Pomp Podcast #385: Michael Saylor On Buying Bitcoin With His Balance Sheet

Happy to be here. Let's start.

Okay. I grew up in an Air Force family, lived on military bases my entire life. I went to MIT on an Air Force scholarship. I got a degree in astronautical engineering, studied spaceship design. I also got a degree in the history of science, studied the structure of scientific revolutions and paradigm shifts, and became very fascinated with how new technologies get introduced. I learned to fly in the Air Force, but I never went active duty because just as I was about to graduate, the Cold War ended, the Reagan Star Wars buildup won it. One day my commanding officer walked in and said, 'You know, we paid for your education, you're on the hook for five years active duty, but if you want to join the Reserve, you can do that. If you want to go active duty, you're going to wait two years before you get called up.' So the choice was to get paid three times as much in the civilian world or serve in the Reserve. This was an easier choice for me because I was going to be a pilot, but in my final semester I was mistakenly diagnosed with a benign heart murmur, which disqualified me from flying combat jets. My hopes of being a fighter pilot were dashed. I decided I didn't want to wait around, so I joined the Air Force Reserve and became a civilian unexpectedly in the final month of my undergraduate career. I thought I wanted to be a professor, got into a PhD program, but I had no money. I decided to work for a year and then apply for a fellowship and go back to get my PhD. I worked for the first six months, the company I worked for blew up. I ended up working at DuPont, building computer simulations for them. Around the 18-month point, I tendered my resignation to go back to MIT. I was building computer simulations to predict the return on billion-dollar capital investments in the petrochemical industry. The computer model was going to be used to justify a $1.5 billion investment. The executive that wanted the money, I'm sure he said to his staffers, 'Tell the kid we need him to finish the job.' I was 24, living in an apartment with milk crates for bookshelves, spending $700 a month. I knew I didn't want to stay and be a corporate bureaucrat, so I said no. The executive said, 'Give him whatever he wants.' I said, 'Well, you want to raise my salary?' I said no. 'Well, what do you want?' I said, 'When I was in high school, I wanted to be a rock and roll star, and that was dashed. When I was in college, I wanted to be a fighter pilot astronaut, and those hopes were dashed. My third idea was to be a professor, and that's what I'm going to go do. There's only one last thing on my checklist: I'd like to be a CEO of my own company. So if you want me to stay, you're going to have to let me start my company. I think I need a quarter million dollars in cash, a $2.5 million contract, let me hire ten people from DuPont, give me free office space and computer equipment for the first two or three years.' They said, 'We can't give you the money up front, you're just a 24-year-old.' I said, 'You have to, because this is the only time this negotiating strategy ever works. You have to give me the money because I have no money.' They went back to their boss and did this deal that you would never ever do, but I just happened to be the one guy on the East Coast that could make their computer program work. The guy was 12 weeks from getting a billion-dollar check from a mega corporation, so it was all irrelevant. They gave me the money. I thought, 'Holy crap, I have $250,000. This is enough capital to last me for seven years.' So I figured seven years, good, let's start. At age 24, I started MicroStrategy with the thought that I didn't want to work for anybody else, and when it failed, I would go back to college. It never failed. In the first year we did 10 people, then 20, then we were $5 million, then $10 million, then $20 million, then $40 million, then $80 million. We came to the market in the '96, '97 time frame, the dot-com revolution was going crazy, everybody was clamoring, 'You have to go public.' So we went public in 1998, and then there was no going back. I got on the roller coaster. That's how I started MicroStrategy. I didn't mean to. I kind of fell off the turnip truck and hit my head on a pot of gold, and I'll keep it.

