now I got to spend the money. So if you are the entrepreneur my general message is you can create a security that a capitalist can then use to get Bitcoin exposure. And if you're public, you sell public equity or debt and buy Bitcoin. And if you're private, you'll sell private equity or private debt and buy Bitcoin. If you can't raise money then you just gotta work very very hard and get lucky and it's hard and you'll see a Zuckerberg on occasion, you'll see some breakthroughs but, you know, it's like it's not easy and so I my recommended strategy is not work yourself to death. My recommended strategy is notice that there are $450,000,000,000 of capital in bonds and real estate and traditional 20th century assets.
There's 1,000,000,000,000, I'm sorry, it's 450,000,000,000,000 in those things, there's 1,000,000,000,000 in Bitcoin. You should be the conduit to move the next $1,000,000,000,000 from the old world to the new world and the way you do it is by raising money with issuing securities to buy Bitcoin and you solve. What's the problem you solve? Custody it for them, buy it for them, take away the volatility, take away the downside risk, you know, and then solve the compliance issue. Chinese billionaires got to buy Bitcoin through a Shanghai ETF, otherwise he goes to jail. Right. That's the problem you solve. It's not as good as self custody. It's not as good as the raw Bitcoin, but that's academic because when you've got $10,000,000,000 in your choices, buy a 1,000,000,000 this way or go to jail or don't buy any, the answer the world is imperfect, That's why they call it earth not heaven.
[00:28:00] Unknown:
Wonderful. Michael, we have 15 minutes. I wanna be very conscious of your time. We have a hard stop here and I have 20 different directions I'd like this conversation to go so I hope this is the first of many. First and foremost I just want to say, feel like there's a little bit of an elephant in the room. Michael and I have had multiple productive conversations in terms of supporting open source development. We are not going to go there today. I I don't think that's the best path for for this conversation to take. I want to talk to you about your thoughts on Bitcoin as a transactional currency, because I I think it's super interesting being in the space with you because we agree on so much and we have such different perspectives on bitcoin but we we we end up in the same space like 99% we're on the exact same page.
The transactional currency piece might be where we differ the most. Let's
[00:29:08] Unknown:
just chat about that. Like, how are you thinking about that right now? Okay. Well, you know, if I think about energy frequency and vibration, every time you trade an asset, it's a vibration. And if you're vibrating in a high friction environment or a high impedance environment, you're bleeding off energy. And so things that you can things you can do in outer space forever, you can do in the atmosphere for less and in the water not so much. So the real issue is when you're doing a transaction, what is the impedance? And there's there's a source of physical impedance, like, for example, what do I think of gold as a transactional currency?
Well, like, I don't think it's good because it's hard to subdivide it and it's hard to send it over the mail, and so you can see how there's a high energy cost to trade gold high frequency, that's why it died. On the other hand, like, what do I think of Apple stock as a transactional currency? And here you're just getting into politics. In a country where Apple stock was legal tender, if it's legal tender and I can send it to you and you could send it back to me and I can do it in one second with no tax, Then, you know, wow Apple stock is better than gold.
Now what do I think of the dollar as, as legal, as a transactional currency? Well, what I think is I can send it back and forth a 1000000 times a day and I don't have a 1000000 taxable events and so I don't have to account for it. If I send a a capital asset whether it's a corporate bond and equity, Bitcoin in the US if you're in the US now, if I move it, I'm moving at high frequency and I'm incurring an accounting event and a taxable event, and if you if you do the calculation it just turns out that everything just cost 10 or 20% more. And and so I don't if we were talking about a country, El Salvador, where it's legal tender and I can move it back and forth a 100 times a month and there is no accounting event and there's no taxable event, then my opinion is if it's satoshi's on lightning I kinda like it.
If it's satoshis over the base layer, I I think at some point the friction is, you know, when it's $3 a transaction Yep. There's too much friction. So I don't like it on the base layer. I do like it on the second layer. But I would counsel anybody that if you had a if you had a certain amount of money, 95% of it should be held in the capital account as Bitcoin, 5% should be in the local checking account. And as a practical matter, you've got real 2 2 things. You've in Argentina, if everything's priced in the peso and then you have to have pesos, I would probably buy them the hour before I had to spend them, but I would buy them.
And on the other hand if if something is legal tender I'm much more likely to wanna vibrate it or transact at high frequency. And if it's and if it's going to be taxed heavily, you know, short term capital gains tax, right, is like 35, 40%. Right? So if I if I gave you a Bitcoin and it was up, you know, a bit and I gave here's the thing I think we both agree on, Matt, which is neither one of us think we should send all our money to the government. Right?
[00:32:45] Unknown:
Very true.
[00:32:48] Unknown:
And and I think that's why, for example, Tether has been so successful, you know, I mean in theory a digital currency that's just a dollar that's pegged to the dollar for high frequency checking, you know, and a digital property, Bitcoin, which you can hold for the rest of your life as the property or the capital asset. Those 2 paired would allow you to go anywhere in the world and stay rich or stay wealthy and stay compliant and minimize you know, what do you want? You wanna hold the the Bitcoin forever and never pay capital gains. You don't wanna, like, you know, and you never you know, you just wanna hold it forever, and then you want everything else to be quick and easy.
So that's what I think on that subject.
[00:33:34] Unknown:
I mean, so you think you think the tax treatment is is the major hurdle. So it's more of a politics regulatory kind of landscape issue. I think the government can basically destroy any asset by the tax treatment. I politics matter.
[00:33:47] Unknown:
Like, if they wanna destroy it, right, then for example, you know, here's the best tax treatment, legal tender. No tax on it. You can hold it forever and you can transfer it and there and there's no tax. What's the second best, which is capital gains or property? What's the last best? Property tax, which is a tax on time. Like, you're holding it and I want 1% of it, you know, I want 1% of the market value every year regardless of whether you trade it. Right? And that's the land tax in the US and that takes your money away from you in 35, 40 years. So I would say if the government passes a property tax on Bitcoin you should leave the country.
