Michael Saylor on How Bitcoin Infiltrates Corporate America

I'm an Air Force brat. My father was in the military, I lived on Air Force bases my entire life. I got a scholarship from the United States Air Force to go to MIT. I went to MIT, and I was that generation where I read science fiction books. I read them all, a big fan of Robert Heinlein. I decided I was going to be a rocket scientist, and I got an aeronautics and astronautics degree with a specialty in spaceship design. While I was there, I stumbled across this school of management, system dynamics, the construction of computer models to predict the future. I ended up getting a second degree in Science, Technology, and Society in the history of science. That was formative because it was all about paradigm shifts, the structure of scientific revolutions, and how people decided to embrace nuclear power, electricity, or petroleum. A lot of people think technology is a modern thing, and they think technology companies are a class of investments. I'm always amused when finance people talk to me about the tech sector because it's kind of an ignorant statement. There's never been a successful growth company that wasn't a technology company once you understand technology for the past hundred years. John D. Rockefeller was a tech company, General Electric was a tech company, Kraft and Hershey's were tech companies. Studying technology for the past 200, 300, 400 years and why people do it was interesting to me. I thought I was going to be a fighter pilot astronaut, so I learned to fly in the Air Force. In my senior year, Reagan won the Cold War, they ramped down the military, cut it in half, and I had a macroeconomic event combined with a random personal event that catapulted me into business. The macroeconomic event was the end of the Cold War, the drawdown of the US military. The US had paid for my education, and I was on the hook to serve. I thought I'd be in the military ten years. My final flight physical my senior year at MIT, they diagnosed me with a benign heart murmur, and that disqualified me from flying jets. The hilarious part of the story is they kicked me out of the aviation program. I was a little dejected, and then the next week they came and said, 'You can join the Air Force Reserve and be a civilian.' I was going to pay three times as much money as a civilian as I would have made in the Air Force. I thought, 'Well, you just gave me a free education, and I get to not pay the money back.' The week before, they said, 'If you don't go in the military, that's AWOL, you go to jail.' So I went from 'You're going to be in the military for a decade or you go to jail' to 'Ronald Reagan is giving you the gift of your freedom, and by the way, to make it easier, if you want to be in the military, you have to wait two years working a part-time job before we call you up, and then maybe we'll call you up.' I kind of got a kick out of the military, and then a doctor said you can't fly. I was kind of dejected and thought, 'This must be a sign from God, I should do something else.' So I joined the Air Force Reserve and left MIT. I worked for about two years, and I was going to go get a PhD because I had a very simple list. Every red-blooded American male in the 80s had this list: rock star, astronaut, fighter pilot astronaut, Top Gun, professor, or CEO. I tried my rock star thing in high school and realized rock stars don't make any money. At least 99% of musicians make like 20 bucks for the game. I tried, and I just can't play guitar. I'm just not coordinated enough, so I had to give up. The second goal was fighter pilot astronaut, and that was dashed by some physician. The hilarious part of the story is a decade later, I go back to the doctor, and he goes, 'Oh, you're perfectly fine.' I said, 'I can't be fine, I have a benign heart murmur, mitral valve prolapse.' He goes, 'No, you don't.' I said, 'But I'm sure I do, they kicked me out of the Air Force because I had it.' He said, 'Oh, that was a mistake. They used to make that mistake all the time. We have much better equipment now.' So I left my fighter pilot astronaut track because of a mistake. I ended up working, but I left the military track in February or March my senior year. I missed all the financial aid applications for fellowships. I couldn't afford it, I had no money, I couldn't afford to go to a PhD program. So I worked for a year, applied for all the fellowships, got into MIT and Harvard, and was going to go get my PhD and be a professor. Life was done. Just as I did that, I informed my boss, and my boss worked at the DuPont Corporation. I had built a computer simulation to predict the return on investment of about a billion dollars of capital investment in titanium dioxide. They needed that model to get the board to give them the money. So when I tendered my resignation, the guy saw his billion dollars of capital going away. I'm sure he said to someone, 'Go tell the kid, give him whatever he wants, but he can't quit yet.' I was 24 years old, I happened to be important to a guy that needed a billion dollars. I didn't know I was important, I was just the right place at the right time. So he tells a guy who tells a guy who comes to me and says, 'Okay, we'll give you a raise if you stay.' I said, 'I don't want a raise, I want to be a professor.' They said, 'Well, what do you want?' I said, 'Rock star, astronaut... there's only one other thing I want: I want my own company.' So I said, 'I'll stay if you finance my company.' I got millions of dollars of contracts, a quarter million dollars up front, free office space for a couple of years, all the computer equipment, IT support, 10 people from DuPont came over to work for me. They didn't take any equity, so it's the best deal ever. I did this one negotiation, my best negotiation of my life. I had zero money. In fact, when I started this company, I went to a bank and got the only unsecured loan you can get as a 23-year-old. I said, 'I want to buy $5,000 of furniture.' They gave me a $5,000 furniture loan. I was living in an apartment at $700 a month with milk crates for bookshelves, and I thought, 'Five grand, that'll last me six months, maybe.' So I got a $5,000 furniture loan. Then I said to DuPont, 'I need a $100,000 cash check up front to start.' You can imagine these guys in suits, they thought the kid is out of his mind. They said, 'We can't give you that, you might take that money and run off to the Caribbean.' I was like, 'Well, you got to give me the money because I have no money.' They looked at me and said, 'You got a point there, you got no money.' So they literally wrote me a $100,000 check. At this point, on $700 a month rent, I literally believed that $100,000 would last me for seven years. I calculated I had seven years of capital. I took the money and started MicroStrategy. We had 10 people the first year, and I thought, 'I'm going to defer my PhD program, and when this thing fails, I'm going back to college.' The next year we were 20 people, the next year 40, the next year 80, the next year 300, and the next year people said, 'You got to go public.' We started in '89, I graduated MIT in '87, started MicroStrategy in '89. I got so lucky. Lucky that I got misdiagnosed by that doctor, lucky that Reagan won the Cold War, then I got lucky that the dot-com boom took off. Between '96 and '99, everybody was going public, and we were just coming of age in '96, '97. In '98 we came public, June of '98. If we were two years late, it wouldn't have happened; two years early, it wouldn't have happened. We came out right through that window. By then, it was just too late for me to go back to college, and I was stuck as a CEO, for better or worse. That's how MicroStrategy was founded. I couldn't do it again. In that Twilight Zone episode where the CEO goes back and gets all his knowledge to try again, he ends up the janitor. If you put me back there again, I'm like, 'Well, I need the Cold War to end, and I need a doctor to make a mistake, and I need someone to tell me to do the opposite of what I wanted to do.' It's just all random.