Here's an irony: I never got that PhD. I'm just a silly MIT undergraduate. I remember competing in my early years with this professor from MIT who had umpteen degrees and was so much more educated. I would be running a million-dollar company, he had a million-dollar company. He said, 'What are you doing?' I said, 'I'm building these computer simulations on a Macintosh.' He said, 'All the experts say the Macintosh is going to die, that's a bad idea.' Eventually I ported it to Windows. The next time I saw him, the company was $5 million and we were working on Windows. He said, 'What are you doing?' I said, 'I'm building executive information systems on Windows machines using this thing called Wings, this new spreadsheet with a programming language.' He said, 'Experts say Wings will never work, Excel is going to dominate the spreadsheet market.' He was still running the million-dollar consulting company giving advice. I said okay. It turns out he was right, and in a year we flipped the company and rebuilt the product on Visual Basic, and we doubled again. He said, 'What are you doing?' I said, 'Now we're doing this executive information decision support system.' He said, 'That won't work on Visual Basic, you're going to use C++.' He stayed at $1 million, and we were at $20 million. Then we started building decision support systems on relational databases. He said, 'That will never work, that's too slow.' It kind of worked until we got to $40 million. Then along came the web, and we flipped it again, put a web interface on it, and that got us to $80 million. Every two or three years there's something new that was simultaneously an existential threat that could kill us or an opportunity if we embrace it. We were always inventing the next thing. Eventually we found ourselves in the business intelligence business. We created business intelligence, web intelligence, relational intelligence. I had three big competitors: Business Objects, Cognos, Crystal Reports. We got to 2007-2008, and conventional wisdom said they all had to sell out. All three of them sold: one to Oracle, one to SAP, one to IBM. We were still standing. We accrued more customers and kept motoring on. Then along came the iPhone. The first iPhone in 2007 was kind of a toy, had no cut and paste, no app store. In 2009, the iPhone started looking pretty interesting. I became very enamored with the mobile wave. What happens when software leaps off of a PC from under your desk? The computers were rocks under your desk, ugly, with lots of cables. I thought, what if the software is running in your hand, in your pocket? It's like software going from solid state, a block of ice, to liquid, a laptop, then to vapor state on the phone. I thought, instead of going to the office to sit at a desk and run your software, maybe you have the software at your kid's soccer game on a Saturday afternoon. Maybe rethink how the software works. We started doing mobile stuff and implemented mobile intelligence, which took us to the next level. Along the way, I was always a tech inventor at heart, an entrepreneur. Back in '96 when the internet hit, you needed an email domain, so we bought microstrategy.com. But I was too lazy to type microstrategy.com, so I thought, why don't we buy strategy.com? We bought it for like $50,000. Then I thought, why don't we just start buying words? We bought wisdom.com, usher.com. By the way, do you know who owns hope in the world? I own hope.com. I bought speaker, alert, angel, alarm, voice. My thinking was, there are all these search engines. If you go online and search for 'voice,' you get 2 billion hits on Google. If you want to launch a company named Voice and you own voice.com, you go to the top of the list. If 5 billion people go to school and learn how to spell 'alert' or 'emma,' isn't that good for a brand? I started thinking about branding. I launched a business, alarm.com. We eventually spun it off; it's a multi-billion dollar publicly traded company on the Nasdaq today. We made some money, not billions, but a lot, like $30-40 million. Then we launched another company called Angel, which was an early version of Siri, an interactive voice response from any telephone. We eventually sold that for about $100-120 million. What I learned was it's easier to invent things and get them to scale, but can you maintain it and commercialize it? A lot of people find you can buy that boat, but can you afford to maintain it? That's harder. The analogy in business is just because you can buy it doesn't mean you can make it competitive, and even if it's competitive, doesn't mean you can make a profit from it. Eventually I learned you can't keep inventing stuff. We streamlined and sold those off. I got to 2020, and in 2019 I sold voice.com. I'll tell you that story in a bit. I got to 2020 and we had a portfolio of domain names sitting there. I appreciated digital scarcity. I thought these are unique in the universe; only one person can own the word. By the way, you know who owns michael.com? Please tell me it's you. Yeah. And you know who's lazy? I thought, what if someone just wants to type in 'mike' about that too? I'm waiting for Michael Jordan to call me up. Why wouldn't you own michael.com?

Two million bucks. Let's call it low single-digit seven figures, a million to three million, back in the '90s. I just sat on them because I figured the English language is going to be around for a while.

We made like $35 million in the alarm transaction and more than $100 million in the angel transaction. But we had commercialized businesses with them, so we sold the domain and the business as part of it. Voice was the first naked domain sale that was material. We did that one for $30 million, just the domain, nothing else.

