I'm super excited to bring this conversation with you guys today. And today we have Phong Le, which is the CEO of Strategy, and a trained engineer, MIT Sloan MBA—hope you don't mind if I give you the real, real quick intro—and a longtime finance and operations executive. Since joining Strategy in 2015, he has served as CFO, COO, and president before becoming CEO. He has helped lead the boldest transformation in public markets, building Strategy into the world's largest Bitcoin treasury company. Few people sit closer to the intersection of Bitcoin, corporate finance, and capital markets. Phong, thank you so much for being a part of the show today. It is an honor and a pleasure to have you on, sir.
Thanks for having me, Charles. I'm extremely excited about having this conversation, especially on an up day, green candle day for Bitcoin. It's always a nice backdrop.
I was just thinking about that myself. One thing I always think that's interesting, too—and this is a total side point—so many companies are pivoting out of Bitcoin, and you're seeing them get less returns as they pivoted towards AI instead of staying a pure Bitcoin play. And so now, seeing all the companies that have stayed like Strategy and like yourselves that have really held the needle for the market, it's seen great returns. So outside that, I have a couple ideas. I'd like to do just a quick two-minute intro for people that don't know Strategy, what you guys are doing. Can you give a 60-second, two-minute intro of what is Strategy?
The best way to describe Strategy is we're amplified Bitcoin. So for those who understand Bitcoin, like Bitcoin, like the return profile of Bitcoin, or perhaps like Bitcoin because it's a decentralized store of value, whatever it is, we are amplified Bitcoin. We're built to outperform Bitcoin. And how do we do that? We buy Bitcoin and we add leverage, or we add amplification through preferred stocks, to outperform. And since we started this experiment since August of 2020, Bitcoin's been up about 35% a year and we're up about 47 to 50% a year. So we have outperformed Bitcoin. That's really the goal. Bigger picture, I'm a Bitcoin bull. I believe in it for a variety of reasons. And we've now stacked 485,000 Bitcoin on our balance sheet, 4% of all the Bitcoin that will ever exist. So, we're also the largest holder of Bitcoin in the world at this point in time. So, not only do we outperform Bitcoin, we have scale that is nearly at this point 20 times the next largest holder of Bitcoin in the world.
Wow. From a quick two-minute view, too, what are you guys trying to accomplish?
You know, if you really sort of take a step back and just talk about Bitcoin and why it's important for the world, it's important because you really want to have a decentralized, non-sovereign, supply-limited store of value, right? And before Bitcoin, there was, I guess, the US dollar, before that there was gold, before that there was real estate, there are other forms that have played this role—stocks, bonds, etc. But if you start with, you know, you work whatever it is, 2,000 hours a year—some people work 3,000, 4,000 hours—the manifestation of your work, of your energy, is money, right? And so I think of money as one of the most important realizations of an individual. There's love, and there's friendships, and relationships, and all that, but money is really what you're here for, right? And it shouldn't really belong or be controlled by a government, a company, a corporation, a CEO. It should be controlled by you. And so what Bitcoin does is it lets you take control of your self-worth, your money, right? And that's a pretty fundamental underlying thought. Now, if people believe that—I think many people do when you think about it that way—then what I would say is, what are we trying to do? We're trying to take the most pristine form of capital, of money, called Bitcoin, and we're giving access to it to the masses, right? And what do I mean by the masses? I mean people who want to access it, you know, not natively just owning Bitcoin, but through a security or an equity, MSTR; through preferreds that pay dividends, STRC; and eventually through what I'll call sort of digital money, like stablecoins, etc., that have Bitcoin behind or STRC behind it. So I start with, you know, Bitcoin is a manifestation of your self-worth, the best possible, and we want to give access to eight billion people to Bitcoin through Strategy. That's really what we're here for.
Absolutely. Can you talk about—and this is, I think, you know, our audience is typically in traditional equities and, you know, a lot of the stuff around non-sovereign hard assets we don't really talk about in the United States, it doesn't really come up that much. Now, if you go to Turkey or if you go to some of these countries that have crazy inflation, like, a hard asset means a lot to them. Can you talk about just some of the underlying qualities and maybe why they matter to some peoples more than others and why they're important, like non-sovereign and it's a hard asset?