In hindsight, I was a risk taker, but at the time I didn't realize I was taking the risk. The most dangerous kind of risk. If I could go back, I would give myself counsel to do things differently. But yeah, we did take risk. One thing I did is I was always very passionate about technology. We launched MicroStrategy as a business intelligence company, and we were always inventing the next thing. The first risk I took was I created a piece of software to create computer simulations on a Macintosh. Older, wiser minds, professors from MIT, told me that's a horrible idea. The Macintosh is not going to win, everybody knows business people use the PC. We were like a million dollar company then. I said, 'Well, I guess you're right, but the Macintosh is much more beautiful and better technology than the PC.' So we doubled and doubled again. The professor that gave me that advice was still running a $300,000 a year consulting business, and we were $4 million with the wrong technology. Then the professor asked me what I was doing. I said, 'I'm creating executive information systems using this spreadsheet called Wings with a hyper-scripting language.' That professor said, 'Well, all my friends tell me that Excel is going to be the choice for all big businesses, and Wings is going to fail.' I said, 'Well, you may be right, but Excel doesn't have a scripting language, so we'll try it for a while.' We doubled again and again, got to be $30 million, and he was right. He's still running his $350,000 consulting business. Then he asked me what I was doing, and I said, 'Well, I've decided to convert to Microsoft Visual Basic, and we're going to create relational analytics on top of big databases.' He said, 'Do you have an experienced big database?' I said, 'No, none at all.' He said, 'Well, you know, Visual Basic is not what people use for software engineering, they use C++.' I said, 'Yeah, but I can't figure that out yet.' So we did it, and we doubled again to $60 million. He was still running his $350,000 consulting business, not making a mistake. At which point I realized, 'You know, you're kind of an idiot, you need to write the software in C++.' So we took the money we made making the first set of mistakes and wrote it in C++, and we doubled again. I'm sure someone said, 'Don't go public.' But basically, we're not very good at listening to people. I always chase after these shiny things. But there's a method to the madness: you're better to be correct and do something that works now and then figure it out three or four years from now than to do nothing and sit and wait and be beat to death. The short of the story is I took like six or seven risks, and every three years we had to invent something new: web intelligence, mobile intelligence. We launched a business called Alarm.com. I got really enamored with domain names. I bought microstrategy.com for my email, and then I got lazy and thought, 'I hate typing micro, wouldn't it be better if I just had the email saylor at strategy.com?' So I bought it back in the day when you could buy it for $100,000. I bought the word 'strategy' and still own it. Then I thought, 'This is kind of cool. What other words could I buy?' I thought it'd be cool to be saylor.michael.com, so I bought michael.com, and then I bought mike.com, and then I bought wisdom. The world needs hope, right? Everybody needs hope. I own hope, I own hope.com. I bought all these domain names. I own 'allah.' About once every month, someone wants to buy hope from me, or they want some hope, but they always offer me like $100,000 or $200,000, and I'm hoping for $100 million, so I just keep it. That's a meandering way of saying I got re-enamored with domains back in the mid-90s to late 90s. I started thinking these are like real estate in cyberspace. What if we could commercialize them? So I commercialized strategy.com and created this like a Twitter subscription. You could sign up for alerts to anything under the sun. The company went from zero to $100 million in one year, and then from $100 million to zero in one year. It was interesting, I learned a lot from that. I had the skin flayed off my back. But then I went on to Alarm.com. We launched these under the MicroStrategy umbrella. The idea behind Alarm was: what if you could wire all your home alarm systems into the internet, and they would talk to you and talk to your phone, and they would call you and tell you if someone broke into your house? Not a brilliant idea today, Amazon and Google and Apple are doing it, but pretty unique in the year 1998 or 1999. We launched it on alarm.com. If you go and type alarm.com right now, you'll find it's a billion dollar company. We eventually spun it off, made a decent amount of money off it, then they went public with Goldman Sachs, and it's a billion dollar NASDAQ traded company now. That's one of my babies, it flew away from home. I created another one called Angel. My theory of these was very simple: people have a hard time spelling and they have a hard time remembering things. Everybody gets taught how to spell 'angel' or 'hope' when they're in high school or junior high. So if I tell you my charity or my company is on angel, you go 'a-n-g-e-l,' you don't have to go to Google, you don't have to search for it. If you search for 'voice' on Google, you get a billion hits. If your company name is 'something voice,' you're fighting with a billion things. If you own voice.com, you go to the top. Not only do you go to the top of the search engine, nobody needs the search engine. Everybody knows how to type in 'voice.' The idea was own the word in cyberspace, it's a scarce asset. For 1,000 years, people have been using the word, so own the word. We commercialized on Angel the idea of interactive voice response, like Siri or Alexa, and we did it back in 2000. Anybody could build an interactive voice response application. We plugged it into your telephone, it was a SaaS application, we ran it out of the cloud, and you plugged in your telephone. We built it to a certain point, but it was a totally different brand, a different business model. I had an enterprise software company, and this was not enterprise software, and it drove all the accountants crazy. Eventually we realized it was more valuable to someone else than it was to us, and we sold it for about $120 million. That was my next little hit with a domain. Then at some point I started to realize that if you're not the best in the world at something, nobody wants you for anything. In the early days, we all thought, 'I got $30 million, I can build this app.' Everybody wanted to be WhatsApp, everybody wanted to be Instagram. If I had a nickel for every time someone said, 'I have an idea for a mobile app,' it's like, 'Yeah, you do, and it's worth a nickel.' I launched all these things, some worked, some didn't. I tried many of them, and then I eventually realized that you need to focus. The first hurdle is: can you acquire a thing, can you build something? You generally can. The second hurdle is: can you compete in that market, can you maintain competitiveness? That means investing every year as much as the next best person is investing forever. Can you stay competitive? That's a higher hurdle. But the highest hurdle is: can you commercialize, can you profit from the thing? A lot of people can do a thing, most people can't do a thing better consistently forever, and even if you can, can you make money off it? This is an articulation of stoicism: just because you can do a thing doesn't mean you should do a thing. Every young man sees everything and says, 'I have to do all this stuff, I have an idea for this and this and this.' I went through that journey. I kind of worked for you, you have more successes than failures. I failed up. I got a lot of scars, but it was humbling. You have to have the failures along with the successes because if you don't fail, eventually you get this big failure where it all comes crashing down. I guess I adopted along the way this idea of stoicism, and I realized that you need to put all of your heart and soul into one thing. At that point, we sold off one company, spun off the other thing, and I realized my destiny was I could run MicroStrategy and be the world's best business intelligence company solely focused upon that one thing. That's what we're going to be. I went back to doing that and let the other things go. I let the domain portfolio just sit. We're the little engine that could, focused upon making our business intelligence better with web intelligence, mobile intelligence, cloud intelligence, and now our cool thing is hyper intelligence. It's like know the answer before you ask the question without clicking on anything. I'll tell you about that in a bit if you want.

I was just busy minding my own business. I used to tweet all the time, I got off Twitter, I focused on my core business. Then eventually I came back, I discovered Bitcoin. The day I put on Twitter that we bought $250 million worth of Bitcoin, the entire hive mind of crypto Twitter came to life. They went through every tweet that I had put out there, a thousand of them, and then someone dredges up the tweet where I had once upon a time in my imminent brilliance discovered that Bitcoin was dead and it was going to zero, and I enthusiastically posted that back in 2013. Everybody wanted to know what I thought about that. What I got to tell you is I didn't remember I ever had an opinion on Bitcoin until they reminded me that I had once been utterly wrong on it. I guess that's very humbling. But I love the entire crypto Twitter community. I think they're the smartest, coolest, most interesting, charismatic individuals. When they're right, they're right; when they're wrong, they're still kind of interestingly right. I think they make us better versions of ourselves. Putting that aside, I was minding my own business running MicroStrategy, trying to be the best business intelligence company we can. I would say that's 150% focus on the P&L. With regard to investment, my investment world consisted of... I was a technology investor. In the year 2012, I published a book, 'The Mobile Wave.' In 'The Mobile Wave,' I essentially said software is leaping from out from under your desk, beyond your laptop, onto a mobile device. It's going from solid state to liquid state to vapor state, and it's going to be like vapor all around us. What that means is that the entire software world is becoming networked, incredibly powerful, dematerialized versions of products and services. The summary is: Apple Computer is going to rule the world. Buy Apple, Facebook, Amazon, Google, go. If you read the book, you know that's what I wrote. The epiphany was in 2009. I asked my niece, who was nine years old, 'What do you want for Christmas?' She said, 'I want the big apple.' I said, 'You want a trip to New York City?' She goes, 'No, I want an iPad.' I thought, 'Apple's going to replace New York City, they're going to rule the world.' My investment thesis was quite simple: Apple, Facebook, Amazon, Google. A simple way for a tech investor to think is you buy a dominant network according to Metcalfe's Law that's won the market. The mobile network, the information network, the video network, the social network. I just named Apple, Google, YouTube, Facebook. Very simple: buy the dominant network and wait while all the naysayers on Wall Street and all the talking heads and all the people that know better tell you why you should hedge. I hate the word 'hedge.' Wall Street luminaries in 2012 would lecture me. They would say, 'You know, you shouldn't buy too much Apple stock. We've got a mutual fund, and what we do is if your Apple stock gets to be too much of your computer portfolio, we sell it and buy HP and IBM to diversify you.' I said, 'Well, guys, don't you realize that eventually Apple's going to eat them all, and there won't be a need for HP or IBM or anybody? What happens when Apple is 150% of all the profit in the entire tech industry?' 'Well, we don't see it that way.' That's what they thought. Then they go, 'Well, you know, we're going to protect you. If your share of your portfolio is too much technology, we're going to sell technology and buy all these other assets.' I was like, 'But guys, what happens when technology eats everything and there aren't any other assets?' In my opinion, and I'm going to be snarky here, I think an ignorant investor thinks that technology companies are a part of the index or a part of the industry. In my opinion, as a science historian, John D. Rockefeller was running a technology company. If you study the history of Standard Oil, he did everything that Jeff Bezos did a hundred years earlier. If you study General Electric, once upon a time electricity was pretty technically interesting. If you've actually been to the Hershey's factory in Pennsylvania, not a one of these investors could build the damn thing. Hershey's factory is a computer built in steel and welded, which is the most majestic creation of mankind you could possibly imagine. Imagine writing a computer program in billions of dollars of steel and moving parts that spits out 100,000 candy bars an hour without contaminating them. You think it's not technology? Or Kraft, you know, I create ketchup. The technology was I had clean room technology. I had to take the tomatoes, manufacture the ketchup, put it in a sealed container without any bacteria so it didn't rot over the course of the next year. It's clean room technology, no different than Intel semiconductor chips. When these people think, 'Oh, we're not buying a technology company,' it's like every company that ever succeeded was a technology company, and the only reason it grew was it had technology superior to everybody else. Back to 2012, I thought my investment thesis is you buy technology companies that have a dominant place in their industry that are going to eat everything, and then you just wait while all the people that don't really think hard about this short you or diversify out of you. Eventually, some 80-year-old investor that's got more money than God will discover that Apple Computer is not some newfangled gimmick. Eventually, he will buy it at 10x what you bought it for, and then it will double again. He will make some money, and you will have made some money, but you'll have to be beat to death by well-educated, well-intentioned diversifying experts while you wait for that to happen. They're going to say things like, 'We're going to hedge you out of this,' or 'We don't want to take too much risk on Apple, don't want to take too much risk on Google.' What if you had diversified your Google search engine into every other search engine for the last 20 years? One of the things I've talked about many times is there's a lot of people who want to trade. They think trading makes money. When you look at people who built real wealth, it's basically one bet. Bill Gates is who he is because he didn't sell his stock. People take one clear bet, filter out all the noise, and just pursue it.