At some point I said to my marketing people, 'Why don't you make a list of all of our premium domains?' My definition of a premium domain is one where if you hit Google search, you will get 500 million hits or a billion or five billion hits when you type it in. They're all just ideas like wisdom and hope. I said, 'Why don't you make a list and send them out to everybody we know and see if they're interested?' We sent out the letter and heard back nothing. Maybe I got two venture capitalists who called, but nothing ever went anywhere. I said, 'Forget that, go back to running my own business.' With voice, this is how it goes down. I'm sitting at my desk one day and one of my junior 20-something business development reps walks in and says, 'Hey, some broker called us and offered us $150,000 for this domain, voice.' I looked at it and said, 'I've been waiting for 20 stinking years. $150,000 isn't going to do much for me. Tell them no.' Nothing goes on, then they come back and offer $300,000. I said, 'Tell them no, don't bother me.' The next day they come back and double it to $600,000. I said, 'Still not interested. Tell them it's going to have to be something north of $10 million. I'm just not interested.' They said they offered $1.2 million, then it went to $3 million, then $6 million. When it got to $10 million, I started having all these other people lobbying me, sales people sitting like jackals saying, 'You have to sell this.' Selling intangible assets like artwork, it all comes down to how much they are worth to you. If you needed the $10 million, you would have taken it. But at this point, I have $500 million of cash in the bank. I love my things. I would rather own it and not have the $10 million than sell it for that. I said no. They went up to $22 million. I said, 'The only price I ever put on the table is $30 million.' I didn't sell for $30 million because I thought that's what it was worth. I think the word 'voice' in the English language is worth $100 million. I've seen people drop $100 million on an ad campaign. But I thought I need to create some market comp for it, so we'll do $30 million. I told them $30 million. They said they'll give you $22 million. I said no, but tell them I'll talk to them. Around $22 million, I agreed to get on the phone. I'm talking to a broker and a lawyer. All through this, I'm like, 'Who's the buyer?' Not some startup. If someone had said, 'We're a startup with $12 million in the bank and we'll give you all of our cash,' maybe they might have swayed me. But I had a whale on the other end of the line that wouldn't identify themselves. I thought, 'Okay, I'm just going to wait until they hit my bid.' If you had an acre in Central Park and someone wanted to buy it, the price is the price. You would wait. I got another decade. I'm not going anywhere. Somebody's going to eventually want to commercialize 'voice.' Eventually they got on the phone. I'm talking to a broker, but I hear a click click, and there are other people eavesdropping on the line. I'm kind of talking to myself. They said, 'We're authorized to go to $22 or $23 million.' I said, 'Go to the Google search engine and type in 'voice' right now. You'll notice it's more popular than WhatsApp with a billion users. It's a better brand than Oracle or SAP or hundred-billion-dollar-plus companies. This is how I value it. This is like my daughter. I'll marry her off, but only to a man that's going to treat her better than I will. If you guys really value this, give me the $30 million. Otherwise, I'm keeping it.' At some point they came up to $30 million.

No, I never knew who it was. I sold it in the blind, basically saying no from $150,000 up to $30 million. Then finally they did it. I still didn't know who it was until after the transaction closed. Then I heard it's some crypto company, and that's the end of it for me. That's my introduction to crypto. I literally am thinking about the broker who's just showing up to work, trying to buy a domain for $150,000, and next thing they know, a couple weeks later, they're brokering a $30 million deal, probably peeing in their pants, hoping to God this goes through because they're already thinking about what house they're going to buy based on the commission. It was amusing.

Can I tell you the truth? I got an iPhone back in the day, installed Twitter on it, and it used to be really fun. I used to really enjoy reading the news and tweeting stuff. There are certain people on Twitter that still seem to enjoy just tweeting out whatever the heck they want. I was in that stage, and I had a lot of opinions. I'm tweeting stuff. By the way, I tweeted a thousand things. I forgot all the things I tweeted. Eventually I realized it's probably better for my communication effectiveness if I limit my tweeting to stay on brand. I have a company, MicroStrategy. If I have something intelligent to say about MicroStrategy, I say it. I have a non-profit foundation, the Saylor Academy, that gives away free education to hundreds of thousands of people. We're giving away a free college degree. If I have something to help them, I say it. Whenever anybody else does anything that I might have an opinion on, I keep my mouth shut now because I've realized it's just an opinion, and I've lived long enough to be wrong on a lot of things. Coming back to that specific tweet, I am ashamed to say I didn't know I tweeted it until the day that I tweeted that I bought $250 million worth of Bitcoin. Then I discovered the hive mind, crypto Twitter consciousness. All of a sudden, they all went through all my tweets, found it, reminded me of it, compared it. I'm like, 'Oh my God, I literally forgot I ever said that.' I took it as kind ribbing. I didn't get all worked up. I'm like, 'You're right, I was wrong, what an idiot I was. I wish I could go back and do it again.'

I would not say it's a bet-the-company decision. What I would say is we looked at it, and before I was able to convince anybody on the board or the executive team to agree that was the right idea, we all needed to collectively be of the opinion that we were going to be generating cash at infinitum. There's a journey that we went through corporately over the past year, and a journey that Bitcoin went through over the last seven years. Focusing on our journey, we had $500-600 million in cash. We were buying our stock back a bit, thinking maybe we'll need to buy another company, need it for a rainy day, or something really bad will happen. One of my heroes is Steve Jobs. He had a near-bankruptcy experience, and I did too. I lived to see my stock go from $333 a share to 42 cents.

It's not something I like to brag about because it's not something you want to be proud of, but I will tell you that two of my bragging rights are: I am pretty much the longest-lived public company CEO in my industry because I've been a public company CEO for 22 years. The second thing is I'm pretty sure I'm the only public company CEO that ever presided over a 99.8% drop in the stock price and kept his job.