I would say if they're gonna capital gains tax that you should manage yourself so you don't have to transfer it very often, almost never. And I would say if they made it legal tender then you probably ought to move to that country, you ought to go the other direction. We haven't talked about inheritance taxes yet, right? That's it but that's the last part. But I do think taxes taxes are 40% of the equation, they matter a lot and generally the best strategies are strategies that allow you to defer tax or avoid tax, and the worst strategies are strategies that accelerate the tax. You're either gonna pay it or you're not gonna pay it and then you've got a legal liability and then you gotta worry about that. And then either way those strategies become
[00:35:19] Unknown:
a friction. You know, they become a problem. Yeah. I mean I think one of the earliest things, you said when you became public in the space was that that politics matter and people aren't taking them seriously enough. I mean, and I think just the last few weeks alone have have proven you right. I mean, just the panel before us was was with our governor and one of our senators. We have the former president of the United States gonna be speaking at at the largest Bitcoin conference in the world tomorrow. Politics clearly matter.
I think one of the cool parts about, Freedom Tech and Bitcoin as freedom money is is it gives individuals more power when it comes to combating governments or not combating governments. Maybe that's too critical of a word, but, defending themselves and and and and supporting their individual liberties. And as a result, it levels the playing field a bit, and that to me has always given me hope. And I think, you've always been really good. You have hope dot com. Bitcoin is hope. I mean, we got Larry Fink out there saying Bitcoin's like the hedge against hope. It's like the exact opposite to a degree. But I the opposite thing. Yeah. I think we can merge I think we can merge that. But, anyway, Michael, I'm curious. Are we do you think we're entering the era of nation state government FOMO? Like, is is is are we about to start seeing, you know, the micro strategy playbook happen on a government scale?
[00:36:50] Unknown:
I think it's it's positive that they're all talking about it. The Overton window has shifted. A year ago, no one would discuss it. Now you've got, you know, you've got Robert F. Kennedy talking about it, you've got a bunch of senators talking about it. So I just think we start with a conversation. I keep my expectations low. I think we should all keep our expectations low but with the observation that when a government starts talking about owning it, they legitimize it and that means what they're not talking about is taking it away from you. So when they're not talking about owning it, like, if you look at the German government, they emergency sold it because it could go to 0.
And so the narrative of it's not an asset and it's, you know, it's a criminal thing and it's going to 0, that thing is pernicious and if you want to move forward you have to put a firm foundation. So I think when the government starts talking about it that means that individuals and small companies will feel comfortable enough to move in. They'll move first. They'll front run. Right? The government's always gonna be slow, it's always gonna be ham fisted, there'll be a lot of fighting. But I think the individuals and families will move. I think if the government's considering it it becomes a lot less risky for you to discuss it in the board meeting. So when I go into a boardroom and they ask me I'm I can say, you know, MicroStrategy is doing, but guess what? Here are all the politicians that have this bill and the question is will I get fired if I propose it? So I think the Overton window is shifting.
I I'm not expecting, you know, that our government's gonna buy a ton of Bitcoin tomorrow and put it on the wire. I think I think you have to discount that. I do think we will over the next 4 years see some government start to take a position. It'll probably come out of the blue, it'll probably be someone you didn't expect, and it'll be a good thing but my I generally think this this plays out over EPIC's 4 years. This is the early institutional phase, then another 4, then another 4.
[00:39:04] Unknown:
Yeah. I mean, we've already seen the smaller nations to a degree start Bitcoin accumulation strategies. Obviously, El Salvador is is the one that's on most people's minds. I think it's pretty cool that you could go to their, like, mempool instance and see they buy 1 Bitcoin a day, which is like a nice little meme step chart up. But, like, even countries like Bhutan that we found out through bankruptcy reports that they were just quietly accumulating as much Bitcoin as possible. But what is your given what may or may not happen tomorrow, do you believe the US Treasury should stack Bitcoin?
[00:39:43] Unknown:
Yeah. I mean, I I just came from a a presentation on a stage and what I said was, you know, the the the 10 percenter strategy for the US would be to buy 500,000 Bitcoin, The BTC the Maxi strategy is they should buy a million. The double Maxi strategy is they should buy 2,000,000 and the triple max strategy for the US is they ought to buy 4,000,000 Bitcoin over the next 4 years. They would have, like, 18% of the of the supply and if they did that, they retire the debt and they flip to a massive surplus. And and I, you know, my precedent is Like the secret to success as a nation state is you have defensible productive property and so the reason that the British Empire rose is they had an island and it was hard to invade it. Nobody got to it after 10/66, and that on that island they industrialized.
And then they got the the colonies and that was defensible productive land. And then the reason the US rose to power is the United States is defended by the Pacific on one side, the Atlantic on the other side, frozen tundra to the north, the desert to the south, defensible, productive. And what do we do? Well, we bought Louisiana Territory, Jefferson did it for $15,000,000 and then he bought 27% of the land mass. Seward bought Alaska, $7,000,000 The United States Federal Government owns 28% of the land. In the US we own, whatever, 18% of the gold or something, so scarce desirable property but by productive property you can defend and so if 100 of 1,000,000,000,000 of dollars are migrating to cyberspace, right, my view is Bitcoin's gonna demonetize Siberian real estate and Chinese real estate and everything in Africa, and why would you want to own bonds of a South American company? Why would you wanna own anything other than Bitcoin? So as the capital flows you're gonna see 100 of 1,000,000,000,000 of dollars there. So if you're the United States what are you worried about?
Losing your world reserve currency status. Where's the money gonna go? To Bitcoin. How do you hedge that? Just go to go to where everybody's going and buy 20% of it, and then when they get there, you know, you'll be fine. Now where else are you gonna go? Right? For example, if you're if you're gonna sell the dollar, right, you're not selling the dollar for the peso, the lira, the euro. Nobody wants any of that. So So when you sell the dollar, you're gonna buy Siberian real estate? No. You're gonna buy buy bitcoin? What's the second best? You're gonna buy a sec nothing second best. There is no second best. So so the point is you want a country you want a country to be capitalized on a firm foundation. The foundation is productive property that no one can take away from you.