Yeah, I mean, I'll give sort of three examples of how an American might relate to this, right? The simplest example is your Chipotle has doubled in price in the last five years. It used to be six bucks, now it's 12 bucks for a Chipotle burrito. And I'm almost sure for most of the people listening, your compensation has not doubled in the last five years, right? Let's say you got lucky and your compensation has gone up 10%. Well, essentially, a burrito going up 100% and your compensation going up 10% means that you lost 90%, right, on that trade. So that's inflation, right? And that inflation matters because the US prints money and your US dollar goes down. Well, if you put that same money in Bitcoin, Bitcoin's gone up in that five-year period—call it the six-year period that I was talking about earlier—it's gone up from $10,000 to now $80,000. So denominated in Bitcoin, if you put your money in Bitcoin versus US dollars, that burrito is actually four times cheaper, right? Denominated in US dollars, that burrito is 2x more expensive.
So that's the US example. Now you go to Argentina and take that example of the burrito, but make it a gallon of milk, and imagine that it went up double in a matter of two hours at the grocery store.
As opposed to over five years. Now, let's take it to another country. Let's say, you know, I've told this story a few times: I was born in Vietnam, and in South Vietnam, after being taken over by the communists, your money was turned into zero, right? So not only did things cost more, your money just went to zero. So no matter where you live, your money, your US dollars, your fiat currency is really controlled by the government. And this is not me saying I distrust the US government—I think America is a great country—not saying that I distrust the Argentinian government or the Vietnamese government. But I go back to, your self-worth should be held in something that cannot be controlled or debased by the government, right? That's really what it comes down to. And that's why I think that non-sovereign store of value matters. That's why people like gold, right? In fact, that's why people like real estate, too. But you forget that with one swipe of eminent domain, the government can seize your real estate, too, right? And so, if you believe that, and put the trust of the government aside, wouldn't you just rather have your self-worth in something that you fully and wholly control and own?
I would think the answer is yes.
Yeah, I think, and one thing, too, when people are investing in the traditional markets now for these ETFs and all the things that are happening in the space, do you think that they're decoupled a little bit from the benefits that they get from Bitcoin in general? Do you think that everybody should learn about hardware wallets and how the underlying asset works, or do you think simply them following along for the financial journey is still the benefit?
I think it's arrogant to believe that to own an asset, you need to understand every single thing about how it works, right? If somebody owns Tesla, does it mean they need to understand battery technology? Does it mean that they need to understand autonomous vehicle driving? Not really, right? If those who have bought—Anthropic is going to IPO this year, does everyone need to understand how all the engineering behind the LLM actually works? No, not necessarily, right? And then you go into Berkshire Hathaway: can you actually name all the companies that they own and how they all work? Probably not, right? And so there are those who do, and that's awesome. And for those who want to understand Bitcoin and its code fully, awesome. Those who want to understand how to self-custody Bitcoin, great. Those who want to buy Bitcoin via a custodian like Coinbase, awesome. Those who want to buy Bitcoin via an ETF, IBIT, great. Those who want to buy it via an equity, MSTR, good for you, right? But to state that for you to own an equity, you need to fully understand it, that's a bit elitist, right? Anybody can buy an equity. I mean, that's America, right? You can buy what you want. You can do what you want. You can invest in what you want. And for anyone to say, "Well, Bitcoin's different. It's so cool, so special that you need to hold it in self-custody," I think it's elitist, it's arrogant, and it's really not true to the ethos of Bitcoin.
Interesting. I had really thought for the longest period of time that you don't get the benefits if you don't understand the asset. But I guess you do get the benefits of the return on the asset even if you don't understand how to hold it sovereignly, which is what you're saying. And people borrow conviction no matter what, whether the CEO comes on and talks about it—if it's Vlad Tenev and he's talking about the vision of the business, you might not understand all the revenue lines, but you're seeing the vision that he's building and borrowing that conviction and still making money on the equity itself.