This takes me back to where we went off on my little tangent. I was minding my own business running MicroStrategy, running the P&L. I was a wage earner. You go and you make a salary and you spend less money than you make. It's a 20th century idea my dad taught me, Depression-era economics: spend less than you make. So we're making money, spending less than we're making, putting cash in the bank, and we're struggling to compete against my competitors: IBM, Oracle, SAP, Microsoft. They're all 100 times bigger than us. We're the independent, we're the Switzerland. That kind of takes up a lot of your attention, and I'm not really paying attention to macroeconomics. My investment thesis as I said was buy tech stocks, but you can't buy tech stocks as a public company CEO and put the treasury into tech stocks, and you certainly couldn't do it near 2012. You might do it in your personal portfolio, but the conventional wisdom if you're running a corporate treasury is you're going to buy short-term treasuries, short-term T-bills. I happen to believe before the financial crisis, I remember the time when you could make 5.5% interest on overnight money. We're getting 5.5% yield. You have $500 million, you're getting paid $30 million. I happen to remember when savings accounts paid 6% interest. We didn't think we were getting a good deal from the bank, we thought that was totally reasonable. Every conventional wisdom was the risk-free cost of capital is 6 to 8%, and then you get tack on a risk premium of 4%, so your real cost of capital is 12% to do anything. That's the old day. That's the way I thought about the treasury. Then I thought, what else can I do with the money? You can buy your own stock back, or you can buy another company. I teach a course in management theory to all my managers, and my number one question is: how do you wreck a software company? By the way, I'm like the longest presiding public company CEO in the enterprise software industry. Nobody has been CEO of a public enterprise software company longer than me: 22 years, 88 quarters. I count them one at a time. Everybody came and gone. How do you wreck a software company? You have an answer for me? What do you think?

Bingo. The CEO of SAP comes in, he lasts for nine months, he buys Autonomy, they take an $11 billion write-off. It's pretty impressive to burn $11 billion in 11 months on one transaction that you probably spent a few hours on. How many lifetimes to make $11 billion? The number one way to kill a company is make a bad acquisition. So I got all this cash. Do I go buy something? I have lived long enough to see 90% of acquisitions end awfully. Microsoft buying Nokia, that was a good idea? You could have seen that one coming a mile away, that was the most awful idea you could imagine. 90% of all acquisitions end awfully. There are a few accretive ones: if you buy a small company, pump it through a massive distribution channel, jack it up by a factor of 10 with no variable cost, maybe it works. But acquisitions are bad. So I'm not going to buy a company. So what else do you do with the cash? You buy your own stock back. How many companies have gone bankrupt? Toys R Us went bankrupt because they levered up, issued a massive dividend, drained the capital out of the company. They were running on vapor when COVID hit. It's all over, everybody is insolvent, out of business overnight. That's another way to kill the company: drain all your capital. So what's left? Steve Jobs is my hero. Steve Jobs had a near-death experience with this company. Apple Computer was almost... there was a point when Michael Dell told Apple they should just give the money back to the shareholders and shut down. That's a tweet you probably don't like coming back. Steve Jobs kept all that cash until the day he died. They accumulated, they didn't buy back the stock. I thought maybe I would like MicroStrategy to not die, so I was going to keep the capital. By the way, so I can serve the customers. You have nightmares of your CFO. The nightmare is you let a customer down. When someone actually invests $10 million in my company's software, and then they build something with it and they deploy it, you're going to go tell them, 'Oh, we decided not to update the software'? Let me put it differently: how would you feel if you put $100 million into Bitcoin, and then the miner said, 'We're turning off the rigs,' and the developers said, 'We're not going to patch the bug or upgrade,' and it's just going to stop working? You have an ethical, moral obligation to your customers. A lot of times these CEOs, they kind of get cute. This is the problem with the LBO guys. 'We're going to get cute, we're going to buy it, I'm going to buy Marvel Comics, I'm going to leverage it up, drain the capital out of it, and bankrupt Marvel.' It happened, sad. So don't want to do that. So what can I do? I just leave the cash in the bank, and I'm buying the stock back at some rate. Then along comes COVID, and COVID is this transformational experience. Thomas Kuhn and 'The Structure of Scientific Revolutions,' the seminal work on the history of science, he wrote: when the paradigm shift comes along, the old guard rejects it. No one accepts it until they're dead, unless there's a war. The one thing that'll get people to change their mind is when they die and their kids take over. That changes some minds. The other thing that gets people to change their mind is a war. World War II, you know, and as Trotsky said, 'You may not be interested in war, but war is interested in you.' When the war arrives, you all of a sudden get interested in stuff that you were able to ignore because it was of academic interest to people somewhere else. So this year we got two wars. We got a war on COVID. By the way, what's the war on COVID done? I would have fired you if you told me you wanted to work from somewhere other than my office. I would have said, 'You don't show up to my office, you're not sitting next to me, you don't have a job here.' Last year, I was firing people that didn't want to come to work. Let me tell you what happens next. COVID hits, lockdown hits. I'm hating that idea. Then I gotta have a meeting. At 9 AM in the morning, we got a meeting, and we're on video conferencing technology A, which I will not mention. The line drops, the sound doesn't work. There's a war ball, I throw a little hissy fit. All my IT people scramble. By 11 AM, we're on video conferencing technology 2, and I got 12 executives, and we're talking blah blah blah. Two of the executives freeze, and one of them doesn't work. I throw a second hissy fit. By 1 PM, they're like, 'Well, you know, Mike, we've got this thing called Zoom, and we haven't tried it yet, but we thought we might try that.' I said, 'Hook it up.' By 2 PM, we're using Zoom. It's working well, like you and I are working well. By 4 PM, email goes out from the CEO to the entire company: 'Zoom is now the corporate standard. We will discontinue all other uses of video conferencing. Everybody in the company will be certified on Zoom, Zoom webinar, Zoom video recordings. A stipend to purchase your own home microphone will go out to everybody. Buy green screens if you need to. I expect it to be done, no more meetings other than Zoom, by AM the next morning.' 2,500 people have turned left. That's what war will do to you in a hurry. Because you got to... now the first war was the COVID war, and that changed everybody's P&L. That's half the business. I have a $500 million operating business, and we sell enterprise software. In a matter of weeks, we needed to figure out how to sell that stuff virtually and how to deliver service virtually. 500 consultants went from being on site to being remote. The war hit, and we started worrying about what's going to happen to our business. Nobody knows. Four weeks later, 500 people had gone remote. I was waiting to see whether a meteorite was going to hit me on the head, whether that was going to be mass destruction. Would the revenues crumple? Would customers go ballistic crazy? Then here's what happened. We stopped spending $5 million a quarter on running around, flying around, hotels. Our next $15 million worth of marketing events, trade shows, got cancelled on us. Then we realized we couldn't stage 150,000 symposiums even if we wanted to. Then we realized that every expensive sales, marketing, and services activity we had previously engaged in was no longer appropriate, or practical, or possible, or relevant, or necessary. Well, I think I just made $40 million a year. About $40 million a year on a $500 million a year revenue stream. I got kicked in the ass with a golden horseshoe. I don't want to make light of it because a lot of people are suffering a lot of pain. One person's cost savings is another person's revenue. If you look at the other point of view, there's a lot of people in the events industry, the hotel industry, the airline industry, and they're suffering. But I'm the CEO, I have to be the fiduciary for my shareholders and for my customers. At the end of the day, what happened at the P&L is we realized we were going to be much more profitable and much more efficient after this, despite the CEO kicking and screaming being dragged into the virtual age. That's me. I had an opinion, I was wrong. War hit me bang on the head. I see it differently today. By the way, at that point, I saw what everybody else in the virtual world had been seeing so clearly three years before me, four years before me. But I had to go through three different vendors, I had to change my technology, my customers had to be forced to take my technology, my employees had to be forced. If I had walked in and said to the CIOs that I deal with, 'I'm not going to meet with you face to face, I want you to Zoom to me,' 12 months ago, they would have told me to go pound sand. What happened really was the war changed everybody's behavior. There's a Lenin quote: 'There are decades where nothing happens, and there are weeks where decades happen.' The war didn't change me, the war changed everybody. So my P&L is different, my operating income is different. Now that takes us back to the balance sheet, which was an afterthought. I got a bunch of money. I'm buying some stock back. Our stock got hammered through the floor. Then what happens? I'm watching the market, and I'm living the pain of Main Street. I'm watching that all of these operating businesses are getting destroyed. It's the most horrific, awful thing of my career. Horror. I have no words for it. I'm not even going to articulate the words for it except to say I watched and felt with a horrifying pain the dismantling of my entire world view. Now having watched that change, then I watched a V-shaped recovery with talking heads on MSNBC. I just watched the market go like that. I watched every equity go through the roof. Apple stock doubles, even though any rational person thinks, 'How can Apple be worth twice as much when half of the world's economy just got wrecked, and when their revenues and their earnings are looking constant?' The earnings multiples blow through the roof. This is one that blows my mind. If you told me, if you're a bond salesman and you said to me, 'Mike, I have an idea for you. I want you to buy 30-year government bonds that are going to yield 2% interest for the rest of your life.' I said, 'Are you out of your mind? You must be crazy to sell me these bonds.' Those bonds had a 22% gain in 12 weeks. You would have made a 22% gain on the long bond index. I feel like an idiot. I would have made money buying bonds at 2% yield for the rest of my life. I would have made money buying leveraged equity of everything as the world is going through the floor. And I'm holding my little bucket of cash as this is happening. That takes me to my second war. The first war is the war on COVID. The second war is the war on currency. People say there's a currency war. I heard it, I didn't understand it. I thought currency war was the US wants to weaken its currency so that our exports are more affordable in Europe. I thought, 'That's kind of cool. When the currency weakens, all of my revenues in Europe denominated in euros go up by 20%, and my revenues in dollars go up by 20%. It's good for my stock in dollars.' That's kind of cute, that's our currency adjustment. We get that every quarter. If the US dollar is weak, we feel good about it. When the US dollar is strong, we have currency headwinds. That's second-order currency war. The first-order currency war is every buddy in the world declared war on currency. Your $100 million in the bank that bought a bond that yields $50,000 a year, that's an asset that's interesting to me. I want to retire. I buy a $1 million bond yielding 5% interest, and I get $50,000 a year. When the currency war hits, now that bond trades up to $2 million, and it yields $50,000 a year, but that's 2.5% yield. What happened was the bonds shot through the roof and appreciated by 100%. What really happened in the past 12 weeks is assets saw asset inflation of 25% to 40%. CPI is such a misnomer. People talk about inflation like it's CPI. You can measure the inflation rate of consumer products and services. I buy a Domino's pizza, I buy Netflix, I buy YouTube. Those aren't inflating. When I measure the market basket of consumer assets, it's like my retired dad would like to buy a $1 million bond that yields $50,000 a year in interest. When I measure that, you're talking about 6%, 7%, 8% in a normal year as the money supply increases. All of the things that I want to buy are going up 8% a year in a good year. All the things that are being given away for me that are manufactured by machines...