And Bitcoin's beautiful. It is productive because the AIs are gonna wanna move $10,000,000,000 from, you know, here to there every hour. They're not gonna move $10,000,000,000 of buildings or silver, right, or dollars. Lord knows they can't get a bank account, right? So everybody's gonna want the capital, if you want a company, a family, a country to last and prosper, like how well would your how good would your family be if you owned a 100 acres in the middle of Manhattan? Like how would you like to own a 1000 square miles in Texas or something. Right? Own something productive for a long time.
The catch is you don't want me to take it away from you. They you don't want them to tax it and you don't want them to steal it from you. And the beauty of Bitcoin is any country puts their money in cyberspace, nobody can steal it, nobody else can tax it. So even though it's brilliant for the US, it's even a better idea for Switzerland or for Norway or for Turkey because there's no point in invading your country to take your stuff if all your stuff is in cyberspace. So I I'm a big believer, I think it's good for the network, I think it decentralizes us further. I mean it it'll be source of a lot of interesting debates and dialogue but, you know, if you if you believe you want if you wanna help the US then give them productive digital capital and anybody else you wanna help, give them the same advice. And if you hate somebody, if you hate someone, tell them to sell their Bitcoin and don't buy it, right, that's the worst you can do to anybody, encourage them to not Bitcoin because that's like encouraging the Russians to sell Alaska.
It's like Napoleon sold a third of America for $15,000,000, blew it on bullets and blankets in the Napoleonic war. We still have a third of the United States so who got the better trade?
[00:44:43] Unknown:
Bitcoin is beautiful and we should all stack as much as possible.
[00:44:47] Unknown:
Stay humble, stack sat. Let's go.
What a week. Michael, thank you so much for joining us. Yeah. Thanks for inviting me. Happy to be here. This is Bitcoin Park. Welcome. Kinda crazy,
[00:00:15] Unknown:
It's a lot of birds and bees buzzing around your park.
[00:00:20] Unknown:
I apologize to Michael before we got on stage. The backstage was actually a little bit hotter than it is in here, but it's it's quite hot with all of it well, with all the heads in the room. So, our air conditioning is a work in progress. We're we're we're trying our best here. It's a a small grassroots iterating project. To those that are not aware, Bitcoin Park is supported by our members. So we have members that support us on an annual basis and that's who makes this possible. By a show of hands, who here is a member of Bitcoin Park? Thank you, guys. Would not be possible without you.
Okay. Well, Michael's time is short, so let's just get into it. First of all, Michael, it's been absolutely crazy watching your Bitcoin journey. You just go 0 to 60 and just aped right into the space in a big way. When you think about this week, I mean, what are you looking at right now? How how how are you thinking about the space? How how we gotten so far so fast? And, how do you think about that basically, I guess?
[00:01:32] Unknown:
Well, I mean, I I think we just see great signs of, Bitcoin adoption throughout the world. Bitcoin's an issue. So the fact you have governors that have interests, the fact you have a lot of senators that have interests, the fact you have a lot of congress people that have interests, the fact that you have 2 of the 3 major presidential candidates that have interests, the fact that you've got tons and tons of, Wall Streeters, you know, you've got representatives from Fidelity and BlackRock and the like. That's interesting. The fact you've got a bunch of operating companies, publicly traded companies like Marathon that are here in size. I mean, it's a big sponsor and, and and all the other public and and private Bitcoin miners. I think you you would have seen the Bitcoin miners private but you rolled the clock back 4 years, you didn't see any public operating companies, you didn't see any public investment trust, you didn't really see any politicians, I don't think they would have well, first of all, they they just wouldn't have any interest, it just would other than squash it out like a bug.
Maybe negative interest but no positive interest and, you know, and, not a lot of enthusiasm and now I think they can't help but be interested. So I think, sometimes, the message is the message and sometimes a half a success in life is just showing up, right? The fact that you're there is sending the message regardless of what comes out of your mouth. And, I know in the in the in the, you know, in the world of say public companies or or Wall Street, the worst thing is not for someone to hate you, the worst thing is for them to be indifferent to you and view you as irrelevant. And so, you know, that's a a kiss of death is you're irrelevant, I don't even think about you.
A lot of people don't like Tesla stock and a lot of people short it, but it's not a problem. Well, you know, there's probably $20,000,000,000 of short interest in MicroStrategy, but then they go long Bitcoin. And I think it's good if they just get up every day and they, like, hate on us or like on us, it doesn't matter. What matters is they're engaged. And so I think this week is all about engagement. You just see engagement across, there are celebrities, there are politicians, there are investors, and then there are Bitcoiners, and then there are the engineers, the technologists, they all come together. And this is presumably it feels like this is the richest, like, most, most energetic gathering of, Bitcoin in a long time. Maybe the one that I remember is most energetic.
[00:04:31] Unknown:
Yeah. I mean, it seems absolutely unreal to me. I remember, my my first Bitcoin conference was in 2013 in, New York, and it was just like an empty exhibitor hall. You know, there was a bunch of companies that had booths they paid for that no one was standing at. Some of them had booth babes that they overpaid for. And, most of those businesses have gone out of business. And it's just the last if you look at the last 10 years, last 11 years, it's been absolutely astounding the pace of growth of this space. And it definitely feels like it's accelerating. Even just this week feels like a decade almost, in in in terms of of progress, in terms of Bitcoin's recognition.
I mean, I agree with you. You definitely cannot argue that that Bitcoin is irrelevant. It's definitely more relevant than it's ever been. We have more haters than we've ever had. We've had more lovers than we've ever had, and it's just been crazy to watch. So Michael, you have basically made a name for yourself with turning micro strategy, turning your baby into this Bitcoin accumulation machine. And I've, you know, I've had this thesis for a long time that every single individual, every single government, every single company is going to try and accumulate as much Bitcoin as possible. That that is the ultimate goal and, most just don't realize it yet and the people that realize it first have the most to gain.