It's another story. I learned a lot of lessons. The short lesson is: don't run out of money, always have cash on the balance sheet, and don't spend more money than you're taking in. I feel like an idiot to give that advice to anybody, but it's still good advice. Let's fast forward back to 2020. We had the money. We were very conservative, no debt, ready for a rainy day, ready to seize the opportunity, buying stock back. COVID hits, the pandemic hits. Our equities are in the tank. We're losing momentum. In Q1, it's all shock and awe. In Q2, the question is how does this impact my customers, our business, our product, our value proposition? Everybody gets impacted differently. If you're running a cruise line or a theater, it's different. Sometimes counter-intuitively. In our case, we sell enterprise software that helps you think better. We sell business intelligence to lots of government agencies, massive banks, global 2000 companies. Even the ones that get impacted, like the national airline, they can't go out of business. That's our customer base. We realized our software kept working, demand was still there, everything was smooth. The great thing about software is you can ship it over the internet. All of our services went remote. Our value proposition was intact. The surprise for us was our productivity went through the roof and our cost structure compressed. $20 million a year flying around in airplanes went away, $10 million worth of trade shows, $20 million worth of marketing things went away, but the customer demand didn't go away. We found we were much more efficient. Bottom line, we got that black swan event, but it actually kicked us into high gear productivity. That was the positive on the P&L side. We realized we were going to generate more cash, and there was no rational business plan where I take $200 million and spend it to make the business better. I can burn it, but I can't spend it to make the business better. Simultaneously, we got a gift from the Fed on the macroeconomic side. While we're trying to figure out what happens on the P&L, all of a sudden we see the long bond index go up 22%. If you asked me what's the investment you do not want to make, I would never in a million years buy a 30-year bond that yielded 2% interest. Never ever. Yet that was a winner this year. If you bought a 30-year bond at 2% interest and interest rates go to 1.2%, you've got a massive spike. Equities spiked, big tech spiked, bonds spiked. We looked at our cash. I had to listen to a litany of talking heads. Ray Dalio said cash is trash. Every podcaster that trolled Ray Dalio said cash is trash. I went to school at some point, probably after I realized I had a problem. I listened to you describe the plight of the working man. I go to work, I get paid $500,000 a year, I save $50,000, put it in my piggy bank, I have $500,000 in cash in the bank, I have kids, I have a future. Then all of a sudden I realize the cost of a college education is going up at 8% a year, and my cash is yielding zero. The Pomp Podcast is telling me I'm crazy to work for dollars and save my cash. If you take the $500,000 in the plight of the lawyer with two kids, when I send them to Harvard and the $500,000 of cash in the bank yielding zero, and now multiply everything by a thousand, that's me. I have a $500 million company, we're making $50 million a year, I have thousands of people working as hard as they can, we're sacrificing right and left, squirreling our pennies away, putting it into the bank account. There it is. In 2019 and before, we worried about the unknowable and thought maybe we'll use it for something. I'm a bit older than you. I remember when you got 5% interest overnight on your money. It wasn't that long ago that the risk-free interest rate was 5% before the Great Financial Crisis. I'm like, 'I'm going to make $25-30 million a year on this.' I kept hoping and waiting for those good times to come back. I was the guy that when the 30-year T-bill started to go to 3.5%, I thought, 'Finally, they're going to go to 4%, then 5%, back to normal.' Hope was dashed. It went the other way. What happens next? Asset inflation goes through the roof. This entire conversation of inflation is really twisted because everybody talks about consumer prices, CPI. We're not getting enough inflation? You're not getting inflation on YouTube, Netflix streaming videos, candy bars manufactured by robots, Domino's Pizza. You're getting inflation on everything you want. If you wanted an Ivy League education, a beachfront house in Miami, an apartment in New York, anything scarce, everything you want is going up 7%. That's asset inflation. If I want a bond that's going to yield $50,000 a year, it used to cost a million bucks. This year it cost $10 million. The cost of the asset good went up by 2%? No. I have a house in Miami Beach, a nice house built in the 1930s. I have the deed of sale for the house, $100,000 for that house in 1930. It's gone up in price by a factor of 100. So no inflation? It's asset inflation. I didn't really think about it until I got slugged in the face with the 2x4 around March or April when Main Street shut down, the economy shut down, and bonds went through the roof while every city is bankrupt, while Apple stock and every other public tech equity went up, multiples blew out, and the economy went to the worst place I've seen in 30 years. At that point you start having a thought with yourself: what is the true inflation rate? We should probably coin a different term. If you looked at asset inflation on a good year for the last decade, it's 7% a year normal. This year you could make an argument it was 25%. If you look at the long bond index and these equities, you can make an argument that the asset inflation rate was between 25% and 30%. What does that mean to me metaphorically? I felt like I had $500 million of cash in the bank safe, yielding 2-3%, ready for a rainy day. Then every month some banker sends me a note saying the interest went down. Now there is no interest. Then someone took my cash out of the bank and put it in the backyard on pallets. Then they open my back gate, and every month someone comes along and starts burning 2% of the money. I started thinking, in 12 months, 25% of the money is going to be gone. Then I started thinking, what is the point of all this? What am I doing wrong? The answer is you can't hold cash. So what do you do with it?