Yeah. I mean, what, six billion people in the world now have cell phones? You think they actually know how cell phone technology works, right? Most would probably, if described that your voice and data travels over electronic waves of information, they would say that's magic, right? But that's okay. I'm not saying you can't have a cell phone, you can't invest in AT&T stock, you can't invest in Apple stock, right? So understanding pieces of it, doing your research, is good, which is basically how the whole mutual fund and ETF industry became, right? If you want to buy QQQ or SPY, do you need to know all the components of the S&P 500?
So true. And they really don't. That's probably the biggest variable of not understanding the basket of goods inside there, because you're really just buying an 11% return.
Yeah. And that's perfectly okay, right? I interact with a lot of folks—my family members, friends. Bitcoin is very popular amongst the manufacturing class, agricultural class, farmers, right? And they certainly don't understand all the characteristics. Heck, when people drink milk, do they know where the milk really comes from, how it's manufactured, how it's pasteurized, where the cow was raised, all those things? No. Should you? Yeah, I think it's a good thing to know. But can I tell you you can't drink milk unless you know exactly where it came from?
The provenance. If you never milked a cow, you can't drink milk, right?
Interesting. I didn't think about it that way. One thing, too, in the beginning, I'd love to pivot just a little bit. Originally when MicroStrategy was still MicroStrategy and just started a Bitcoin buying strategy, you guys have really evolved over time into a financial instrument company. Can you talk a little bit about the original thesis going in and maybe how that evolved over time into building all the financial instruments that you've built now?
Yeah. So in 2020, we were about a $480 million revenue software company growing about 3% a year with 50 to 75 million of cash flow, right?
Can I ask what the software was, what you guys were doing?
The software was called MicroStrategy Software. Now it's called Strategy Software. That's the company that Michael Saylor founded in 1989. I actually started using the software in 2000 as a customer and a user because I'm a data guy, I'm an engineer with a software engineering background. And so the software basically provides enterprise-level analytics to half of the Fortune 500, right? So you probably wouldn't know it, but you have likely interacted with somebody who was using the software at a retail point of sale. Most of the financially large banks use our software to report on. So that's what the software does, and it's actually an amazing piece of software. We've now transformed it to be primarily AI-driven. Our engineers build the software using AI, test, deliver, ship the software using AI. So that's the business that was there in 2020, and it was worth about a billion dollars, right? And I think if you ask most entrepreneurs, "Would you be interested in building a billion-dollar software company?" that was the outcome. That's a unicorn company. That's what Michael Saylor did. Most people say, "Heck yeah, sign me up," right? So we were, and still are, a very healthy software company. And that's what we were in 2020. The challenge we had is we were very conservative about our cash. So with $480 million in revenue, we also had $600 million of cash on our balance sheet. And before we happened upon Bitcoin, we put that cash basically in short-term T-bills. We laddered them out to about a year, and we earned two and a quarter percent on them, right? Not great, but that's just sort of what you did with your cash.
And then COVID came along, and people likely remember what did the Fed do? They cut the short-term interest rates from two and a quarter percent to zero to stimulate the economy, and then they took $20 trillion of monetary supply and they printed $5 trillion over the course of the next year, right? In the form of stimulus to individuals—most people got tax refunds—and in the form of stimulus to small businesses, right, to keep them afloat. Many would argue that was the right thing to do, right? But what ended up happening was our $600 million that was earning two and a quarter percent was now earning nothing. And fairly simply, it was worth 25% less, right, because we printed $5 trillion of money. And that was a crisis. And we said, "Okay, well, that $600 million took us essentially 31 years to build up." Back to this is our worth. The worth of the company is the cash flow, right? That's how you value companies. And the cash we had on our balance sheet was 31 years of hard work, thousands of people, and all of a sudden it was worth 20% less and earning nothing.
Right, existential really, if you think about it. So what do you do? You want to preserve that. And so the first was just a solution to a problem where our $600 million was melting away, and we said, "Let's put it in Bitcoin to preserve value," right? That was ultimately what we wanted to do. That was step one, right? Step one was let's put it in Bitcoin. And when we started to do it, our existing shareholders were not so excited. So we gave them an off-ramp, and then a bunch of new folks who were bitcoiners came in, and we were like, "Hey, this is bigger than we thought it would be when we did this."