Since you've embarked on that strategy, we've seen over the last it actually kinda took a little bit longer than maybe even you expected. I definitely took longer than I expected, but we're starting to see smaller public companies around the world try and adopt a similar strategy. I'm kinda curious how you think about that like because to me, yeah I'm not gonna answer the question for you. How do you think about that these these like smaller public companies? I mean one example would be like, the meta planet that's happening in in Japan where they just said we're gonna do the micro strategy thing in a press release and the stock kinda just goes wild.
[00:06:35] Unknown:
You know, I've got a chart that I tweet and the chart shows that bonds are minus 5% ARR for the past 4 years and Bitcoin is plus 55%. So if you're an operating company, by law, you're only up until January of this year, by law you had to invest your excess capital in in treasuries and you couldn't invest it in the S and P index and you couldn't you know, an operating company can't reasonably hold their excess assets in real estate, timber rights, sports teams and Apple stock. The reason not well talked about but the reason, Berkshire Hathaway for example has so much cash is because they can't buy the S and P index and they can't buy more Apple stock because they would trip a 40% covenant or limit that's put in place by the SEC 40 act. And if the company gets more than 40% of its liquid assets, in a security, it's no longer an operating company and that means it can't take on debt, it can't issue option, it basically blows up the company, you become a investment trust.
So for a 100 years, 80 years, the law forces operating companies to hold their excess capital in an asset which is losing 5% of its, economic energy, 5% of its purchasing power per year. And when 2020 came along, you know, we were pushed in the Bitcoin space, but there are really 3 crippling, defects of, you know, 3 crippling things that keep a company from swapping out bonds for Bitcoin or or basically putting Bitcoin in and bonds out. The first thing is you need, the SEC to endorse it as an institutional or a legitimate asset class, a digital commodity and not a security.
It's it's either illegal, you know, because you can't it's illegal to own Apple stock, you know. It's and, you know, and so and it's definitely you don't wanna have an unregistered security. So we had to have digital commodity first step, and we kinda got 75% of the way there in January. It's not a perfected endorsement. It's like a it's a grudging endorsement, you know, with reservation, but we cross the event horizon, you can't turn that back. The second thing that's required is fair accounting. You can't invest in something that you only lose money in and you never make money in. Just simple, right? No one wants to invest and always lose money and never make money, but the accounting rules before January were you can only lose money in Bitcoin. And so nobody is gonna buy an asset that always gets written down and never get written up, and so that got that's optionally fixed in January, that's mandatory, fair accounting in next January. That's the second stall leg of the stall. And the 3rd leg of the stool is Google can wire a $1,000,000,000 to JPMorgan every month and say put it in T Bills and it's like 15 seconds. And if JPMorgan loses it, it's JPMorgan's problem.
The status quo right now is Google would have to wire a $1,000,000,000 a month to Coinbase while the SEC is trying to put Coinbase out of business and they'd have to cross with Cross River Bank, like a bank you've never heard of, that's the only bank that will actually take the wire. So the CFO of Google is not gonna be so interested in wiring 1,000,000,000 and tens of 1,000,000,000 of dollars to a crypto exchange as a custodian. They want State Street, they want Citigroup. Citibank is the predi the successor to National Citibank. National Citibank was run by the brother of John D. Rockefeller, it was the Rockefeller Bank. So if you want a sense of how long these relationships run, 30 years is a short period of time. So the 3rd piece we need is we need banks to be able to custody Bitcoin and then then they can buy it for you, sell it for you, loan money against it, and then in that world you will be able to get a margin loan at SOFR plus 50 basis points against your Bitcoin, you will probably get 5% interest, you'll probably get the same interest rate on Bitcoin as you get on a money market fund. And if you had those two things then a corporate charge, like, a $100,000,000,000 of Bitcoin going up 20% a year yielding 5% with no risk and a bank too big to fail is doing the headache for me. You can imagine Apple might say put $50,000,000,000 in Bitcoin. So we don't have that third thing. We're kind of in year 1.
You could say we're year 0 because year 1 is when you get the third thing and you get the endorsement without prejudice, you know? But I would say that's we're 6 months in, now you got 50,000 publicly traded companies. They're all capitalized on toxic credit which is collapsing. You know, one of the points of my speech is if you if you build your company on a capital asset with a 10 year useful life, your company's gonna last 10 years. And so all these companies have a 10 to 20 year life because they're sitting on a defective capital asset. The driver for them to switch from bonds to Bitcoin is Bitcoin's got a useful life of 10000 years.
If you self custody it your maintenance cost is, you know, one basis point or something. So the useful life of Bitcoin is 1,000 of years, the useful life of a bond is a dozen years or 20 years. The regulatory impediment keeps mainstream companies and institutions from doing it because it's too much trouble and 2024 is that 1st year. So the reason that they're kinda creeping into it right now is finally you can sorta do it. It's a lot of effort to figure out who you're gonna custody with and how you're gonna buy it right now and you can buy it for 65,000 because you're doing the effort.
When JPMorgan and Goldman Sachs do this, it'll be easy and it will cost $500,000 So you get 85% discount if you do the work and you take a little bit of risk. If you'd done it in 2020, you know, you would have got a 98% discount. If you came in in 2013, you got a 99 point 8% discount but that was a lot more risk and a lot more work. And, you know, a lot of these institutions they're just like, if I can make a phone call in 30 seconds and say buy $10,000,000,000 of Bitcoin, they'll do it. But if they have to work harder, they'll study it for 3 years and then they won't do it because why should they take that risk? And so we're in that transition.