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

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

Okay, so let's take through them. Commercial real estate: how do you go buy $500 million worth of commercial real estate at a fair price that's not an impaired asset by something happening in the economy right now? How many people want to sell you commercial real estate at a fair price right now that is not impaired? They all think it's still worth what it was worth in January. That's kind of difficult. What's my next thing? Go buy Apple, Amazon, Facebook, Twitter? By the way, back in 2012 I wrote 'The Mobile Wave.' I said go buy Facebook, Amazon, Apple, Twitter. It was a good idea in 2012. If you had done it then, you would have made 10 times your money. Very good idea. Not the same idea this week. Is Apple computer going to go up by a factor of 10 from here? Maybe it might double, might be cut in half. With the best equity in the world, you've got equal upside and downside. There's no asymmetric payoff.

I got to give a plug to my friend Eric Weiss. He's running his own Bitcoin investment advisory service. He was saying, 'This is what I'm doing,' and I was just dismissing him like, 'Whatever, this Bitcoin thing, I don't know what it is, but it's crazy crypto, it's a shell game.' He just keeps mentioning it, and I keep thinking about it. Then one day we're sitting around my pool in Miami, and he starts explaining it, and something clicks in my head that maybe this is a pretty good idea. I had been beaten over the head with a two-by-four, so I'm a bit more open-minded. I start thinking about it. Then I realized I really have to look at precious metals. You go to Robert Kiyosaki: silver, gold, or Bitcoin, choose one. We get down to choosing: are we going to invest in precious metals or Bitcoin? I already dismissed commercial real estate and a market basket of equities, the S&P 500, Nasdaq 100. That stuff is just not compelling. I'll tell you what I want: something that might be cut in half but can go up by a factor of 10. Asymmetric payoff. That's what any intelligent investor wants. When you bought Amazon in 2011, that's what you were getting. When you bought Apple when the iPhone came out, that's what you were getting. Every rational winner is getting a 10x upside. I can even live with losing all the money. Every good investment, in my opinion, if you're going to put a lot of money to work, the winning formula for the past 10 or 15 years has been: find a digital dominant network that has dematerialized some fundamental thing. The mobile network is Apple, the information network is Google, the video network is YouTube, the social network is Facebook, the speech network is Twitter, the retail network is Amazon. You buy them when they're a $100 billion market cap. When something hits a $100 billion and is 10 times bigger than the next biggest thing, they're probably going to crush everything. I remember lecturing Wall Street guys in 2011-2012 about Apple. They said, 'We know you love Apple and think it's going to beat the world, but our idea is if Apple goes up too high, we're going to sell the stock and buy HP or Dell to diversify your computer portfolio. If all your tech names go up too much, we're going to sell those so you don't get too much in technology.' My answer was, if you think about it broadly, there's no example of a successful company in the history of the world that wasn't a technology company. Standard Oil was a technology company. If you go to Hershey's factory, you'll find they figured out how to manufacture 50,000 candy bars in a clean room, and it's the most sophisticated piece of technology you will ever see. You think they're not technology companies? You're just ignorant. There is no winning investment in a company that's not a technology company at their time. General Electric, there was a time when electricity was interesting technology. Boeing, same thing before we could fly. The idea that you sell too much tech is a foolish idea in my opinion. The idea that you sell Apple when it gets too big is another foolish idea. People said, 'There's never been a company that was $500 billion in market cap,' or trillion. They're people saying that. There's never been a company as valuable as Apple because there's never been a company as valuable as Apple. Another way to say that is there's never been a company that could create a software camera, change the way it works, and ship it to a billion people overnight for a nickel. If you could actually ship a product to a billion people overnight for a nickel, you could create a lot of value with no cost. Obviously these digital networks, Facebook, Apple, Amazon, you can see them all around us. They're insanely value-generating. But there's another dynamic here: the network effect, Metcalfe's Law. As soon as everybody uses Facebook, how do I get 257 of my closest friends to switch to the next thing? It's really hard. Twitter, how do you get all of your followers to switch to the next speech network? Even if a guy has a massive following on Twitter, do you think he's going to switch to another thing? Probably not. He's going to be the last person to leave. You're buried in concrete there. Now we come back to Bitcoin. The number one knock on Bitcoin for the outsider is, 'It's just software, someone else can copy it.' I think Bitcoiners don't do themselves justice here. Sometimes the exchanges and others over-promote the fact that there are 237 different crypto pairs you can trade. That long tail where all of a sudden there's one thing, and I want to have a list of 47 things. But what's an epiphany? The epiphany is when you're a young CEO and you're like, 'I'm going to put a salesperson in every single state in America, 50 states, 50 salespeople.' There's an epiphany when you go to New York City and realize that half of all the money in the country is in one city. Then you realize maybe you're being captured by orthodoxy. In this entire crypto area, it's great to have all the innovation and experiment with this and that, and maybe that'll work. But to the outsider, you look at it and think, 'What if everybody moves their money off of Bitcoin to Ether or to whatever, or to Yoyo Coin?' Then someone puts eight pages of language in front of you about what happens if there's a hard fork or a soft fork. How debilitating that would be to get eight pages of legal disclaimers on hard fork/soft fork risk. You mean my crypto can float away? They get all anxiety-ridden. You've got to get beyond that. The easy way to get beyond it is to say, 'Look, this is a proof-of-work crypto network designed to be a store of value. The only thing we're going to do is maintain a constant store of value as digital gold. We're going to expend huge amounts of energy to protect that network and upgrade it. You can take your $500 million out of the bank and put it on our network. Everybody in the community is going to spend every iota of their energy to make sure no one messes with that network.'

