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

You know, when times are good, everybody's busy. If you're in love with the iPhone, then the answer to everything is iPhone. If you're in love with your Apple Watch, when you're in love with Twitter, the answer is that. So when times are good, everybody focuses on that, and there's only limited time. So I think I was closed to the possibility; it's just there's so many other things going on. And when the COVID crisis hit, everybody got sent home, and we all had to contemplate ideas that we had previously rejected, and we had to embrace ideas that were very foreign to us. So how do I discover crypto? Well, first I have a mega, mega, mega problem. And the mega problem is I have a lot of cash, and I'm watching it melt away. And 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 of the talking heads. So after that, then I have an opportunity, which is I've got a cash-generating business. And then I've got one more problem, which is the investors, 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, 'Well, we don't really value the cash.' What I mean—they're smarter than I am, right? I'm not joking, I'm being serious. They are smarter than them. They knew before I knew that cash is trash, and you're a fool to sit on the cash. You're just—if the natural asset inflation rate is 10%, it means that every time I generate $50 million in operating income, I burn $50 million in purchasing power on the cash. And we're just running as hard as we can to stand still. So we weren't getting any credit for the cash, we didn't need the cash, ergo we need to do something. And so what is the thing you're going to do? We started working through it like, what do you do if you have $500 million of cash you don't need? Well, you can buy your own stock back, right? 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 or 20% a year, you don't got four years. Inflation is going to do a better job. So that didn't really make sense. So we got kicked into high gear, like everybody got kicked into high gear this year. If you didn't know how to use Zoom, we started on a Monday morning with one video conferencing technology, we discarded it—I'm not going to say which one—we discarded it for another one by 11 a.m., by 2 p.m. we're using Zoom, by 4 p.m. 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. And by the way, the same CEO that said 'I don't believe in remote work, you got to show up to the office or else you're not working for me'—I would have sworn up and down I hated remote work until COVID crisis hit. Flip. And so that same idea happened with the balance sheet. There are all these strongly held views: you got to be conservative, you got to invest in cash and short-term T-bills, and you don't contemplate anything else. And then all of a sudden, you contemplate other things. So I mean, you're an expert, you tell me: if you had $500 million of cash right now, where would you invest it?

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

Right. 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. So that's kind of difficult. So what's my next thing? Go buy—I'm not so silly as to go buy 20th century stock. Go buy Apple, Amazon, Facebook, Twitter. Oh, by the way, back in 2012 I wrote 'The Mobile Wave.' You know what I said in '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. I mean, at this point, is Apple computer going to go up by a factor of 10 from here? Maybe it might double, it might be cut in half. But with the best equity in the world, you've got equal upside and downside. You're really just—there's no asymmetric.

I went—okay, and this is where I got it. I got to give a plug to my friend Eric Weiss. Eric Rice, running his own bitcoin investment advisory service. He's saying, 'This is what I'm doing,' and I'm just dismissing him like, 'Whatever, this bitcoin thing, I don't know what it is, but it's crazy crypto and shell game.' So he just keeps mentioning it, and I keep thinking about it. And 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 have been beaten over the head with a two-by-four, so I'm a bit more open-minded. But I started thinking about it, and then I realized I really got to look at precious metal. You got now—go to the Robert Kiyosaki: silver, gold, or bitcoin, choose one. And so we get down to choosing: are we gonna invest in precious metals or bitcoin? I already dismissed commercial real estate, I dismissed a market basket of equities, the SPDR, NASDAQ 100. That stuff's just not compelling. I tell you what I want: what I want is something that might be cut in half that can go up by a factor of 10. Asymmetric payoff. By the way, that's what any intelligent investor wants. That's what you were getting when you bought Amazon in 2011, that's what you were getting when you bought Apple computer when the iPhone came out. That's what every rational winner is getting. You want a 10x upside, and you can even live with losing all the money. Although here's the catch: every good investment, in my opinion, if you're gonna put a lot of money at work, the winning formula for the past 10 or 15 years has been: find a digital dominant network that's dematerialized some fundamental thing. The mobile network is Apple, the information network is Google, the video network is YouTube, the social network is Facebook, even Twitter is a speech network. Amazon dematerialized retail. You buy them when they're a $100 billion market cap. When something hits a $100 billion and they're 10 times bigger than the next biggest thing, they're probably going to crush everything. At that point, I remember lecturing Wall Street guys in 2011, 2012 about Apple. Here's what they said: 'Well, we know you love Apple and you 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 we're going to buy HP or Dell so we can diversify your computer portfolio. And if all your tech names—if Apple and Amazon and Facebook go up too much, we're gonna 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 in your life. 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. So 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 a trillion.' They're 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. And 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. So obviously these digital networks—Facebook, Apple, Amazon—you can see them, they're all around us. They're insanely value-generating. But there's another dynamic here, which is 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 on Twitter to switch to the next speech network? Even if a guy has a massive following on Twitter, you think he's going to switch to another thing? Probably not. He's gonna be the last person to leave. So you're buried in concrete there. So now we come back to bitcoin. The number one knock on bitcoin for the outsider is, 'Well, it's just software, someone else can copy it.' And I think bitcoiners don't do themselves justice here. I mean, sometimes I think the exchanges and some of the others over-promote the fact that there's 237 different crypto pairs you can trade. And if I've done that, it's that long tail where all of a sudden there's one thing and I want to have a list of 47 things. But you know what's an epiphany? The epiphany is when you're a young CEO and you're like, 'I'm going to put a sales person in every single state in America. There's 50 states, 50 sales people.' There's an epiphany when you go to New York City and you realize that half of all the money in the country is in one city. And then you realize that maybe you're being captured by orthodoxy. So in this entire crypto area, it's great to have all the innovation and it's good to experiment with this and that and DeFi, and maybe that'll work and maybe that'll work. But to the outsider, you look at it and you're like, 'Well, what if everybody moves their money off of bitcoin to ether or to whatever, or to yoyo coin?' And they stop. And then someone puts this language—eight pages of language—in front of you: 'What happens if there's a hard fork or a soft fork?' How debilitating, anxiety-inducing that would be to get to deliver eight pages of legal disclaimers on hard fork, soft fork risk. Like, you mean my crypto can float away? And they get all the anxiety. So you got to get beyond that. But it's easy 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. And the only thing we're going to do is maintain a constant store of value as a digital gold. And we're going to expend huge amounts of energy to protect that network and upgrade that network. And you can take your $500 million out of the bank and put it on a network, and everybody in the community is going to spend every iota of their energy to make sure no one f***s with that network.