[00:13:37] Unknown:
But I guess that makes sense to me. I mean, risk reward. I I have a friend who always says the the best way to measure how long someone's been in Bitcoin is not how much Bitcoin they own, but how much Bitcoin they've lost, just because it was incredibly risky. And, also, it's very easy, to not stay humble and and to lose lose your coin, on various schemes. I guess where I'm going with it is, and this is something that I'm intimately focused on because of my work at 10:31. So at at 10:31, we're a venture firm, that specializes in the Bitcoin space. We have a portfolio of 36 Bitcoin startups.
You know, they're all trying to accumulate as much Bitcoin as possible. That is their goal. And I'm trying to separate in my head, where at some point, it can't it I I think there's some companies out there that are just kind of riding on almost like cheap cheap trick, strategy. It's like we say Bitcoin. We accumulate some Bitcoin. They don't actually have a business model. They they they don't have a competitive advantage to outperform the hardest asset of all time. And at some point, that evaporates. And and we we kind of haven't hit that yet. But at the core, what I look at is low low low expenses. Keep your expenses as low as possible. Keep your cash flow as high as possible, and just try and accumulate as much Bitcoin on the balance sheet while growing in a responsible way. Do you do you would you agree with me on that on that front that there's a lot of kind of just say Bitcoin or say AI. Right? And as a result, your stock pumps, and I'm obviously not accusing micro strategy of that. I mean, I think you've proven that the stock is accretive, and as you hold the stock you you you gain more Bitcoin over time.
[00:15:25] Unknown:
I think that every business has got a p and l and has got a balance sheet. And the P and L is the operation, it's what you do and the balance sheet is how you save what you do. And so the people that have it very easy, the people that can make lots of money right now are just people that started with the money. Right? If you've already got the money and you just couldn't move it from a bond to Bitcoin then you moved it from minus 5% a year to plus 50% a year and that's not hard. Right? It's very hard to compete with Microsoft, like it's very hard to compete with Amazon, it's very hard to compete with Google, it's very hard to compete with Apple. All of those companies are examples where they wiped out 20,000 competent, healthy, hardworking companies. Like, if you ever been in the retail business, every single retailer except Walmart got wiped out by Amazon. There's nothing wrong with those people.
They're good people, they work hard, they work themselves to death but at the end of the day it's, you know, same with Microsoft. They have a monopoly on every, on 80,000,000 businesses and they sell them their software for 3 years and so so I think that if you're asking me is it easy to create a business in the modern world? My answer is it's not easy. You can do it. I mean, mister beast can you know, it happens. Right? Random stuff happen but it's it's hard and it's and if you ask me for advice in entertainment versus medicine versus law versus software versus whatever, I would say I'm not an expert in any of those things, I would say probably you ought to look at AI because it's probably gonna, you know, disrupt and obliterate anything that's labor intensive is getting obliterated, the distribution is getting disrupted, and, so that's hard.
On the other side, the the Bitcoin, the balance sheet strategy it's actually quite easy. Right? The reason I talk about Bitcoin is your choice is lose 5% of your money with bonds or make, you know, if it's 50% right now, right, my my forecast is on average the ARR is gonna be 25, 30% over the next 20 years. So if it if it goes to the worst case for me is it's gotta go up faster and perform better than the S and P index And if the S and P is 10 to 12 then Bitcoin is 20 to 22. So I basically, talk about that which I know, I don't give advice to people on that which I don't know. And and the sad fact is if I were to tell you there's a 99 percent chance the startup will fail, I might be overstating your chances of success.
99% of the S and P 500 is failing right now. Yep. I mean, there's 5 companies in the S and P 5 everybody's saying how do I compete with NVIDIA and that includes Apple and Tesla are saying I don't know if we can. Right? What you will see is a rise of $1,000,000,000,000 corporations because someone's gonna give all the medical advice to a 1000000000 people with AI doctors without an employee. And whoever figures that out is gonna make a lot of money and it's gonna make medical care cheaper, It's gonna put a lot of people in the middle out of business and there'll be disruption. So I don't think that Bitcoin is a competes with Microsoft compete better. Right? It's not gonna make you, it's not gonna help you build better cars than Tesla.
The dude that creates the humanoid robot that's as smart as a 1000000 PhDs, you know, that actually you can buy for a $100 a month, they're probably gonna sell a lot of them. And the dude that creates the 2nd best humanoid robot, nobody will wanna buy it. Nobody wants the 2nd best of anything, right? They just want the 1 they want the best one and they're gonna sell a 1,000,000,000. So, you know, I think the summary of that is sometimes people think that by doing something with Bitcoin it will generate a p and l for them. It's like, okay. I'm gonna launch a Bitcoin exchange and I'm gonna compete with my with Fidelity or with Morgan Stanley or with Vanguard. It's like just because you sell and buy in custody Bitcoin doesn't mean it's easy to displace fidelity.
And so I think you gotta have humility there. And like in in our journey, for example, we got into Bitcoin, you know, we now have $15,000,000,000 of Bitcoin but I'm not selling the Bitcoin to hire engineers to compete with Microsoft. See, it would it would be like throwing good money after bad, right? I mean, so what is a good idea? Well, I mean our ideas securitize the Bitcoin. There are a lot of people, they want the upside of Bitcoin but no downside. Right? Have you ever met people they'd like to make a lot of money but with no volatility and no risk? Many such cases. Okay. So how do you buy Bitcoin at the all time high and not lose money, and then make money if it goes up? Well, you buy a convertible bond. If I sell you a convertible bond with 70% upside that's 5x over collateralized on the downside and you and if MicroStrategy guarantees you to give back your principal, it's like I'm guaranteeing you'll get your money back in 6 years, but if Bitcoin goes up you'll also get the warrant and so you're getting half the upside, none of the downs or 5% of the downside, half the upside, and that's a security.
And so if you think about that, we're just stripping the volatility or we're stripping the, risk off the bottom. And there are a lot of people for which for example, if you go up to a typical investor and you said, what would you like 20% return, no volatility, no, you know, and little risk, or 50% return, lots of volatility. Most will tell you 20% even though that's the wrong answer. Right? It's the wrong I mean, you're gonna take 20 instead of 55. Well, I just I don't want the volatility. So what we do is we simply strip away the volatility and the risk and give them what they want. But other companies in the Bitcoin space, if your idea is you're going to create a mobile app that lets you buy and sell Bitcoin, you're competing against Cash App and Cash App is, you know, holding their own but they're gonna have to compete against Apple and Google and and Robinhood.