I am completely oblivious to any previous opinion I had before. But I didn't follow Bitcoin all through the 2017 Bitcoin Cash fork or any of the fireworks. I missed it all. I show up with a clean slate in 2020. I'm reading about this history. I'm watching Andreas's videos, your videos, Dan Held's videos. I'm reading 'The Bitcoin Standard' by Saifedean. I'm reading Parker Lewis's essays. I got indoctrinated by the Bitcoin community. I got hit with all the content. I'm seeing Max Keiser. I'm starting to figure out there seems to be some interesting drama here, but it's more entertaining for me. The thing that really kicks you over the edge is when you go to real Bitcoin dominance and look at Bitcoin, then Bitcoin Cash, then the next one. Bitcoin is 92% of everything, the next competitor is 2%, then 1.5%. The number one knock on Bitcoin is, 'Maybe it's the MySpace to Facebook.' Absolutely not. If you know anything about MySpace, you realize MySpace was never worth more than a billion dollars. MySpace was 200 times smaller than Bitcoin is right now. There's never an example of a $100 billion monster digital network that was vanquished once it got to that dominant position. All you have to do is see that chart, then think about the dynamic and the network effect. This is already one. It's been tested. By the way, the hard forks are a big advantage. The fact that Bitcoin went through it, and we saw what happened, and we saw that the community would defend Bitcoin, that's what gives a person like me the confidence to invest hundreds of millions of dollars in Bitcoin. I don't want to hear that you've got a new idea and you're upset over transaction fees and you'd like to implement smart contracts so you have to change everything. I want to hear that you're going to defend the network to the death against someone that's going to break it or compromise it in any way.

I started assigning them homework. They all know you, so they've all watched a variety of your podcasts. They all know Andreas. They were all required to watch the debate between Erik Voorhees and Peter Schiff on gold versus fiat versus Bitcoin: what is better money? Then a non-stop stream of essays on macroeconomics and Bitcoin theory. The who's who litany of people you've interviewed. When Lyn Alden publishes her piece, it goes to my board. 'The Bullish Case for Bitcoin' goes to the board. All of those things. Between them and the general counsel and the CFO and myself, we're all basically just going down the rabbit hole. Following that is a series of discussions, one-on-ones with everybody. Everybody goes off, does their own homework. We all come together, lots of group discussion. We all split. The CFO goes off to organize and consult with arrays of accountants. The general counsel goes off to consult with arrays of attorneys. Then we go off and consult with arrays of financial advisors, then arrays of bankers. Then we come back together again, share, have deliberations, deliberate some more, and think very carefully about what is the appropriate and prudent way to begin to move forward with or affect the strategy here.

Before we get there, I'll make one more point. We had $500 million in cash. We wanted to buy our own stock back with it or put it into some asset like Bitcoin. Our first step was to announce that we're thinking that through. Our second step was to announce a tender offer for our stock, $250 million, which took place the same day we announced that we bought the $250 million in Bitcoin. Then we have a 20-day period where we wait for our shareholders to decide if they're going to tender and how much. We had to move through that. When we got done, we actually bought $60 million worth of our stock. That hit the wire in the last few days too. Our real goal was to invest it all. It was going to be $250 in Bitcoin, the tender ends up being $60 million or so, you're at $310 million. Then we had another $175 million that we could play with and still keep some cash in the bank. It's the shareholders' decision as to how much of that will be tender. We wait for them. After the tender offer, we had excess cash in our treasury. The next step was to invest our treasury cash. That's what we announced today. We've wrapped it all up. Substantially 95% of that money is either invested in our stock or in Bitcoin. We accomplished that in short order, over the course of six weeks or four weeks. Regarding acquiring that much Bitcoin, first of all, I can't give you exact blow-by-blow details because I've got security issues and the world is watching. But I can describe to you how you should think about this if you were running a company. You're going to audition a bunch of institutional-grade exchanges. You're going to work through and look for institutional-grade custodians. You're going to look at all the security issues, technology issues. You're going to think about the team, build a relationship with them. Then you're going to buy. If you're going to buy that much, you're going to buy it in thousands or tens of thousands or 100,000-plus small transactions day and night, minute by minute, over the course of many, many days. It's not like we're going in. I'll sit and watch this happening. I've got a great team that I've worked with, excellent professionals. They are brilliant geniuses at what they do. They've got great technology too. You have to have the right technology, the right team, and be very patient. Very, very patient. I'll watch people walk in on Monday morning and some dude just got up at 9 AM and decided to buy some Bitcoin, and the price spikes. Whenever I see that, I think, 'That guy won't be in the market very long.' No one that really wanted to buy a lot of Bitcoin would be so silly as to spike the price so hard. I can tell you this: we bought $425 million worth of it, and we never ran the price not a dollar. You wouldn't know I'm trading against you because that's not how you get stuff done. Let the market come to you. The good news is if you want to buy hundreds of millions or sell hundreds of millions, you can do it and not be seen, and you can do it without moving the market materially or panicking anybody. But you have to have the right team, the right tools, and the right discipline. You can't be in a hurry.