And that's when we decided fairly rapidly to borrow money in the form of convertible notes to buy more Bitcoin. And that's what led us to become what we are now, right? We went from being a billion-dollar company to a $50 billion, $60 billion company, one of the most rapidly growing companies in that six-year period, outperformed by very few. Nvidia has outperformed us, but we've outperformed pretty much everybody else, including Bitcoin.
Wow. Can you talk through just the conviction points of taking 600 million and sticking it into Bitcoin? Are you nervous in that moment? How much are you studying the asset? Because I feel like to make a move like that, maybe for you guys, you're already making nothing on it and losing 20%, so it's not necessarily that big of a move because you're losing on the other side. But when you're making a key decision like that, a pivot, what was that moment like?
We didn't do all 600 million at once. We did about 200 million at the beginning, somewhere in that range, which is still a pretty significant amount. And we did talk to a lot of folks—advisers, people in the space, people outside this space, accountants, attorneys—to understand how best to do this. But in 2020, it's an asset class that was out there in existence for 12 years, right? And even at $10,000, the market cap was, what, 300 billion or something in that range. So although it was novel for a public company in the US to put Bitcoin on our balance sheet, it was not novel for some very sophisticated, intelligent, high-net-worth individuals to put their money into Bitcoin. So as much as I'm proud of the fact that we were the first major public company to do it, we were not the first to think about Bitcoin as a real, high-performing asset class, right? And after we put the 200 million in, the reaction was overwhelmingly positive from the market. And so once that happened, the next 400 million wasn't as hard.
Yeah, I could totally see that. Do you remember the move when you stuck the first 200 million in? What happened to the stock at that point? Did people just jump on it like crazy, or—
Yeah, pretty quickly. In about the next month, the stock went—this was before our split, but split-adjusted, our stock went from essentially $10 to—and I don't remember exactly what it was at that point in time, but it went to $20, $30 fairly rapidly.
Yeah. And the other piece behind this is you do have to remember, Mike and I are technologists. We're software people. We're entrepreneurs. Inherently, if you're in the software space, you're a bit of a risk taker, right? And if you don't want to take risk, then you should probably go into a space that's a little bit slower-moving, right? Maybe go work for the federal government, or go into manufacturing or commodities, or a slower-moving space. So you had folks who are already naturally inclined to take risk, especially on technology, which is what Bitcoin is ultimately.
Wow. So jumping from that point on: you guys put 600 million in after a period of time, 200 million in the first one, and you just have a buying Bitcoin strategy, and now you moved into financial instruments. Can you talk me through that journey from just buying Bitcoin into the financial instruments?
Yeah. I mean, once you find something that you believe in and you have conviction in, the next thing is to lever up to grow it further, right? And that's true whether you're in any high-growth space, right? Real estate is leverage, right? Most people are not buying real estate with cash. You can get 10 or 20% down when you buy a house, but the rest is leverage, 80%, right? And why are you doing that? Sure, there's some utility value, but you believe the real estate is going to go up over time, right? You see it in the AI trade right now, right? Everybody's starting to borrow huge amounts of money to invest in AI, primarily sort of data centers and others. But if you believe that something's going to grow, then the best investment theory is to lever up so that you can ultimately capture more of the growth for yourself. And so that's what we did. That was the next step: when we saw the growth potential of a company that was invested in Bitcoin, we decided to invest. And one of the better ways to invest rapidly is through something called convertible bonds, because you tend to have a low interest rate. And so that's what we did as the next step.
Okay. Can you talk me through the basics, like the dumbest-down version of convertible bonds and how they work and what it offered for you guys?
Yeah. A convertible bond really has, I'll call it two components, right? It has a debt component and an equity component, right? And the simplest way to think about it is it's convertible, meaning at some point in time—a standard bond, a standard debt instrument matures in whatever: three, five, seven years, right? And you have to pay a coupon or an interest on it, and it could be 5%, 7%, 10%, right? So that's—
You pay the full interest at the end of the bond?
