Jack Mallers Asked The Question Nobody Wanted To Answer

It feels like when it comes to financing these dividend payments like someone is burdening that cost right now.

Offensive strategy meaning what? Buy, buy, buy Bitcoin.

Okay.

Yeah. Okay. So my name is Jack. I've been working on Bitcoin for almost 14 years now. I do that predominantly through Strike and 21. I think as the Bitcoin and the capital markets and the Bitcoin treasury strategy has evolved, I currently sit in the camp of wanting to build a cash flow business alongside a Bitcoin treasury. I think that they complement each other the best. Ultimately, even just from an Austrian economic standpoint, I believe in being productive in the marketplace, producing profit. I believe that to be an ethical good and an economic good. And I also think it's the most scalable way to build a large Bitcoin treasury. If you have growing high margin cash flow and you're producing products productively for customers alongside an ability to find leverage and stuff. And so we actually have not pursued what's described as digital credit and such. Not a bad... hopefully this isn't Twitter. Not trying to get in a fight, unless you want to. But that's where I sit. So Strike optimizes to be a high growth, profitable, cash generating business. And then we're not afraid of leverage, but ideally, I think the dream for all businesses is to not finance their future with dilution. Because at the end of the day, if you're not producing profit, you have to ask the philosophical question of who's financing your worldview, who's financing your future if it's not your own productivity. And you know, could you get away with a heavy dose of financial engineering and perfectly financially engineer your way through that? Maybe. I would prefer to build a business alongside that. Not that one's right or wrong, but I would say that's more my interest in both of my businesses.

I reject the premise that Bitcoin is struggling to get adopted, to be quite honest. I mean, it's how old is it? 17 years old, 16 years old, depending on how you count. It's done a pretty good job. It's the top 10 asset in the world. Fastest growing ETF, corporate balance sheet adoption. It's a global... in the middle of conflict in the Middle East right now, it's being used to broker commodity trade at war. I don't know. It's doing pretty good. And my mental model is pretty straightforward. Bitcoin is some combination of technology plus fiat liquidity. Technology is the fact that it is disruptive technology. It's solved a previously impossible computer science problem that gives it monetary properties that nothing else has. Like censorship resistance, like I can put money in my brain and cross a border. One of my favorite quotes of my own is with gold I got to put it up my butt if I want to get through the TSA. And so technology has utility value. And that's where you see Bitcoin adopted in a lot of the third world when people are living under oppression or authoritarian regimes. And volatility? If Putin took my bank account, put a gun to my head, I don't give a damn about volatility. I need money. So that's the technology piece. Now, the fiat liquidity piece, I also think it's fairly straightforward. Bitcoin is priced on future expectations of fiat and you see it go through these adoption waves when they printed a lot of money after COVID. Bitcoin went on a tear. There's more fiat currency units competing for a scarce amount of goods. So yes, eggs went up, housing went up, gold went up, but Bitcoin went up the most because Bitcoin you couldn't make any more of it. You can make marginally more eggs, marginally more housing. Oh, someone has a penthouse. Well, I'll pay them even more to build a floor on top of his penthouse. No, I got the penthouse, but there's no more Bitcoin to be made. And then when they hike rates, fiat liquidity contracts and so does Bitcoin. And so right now, I think the Bitcoin price is just telling us there's not enough filthy fiat in the financial system to sustain everything that's... to sustain the levels of debt, the eagerness to go to war, and the amount of build that artificial intelligence is requiring. There's not enough fiat. And so I think Bitcoin's doing its thing. It's telling the world the truth. It's the only functioning smoke alarm of liquidity left in the world. If you want to know if the world is in a good place or not when it comes to liquidity, just look at the Bitcoin price. Don't listen to any of these stupid analysts. They don't know what they're talking about. And so, I think there's not enough liquidity to support all these IPOs, support all this war that people wanted to go on, support all this deficit spending and all this debt. And they're going to have to print a bunch of money and Bitcoin will tell us exactly when they do and how much they did. And so I stay humble and stack sats. But to say that, oh man, I'm checking my clock and Bitcoin's taking too long... I'm on Bitcoin's time. Bitcoin's not on my time. I think as humans we all lust to be a part of something bigger than ourselves and last longer than ourselves. The most natural expression of that is family. Find a partner. Fall in love. Have a kid. That's creating something that will last longer than you, which is extending your bloodline and being a part of something that's numerically bigger than just yourself. That's family. I think Bitcoin is another expression of that. Bitcoin's going to... there's going to be a block mined long after I'm gone. Who am I to say Bitcoin's taking too long? So I just disagree with the premise that, oh man, what are you guys doing taking so long? It's fine. And one more point related... I think people say, oh, people early to Bitcoin just got lucky. That's not true. First of all, there's no luck in markets. And I take my father for example, who's my hero. My dad got us all into Bitcoin, my whole family, in early 2013. And he started the first meetup in Chicago. He was posting on the Bitcoin talk forums. He helped get Andreas Antonopoulos's career off the ground. There were human beings that had to give this idea time, energy, and effort in order for all of us to be here in the first place. And the Mt. Gox hack and the crash from $1,200 down to $200 at the time before regulatory clarity, before crypto president, before MicroStrategy, before IBIT, before any of that stuff. And you get rewarded for showing up and eating that volatility to the face like a man.

So if you like... and that's what my father explained to me is like you could cry if you want but let me know when you're done crying so we can get to work. And if you don't want to show up and take the risk and stay humble, stack sats, produce more profit for the world than you consume from the world, then show up later. I can't promise you're going to. So I think the world is reallocating capital. This is a new wealth distribution. And I think wealth is being distributed to those that earn it, those that produce profit, produce businesses, have a low time preference, take care of themselves, optimize for the right things. So I let it play its course.