You're right. I think we're doing well if you were smart enough. It's totally counter to my thinking. How could a person rationally lock up his company's capital for the next 30 years for 2% interest? If I'm the CEO and you said, 'No, you'd invest it back in the business at the very least,' if not, you're saying your business cannot generate a 2% ROI. Here's my problem: moral hazard. If I took $500 million and put it into a 30-year bond yielding 2% interest, and if any rational economist took over the Fed, you would think the interest rate's going to go to 4% or 5%. Everybody knows that the economy cannot function with a 0% interest forever. Interest rate is the value of time. We're in a war with time. We want to stop. 'Will you give me everything that you own for the rest of your life if I return one third of it to you when you're dead?' That's what 1% interest is. 'Give me everything you own, I will give you 1% of it back each year for the next 30 years, and when you're dead, your heirs will get 30% of what you gave me now.' Here's the moral hazard or the dilemma for me as a CEO. If I invest the $500 million in 30-year T-bills at 2%, I'm taking the risk. I'm making the bet that no rational actor will ever fix the problem at the Fed. I have to bet all my company's treasury that the world will stay irrationally priced. It was the right bet for a Japanese CEO to have made. If Ray Dalio says cash is trash, I don't know if he says it, the trolls say he says it. I'm going to wait for 30 years and see whether the government has inflated the cash, and then you're going to give me back the $500 million in 30 years? That doesn't make any sense. I can't construct a rational argument whereby 30 years from now I will have made money on it. Any rational person would think: you lock up $500 million for 30 years at 2% interest, when the interest rate goes to 4%, your bonds are going to trade down by 30% or 40%, and you're going to lose $200 million. That's the craziest thing ever. If you're a shorter term trader, have at it, buy the 30-year long bond index. But no one seems to be thinking they're going to hold it for 30 years. I can't get that. So on one hand, I look at that, it's just massive moral hazard craziness. On the other hand, I look at all these equities. I can't just buy individual equities, there's too much equity risk there. Meantime, I just watch the talking heads, we get beat to death with this issue of real return. I start to go to school on that, and I realized that you can calculate a real yield. If your real yield is take the asset inflation rate and subtract that from the nominal yield, then the conclusion you come to pretty quickly is that the real yield on cash this year is minus 30%, minus 25%. If you were holding a 30-year bond, you broke even or maybe you're okay. But if you're holding a 2, 3, 4 year instrument, the real yield is obscenely bad: minus 10%, 20%, 15%, 20%, 30%, depending upon how you see it. The real yield on anything I was holding is bad. Now the question is: how do I get a positive yield? I use this phrase: I come to the horrifying conclusion that I'm sitting on a $500 million ice cube that's melting. It's melting at 6% in a good year. For the last decade, it's been melting at 6%. I was there, but I could ignore it in good times. You ignore the 6%. But then when you have to actually get educated on macroeconomics, you realize it's been melting at 6%, and then you realize that this year it's melting 25%. Then you have to look out over the next three years and ask the question: is it going to continue to melt at 20% a year for the next three years, or is it going to melt at 15% or 10%?