Usually bonds you would pay—it's annualized, and depending on the terms, you might have to pay that quarterly, right? So that's a standard bond. Usually it's secured by something, meaning if you default, behind it is components of the business, other pieces, and that's just normal debt, right? And so back to the mortgage example: it's actually secured by a house, right? And a mortgage, you might have a 30-year mortgage or a 15-year mortgage, and you pay the interest on it. In that case, you likely pay on a monthly basis, right? So that's a standard bond. A convertible bond has that piece, right? And then on top of it, it has the opportunity to convert to equity, right? And that's the strike price. And maybe it converts at 100 or 200—call it 50%, 75% upside, right? And so what that does is when somebody invests, they also have the ability to equitize. And because you do that, you have the ability to convert it into MSTR shares, right? If MSTR grows a certain amount, then you have to pay less for the bond. And instead of paying 7%, 6%, you pay 0% or 0.5%.
So it's kind of a bet to the upside.
It's a bet to the upside, right? You would buy a convertible bond for a company that you believe has significant growth potential in the future, which is why you see it used in industries like high tech, pharmaceuticals, healthcare, and less so in slow-growing industries. And so it's a bet on a company that it's going to go up, and then you don't have to pay as much on the coupon.
Wow. And how much did you guys end up borrowing in total just through bonds?
Over the course of time, so we ended up doing our first convertible bond, I believe was about 600 million in February—600 million, I said billion.
Oh, I was just like, "Wow, that was great." That's why I was like—
The second one in 2021 was over a billion dollars with excellence. And over the course of end of 2020 to beginning of 2025, we ended up raising around $10 billion in convertibles. To give you a sense, in 2024, we had saturated the market. We were 36% of all convertible bonds done in the entire market in the US, which is—
Yeah. People had a thirst for MSTR convertible bonds because they saw the growth potential. And the other thing—and this is a technical thing I won't spend too much time on—if you're buying convertible bonds, you're typically a convertible hedge fund, and you're not buying it for the growth potential, although that's important. You're buying it for the volatility, because they buy the bond and they short the equity, and so they like vol. They're basically monetizing—
So they're hedging against it.
Yeah. And when you're monetizing vol, what do you want? You want a highly volatile company. Well, you get Bitcoin, which has a vol of like 40, 50, and MSTR, because we're leveraged Bitcoin, we outperform Bitcoin both in terms of returns, but also in terms of vol. So our vol has been 90 or 100. So we're sort of a convertible bond hedge fund's dream.
Because of the level of volatility.
Wow. So you're 30% of the entire bond market. What happens when an appetite dries up for it? Is it just that you've already spoken to every single person and they already have positions, and there's just not any more money to actually put into the positions, or what does that look like?
So we went from levering up using convertible bonds to now, call it amplification with preferred securities. So why did we do that? Because the convertible bond market is still a very small market overall compared to equities, debt, preferreds, all that. And so at the point where we saturate the market, there aren't many other buyers out there, right? And why? Because one, the only people that can buy convertible bonds are qualified institutions, meaning a retail investor can't buy a convertible bond. They can buy MSTR, they can buy our preferreds, but they can't buy a convertible bond. So it's a small market, it can be quite illiquid at times. And I mentioned to you that they're not necessarily in it for Strategy to win, right? They're in it for Strategy to be volatile. So they turn over, they buy the bond, they short the stock. So that's not the healthiest relationship—not a terrible one, like they're creating liquidity out there, so that's positive. And the other piece is with most debt, including convertible bonds, they have a maturity, meaning they come due at some point in time, right? And although you can choose maturities over a ladder, what the risk there is, as everyone knows about Bitcoin, is Bitcoin is quite volatile. It goes up, it goes down. People believe it's a four-year window, but it's still reasonably difficult to predict. So what you don't want to have happen is a billion dollars of convertible bonds come due when Bitcoin—
So that's the other risk with convertible bonds. Now, I think they're a good instrument for a variety of reasons, for a variety of people, but we wanted to find something that had a profile that was better suited to buying Bitcoin.
Wow. Are you guys still in convertible bonds right now?
