Michael Saylor: Bitcoin has no existential threats and will dominate 21st century (Pt. 1/2)

Thanks for inviting me, Michelle.

I think you can divide the entire crypto world into crypto assets and crypto applications. Crypto asset networks are meant to store a long-duration safe haven asset for a decade, a century, a millennium, and Bitcoin is of course the leader in that space. I think crypto application networks are meant to do lots of different things, maybe DeFi, NFTs, operate stablecoins, or provide very flexible application rails. Ethereum clearly is the leader in that space. I think there's a whole set of investors that are interested in investing in applications that would be different than the class of investors that are looking for an asset. For example, corporate treasurers or widows and orphans, insurance funds, they just want to store their money for 100 years and they don't want complications. But the world's full of tech investors and venture capital investors that are always looking for the latest, greatest, cool thing. From my point of view, the application space is going to be a bit riskier because of more centralization, more complexity, and more competition in the space. But that means that they'll be higher highs, lower lows, and a lot more fireworks along the way.

I don't think it's appropriate for a corporate treasury, and it's not really appropriate for us. Our business is to acquire and to hold Bitcoin. I think that crypto applications would be appropriate for crypto venture funds and crypto-specific technology investors.

I really don't. I prefer not to opine on things that I am not an expert in. I have a lot of very strong opinions about crypto asset networks and the right architecture for a crypto asset network. For example, I think that a proof-of-work architecture is appropriate, if not critical, for a good crypto asset network. I don't have strong opinions about what's the appropriate architecture and then what's the likely outlook in the crypto application space. I think there are too many variables. It's much, much more complicated.

I think that there's 500 trillion dollars of monetary assets in the world, split between currencies, bonds, real estate instruments, equities, precious metals that are being held as money, etc. Most of those are fiat derivatives, and so they derive their value in part or in whole from the expectation of future fiat cash flows. And I think right now in the world, you have a set of strong currencies losing one percent or more of their value a month — that'd be the US dollar and the euro and everything pegged to the dollar and the euro. I think you've got a set of weaker currencies losing two percent of their value a month, and then you've got a set of currencies that are collapsing, losing three to four percent of their value a month. All of the companies and the bonds and the commercial real estate in those economies are of course losing their monetary value because the currency that they're valued based upon is weakening. So the Bitcoin standard is all about converting your long-term treasury assets, that is your savings account, from a fiat derivative asset to a non-fiat derivative, a non-sovereign store of value that doesn't derive its value from cash flows in the future. The 19th century solution was the gold standard, and the 21st century solution is the Bitcoin standard. And so that's what I mean when I say adopt a Bitcoin standard.

I think they're baiting a 97-year-old man. It's colorful. The mainstream media wanted to comment. They didn't ask him about TikTok, Netflix, Amazon, Apple, Facebook, Google, Microsoft. They didn't ask him about any of a hundred other new technologies. If you want to understand Bitcoin, you reasonably scratch the surface in 10 hours, you start to understand it in 100 hours. I don't think Charlie Munger has spent 100 hours studying Bitcoin, so I think it's kind of unfair to poke him with the question. But I'll state for the record, isn't Berkshire Hathaway a generation behind all technology? Despite the fact that Warren Buffett is best friends with Bill Gates, Warren Buffett never invested in Microsoft, and Microsoft was founded in 1976. They never invested in Apple until 40 years later, and then it was a person that worked for them that invested in Apple. They didn't invest in Google when it came public, and they passed on it every year since. So I think that this controversy is just because Bitcoin is the fastest growing, most disruptive force in the world right now. Objectively speaking, it went from zero to a trillion dollars in 12 years. That makes it the most disruptive technology in your lifetime, in my lifetime, more disruptive than Amazon, Apple, Facebook, and Google. More disruptive than anything in our lifetime. Maybe if we went back to the automobile and Henry Ford in 1910, we might find something that changed the world in a decade, but that doesn't come along often. So all these people are getting poked and asked their opinion. When I'm 97, if I'm still working, if I'm lucky enough to still be alive and still working, if you ask me about the latest greatest hologram simulation technology startup that's taking the world by storm, that's used by my grandchildren, and I don't quite get it, I wouldn't expect to get it. Isn't Charlie Munger old enough to be your great grandfather, Michelle? Do you go to your great grandfather for investment advice on new technologies? I like Warren Buffett, they've been successful, but they haven't been successful technology investors this century. I would just leave it at that.