I got it. Okay, until this year I would go to my investors and I said, well, we got a great company, we got 500 million, 600 million in cash, a great bulletproof balance sheet. And they looked at me like they're not going to value the cash. Like they didn't value my cash. They thought it was worth nothing. And I kind of took offense to that, like they don't get it. The cash means that we're indestructible, we're going to live forever, and we can do the right thing by our employees, our shareholders, and by our customers, right? And why am I being punished for being virtuous, for saving my money and for being responsible and conservative? And I was kind of angry, not angry, irritated a little bit, like they don't get it. And then I realized they kind of do get it. They had a different perspective. I just didn't understand what they were trying to tell me. And their perspective is, I mean, there's no rational investor that would raise a billion dollars and say my plan is to put it in cash and wait, right? You can't go raise that money. So their perspective was, assets are inflating at six percent or seven percent a year in a good year. If I'm not beating seven percent, I can't stay in this business. So that takes you to this notion that the asset inflation rate is actually just the cost of capital. Okay, and bingo. Your cost of capital, if you're the CEO of a publicly traded company in a good year, in a normal year, is six percent or seven percent. You better actually generate more than seven percent with it, or you got to give it back to the shareholders, down to the razor thin margin. Now, there's a certain elegance to that. Why didn't we actually do that? Well, it used to be we're thinking, I've got a bunch of capital, we're buying our stock back at a measured rate. And we were very friendly traded, so if I bought 20% of the stock back in the windows without moving the market, it takes me like seven years. It's very frustrating. And I can't go any faster than that without doing a tender offer. So we're doing a bit of that, and then along comes the pandemic and everybody gets kicked into high gear, and the P&L gets kicked into high gear, and we're transforming. And then this macroeconomic change takes place and the cost of capital now, it's not six percent anymore. The cost of capital just spiked. And so the fascinating thing here is, if you're a corporate treasurer, your cost of capital was six percent. This year your cost of capital is 25%. And then all the assets that you could buy go through the roof. And now that's a problem. Like, do I go buy a company? 90% likely I burn the business. I destroy it. If I buy a bad acquisition, then I probably make a mistake. That's a peril. Do I go buy the S&P 500 after it spiked up today? The most crowded trade, they're saying the most crowded trade is also the future expected returns are basically negative by most people's assessment for the next 10 years. So you're basically locking into a loss. It could very well be a lost decade for equities. So, I watched television for the past like four months, and it's just amazing to me that the equity commentators managed to find something positive to say every single day. It's amazing. So that doesn't really work for me. So my cost of capital spikes, I get sensitized to the issue. We start thinking, we got to do something. Okay, so now you put yourself in my situation. You have 500 million in cash. Cost of capital went through the roof, and every central banker wants to print more money, and every intelligent investor is telling you that cash is trash. What would you do if you're me? I came to the same conclusion you did. I mean, it's basically you need to look for an asset that's going to protect you in a number of scenarios, that has a high expected upside, that beats the cost of capital. And so that's the only thing I can think of. And so to me, it came down to gold and bitcoin. So we tick through these. So what can I buy? I'm not going to buy an individual equity. I'm not going to buy another company. Can I buy a portfolio of commercial real estate? Oops, half of commercial real estate's impaired, the other half is overinflated. And who's going to sell me 500 million dollars worth of commercial real estate at a fair price that's not impaired this year? That's not going to work. So now I'm down to, can I buy an index of stock? Well, anything you want to buy company-wise that's cheap is basically insolvent and comes with a bunch of debts. Anything that doesn't have a bunch of debts is crazy ludicrously expensive. Okay, you're right, I get it. So mark that off the list. So now, what have I got? Precious metals and bitcoin. So I look at two things that I completely dismissed, was oblivious to my entire life. And so all of a sudden you get hit in the head with a two-by-four, and you cross off your list, and every door is shut to you, but these two other random doors. And so you got to open up the doors and start to look. And so now I go down the rabbit hole and I start studying. And you can learn anything on the internet. So all of a sudden, Pomp gets discovered by me. I have this friend, Eric Weiss, who runs a crypto hedge fund. A couple years ago he told me about bitcoin. I thought, well, that's crazy. I kind of dismissed it out of hand, like, couldn't someone else create a bitcoin cryptocurrency and then all the money will drain away? And maybe, how do you know it's going to work? And so I just don't even look at it, don't even think about it. And when all the other doors shut, this one opens. And now I have a problem, right? If someone took 500 million dollars out of your bank, put it in your backyard, open the back gate, and then every month someone came in and they burned two percent of your money, you go from thinking your money is safe to having extreme anxiety. So now I got a problem. First I had to solve the P&L problem. Now we switch to the balance sheet. And so what do we do? Well, take this off. First, I go and I start studying the stuff, and I get introduced to stock to flow. Now all of a sudden I'm looking at Plan B. And what is stock to flow? Okay, two percent of the gold supply gets inflated every year. And then I start doing the math and I start thinking about it. I'm thinking, well, two percent minus whatever, it's better. And then I start looking at crypto and I look at bitcoin, and then I realized this is what... And then I start with all the concerns about bitcoin, right? What if it gets forked? I mean, there's nothing more anxiety inducing than when someone puts eight pages in front of you of what happens to your crypto if it gets a hard fork or a soft fork, and you're studying it. So I started studying it, but then I realized, here's what I realized in short order. Bitcoin's the 200 billion dollar asset. Bitcoin is a hive of cybernetic hornets doing the bidding of mother nature, protected by a wall of encrypted energy. That's what I saw once I started to dig. It's a living cybernetic hornet hive creature with a wall of encrypted energy. And lord help the guy that tries to shove his hand into that hornet's nest and steal from it. And I thought that's interesting. And then I studied Ethereum, that's the number two. And then I realized Ethereum is something totally different, a world computer. And they're still chasing after functionality, all sorts of functionality. And like, more power to them. Decentralized finance, it's interesting, it's experimental. It might be something that MicroStrategy builds something on in the future for Ethereum. Yeah, I mean, I guess what I'd say is, I saw all that stuff, but there's still a question of will it work? It has to be proven, and there are centralized competitors to it, and they're not done with the functional architecture. I mean, if you understand proof of work, then when the founder says, well, we think we're going to switch it to proof of stake because we don't think proof of work will work for us, then you realize there's a fundamental dogmatic set of assumptions and there's an existential debate going on there. Sure. Fast forward to the conclusion, which is, if you look at all the proof-of-work crypto networks, bitcoin is 92% of them all. The next competitor is two percent, the next competitor is one and a half percent, the next competitor is less than one percent. It's the market screaming to you that there's a winner. So when everybody says, well, you know, there might be another one, no. They wouldn't be. Well, this might be the MySpace. Well, no, if you knew anything about the history of MySpace, you would know that MySpace flamed out at a billion dollars. It flamed out when it was less than one percent of what bitcoin was. Bitcoin was never MySpace. Bitcoin is the Facebook of closed digital monetary networks, and it's already crushed everything. And it's eating, it's software eating the world, software eating money. And it's only going to get more powerful. So now we're back to my issue. I know I got to buy hard assets. It's a question of silver, gold, bitcoin. And now I start thinking about it. And here's what I'm thinking. I think everybody's too short-term on this stuff. You want to really understand it, step back from the noise, look at the big picture. How does this feel across time and space? I'm going to take a hundred million dollars and I'm going to give it to my successor in a hundred years. Okay, you want to send something to your grandchildren or your great-grandchildren? If you want to endow anything of value, a park, a company, an institution, a foundation, a family, or whatever, whatever you're a religion, a political system, I don't care what it is. If you believe in it and you want it to be here a hundred years from now, you got some money. How are you going to convey the hundred million dollars across a hundred years without losing it? Would you invest in Apple stock? Apple might not be around. Would you invest it in dollars? Traditionally, real estate's been that answer, but even that's risky. Okay, so you want to buy a hundred million dollars of real estate in California? Yeah, no. Okay, do you know what the property tax rate is in Florida? That's true, I forget about U.S. property taxes. Yeah, I know it's two percent. If you take a hundred million dollars and you buy Florida real estate, it's two million dollars a year. And by the way, it gets appraised up every year, which means that over 30 years you'll lose it all. The property tax rate on anything in the real world is going to drain it from you. You can't buy real estate. If you look at all assets you can buy, you buy a stock, you buy an equity, you've got a property tax, you've got an income tax, you've got employee payroll taxes, you've got regulation, you've got customs, you've got trade, you've got tariff. Now I'm going to come back to you with a question. How are you going to convey your family's wealth across the generations for 100 years? And if you're not, I'll just stop right there. How are you going to do it? You tell me. Well, the only thing is, and gold is not easy because where do you store it and how do you pass that along? Okay, so let me stop you there and tell me what the... I'm going to tell you what the problem is. The gold, I thought about. Take your 100 million dollars and put it in gold in a vault. Gold miners are going to print two percent more every year. Okay, if gold miners produce, if you own the entire supply of gold in the world, and if it was pure, right, for London delivery gold bars, and it isn't, but if it was, and if you were sure you owned it all, if gold miners create two percent more every year, the rule of 70 says every 35 years the gold supply doubles. Which means that you would own half the gold supply in 35 years, a quarter of the gold supply in another 35 years, and in a hundred years you're going to own about 15 percent, maybe even 12 percent of the gold supply. So here you'll like this. So I was thinking through something similar in a different way. I just wanted to look at the Fed balance sheet growth over the last whatever period I wanted to choose, and I looked at every asset against it. The Fed balance sheet outperformed everything outbound gold by 50. So gold's done a bloody lousy job. It's better than many things. There's only one asset, only one asset that did it, and it killed it was bitcoin. Okay, and by the way, I know why now, and I'll tell you what I think it is in a second. I thought I was going to buy gold, and a very smart guy that works for me, my consigliere, he said, he said, Mike, I remember gold back in the 70s and the 80s was 600, and then it traded down, and it's gone nowhere for a decade. And I'm like, everybody says gold's the ultimate hard money. What's the problem? What am I missing in this picture? And then here's what I realized. Gold's got an inflation rate of two percent over time. That means a hundred million dollars is going to be worth twelve and a half million dollars at two percent. You're going to lose 80, 85, or 87 percent of your wealth if it inflates at two percent. But it's worse than that, because gold's not pure. Half the gold supply is floating around, right? It's not all stamped good delivery bars in London. Yeah, that's the second problem. The third problem is, if gold price goes up, every miner is your enemy. They're going to print more, they're going to mine more gold, they're going to ship more gold, they're going to capital invest in more gold. This is the dilemma of every commodity business. And I used to work for commodities at DuPont. The dilemma is, if the price of the commodity goes up... Let's go back to oil. Fracking. We fought wars over oil. We went and fought wars over oil to protect our oil. What happened when the price of oil went to a hundred dollars a barrel? Fracking. We invented a new technology. And by the way, what happened? The US produced so much oil, it became a world crisis. We doubled, we produced five million barrels a day, and now we produce 10 million barrels of oil a day, and then 11 and 12. And everybody was like, hold it, you're going to produce too much oil. Okay, and then you realize OPEC, the secret to making money in oil is a cartel. John D. Rockefeller understood it, a cartel. Anything that humans can produce with their brains and with capital is going to get overproduced. And that's the problem with using a commodity as a money, because ultimately if gold is successful, then intelligent people are going to produce more gold, and you're going to double, triple, quadruple the supply of it. Anything with a supernormal return gets arbitraged away. So those returns are only available for a period of time. Everybody gets into the game, the margins collapse. I mean, it's everywhere. That's capitalism. And so people that think they're buying hard gold, the problem... By the way, I could have another cast, I could talk with you for two hours about the technical problems with gold. But I don't want to get derailed by that. I want to basically start with a simple premise. If I look at bitcoin, there's a lot of people in the bitcoin community talk about stock to flow and how it's going down, and I appreciate it and I think it's a good contribution, but I have a different take on that as a public company CEO. Which is this: every time I print my share count, there's only one number that matters. I print fully diluted share count. No one ever asked me, well, how many shares do you have this minute? Nobody ever asked me how many shares are going to vest with employees next month or next year. They just ask me one question: what's your fully diluted share count? We take your earnings, we divide by that, we're done. Take your revenue, divide by that, we're done. The fully diluted bitcoin count is 21 million. Done. The fact that it's going to trickle out about it, I don't care. Fully diluted bitcoin count, 21 million. Instead of saying it's the hardest stock, stock to flow is higher. Now stock to flow is exponentially going to infinity. Stock to flow is infinite, which means it's infinitely hard. Because a rational actor, and I consider myself a rational actor, I didn't buy bitcoin expecting I was buying this much bitcoin divided by 18 million, 500,000. I bought the bitcoin thinking I was buying that share of 21 million. And I knew that. And so now we're back to this very simple thing. You take your 100 million dollars and you hold it for a year in fiat currency, you're going to have one percent or half a percent of it left. You're going to lose 99% of your money in a hundred years. By the way, I know that to be the case. I have a house in Florida. A nice house in Florida. It would cost you 15 million dollars to buy that house, 20 million today. I have the sale deed for that house in 1930. You know what the number is on it? A hundred thousand. A hundred thousand dollars in 1930. Count the number of years between 1930 and the year 2020, and figure out what the depreciation rate was on fiat currency in the US dollar. It's, you're going to lose 99% of your money if you put it in cash. Okay, so we all agree on that. Okay, this is the thing that people don't say. You're going to lose for sure 85% of your money if you put it in gold. You're for sure, by the way, and that's assuming that nobody invents a better chemistry for gold, we don't find gold anywhere else, nobody invests any more money in gold mining, nobody gets any smarter, and the gold price doesn't go up too much. And if all those things are true and people still use gold, you're going to lose 85% of your money. But if human ingenuity kicks in, gold's a commodity, you're going to lose 90% of your money in gold. Now if you put your money in bitcoin, you're keeping it all. You're not losing anything. Once, if you don't believe in fully diluted bitcoin count, you have a 15% loss in 100 years. But if you do believe in it, there's no loss. Now let me give you another analogy. You want to cross the Atlantic. If you cross the Atlantic in a vessel made of fiat currency, it's like stitching together a bunch of inflatable rafts. You're crossing the Atlantic in an inflatable boat with a leak in it. Or you want to cross the Atlantic in a gold vessel. You're crossing the Atlantic in a wooden ship. It's sort of good, but it's rotting. It's a wooden ship. It's better than inflatable, it doesn't have a leak in it, but it's wood and it's going to decay. It's decaying two, three percent a year. You're crossing the Atlantic in bitcoin. It's a steel hull freighter. The thing about steel, you know, like I say to the guys that say, well, why do I want a steel boat? They go, well, because steel is indestructible, and the welds are harder than the original steel. If you put a hole in steel and you weld it, the weld is stronger than the original material. Steel will last as long as you maintain it. It will last forever. Okay, so rubber boat, wooden boat, steel vessel. And now here's an epiphany. Right, I mean, if that's not enough, I mean, there's no comparison between losing 80 to 90 percent of your money versus not losing any of your money. There's no comparison. But here's another epiphany. I'm an aeronautical engineer from MIT. I studied spaceship design, I studied aircraft design, I studied building design. You know, the entire science of civil engineering requires one element. You know what the element is? Steel. Think about it for a second. I build a building with wood, you can build a two-story building. You ever see a five-story wooden building? I built, you know, that's fiat. I build a building of stone and masonry. Look at all of Europe. All of beautiful Europe, every building in Europe, five stories, six stories. That's as far as you go with brick. What happens when I invent steel? I build a 50-story building. You think steel is twice as good as bricks? Yeah, you can build a hundred story building. Steel is elemental to, or instrumental to, New York City. There is no New York City without steel. There is no skyscraper. There's no science of civil engineering until you invent steel. You could say iron maybe if you want, but without the element of steel, there's no civil engineering. Now flip to aerospace. You ever see a plane made of steel? No, they don't fly. Steel is the perfect element except for the fact it's too heavy to fly. That's why we use aluminum. No aluminum, no airplanes, no industry, nothing. Take away aluminum, the entire aviation industry goes to zero. Andrew Mellon made his money on aluminum. Andrew Carnegie made his money on steel. These are fundamental things. These were technologists. The entire industry is based on it. Now, the gold standard, good idea in the 19th century. The best idea you could have in the 19th century. But I mean, just like wooden ships, pretty good idea to have wooden ships if you're the British Empire, if that's the best you can have. Now along comes bitcoin, cryptocurrency. It's, when I say it's harder than gold, I mean it's not just 10 times harder, because it goes 100 years without losing any of its value. I say it's harder because it's an organic nest of cybernetic hornets feeding off of encrypted energy. It's a living thing, which means that the miners are going to keep upgrading their equipment, the developers are going to keep upgrading their development, the nodes are going to change, everybody, the ecosystem is going to change. And they're changing in this terrifying Darwinian, capitalistic, libertarian, aggressive, winner-take-all, hold-no-bars, no one company, country, companies holding like that. I've been CEO, I thought I was right. I was wrong. You could be the most brilliant CEO at all, anything that's controlled by a CEO is crippled. Controlled by a state is crippled. Controlled by a country is crippled. This entire thing is its own ecosystem. Gold is not going to get a million times smarter in the next 10 years. It's not thinking at all. It's a lump of metal lying there. Nicholas Taleb wrote Antifragile. I think Taleb is brilliant. I love all of his books, read every one of them twice. Bitcoin is an antifragile, evolving thing. It's the hardest currency because it's getting continually exponentially harder. It's getting harder, but it's also smarter, stronger, and faster than gold. It's smarter because I can create a computer program, I can put on a machine behind that bar, and I can have it make a million trades with your crypto every night while you're sleeping and move it around. But I can't do it with gold. If I want to move a hundred million dollars of gold, I got to put it on a jet, fly it around the world. It's $250,000 to physically deliver $100 million worth of gold. I can physically deliver $100 million worth of bitcoin in five bucks, and 30 minutes, depending upon how risk-averse you are. But if I want to move it, I can put a piece of software on it. By the way, Ralph, when I move a hundred million dollars into a crypto exchange to buy crypto, I got to talk to like three bankers on the phone, and they're asking me for my birthday. Ralph, you can go on Google and you can Google Michael Saylor, and do you know what Google puts underneath the Google for my birthday? My birthday. So the banking system is running about a million times slower and less secure to move this stuff around. When I put this elemental energy into bitcoin, it's smart because it's getting smart as fast as the smartest crypto bank can program something intelligent. And I am in awe of how many of these things are going on so fast. D5 and C5, it's not clear to me whether you're going to use D5 or C5. Doesn't matter. Whatever is going to work is going to work. It's all happening. It's faster because it's dematerialized gold. I look at all my employees and I say, we're in the virtual wave, guys. You can now move at the speed of light and bend time and space. What are you going to do with it? If I can actually take your $100 million worth of gold, dematerialize it, chop it into 10 million pieces, and move it around the world 100 times a second, something new is going to happen. And it's stronger. It's stronger because you can liquidate a hundred million dollars with bitcoin on a Saturday afternoon in a foreign country in a foreign currency. And you can do this, and maybe you might take a three percent haircut. You might be like, oh holy crap, it's volatile, it moved down 300 bucks. Well, three percent haircut to liquidate $100 million of gold on a Saturday afternoon? Try doing that in Istanbul. Try liquidating $100 million sitting in a vault in New York City in Tokyo on an afternoon on a weekend. So the issue is, gold's going to be audited once every... By the way, I apologize for digressing, but you can't make this stuff up. It's really hilarious. When I borrow $100 million from a conventional bank, you know how they verify my collateral? They ask me to have my accountant prepare a financial statement as of the end of last fiscal year. And so I actually deliver a statement that has all of my assets on it. And if I'm borrowing money on June 30th, I'm giving you a January 1st financial statement. And I'm asserting that I have not double pledged the collateral or committed bank fraud. And my accountant is asserting it. And that's a pretty serious thing. But I'm saying it tongue-in-cheek. That's ridiculous. Why do people care about publicly traded companies? Well, a public company has more credibility than a private company, and has a lot more credibility than a private individual. And here's one reason why. I and my CFO sign Sarbanes-Oxley statements, financial reports. Every quarter I sign my financial report. If I lie to you, Ralph, it's a crime. I go to jail. If a public company officer misrepresents the state of the balance sheet, the state of the business, you asked me like, how's the future of the business? I'm going to equivocate. I think we're, you know, the future of the business will be the future of the business, and we're just really excited about working on the future of the business. It's because it's a crime for me to mislead. So the way that we actually certify collateral is via regulations and criminal statutes. And that's why the most credible entities in the world are American publicly traded companies. Because everybody knows that if you trade on the NASDAQ or the New York Stock Exchange, and you're a CEO or a CFO of an American... If I heard a guy that worked for a guy that worked for a guy that worked for a guy that worked for me in a foreign country was actually doing something sloppy, I'm thinking, well, Foreign Corrupt Practices Act makes me criminally liable for that, and that person gets chopped off. So that's the way that you actually pledge collateral normally. With bitcoin, we've totally turned his head. Anybody can inspect the fact that I own the bitcoin in one second. And every 10 minutes you could take a complete audit of everything. I wrote that article about it being the world's most pristine collateral. It's perfect. It's the foundation stone of everything. As you were talking about, it's the steel of an entire new financial system. I think what you've said is brilliant, but I don't think it's understood when you say it's the world's best collateral. The world is operating on like gold is collateral. It gets audited every seven years or every three years. It might be there. It's impossible to move. And it's impossible because of rehypothecation and the reuse of assets. Bitcoin ownership is guaranteed, so it's so pristine. The only thing we haven't got is a yield curve. So your third... Yes, you've got it implicitly in the fact that it's got a limited supply. But eventually there will be a market for you to lend out your bitcoin, and it's going to trade at a premium to US bonds, because it's like you lending out a piece of art. Well, if somebody's going to borrow your piece of art, they're going to pay you for it. I totally agree, and I think the yield curve is coming. And when I look at the forward contracts, it's very fascinating to me. But yeah, summary of my entire meandering analysis is, bitcoin, if it's not a hundred times better than gold, it's a million times better than gold. And there's nothing close to it. And most people, they're focused upon stock to flow is better. And what they haven't factored in is the smarter, faster, stronger makes it a million times better. And it's steel to masonry for the firmament of the 21st century financial ecosystem.