And look there are Robinhoods, I mean there are successful businesses but at the end of the day I if there's a theme to this business is hard, like launching a business and growing a business is hard. Investing is hard. When you look at every public company you try to guess if their stock is overvalued or undervalued versus their their cash flow forecast, that's hard. It's not hard to say it's good company, it's hard to say whether the stock price is a good entry point. Right? Investing is hard. Saving was hard under the Fiat standard, but under the Bitcoin standard if your goal is I have some money I'm gonna hold it for 4 years, that's easy.
I buy Bitcoin. If I'm gonna hold it for 4 years, it doesn't matter what the volatility is. And, from there, you know, business is hard, man. Businesses, you know, there there's something happening in the world which is, like, how does anybody sell software to a corporation? If Microsoft look what they did with, Slack. Look what they did with Zoom. They will just take your Slack and make it Teams and put it into their 3 year enterprise deal and you have to buy it. And they will take Zoom and put it in Teams and put it in a 3 year deals and you have to buy it. And it would be easier for a company to leave the US than to leave Microsoft.
Just like Apple, not that different. Right? I mean, how many people wanna throw away their Apple phone and switch to a new ecosystem? They've got
[00:23:34] Unknown:
your stuff. So business And if they do switch, they switch to Google. Right? In both your examples. Like Microsoft you leave Microsoft Teams, you go to Google Suite. And what's the 3rd choice? Yeah. Like so so business is hard
[00:23:46] Unknown:
and it's and it's not that you can't create new opportunities, but Bitcoin what Bitcoin offers is you can either use it to to escape the bond conundrum or if you're a private company that can raise money or if you're a public company that can raise money, you can securitize Bitcoin because there are large pools of capital that people have where they have to buy a security. For example, a venture capitalist, they have to buy a security, a participating a preferred stock in a private company that might go public. They have a $1,000,000,000, they can't buy Bitcoin, they can't buy the ETF, they can't buy land, they can't buy art, they can't buy a public operating company, they just can't. It doesn't matter whether it's gonna go up by a factor of a1000000, they can't buy it. Their charter says spend the $1,000,000,000 on private equity.
So, you you know, they can't buy Bitcoin but you can actually create a company with Bitcoin on the balance sheet and go sell them a participating preferred stock with half of the return of Bitcoin, none of the volatility, they don't have to market to market, they don't say, oh, I'm risking all your money on Bitcoin. They're like, oh, I made an interesting investment in a Bitcoin based company. They make 22%. If they get a 20% return and the S and P returns 12, they'll go back to their investors and raise 10,000,000,000 more dollars and the Fireman's Pension Fund will say, oh, you beat the S and P, how much money do you want?
So they need to do that. The guys that buy my converts, when I sell a convertible bond I have a 1 hour phone call, I'm like, Okay, this is the bond, this is what we're gonna do. Okay. They buy 800,000,000 of it at the end of the day. Okay. Why? It's like they have the money, they have to buy a convertible bond, they can't they're like, why don't they buy Bitcoin? They can't. Why don't they buy your equity? They can't. They need to buy there's a phrase in Wall Street, if the ducks are quacking, feed the ducks. They want that. There's another group of people, they want equity in a public company, they can't buy the spot ETF, they can't. It's it's against their charter, they get fired, they just can't. Why don't they?
Well like you're questioning the world, right? I mean at the end of the day the world is made up of huge pools of capital and it might have taken 20 years to raise the money, now I got to spend the money. So if you are the entrepreneur my general message is you can create a security that a capitalist can then use to get Bitcoin exposure. And if you're public, you sell public equity or debt and buy Bitcoin. And if you're private, you'll sell private equity or private debt and buy Bitcoin. If you can't raise money then you just gotta work very very hard and get lucky and it's hard and you'll see a Zuckerberg on occasion, you'll see some breakthroughs but, you know, it's like it's not easy and so I my recommended strategy is not work yourself to death. My recommended strategy is notice that there are $450,000,000,000 of capital in bonds and real estate and traditional 20th century assets.
There's 1,000,000,000,000, I'm sorry, it's 450,000,000,000,000 in those things, there's 1,000,000,000,000 in Bitcoin. You should be the conduit to move the next $1,000,000,000,000 from the old world to the new world and the way you do it is by raising money with issuing securities to buy Bitcoin and you solve. What's the problem you solve? Custody it for them, buy it for them, take away the volatility, take away the downside risk, you know, and then solve the compliance issue. Chinese billionaires got to buy Bitcoin through a Shanghai ETF, otherwise he goes to jail. Right. That's the problem you solve. It's not as good as self custody. It's not as good as the raw Bitcoin, but that's academic because when you've got $10,000,000,000 in your choices, buy a 1,000,000,000 this way or go to jail or don't buy any, the answer the world is imperfect, That's why they call it earth not heaven.
[00:28:00] Unknown:
Wonderful. Michael, we have 15 minutes. I wanna be very conscious of your time. We have a hard stop here and I have 20 different directions I'd like this conversation to go so I hope this is the first of many. First and foremost I just want to say, feel like there's a little bit of an elephant in the room. Michael and I have had multiple productive conversations in terms of supporting open source development. We are not going to go there today. I I don't think that's the best path for for this conversation to take. I want to talk to you about your thoughts on Bitcoin as a transactional currency, because I I think it's super interesting being in the space with you because we agree on so much and we have such different perspectives on bitcoin but we we we end up in the same space like 99% we're on the exact same page.
