Why Michael Saylor Converted $400 Million of the MicroStrategy Balance Sheet Into Bitcoin

You know, when times are good, everybody's busy. If you're in love with the iPhone, then the answer to everything is iPhone. If you're in love with your Apple Watch or Twitter, the answer is that. So when times are good, everybody focuses on that and there's only limited time. I think I was closed to the possibility because there were so many other things going on. When the COVID crisis hit, everybody got sent home and we all had to contemplate ideas we had previously rejected and embrace ideas that were very foreign to us. How did I discover crypto? First, I have a mega mega mega problem, and that problem is a lot of cash that I'm watching melt away. I realized I had a mega problem thanks to the insane V recovery in the bond and equity markets. After that, I had an opportunity since I had a cash-generating business. Then there's another problem: the outside investment community. If you go to them and say, 'We're a great enterprise software company with all this cash,' their answer is, 'We don't really value the cash.' They're smarter than I am—I'm serious; they knew before I knew that cash is trash and you're a fool to sit on it. If the natural asset inflation rate is 10%, then every time I generate $50 million in operating income, I burn $50 million in purchasing power on the cash. We were just running as hard as we could to stand still. So we weren't getting credit for the cash, we didn't need it, and we needed to do something. We started working through it: what do you do with $500 million in cash you don't need? You could buy back your own stock, but there's a limit. If you go into a thinly traded stock and buy 20% of the float every day, it would take about four years. If your ice cube is melting 15-20% a year, you don't have four years. Inflation will do a better job, so that didn't make sense. We got kicked into high gear. If you didn't know how to use Zoom, we started Monday morning with one video conferencing tech, discarded it for another by 11 AM, used Zoom by 2 PM, and by 4 PM the CEO sent an edict: 'Zoom is now the corporate standard, everyone switches over tomorrow.' The same CEO who said, 'I don't believe in remote work, you have to show up or you're not working for me,' and I'd have sworn up and down I hated remote work until the COVID crisis hit. Flip. The same happened with the balance sheet: all these strongly held views about being conservative with cash and t-bills, and then suddenly you contemplate other things. So you tell me—if you had $500 million in cash right now, where would you invest it?

Okay. And if you didn't know what you know but were an intelligent person watching YouTube and everything else, what would be your laundry list of assets to consider investing in?

Okay, so let's take through them. Commercial real estate: how do you buy $500 million worth of commercial real estate at a fair price not impaired by something happening in the economy? How many people want to sell you commercial real estate at a fair price right now? They all think it's worth what it was in January, so that's difficult. What's next? I'm not so silly as to go buy 20th-century stock like Apple, Amazon, Facebook, Twitter. By the way, in 2012 I wrote 'The Mobile Wave,' and I said go buy Facebook, Amazon, Apple, Twitter. It was a good idea then—you would have made 10 times your money. Not the same idea this week. Is Apple going to go up by a factor of 10 from here? It might double or be cut in half. With the best equity in the world, you have equal upside and downside, truly asymmetric. So when I started looking at this, I considered real estate, precious metals, and Bitcoin. I have to give a plug to my friend Eric Weiss—he runs a Bitcoin investment advisory service. He kept mentioning Bitcoin and I kept dismissing it as crazy, a shell game. Then one day we were sitting around my pool in Miami and he started explaining it. Something clicked. I had been beaten over the head with a two-by-four, so I was more open-minded. I started thinking about precious metals too—Robert Kiyosaki says gold, silver, or Bitcoin. So we got down to choosing: precious metals or Bitcoin. I already dismissed commercial real estate and a market basket of equities like the Nasdaq 100. That stuff's just not compelling. I want something that might be cut in half but can go up by a factor of 10—an asymmetric payoff. That's what any intelligent investor wants. When you bought Amazon in 2011 or Apple when the iPhone came out, that's what you were getting. Every rational winner wants a 10x upside, and you can even live with losing all the money. But here's the catch: every good investment for putting a lot of money to work in the past 10-15 years has been finding a digital dominant network that dematerializes something fundamental. The mobile network is Apple, the information network is Google, the video network is YouTube, the social network is Facebook, the speech network is Twitter, and Amazon is the retail network. You buy them when they're a $100 billion market cap, when they're 10 times bigger than the next biggest thing. At that point, they'll crush everything. I remember lecturing Wall Street guys in 2011 and 2012 about Apple. They said, 'We know you love Apple, but if it goes up too high, we'll sell it and buy HP or Dell to diversify your computer portfolio. If all your tech names go up too much, we'll sell them so you don't get too much in technology.' My answer: if you think about it broadly, there's no example of a successful company in history that wasn't a technology company. Standard Oil was a technology company. Go to Hershey's factory and you'll see they figured out how to manufacture 50,000 candy bars in a clean room—the most sophisticated piece of technology you'll ever see. You think they're not a technology company? You're just ignorant. There's no winning investment in a company that isn't a technology company. General Electric was a technology company when electricity was interesting. Boeing too, before we could fly. So the idea of selling too much tech is foolish. Selling Apple when it gets too big is also foolish. People said there's never been a company as valuable as Apple—because there's never been a company that could create a software camera, change how it works, and ship it to a billion people overnight for a nickel. If you can do that, you can create a lot of value at no cost. These digital networks are around us and insanely value-generating. There's another dynamic: the network effect, Metcalfe's law. Once everyone uses Facebook, how do I get 257 of my closest friends to switch to the next thing? It's really hard. How do you get all your followers on Twitter to switch to another speech network? Even if a guy has a massive following, he'll probably be the last person to leave. So you're buried in concrete there. Now we come back to Bitcoin. The number one knock on Bitcoin for an outsider is, 'It's just software; someone else can copy it.' I think Bitcoiners don't do themselves justice. Sometimes exchanges over-promote the 237 different crypto pairs you can trade. It's that long tail where suddenly there's one thing and I want a list of 47. But here's an epiphany: as a young CEO, you might think to put a salesperson in every state—50 states, 50 salespeople. Then you go to New York City and realize half the money in the country is in one city. That's being captured by orthodoxy. In this crypto area, it's great to have innovation and experiment, but to the outsider, they wonder what if everyone moves their money from Bitcoin to Ether or Yoyo Coin? Then someone puts eight pages of legal language about hard fork and soft fork risk in front of you. How debilitating is that anxiety? Like, can my crypto float away? But it's easy to get beyond that by saying: this is a proof-of-work crypto network designed to be a store of value, maintain a constant store of value as digital gold, expand huge amounts of energy to protect and upgrade the network. You can take your $500 million out of the bank and put it on that network, and everyone in the community will spend every iota of their energy to make sure no one messes with that network.