I started cheerfully assigning homework to all the officers and all the directors of the company. You can imagine some of your podcasts got linked to them. A lot of Pomp's podcast got sent to them. Eric Voorhees' famous epic debate with Peter Schiff over the future of fiat versus bitcoin as the world's best currency got sent to them. The Bitcoin Standard, the Bitcoin Center, Lyn Alden's paper on three reasons I'm now bullish on bitcoin got sent to them. Andreas Antonopoulos' 'What is Bitcoin?' got sent to them. Lots of compulsory YouTube watching. Guys, I'm going to need you to watch these things on YouTube. Then I'm going to need you to read this. Then lots of individual meetings. Meet everybody. I'm lucky I've got a very intelligent board, a very engaged board. I met with my general counsel and I said, I was worried, like general counsel is going to tell you a million reasons you can't do something. I said, well, you know, I think we should be thinking about bitcoin, and this and this and this and this. And I waited for him to tell me no way in heck can we ever do this ever. And he goes, yeah, that's a very interesting thesis. I bought bitcoin two years ago. I love it. It turns out that half of them had already invested in bitcoin personally. So we went through this round of study, think about it, evaluate all the options, meet as a group, break after that. The CFO went off and he met with our auditors and our outside auditors and more auditors and the NRGC, met with attorneys and more attorneys and more attorneys than our outside attorney. And then we started sifting through all the regulatory filings of everybody. I went down the rabbit hole, they went down the rabbit hole, the board went down a rabbit hole. We all came together. I'm really proud of the team. But at the same time, I think it's important to say that rational people, if this is put on the table and if they're given enough time and the right resources, they all unanimously come to the same conclusion that I come to. No dispute, no dissent. Everybody's got to be part of the process, and you got to give everybody time to absorb it, and you got to do your due diligence.