Let me characterize my comments again. I don't think that Charlie Munger is not qualified to opine on Bitcoin because he's 97. I think he's not qualified to opine on Bitcoin because he hasn't spent the time and the energy to understand how crypto asset networks work. Nor do I think he prepped for 100 hours on the subject with an open mind. I think it's a mistake to think that any investor that's been successful in a particular field is thereby an expert in every other field. There's a thousand fields that I'm not an expert in, so I don't know why people would... if you ask me my opinion on something in biometrics or in medicine, I wouldn't opine on that either. It's inappropriate. With regard to privacy, Bitcoin is not nearly as private as many other cryptocurrency networks like Zcash and Monero and the like. We've seen just in the past few weeks that law enforcement is able to trace back transactions all the way through a decade. The entire blockchain is completely transparent, immutable, and every transaction that ever took place is traceable. So if anything, I think there's a consensus that's forming amongst regulators and law enforcement that Bitcoin is probably the safest and the most manageable of the crypto asset networks. If there's any risk with regard to regulation in this regard, it's probably on some of the other crypto application and crypto asset networks because they actually have a much greater intent to promulgate privacy applications. Bitcoin's mission is to be a crypto asset network. The idea is not to move money fast and privately. The idea of Bitcoin is to store a billion dollars for a hundred years securely. The network and the architecture has been designed with that in mind. So as interest and... this is something that you would know if you sat through 40 hours of lectures on crypto economics and crypto technology, but again I don't think that Charlie Munger did. I have, and many other people in the crypto industry have. So as regulators become more interested in privacy, I think it's going to be a net benefit to Bitcoin because what you determine is Bitcoin is the crypto asset network that you want to support, that you can build a 21st century economy on, that does fit well within the regulatory framework and law enforcement frameworks of the Western world.

I think the people that spend a few hours poking around in cryptocurrency often times come forward with this observation that cryptocurrency is a threat to central banks and they have privacy concerns and the like. But it's generally only those that are spending a few hours. If you spend 100 hours or enough time to understand the situation, then you start to embrace a more sophisticated model, which is money can be decomposed into a currency component and an asset component. These aren't really cryptocurrencies, they're crypto assets. Bitcoin is a crypto asset, it's not a cryptocurrency. Currency is defined in the law as something you can exchange as a medium of exchange or in a transaction without incurring a tax obligation. So Bitcoin hasn't been a currency by law in the United States since 2014 when the IRS determined it to be property. That's well understood by the regulators. If you look at public commentary by Jerome Powell, by Christine Lagarde, by the deputy governor of the China central bank, by Gary Gensler, they've all commented that this is a digital asset, it's not a digital currency. If you read the 140 pages of testimony by Janet Yellen, you'll see she's a very progressive, informed regulator that understands that crypto assets or digital assets like Bitcoin are a cornerstone for a 21st century economy and a force of good. All regulators will state as a matter of fact, and because it's appropriate, that of course we have to make sure they fit into a regulatory environment and a framework so they're used for good and not by malefactors. So all of these conversations are oftentimes just cherry-picked comments. Neither the head of the EU central bank nor the head of the US central bank nor the head of the Chinese central bank has actually suggested that people should be banned from owning the asset. In the example of Turkey you named, what they said was they didn't want people to use it as a currency. That's no different than what the IRS said in 2014 in the US when they actually taxed it on transfer. They also effectively said you can't use it as currency. So stating that we don't want something to be used as a currency because it threatens our currency is not the same as depriving people of an asset. Even the Turkish central bank hasn't deprived or limited Turkish citizens from owning the asset. So it's very important to understand that the future of the world is eight billion people with mobile wallets, with a currency layer and an asset layer. The currency is going to be the dollar and the euro or the Chinese renminbi, and the asset layer is going to be Bitcoin and whatever other assets you choose to hold in them. The government's province or the government will of course demand control of the currencies. Where you have strong governments like the EU, China, and the US, they will have a strong currency and those currencies will be successful. Where you have weak governments like in Venezuela or Zimbabwe, you will see the currencies collapse. They will lose their currency privileges. The citizens in those countries will download stablecoins that will either be the US dollar or the Chinese renminbi. The underlying asset framework or asset protocol and network that we use to synchronize all those wallets is going to be Bitcoin.