The transactional currency piece might be where we differ the most. Let's
[00:29:08] Unknown:
just chat about that. Like, how are you thinking about that right now? Okay. Well, you know, if I think about energy frequency and vibration, every time you trade an asset, it's a vibration. And if you're vibrating in a high friction environment or a high impedance environment, you're bleeding off energy. And so things that you can things you can do in outer space forever, you can do in the atmosphere for less and in the water not so much. So the real issue is when you're doing a transaction, what is the impedance? And there's there's a source of physical impedance, like, for example, what do I think of gold as a transactional currency?
Well, like, I don't think it's good because it's hard to subdivide it and it's hard to send it over the mail, and so you can see how there's a high energy cost to trade gold high frequency, that's why it died. On the other hand, like, what do I think of Apple stock as a transactional currency? And here you're just getting into politics. In a country where Apple stock was legal tender, if it's legal tender and I can send it to you and you could send it back to me and I can do it in one second with no tax, Then, you know, wow Apple stock is better than gold.
Now what do I think of the dollar as, as legal, as a transactional currency? Well, what I think is I can send it back and forth a 1000000 times a day and I don't have a 1000000 taxable events and so I don't have to account for it. If I send a a capital asset whether it's a corporate bond and equity, Bitcoin in the US if you're in the US now, if I move it, I'm moving at high frequency and I'm incurring an accounting event and a taxable event, and if you if you do the calculation it just turns out that everything just cost 10 or 20% more. And and so I don't if we were talking about a country, El Salvador, where it's legal tender and I can move it back and forth a 100 times a month and there is no accounting event and there's no taxable event, then my opinion is if it's satoshi's on lightning I kinda like it.
If it's satoshis over the base layer, I I think at some point the friction is, you know, when it's $3 a transaction Yep. There's too much friction. So I don't like it on the base layer. I do like it on the second layer. But I would counsel anybody that if you had a if you had a certain amount of money, 95% of it should be held in the capital account as Bitcoin, 5% should be in the local checking account. And as a practical matter, you've got real 2 2 things. You've in Argentina, if everything's priced in the peso and then you have to have pesos, I would probably buy them the hour before I had to spend them, but I would buy them.
And on the other hand if if something is legal tender I'm much more likely to wanna vibrate it or transact at high frequency. And if it's and if it's going to be taxed heavily, you know, short term capital gains tax, right, is like 35, 40%. Right? So if I if I gave you a Bitcoin and it was up, you know, a bit and I gave here's the thing I think we both agree on, Matt, which is neither one of us think we should send all our money to the government. Right?
[00:32:45] Unknown:
Very true.
[00:32:48] Unknown:
And and I think that's why, for example, Tether has been so successful, you know, I mean in theory a digital currency that's just a dollar that's pegged to the dollar for high frequency checking, you know, and a digital property, Bitcoin, which you can hold for the rest of your life as the property or the capital asset. Those 2 paired would allow you to go anywhere in the world and stay rich or stay wealthy and stay compliant and minimize you know, what do you want? You wanna hold the the Bitcoin forever and never pay capital gains. You don't wanna, like, you know, and you never you know, you just wanna hold it forever, and then you want everything else to be quick and easy.
So that's what I think on that subject.
[00:33:34] Unknown:
I mean, so you think you think the tax treatment is is the major hurdle. So it's more of a politics regulatory kind of landscape issue. I think the government can basically destroy any asset by the tax treatment. I politics matter.
[00:33:47] Unknown:
Like, if they wanna destroy it, right, then for example, you know, here's the best tax treatment, legal tender. No tax on it. You can hold it forever and you can transfer it and there and there's no tax. What's the second best, which is capital gains or property? What's the last best? Property tax, which is a tax on time. Like, you're holding it and I want 1% of it, you know, I want 1% of the market value every year regardless of whether you trade it. Right? And that's the land tax in the US and that takes your money away from you in 35, 40 years. So I would say if the government passes a property tax on Bitcoin you should leave the country.
I would say if they're gonna capital gains tax that you should manage yourself so you don't have to transfer it very often, almost never. And I would say if they made it legal tender then you probably ought to move to that country, you ought to go the other direction. We haven't talked about inheritance taxes yet, right? That's it but that's the last part. But I do think taxes taxes are 40% of the equation, they matter a lot and generally the best strategies are strategies that allow you to defer tax or avoid tax, and the worst strategies are strategies that accelerate the tax. You're either gonna pay it or you're not gonna pay it and then you've got a legal liability and then you gotta worry about that. And then either way those strategies become
[00:35:19] Unknown:
a friction. You know, they become a problem. Yeah. I mean I think one of the earliest things, you said when you became public in the space was that that politics matter and people aren't taking them seriously enough. I mean, and I think just the last few weeks alone have have proven you right. I mean, just the panel before us was was with our governor and one of our senators. We have the former president of the United States gonna be speaking at at the largest Bitcoin conference in the world tomorrow. Politics clearly matter.
I think one of the cool parts about, Freedom Tech and Bitcoin as freedom money is is it gives individuals more power when it comes to combating governments or not combating governments. Maybe that's too critical of a word, but, defending themselves and and and and supporting their individual liberties. And as a result, it levels the playing field a bit, and that to me has always given me hope. And I think, you've always been really good. You have hope dot com. Bitcoin is hope. I mean, we got Larry Fink out there saying Bitcoin's like the hedge against hope. It's like the exact opposite to a degree. But I the opposite thing. Yeah. I think we can merge I think we can merge that. But, anyway, Michael, I'm curious. Are we do you think we're entering the era of nation state government FOMO? Like, is is is are we about to start seeing, you know, the micro strategy playbook happen on a government scale?
[00:36:50] Unknown:
I think it's it's positive that they're all talking about it. The Overton window has shifted. A year ago, no one would discuss it. Now you've got, you know, you've got Robert F. Kennedy talking about it, you've got a bunch of senators talking about it. So I just think we start with a conversation. I keep my expectations low. I think we should all keep our expectations low but with the observation that when a government starts talking about owning it, they legitimize it and that means what they're not talking about is taking it away from you. So when they're not talking about owning it, like, if you look at the German government, they emergency sold it because it could go to 0.