The auditors give you feedback on how you're going to account for it. That's their position, and they're good at telling you how to do that. So we take their advice. At some point we talk to lots of different auditors. I do think that we're leading the way here. Clearly, in fact, it's news that we did this. It'll be news when we put out our 10-Qs. If you want to see exactly how it gets accounted for, people will be looking at the 10-Qs to figure out what that does to the balance sheet and the P&L. But let me make one point, Ralph. You can run your business in order to make your GAAP accounting beautiful. If you did that, you would never issue a stock option. And if you look at every successful tech company, they have stock option expenses. Every screaming success, Facebook comes public and there's huge amounts of stock options that they've issued, and they take non-cash charges for them. So the result is most public companies have pro forma results and they have after adjustments. There are mega adjustments based on currency fluctuations and all sorts of non-cash and intangible things. The investment community looks at those and generally they focus more on the as-adjusted, pro formas. As long as you explain what it is, then people don't care, because GAAP doesn't necessarily keep up with the reality of the business. For example, if I told you, would you buy a company that's going to go up in value by a factor of 10 if it printed a GAAP loss, or would you not? And also, the other thing is, as you told me before, the investors valued your cash at zero. So what the hell you got to lose? If you say, well, it's a non-zero asset now, and whether it's included in your GAAP accounting or not, it's like, well, he wrote it off to zero anyway. So now you can either value it as an option or not. If we buy bitcoin and it gets valued as an intangible, and then we're forced to write it down based upon the volatility, it could happen. We could buy a bunch of bitcoin, it could be written down by 50%. Then you have a GAAP write-down, and intangible carries an intangible on your balance sheet. On the other hand, if the value of bitcoin doubles, if you have a billion dollars of bitcoin, and the GAAP accounting says you're only showing 200 million, the investors are going to look at that. They're rational. They will understand that you have a billion dollars worth of something even though GAAP accounting doesn't let you mark it as a billion dollars. But if the market is irrational over the long term, you sell some of the bitcoin, buy all your stock back. In fact, in the extreme, if your net asset value is worth more than the value of the company outstanding, you buy your shares. You buy the company. At the end of the day, if the bitcoin's worth 10 billion and the accounting says it's worth zero, and if the investors insist upon looking at the zero accounting and they value you at nothing, you buy every single share of the stock back and you got a private company with nine billion dollars worth of bitcoin in it. But there's a point to what I'm saying. You can't run a business in order to make the GAAP accounting optically look perfect. If you did that, you wouldn't be in any business that outstrips the rate of accountants that have a 30-year lag. Also, you have a reputation. The firm's resistance for a long time, as long as you can explain to people what you're doing, nobody cares. Either they like it or they don't. That's what shareholding is. And that's okay. I think we have an obligation to be as clear and articulate and respectful to our shareholders as we possibly can be. If you look at what we've done over the past three months, we have tried to be extraordinarily transparent and methodic. First we say, we think we've got a treasury issue and we need to either buy our shares back or invest our treasury. Then we said, we've done the analysis and we're going to do a $250 million tender and we're going to do a $250 million investment in bitcoin. Then we let the investors decide what they want to do. That's their choice. Then the investors decide to tender some of their shares, and we buy some of those shares, and we have some extra cash. Then we take the extra cash, and we tell the market, it looks like we have some extra cash. By the way, our treasury policy is to invest in bitcoin. Then we invest in bitcoin. If anybody's holding the stock, this is very important for them that they understand what's going on. I can't tell you how to think about this. But by the way, you would hear rumors like, oh, I don't think investors will like it. So we went and met with all the investors. It's like 80% of us. That's probably a good idea. That's kind of interesting. And then they go to me, well, this one investor, he was kind of concerned about it, he had a problem with it. I met with him. He goes, well, why don't you just buy back all the stock? I said, well, the issue is we would decapitalize the company. If we buy back all the stock, we'll have no treasury assets. If we have no treasury assets, no capital, then that puts our customers at risk. My customers are governments, banks, big organizations. I need to be able to represent to them that for the next 30 years they can count on me. So I can't drain the entire assets of the company. Even though, that's the problem with just draining the treasury. I have to have a treasury balance. And then I proceeded to explain the bitcoin thesis to him. He cuts me off halfway through. He goes, oh yeah, I get it. I own bitcoin. So the point is, this is an example. Everybody's really afraid. Everybody says, oh, that's a really ballsy, risky, they're all alone themselves, they're all alone on bitcoin. It's the same in the hedge fund world. Paul Tudor Jones goes, you're the Paul Tudor Jones of the corporate world. Paul was the first guy to stand up and go, well, I bought bitcoin in my fund. Well, guess what? Every bloody fund manager I know owned some bitcoin already. Not to beat up on Paul Tudor Jones if he's listening, but Paul, if you believe in it, buying one percent? One percent is like I go to Vegas and I want to convince my friends I'm cool, and I go, yeah, I really get gambling. I really believe in gaming. So I take out a hundred thousand dollars, I put it on a table, I play blackjack for a few hours, and I impress my friends that I'm really cool. That's one view. On the other hand, if you're really a baller, you're Howard Hughes. He went to Vegas. Howard Hughes bought Vegas. If you really believe in gambling, if you get gambling, you don't gamble a hundred thousand dollars or one percent of your wealth in Vegas. You buy the casino. But Paul doesn't care. He's rich enough. For him, whatever he says and does are two different things. I know him very well from the past. Paul can move his positions on a dime. We've seen him be three or four times levered. The guy knows what he's doing. So even if he says one percent, that was that snapshot of that afternoon that he finished that note. It could be anything. I noticed the hedge fund guys either say the opposite of what they're doing, or they talk their book. It's amusing. But to state what I think is pretty obvious, once you understand bitcoin, you have anxiety about being short. Once you understand it completely, terrified of not having enough. If that's the case, then if you're running $10 billion of money, you go take one or two billion dollars of it, or three, or you just buy it all. Don't you sit around and think, I'm trading this bitcoin, Ralph, and to buy this much, you can't buy it in a minute or an hour. You can't even buy it in a day. When I'm in the market, I'm buying bitcoin four days in a row, every minute.