First of all, I think this is a year where every CEO is busy minding their own business. They've either got a business that has serious solvency issues or struggle, or they've got a business that's being digitally disrupted or twisted one way or the other, or they've got all sorts of employee care and feeding issues. This is not the year where a lot of CEOs are necessarily sitting around shooting the breeze about what's happening. Everybody is all hands on deck, working hard. The people I do speak to, I would say everybody has had a lot of their assumptions shaken this year. Assumptions about how the market will behave, about regulations, about international business, about their balance sheet. Things that were inconceivable last year, like Oracle and TikTok, all sorts of interesting things you see on the paper. People just nod and don't even give it a second thought. 'Oh yeah, that's happening.' All those things are being considered this year to a much greater degree. I do have people coming to me wanting to know how we think about it, why we did it. They're all starting to think about what their angle on this is now. I think it's catalyzing people to be much more open-minded.

I think it's like the four-minute mile. People told themselves they couldn't do it, and then someone does it, and in the next year dozens and dozens of people do it. In this particular case, there's a lot of stuff that I've done in my career that was a lot harder than this. I will say any entrepreneur that ever successfully launches a business and gets to profitability will have accomplished something much harder than what we did. It's a challenging project, but it's not beyond the capability of any management team. I think a lot of people just had a mental block. They just dismiss it, don't even consider it, and get focused on something else. My own experience is, from the day that I decided I wanted to buy Bitcoin, if I decided on that day as an individual, you go to these high-end exchanges, it's going to be six weeks to get through the KYC for an individual. If you're a private company and you had your team all around you, from the point that you thought it was interesting, you're 12 to 18 weeks to get through the hoops. If you're a nimble publicly traded company, I think you're looking at six months. If you're a good, rational publicly traded company, you would do it in nine to 12 months. People were kind of oblivious to the need and the role of Bitcoin and the Bitcoin narrative of digital gold. This is the ultimate inflation hedge. It's not 10x better than gold, it's 100x, maybe 1000x better. We could go on for hours about why I think it's 1000x better than gold. Let's just assume since we're preaching to the choir that it's 1000x better than gold. Once you realize that, from that point it's minimum 12 weeks if you went like a bat out of hell, and probably six months. I kind of feel that if people were waiting to see if this was possible, they saw our announcement in August. The six-month clock starts in August. If they were super perfectly configured with all the same characteristics as us, they start focusing on this in May or June. Nobody was thinking about this in March or April; I was just so busy trying to keep the doors open and getting things wrong. Take August, September, October, December, January, February. I think what you're going to see over the next two, three, four months is something interesting. The other point not lost upon me is there are 3,500 publicly traded companies, $5 trillion in their treasuries, and it's all melting. At some point you have a fiduciary obligation to not lose the money. It used to be acceptable to be conservative, but that was before the asset inflation rate went from 6% to 30%. When the inflation rate goes to 30%, it's not necessarily something you can ignore. I think a lot of people are getting catalyzed right now. I think it has to be CEO/CFO led because it is an innovative thing. But I think we've shown people how to do it, and we've shown them that it's possible and straightforward. Once it's like anything, if I tell you it's possible, go figure it out on the internet or YouTube. You can figure it out yourself. All you have to know is that it's possible. It's possible to run 52 miles in a single day. Go figure it out. You're going to Google '52 miles in a single day' and fall down the rabbit hole. I think people now know it's possible, but I don't think you can expect them to move in less than six months. Reasonably, in a year.