I would say that scanning every utterance of every regulator in the world, I haven't seen any indication that they view it as anything other than an asset. Jerome Powell two weeks ago said, 'Hey, it's digital gold, like gold.' Christine Lagarde said, 'Yeah, it's a speculative asset, people speculate with it, it's not like a currency.' They're going to be concerned about stablecoins, like the ability to move billions of dollars of euros on a crypto rail, or the ability to move billions of dollars of US dollars on a crypto rail. That's going to draw the interest of the banks because currency is the province of the bankers and the government, and they're going to be concerned about controlling their currency. That's why you can expect AML and KYC regulations on the custodians that allow you to move large sums of those digital currencies. But I think the most common misconception people in the world have is that 'cryptocurrency' is the right word. It's not the right word. If you roll the clock back a number of years, lots of very intelligent people, and I could probably think of six regulators that are currently running the world, have all said it should be deemed a crypto asset. Mark Carney actually said more than two years ago, it's a crypto asset. Once you understand it to be a crypto asset, then you understand it's not competing with the dollar and the euro, it's competing with gold and silver and ETFs and stocks and GameStop and derivatives and, to a certain degree, perhaps savings accounts that are used as long-term store of value.

I don't think there is. I think that Bitcoin is going to be the emergent strong money, store of value asset in the 21st century. I think it's pretty clear that it has won this space. There are eight billion people that need a strong money, a monetary asset, if they're going to live a decent life. That asset needs to be digital and needs to flow to eight billion mobile wallets. You need three things: you need an asset which is deflationary, you need a global network to synchronize all those mobile wallets and all those applications, and then you need an open protocol so that you maintain real-time settlement and synchronicity between all the various layers if you're going to maintain the integrity and the trust of the network. Bitcoin has those three things: the asset, the network, the protocol. Silver doesn't, gold doesn't, can't do it with real estate, can't do it with stocks, can't do it with bonds, can't do it with any fiat currency. If you look at all the other cryptocurrencies, the proof-of-stake currencies don't offer the security or the stability of a proof-of-work crypto asset network. Bitcoin is 100 times bigger than the next best one. So I think it's pretty clear Bitcoin's the solution to the economic problem of the 21st century.

The problem is billions and billions of people need sound money in order to store their economic energy. If I don't have a bank, and if I don't have a currency, and I don't have access to an asset, then I'm living hand to mouth day by day. In the week or in the day when I can't get food or can't get money, I'm going to starve to death. You could imagine if I take away insulin from a type 1 diabetic, they can't form fat, so when they eat they can't store that excess energy. It means that they're doomed to a life of starvation as they waste away no matter how much they eat. The problem in the world is if you're unbanked, and there are a billion people that are unbanked, and if the currency won't hold economic energy, you live in a country with a collapsed currency or a weakening currency, then your economic vitality is being sucked out of you. Sound money is a human right. The solution to the economic prosperity of eight billion people on the planet is to install a thermodynamically sound digital asset which will store their economic energy over time and then allow the synchronization of all those wallets over space so that they actually have the ability to function. That's the problem. If you want to put a value on that, for the two or three billion people at the bottom of the pyramid, the value is like life. That's the value. How do you live a decent life without money and assets? But if you want to look at it from the top of the pyramid, the 500 trillion dollars worth of money in the world is sitting in fiat derivatives, presumably conservatively losing 10 percent of its value a year. So you've got something like a 50 trillion dollar energy drain or inefficiency in the economic battery of the world. The solution to the problem is install a digital monetary network that doesn't bleed energy, in essence a trust network, that allows hundreds of thousands if not millions of mid-sized banks and corporations to all trade with each other, settle with each other, and store their economic energy without corruption and without power loss, which we sometimes call inflation, but it's not just inflation.