I haven't given it to anybody else. I control it all. If it's worth doing, do it yourself. So here's, I want to ask you two questions.

Okay, well, a couple of points. One, I can't give you too much details about how we do it and how we handle our crypto, just for security reasons. Obviously, in private, off the record, we talk about it, but in public I can't. Generally, our approach is to work with institutional grade crypto exchanges and institutional grade crypto custodians, and then handle it like handling nitroglycerin. Handle it very carefully. That means that before I move anything material, we're whitelisting everything every which way, and I'm moving 0.01 bitcoin. The first time it took me like 60 minutes or 90 minutes to get it confirmed. I was like, you know, I'm working on it. But let me make the next point. If you want to trade this stuff, you need a great team of over-the-counter brokers you work with, and they have to have great technology, because you're going to buy this thing in 89,000 small bytes of 0.2 bitcoin each. If I'm in the market, you don't know I'm in the market. I get a laugh when I watch people come in and hammer the price up by a hundred bucks, and people are thinking, is that some whale? Well, if you wanted to buy a hundred million dollars of it, there's no way you're chasing it up 100 bucks. So I'm waiting for someone to panic, at which point I'm going to buy $10 million in one minute while they think they're getting the better of me. That's the way you're going to do that. And then my last point is, while I'm sitting there for all those days and I'm trading this stuff day and night, everybody thinks, well, bitcoin's too volatile. When people like me or these other institutions get into it, we've got computer programs that are trying to buy it every minute of the day, day and night. Pretty soon there'll be one set of computer programs talking to another set of computer programs. There's no people involved. The volatility is collapsing. It's already collapsing. Anybody that's watched this stuff over the past three months would see the volatility is coming in. The other day I'm watching it, bitcoin's less volatile than Apple. It's definitely less volatile than Amazon, less volatile than all the big tech companies. That's a story. My last point, it's like, who are these people that are selling it to me? I can't believe someone is willing to sell it to me. But I'm thanking my lucky stars. Hit me again, hit me again, hit me again. I see these guys on crypto Twitter and they're like, yeah, Saylor's gonna buy it and he's gonna dump it, or he's gonna buy another company with it. I'm like, they don't really understand the mindset of longs. I'm buying it for the dude that's gonna work for the dude that's gonna get hired by the guy that takes over my job in a hundred years. I'm not selling it. When it goes up by a factor of 100, I might be borrowing a little to go buy something that I want, but this is, what am I going to buy with it that's better than what I'm buying? Every other treasury asset, and I count $250 trillion worth of stuff, this is not about gold. Gold, fixed income, sovereign debt, cash equivalents, every other treasury asset has a negative real yield. What am I going to buy with it? There's no other asset to buy with it. And that's why I got into the irresponsibly long thing. In the end, I just looked at everything and said, right, fine, you can trade around, do stuff, but if there's anything you actually want to put a real position in for an extended period of time, there is only one thing I can really see.

100% agree. And that's exactly the conclusion. But for me, why I'm so interested now of all time, really intensely focused, is across almost every single time horizon, it now looks superior. That won't always be the case. There'll be a time when technology stocks or whatever it is will outperform bitcoin. But when I look at almost every time horizon, going from a month, that would be the shortest I'd look at, a month out to 100 years, bitcoin looks like it's going to be everything for the time being. Great, that's a home run opportunity. So that makes the decision easy.

No, no, exactly.

Exactly right. And that's the journey. You know, we're launching this crypto channel on Real Vision. It's part of the same bet. I know where this is all going. I've been talking about this in 2012, and I knew that macro and crypto were about to collide, and I knew it was going to happen in the next recession. I didn't guess it would, and here we are. And then what's happened is you've actually moved it on further by saying, okay, it's not just about markets and investments, everything else. We're now talking about a new standard that becomes the new gold standard. I.e., corporations around the world, Apple, where their balance sheet and everybody else, should think of this as a reserve asset. Which was my point that I've been talking about: this is the world's most pristine reserve asset. And that's what you're doing. You bought a reserve asset and put it on your balance sheet. Brilliant. Imagine a CEO of a construction company that said, we thought we'd start building buildings with steel this year. And every other construction company is saying, oh, what a risky thing. That's too expensive as well. And all the other arguments that you would have had, we've not tested it in earthquakes or whatever it is. I think we've covered a lot of ground, and I think we'll probably have another conversation down the track because there's a load of things I love, the philosophical things that you're thinking about, and just also how you've observed the tech industry and everything else. So I'm definitely going to get back in touch with you again, and as your thinking evolves and other people's thinking evolve, it's just nice because you're outside of the noise of a lot of the financial market stuff, and you look at it differently. It's brilliant. And bravo to you. As you said, it's a logical conclusion, but most people haven't reached it yet, and you've done something really inspiring for a lot of people.

I would return a compliment and point out that I was obsessing over everything that you published before we made this decision. So the truth is, you and the entire crypto community that went out there, especially on YouTube and published everything, they're the inspiration. It's a wonderful community, and you can learn a lot on YouTube. So if people ever wonder, does anybody listen to the stuff we say? The answer is yes. I listened. Every one of my board members listened. So we wouldn't be here. I wouldn't be here talking to you, nor would I have done anything had you not said what you said when you said it. That's very cool. Welcome the opportunity in the future. Thanks for having me. I loved it. I reached out on Twitter and said, listen, I'd love to tell your story. You replied, I love Real Vision. That's great. We're all doing the right thing, spreading the word.

Thank you, Ralph.