First of all, I think the volatility is falling. All you have to do is look at the chart. Everybody wants to say they know something about crypto and jump up and say, 'It's volatile.' Well, it was volatile in 2017 when individuals were trading it on their mobile phone. But think about what I just said about how we acquired it. We buy $175 million. I'm in the market every minute of the day for multiple days in a row. I'm damping the volatility. One person like me, in every trading day that I'm in the market, I'm damping it to the upside and the downside with large sums of money. How many institutions does it take before they damp it? I'm the dude. I'll pay an extra whatever, but stop this thing. I'm holding it for a hundred freaking years. I'm not the day trader guy worried about it. I think as the institutions come in and buy bigger amounts, they're damping the volatility. That's my first observation. My second observation is crypto trades 168 hours a week. Every other asset trades 35 hours a week at best, sometimes less on holidays. You're trading... I look at this thing in awe. When I look at these exchanges on Saturday night at 9:30 PM and I'm watching the streams, I think this is the most magical, hardest-working security in the history of the world. I would think everybody ought to be in awe that the thing is not going haywire. It's remarkably non-volatile in that regard. In my opinion, you could go into the market and liquidate $50 or $100 million worth of this stuff in a matter of an hour, any hour of the day, any day of the week, on a holiday, and maybe you take a 3% haircut. But go try to liquidate $100 million of gold on a Saturday afternoon in Istanbul on the street side. My answer is I don't think it's that volatile. But my other answer beyond this, let's be honest: there's a negative real yield on everything else I can buy. Gold has a negative 3-5% real yield in my opinion. We talked about why bonds have a negative real yield. It's just a question of debating whether it's 7% asset inflation, 15%, or 3%. But it doesn't really matter. Every other non-volatile asset is a negative real yield, which means everything else is lifeblood draining out of my veins. If my choice is to accept some volatility and live, or have non-volatile cash that bought 30% less in a matter of eight weeks, at that rate you're not going to make it through the decade. Volatility is just something you have to live with. But I really think there's a group of crypto enthusiasts that lived the last 10 years, and they are the result of their experience. They lived through a difficult time, and they're heroes. I respect them. But the next 10 years are not going to look like that. The next 10 years, you have people coming in moving hundreds of millions of dollars in and out of the market. They're going to tend to damp all the volatility. The institutions are going to dampen it because it's in their interest. If there is any, it's just going to be to the upside for the good of everybody. Otherwise, not a big problem for me.

It's not crazy. Gold is a great narrative, but to say that this is much better than gold undersells it. The truth is, if you look at these treasuries, there's something like $200 trillion worth of debt instruments and other treasury instruments that have a negative real yield. Precious metal is just one of them. If you're looking at $10 trillion in gold, there's easily $100 trillion of shadow money, $75 trillion of sovereign debt, $50 trillion of other stuff. You're really looking at $200 trillion or more of negative real yield. The only debate is how negative it is. Bitcoin is the only thing I could find that is positive. If I could find something else, we'd be talking about it. No-brainer.

You're going to hate me for this, but it's 'The Moon is a Harsh Mistress.' Robert Heinlein was my favorite author growing up. I'm a rocket scientist. It's about a protagonist computer whose name is Mike who saves the moon. I like that a lot. I grew up with it; it was very inspirational.

I think they're out there. There are so many stars, galaxies, and planets. Statistically, it seems impossible that somewhere there isn't somebody.

Jack Dorsey has a one-word Twitter bio, and that one word is 'Bitcoin.' He's also got $10 billion in cash and cash equivalents between Twitter and Square. To my knowledge, none of it is invested in Bitcoin, either Square or Twitter. You want to help me try to persuade Jack to break off a small $500 million or billion dollars and go buy some Bitcoin? I know he loves the community and is doing as much as he can to help, but the single most useful thing he could do to help is lead on the corporate treasury side. If he bought a billion dollars worth of Bitcoin, what do you think happens the next day?

I absolutely think that, again, this is me speaking my opinion. I've never talked to Jack about this. I don't have any inside information. I would guess that if it was his choice, he would absolutely do it if he had sole power. I think you kind of pick your battles sometimes. My guess is that when Elliott Management is knocking on the door and basically has a target on your back as the CEO, the first thing you don't want to propose in the board meeting is, 'Hey, why don't we take $500 million and go buy Bitcoin?' But that doesn't mean it wouldn't be the right thing to do. You just have to pick your battle. If we can get the crypto community to give them some air cover or wage a charm offensive... What we need is the Bitcoin community to go meme Elliott Management to death, and then they'll back off and leave them alone. I don't know.

I would end just by saying that I find the entire Bitcoin community to be inspirational. I did note in our press release that one of the key drivers of our belief in the success of this is the community ethos. It's a pretty amazing group of people. All of the thinking and all of the initiatives I find to be extraordinary. I think we wouldn't be doing what we're doing without everybody that's ever passed through this podcast. That means a lot.

MicroStrategy is microstrategy.com. I'm @michael_saylor on Twitter. You can probably Google me and get every single one of my contacts if you want.

Thanks for having me.