I can ask another question or if you want to react to anything you said.

Okay.

I do think Bitcoin adoption is a form of ego death. I just wanted to touch on that. I think that ego is one of the most expensive burdens you can carry in life because wisdom is achieved through experience and a form of trial and error. Becoming wise requires proof of work. If wisdom was reading five books, we'd all be wise. We'd all buy the books on Amazon and read them. Wisdom is a unique scarcity because it requires a lot of proof of work to go through the trial and error to become wise. And that requires a death of ego. An egotistical maniac cannot put him or herself in a position to fail and learn and become wiser. And so I think it's another... I wanted to just revisit a point of how Bitcoin is reallocating capital. If you can't handle volatility, lower your time preference, earn more than you spend in the world, take care of yourself, do the necessary research, live a life that doesn't prioritize your own ego. Those are the people in society that I want to have capital. Those are the people I want to start businesses. Those are people I want to have kids. Ego-driven, maniacal, fast money Wall Street douchebags are the people that I want decapitalized. So when it's like, oh well, I've had plenty of meetings on Wall Street. 21 owns the second largest public treasury in the world. We own a lot of Bitcoin. And you go meet people and they say, "Ah, Bitcoin's a little too risky." Fine, buy bonds. Guess what? The man that's hedged with bonds since COVID is moving out of his big house to a smaller house and having to take his kid out of school. And the guy that bought Bitcoin probably flew here on a private plane. But go ahead, buy bonds. Capital is being reallocated to where I think it deserves to be. When you say fix the money, fix the world, this is what we mean literally. How do we capitalize the humans and the moral and ethical driven philosophy that I think creates a flourishing society and how do we decapitalize ego-driven, fast money, high time preference garbage. So it is an ego death.

I was gonna ask them a question. They have products that I don't have. So I was gonna ask them.

I'll be quick. I wasn't talking about anyone's grandma, to be clear. I was talking about the culture of Wall Street. Unless your grandma works on Wall Street. But no, I mean, listen. The elephant in the room is I don't understand digital credit. I don't get it. Sure, everyone wants 10% yield. I also wish I was 6'4", 250 pounds, and rich. But what are we talking about? Where's the yield come from? A perpetual preferred means it's not debt, but it's also not equity. It never converts to equity. I don't know what it is. And I'm speaking humbly, right? I have no idea. You guys are the experts. You'll tell me. But you owe the money forever. So you're creating a liability that you need to pay forever. Unless you just tell the preferred holders to go screw themselves. And if you can't afford it, which technically some of these companies can do. I don't think they would. I think it would tarnish their credibility. But if you say, "Okay, how do I come up with $2 billion a year?" That's going on, according to these charts and these models people post, $200 billion a year. But let's say I owe $2 billion a year, but you don't make $2 billion a year. You're not doing anything productive in the economy to produce cash flow that can afford the money that you want to give to your grandmother. So who's coming up with the money? You can either sell Bitcoin, which is fine, but this is a trade then and the trade is path dependent. If Bitcoin is not only going up enough CAGR but predictably and reliably going up, what if it's in a bear market for 5 years? What if it's in a bear market for two years? What if Trump drops a nuclear bomb on somebody? So there's a path dependency to the performance. Or you can sell the equity, but obviously the way NAVs are calculated, I also don't understand. There are way out of the money securities that are being counted as equity which nobody would ever do in an M&A transaction. So selling the equity in this market right now is highly dilutive. Or you can just let these things that are marketed like a money market fund bleed down and not ratchet them back up to the $100. And so I just disagree. I don't understand the premise whatsoever. Like okay, your grandma wants 10%. Not about your grandma, more just broadly to human beings. I would say there's two ways to increase wealth and this goes back to Austrian school of economics. You can either be more productive in the marketplace. So people are giving you money in return for what they perceive to be value. So if you want to be wealthier, produce more value for the world. Or if you want more wealth on net, excess cash at the end of the month, spend less. Reduce your lifestyle. Consume less stuff. Either produce more value or consume less stuff. At the end of the day, Austrian School of Economics 101. That's how you produce more wealth for yourself. Saying that someone's gonna magically just give you 10% yield again... Can someone financially engineer that? Maybe. But I think these are real questions. In this current market, it feels like when it comes to financing these dividend payments, someone is burdening that cost right now.

Yeah.

Yeah. I just... so first of all on the ego point earlier, this is me killing ego entirely. I could be missing something, uneducated, the dumbest person and I'm totally open to that. So I'm not coming at this from a place where I'm right whatsoever. I think this is super important. Let's take Strategy for example. It's the most common example and it's relevant enough and the most popular Bitcoin anything where I know the numbers off the top of my head. And by the way, I don't know if Michael's here. Love Michael. Super net positive for Bitcoin. I have not a bad word to say about Michael. Strategy's... where is he? He's...

In terms of numbers of Bitcoin?

Okay. So they're at a loss so far, which is fine. Low time preference, hold it for the long term. That's fine. Also, the NAV, it depends on how you calculate it. There's five different NAVs. I disagree that taking out of the money securities and treating them as if they're equity is probably not the way to do it. Okay. So selling Bitcoin would be selling it at a loss. Selling equity would be dilutive. And you owe billions of dollars forever. So in this current market, how do you finance that? Who's burdening the cost?

That's a good question, right?

Okay.

Call me an idiot, but like...