And so the narrative of it's not an asset and it's, you know, it's a criminal thing and it's going to 0, that thing is pernicious and if you want to move forward you have to put a firm foundation. So I think when the government starts talking about it that means that individuals and small companies will feel comfortable enough to move in. They'll move first. They'll front run. Right? The government's always gonna be slow, it's always gonna be ham fisted, there'll be a lot of fighting. But I think the individuals and families will move. I think if the government's considering it it becomes a lot less risky for you to discuss it in the board meeting. So when I go into a boardroom and they ask me I'm I can say, you know, MicroStrategy is doing, but guess what? Here are all the politicians that have this bill and the question is will I get fired if I propose it? So I think the Overton window is shifting.
I I'm not expecting, you know, that our government's gonna buy a ton of Bitcoin tomorrow and put it on the wire. I think I think you have to discount that. I do think we will over the next 4 years see some government start to take a position. It'll probably come out of the blue, it'll probably be someone you didn't expect, and it'll be a good thing but my I generally think this this plays out over EPIC's 4 years. This is the early institutional phase, then another 4, then another 4.
[00:39:04] Unknown:
Yeah. I mean, we've already seen the smaller nations to a degree start Bitcoin accumulation strategies. Obviously, El Salvador is is the one that's on most people's minds. I think it's pretty cool that you could go to their, like, mempool instance and see they buy 1 Bitcoin a day, which is like a nice little meme step chart up. But, like, even countries like Bhutan that we found out through bankruptcy reports that they were just quietly accumulating as much Bitcoin as possible. But what is your given what may or may not happen tomorrow, do you believe the US Treasury should stack Bitcoin?
[00:39:43] Unknown:
Yeah. I mean, I I just came from a a presentation on a stage and what I said was, you know, the the the 10 percenter strategy for the US would be to buy 500,000 Bitcoin, The BTC the Maxi strategy is they should buy a million. The double Maxi strategy is they should buy 2,000,000 and the triple max strategy for the US is they ought to buy 4,000,000 Bitcoin over the next 4 years. They would have, like, 18% of the of the supply and if they did that, they retire the debt and they flip to a massive surplus. And and I, you know, my precedent is Like the secret to success as a nation state is you have defensible productive property and so the reason that the British Empire rose is they had an island and it was hard to invade it. Nobody got to it after 10/66, and that on that island they industrialized.
And then they got the the colonies and that was defensible productive land. And then the reason the US rose to power is the United States is defended by the Pacific on one side, the Atlantic on the other side, frozen tundra to the north, the desert to the south, defensible, productive. And what do we do? Well, we bought Louisiana Territory, Jefferson did it for $15,000,000 and then he bought 27% of the land mass. Seward bought Alaska, $7,000,000 The United States Federal Government owns 28% of the land. In the US we own, whatever, 18% of the gold or something, so scarce desirable property but by productive property you can defend and so if 100 of 1,000,000,000,000 of dollars are migrating to cyberspace, right, my view is Bitcoin's gonna demonetize Siberian real estate and Chinese real estate and everything in Africa, and why would you want to own bonds of a South American company? Why would you wanna own anything other than Bitcoin? So as the capital flows you're gonna see 100 of 1,000,000,000,000 of dollars there. So if you're the United States what are you worried about?
Losing your world reserve currency status. Where's the money gonna go? To Bitcoin. How do you hedge that? Just go to go to where everybody's going and buy 20% of it, and then when they get there, you know, you'll be fine. Now where else are you gonna go? Right? For example, if you're if you're gonna sell the dollar, right, you're not selling the dollar for the peso, the lira, the euro. Nobody wants any of that. So So when you sell the dollar, you're gonna buy Siberian real estate? No. You're gonna buy buy bitcoin? What's the second best? You're gonna buy a sec nothing second best. There is no second best. So so the point is you want a country you want a country to be capitalized on a firm foundation. The foundation is productive property that no one can take away from you.
And Bitcoin's beautiful. It is productive because the AIs are gonna wanna move $10,000,000,000 from, you know, here to there every hour. They're not gonna move $10,000,000,000 of buildings or silver, right, or dollars. Lord knows they can't get a bank account, right? So everybody's gonna want the capital, if you want a company, a family, a country to last and prosper, like how well would your how good would your family be if you owned a 100 acres in the middle of Manhattan? Like how would you like to own a 1000 square miles in Texas or something. Right? Own something productive for a long time.
The catch is you don't want me to take it away from you. They you don't want them to tax it and you don't want them to steal it from you. And the beauty of Bitcoin is any country puts their money in cyberspace, nobody can steal it, nobody else can tax it. So even though it's brilliant for the US, it's even a better idea for Switzerland or for Norway or for Turkey because there's no point in invading your country to take your stuff if all your stuff is in cyberspace. So I I'm a big believer, I think it's good for the network, I think it decentralizes us further. I mean it it'll be source of a lot of interesting debates and dialogue but, you know, if you if you believe you want if you wanna help the US then give them productive digital capital and anybody else you wanna help, give them the same advice. And if you hate somebody, if you hate someone, tell them to sell their Bitcoin and don't buy it, right, that's the worst you can do to anybody, encourage them to not Bitcoin because that's like encouraging the Russians to sell Alaska.
It's like Napoleon sold a third of America for $15,000,000, blew it on bullets and blankets in the Napoleonic war. We still have a third of the United States so who got the better trade?
[00:44:43] Unknown:
Bitcoin is beautiful and we should all stack as much as possible.
[00:44:47] Unknown:
Stay humble, stack sat. Let's go.
Introduction and Welcome
Michael's Bitcoin Journey
Bitcoin Adoption and Interest
MicroStrategy's Bitcoin Strategy
Regulatory and Accounting Challenges
Business Models and Bitcoin
Bitcoin as a Transactional Currency
Politics and Bitcoin
Nation-State Bitcoin Accumulation
US Treasury and Bitcoin
